<HTML>
<HEAD>
<TITLE>ASSURANT, INC.</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
 <B><FONT size="2">As filed with the Securities and Exchange
Commission on October&nbsp;24, 2003.</FONT></B>
</DIV>

<DIV align="right">
<B><FONT size="2">Registration
No.&nbsp;333-&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<P align="center">
<B><FONT size="4">SECURITIES AND EXCHANGE COMMISSION</FONT></B>

<DIV align="center">
<B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="5">Form&nbsp;S-1</FONT></B>

<DIV align="center">
<B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="center">
<B><FONT size="6">Assurant, Inc.</FONT> *</B>

<DIV align="center">
<I><FONT size="2">(Exact name of Registrant as specified in its
charter)</FONT></I>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Delaware</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">6321</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">39-1126612</FONT></B></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <I><FONT size="2">(State or other jurisdiction of<BR>
    incorporation or organization)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(Primary Standard Industrial<BR>
    Classification Code Number)</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <I><FONT size="2">(I.R.S. Employer<BR>
    Identification No.)</FONT></I></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<B><FONT size="2">One Chase Manhattan Plaza, 41st
Floor</FONT></B>

<DIV align="center">
<B><FONT size="2">New York, NY 10005</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">Telephone: (212)&nbsp;859-7000</FONT></B>

<DIV align="center">
<I><FONT size="2">(Address, including zip code, and telephone
number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">including area code, of Registrant&#146;s
principal executive offices)</FONT></I>
</DIV>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<P align="center">
<B><FONT size="2">Katherine Greenzang, Esq.</FONT></B>

<DIV align="center">
<B><FONT size="2">Senior Vice President, General Counsel and
Secretary</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Assurant, Inc.</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">One Chase Manhattan Plaza,
41st&nbsp;Floor</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">New York, NY 10005</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Telephone: (212)&nbsp;859-7021</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">Facsimile: (212)&nbsp;859-7034</FONT></B>
</DIV>

<DIV align="center">
<I><FONT size="2">(Name, address, including zip code, and
telephone number,</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="2">including area code, of agent for
service)</FONT></I>
</DIV>

<P align="center">
<B><I><FONT size="2">Copies to:</FONT></I></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="50%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" valign="top">
    <B><FONT size="2">Gary I. Horowitz, Esq.<BR>
    Simpson Thacher&nbsp;&#38; Bartlett LLP<BR>
    425&nbsp;Lexington Avenue<BR>
    New York, NY 10017-3954<BR>
    Telephone: (212)&nbsp;455-7113<BR>
    Facsimile: (212)&nbsp;455-2502</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <B><FONT size="2">Susan J. Sutherland, Esq.<BR>
    Skadden, Arps, Slate, Meagher&nbsp;&#38; Flom LLP<BR>
    Four Times Square<BR>
    New York, NY 10036<BR>
    Telephone: (212)&nbsp;735-2388<BR>
    Facsimile: (917)&nbsp;777-2388</FONT></B></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Approximate date of commencement of the
proposed sale of the securities to the
public:</FONT></B><FONT size="2"> As soon as practicable after
the Registration Statement becomes effective.
</FONT>

<P align="center">
<HR size="1" width="26%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If any of the securities being registered on this
form are to be offered on a delayed or continuous basis pursuant
to Rule&nbsp;415 under the Securities Act of 1933, check the
following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this form is filed to register additional
securities for an offering pursuant to Rule&nbsp;462(b) under
the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this form is a post-effective amendment filed
pursuant to Rule&nbsp;462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If this form is a post-effective amendment filed
pursuant to Rule&nbsp;462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If delivery of the prospectus is expected to be
made pursuant to Rule&nbsp;434, check the following
box.&nbsp;&nbsp;&nbsp;&nbsp;<FONT face="wingdings">&#111;</FONT>
</FONT>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<DIV align="center">
<B><FONT size="2">CALCULATION OF REGISTRATION FEE</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Title of Each Class of</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Proposed Maximum Aggregate</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Amount of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Securities to be Registered</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Offering Price(1)(2)</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Registration Fee</FONT></B></TD>
</TR>

<TR>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common Stock, par value $.01 per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$1,000,000,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="bottom">
    <FONT size="2">$80,900
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

<TR>
    <TD colspan="5" align="left"><HR size="1" noshade></TD>

</TR>

</TABLE>
</CENTER>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Estimated solely for the purpose of calculating
    the registration fee pursuant to Rule&nbsp;457(o) under the
    Securities Act of 1933, as amended.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes shares subject to the underwriters&#146;
    over-allotment option.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.</FONT></B>

<DIV align="center">
<HR size="1" width="26%" align="center" noshade>
</DIV>

<P align="left">
<FONT size="2">*Prior to the effectiveness of this Registration
Statement and in connection with the reorganization for the
purpose of reincorporation as described in this Registration
Statement, Assurant, Inc., a Delaware corporation, will become
the successor to the business and operations of Fortis, Inc., a
Nevada corporation.
</FONT>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<DIV align="left">
<HR size="1" width="100%" align="left" noshade>
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="1" cellpadding="5"><TR><TD>
<B><FONT size="2" color="#F93F26">The information in this
prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.</FONT><FONT size="2">
<BR>
</FONT></B>
</TD></TR></TABLE>

<P align="left">
<FONT size="2"> </FONT><I>PROSPECTUS
<FONT color="#F93F26">(Subject to Completion)</FONT></I>

<DIV align="left">
<I><FONT color="#F93F26">Issued &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="4">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Shares</FONT></I>
</DIV>

<DIV align="center">
<I><FONT size="6">Assurant, Inc.</FONT></I>
</DIV>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<I>Common Stock</I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<I><FONT size="2">Fortis Insurance N.V., the selling stockholder
in this offering, is
offering &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock in an underwritten initial public offering.
This is our initial public offering and no public market
currently exists for our common stock. We will not receive any
of the proceeds from the sale of shares by the selling
stockholder. We anticipate that the initial public offering
price of our common stock will be between
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;and
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;per
share.</FONT></I>

<P align="left">
<I><FONT size="2">Fortis N.V. and Fortis SA/NV, through their
affiliates, including their wholly owned subsidiary, Fortis
Insurance N.V., currently indirectly own 100% of our outstanding
common stock. After the offering, Fortis Insurance N.V. will own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock.</FONT></I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<I><FONT size="2">We intend to apply to list our common stock on
the New York Stock Exchange under the symbol
&#147;AIZ.&#148;</FONT></I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">
<B><I>Investing in our common stock involves risks. See
&#147;Risk Factors&#148; beginning on page&nbsp;10.</I></B>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<I><FONT size="2">PRICE
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A
SHARE</FONT></I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underwriting</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Discounts and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Proceeds to Selling</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><I><FONT size="1">Price to Public</FONT></I></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Commissions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stockholder</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Per Share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<FONT size="2">The selling stockholder has granted the
underwriters the right to purchase up to an
additional&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
to cover over-allotments.
</FONT>

<P align="left">
<B><I><FONT size="2">The Securities and Exchange Commission and
state securities regulators have not approved or disapproved
these securities, or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.</FONT></I></B>

<P align="left">
<FONT size="2">The underwriters expect to deliver the shares to
purchasers
on &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004.
</FONT>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="center">
<I><FONT size="5">MORGAN STANLEY</FONT></I>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="50%"></TD>
    <TD width="50%"></TD>
</TR>

<TR valign="top">
    <TD align="left"><I><FONT size="4">CREDIT SUISSE FIRST BOSTON</FONT></I></TD>
    <TD align="right"><I><FONT size="4">MERRILL LYNCH &#38; CO.</FONT></I></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">TABLE OF CONTENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Prospectus Summary
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk Factors
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forward-Looking Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Use of Proceeds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividend Policy
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate Structure and Reorganization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Capitalization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selected Consolidated Financial Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management&#146;s Discussion and Analysis of
    Financial Condition and Results of Operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Regulation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">115</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Management
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Principal and Selling Stockholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certain Relationships and Related Transactions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Certain United States Tax Consequences to
    Non-U.S. Holders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Share Capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Description of Other Securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares Eligible for Future Sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Legal Matters
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Experts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Where You Can Find More Information
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Index to Consolidated Financial Statements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Glossary of Selected Insurance and Reinsurance
    Terms
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">G-1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<HR size="1" width="30%" align="center" noshade>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
2004, which is the 25th day after the date of this prospectus,
all dealers that buy, sell or trade our common stock, whether or
not participating in this offering, may be required to deliver a
prospectus. This delivery requirement is in addition to the
dealers&#146; obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">You should rely only on the information
contained in this prospectus. We have not, and the underwriters
have not, authorized any other person to provide you with
information that is different from that contained in this
prospectus. We are offering to sell and seeking offers to buy
these securities only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of common
stock.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The states in which our insurance subsidiaries
are domiciled have enacted laws which require regulatory
approval for the acquisition of &#147;control&#148; of insurance
companies. Under these laws, there exists a presumption of
&#147;control&#148; when an acquiring party acquires 10% or more
(5% or more, in the case of Florida) of the voting securities of
an insurance company or of a company which itself controls an
insurance company. Therefore, any person acquiring 10% or more
(5% or more, in the case of Florida) of our common stock would
need the prior approval of the state insurance regulators of
these states, or a determination from such regulators that
&#147;control&#148; has not been acquired.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In this prospectus, references to the
&#147;Company,&#148; &#147;Assurant,&#148; &#147;we,&#148;
&#147;us&#148; or &#147;our&#148; refer to (1)&nbsp;Fortis,
Inc., a Nevada corporation, and its subsidiaries, and
(2)&nbsp;Assurant, Inc., a Delaware corporation, and its
subsidiaries after the consummation of the reorganization for
the purpose of reincorporation as described under
&#147;Corporate Structure and Reorganization.&#148; Unless we
specifically state otherwise or the context suggests otherwise,
the information in this prospectus assumes that the
reorganization as described under &#147;Corporate Structure and
Reorganization&#148; has occurred. Unless the context otherwise
requires, references to (1)&nbsp;&#147;Assurant, Inc.&#148;
refer solely to Assurant, Inc., a Delaware corporation, and not
to any of its subsidiaries, (2)&nbsp;&#147;Fortis, Inc.&#148;
refer solely to Fortis, Inc., a Nevada corporation, and not to
any of its subsidiaries, and (3)&nbsp;&#147;Fortis&#148; refer
collectively to Fortis N.V., a public company with limited
liability incorporated as naamloze
</FONT>

<P align="center"><FONT size="2">i
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">vennootschap under Dutch law, and Fortis SA/NV, a
public company with limited liability incorporated as
soci&#233;t&#233; anonyme/ naamloze vennootschap under Belgian
law, the ultimate parent companies of Fortis Insurance N.V., the
selling stockholder in this offering. Unless otherwise stated,
all figures assume no exercise of the underwriters&#146;
over-allotment option. All share amounts contained in this
prospectus will be adjusted to reflect changes that will take
place in connection with the merger for the purpose of
reincorporation. For your convenience, we have provided a
glossary, beginning on page&nbsp;G-1, of selected insurance and
reinsurance terms and have printed these terms in bold-faced
type the first time they are used in this prospectus.
</FONT>
</DIV>

<P align="center"><FONT size="2">ii
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "PROSPECTUS SUMMARY" -->

<P align="center">
<B><FONT size="2">PROSPECTUS SUMMARY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">This summary highlights information contained
elsewhere in this prospectus and may not contain all of the
information that may be important to you. Although this summary
highlights important information about us and what we believe to
be the key aspects of this offering, you should read this
summary together with the more detailed information and our
financial statements and the notes to those financial statements
appearing elsewhere in this prospectus. You should read this
entire prospectus carefully, including the &#147;Risk
Factors&#148; and &#147;Forward-Looking Statements&#148;
sections before making an investment decision.</FONT></I>

<!-- link1 "OUR COMPANY" -->

<P align="center">
<B><FONT size="2">OUR COMPANY</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed <B>homeowners
insurance</B>, manufactured housing homeowners insurance,
<B>debt protection</B> administration, <B>credit insurance</B>,
warranties and extended service contracts, individual health and
small employer group health insurance, group dental insurance,
<B>group disability insurance</B>, <B>group life insurance</B>
and <B>pre-funded funeral insurance</B>. The markets we target
are generally complex, have a relatively limited number of
competitors and, we believe, offer attractive profit
opportunities. In these markets, we leverage the experience of
our management team and apply our expertise in <B>risk
management</B>, underwriting and business-to-business
management, as well as our technological capabilities in complex
administration and systems. Through these activities, we seek to
generate above-average returns by building on specialized market
knowledge, well-established distribution relationships and
economies of scale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of our strategy, we are a leader in
many of our chosen markets and products. We have leadership
positions or are partnered with clients who are leaders in
creditor-placed homeowners insurance, manufactured housing
homeowners insurance and debt protection administration. We are
also a leading writer of group dental plans measured by the
number of <B>master contracts </B>in force, and the largest
writer of pre-funded funeral insurance measured by face amount
of new policies sold. We believe that our leadership positions
give us a sustainable competitive advantage in our chosen
markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have four decentralized operating
business segments to ensure focus on critical activities close
to our target markets and customers, while simultaneously
providing centralized support in key functions. Our four
operating business segments are: Assurant Solutions, Assurant
Health, Assurant Employee Benefits and Assurant PreNeed. Each
operating business segment has its own experienced management
team with the autonomy to make decisions on key operating
matters. These managers are eligible to receive incentive-based
compensation based in part on operating business segment
performance and in part on company-wide performance, thereby
encouraging strong business performance and cooperation across
all our businesses. At the operating business segment level, we
stress disciplined underwriting, careful analysis and constant
improvement and product redesign. At the corporate level, we
provide support services, including investment, asset/liability
matching and capital management, leadership development,
information technology support and other administrative and
finance functions, enabling the operating business segments to
focus on their target markets and distribution relationships
while enjoying the economies of scale realized by operating
these businesses together. Also, our overall strategy and
financial objectives are set and continuously monitored at the
corporate level to ensure that our capital resources are being
properly allocated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Assurant Solutions segment provides specialty
property solutions and consumer protection solutions. Specialty
property solutions primarily include creditor-placed homeowners
insurance (including tracking services) and manufactured housing
homeowners insurance. Consumer protection solutions primarily
include debt protection administration, credit insurance and
warranties and extended service contracts. Our Assurant Health
segment provides individual health insurance, including
short-term and student health insurance, and small employer
group health insurance. Most of the health insurance products we
sell are <B>preferred provider organization (PPO) </B>plans. In
Assurant Employee Benefits, we provide employer- and
employee-paid group dental insurance, as well as group
disability insurance and group life insurance. In Assurant
PreNeed, we
</FONT>

<P align="center"><FONT size="2">1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">provide pre-funded funeral insurance, which
provides <B>whole life insurance</B> death benefits or
<B>annuity</B> benefits used to fund costs incurred in
connection with pre-arranged funerals.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have created strong relationships with our
distributors and clients in each of the niche markets we serve.
In Assurant Solutions, we have strong long-term relationships in
the United States with six of the ten largest mortgage lenders
and servicers, four of the seven largest manufactured housing
builders, four of the six largest general purpose credit card
issuers and six of the ten largest consumer electronics and
appliances retailers. In Assurant Health, we have exclusive
distribution relationships with leading insurance companies,
through which we gain access to a broad distribution network and
a significant number of potential customers, as well as
relationships with independent <B>brokers</B>. In Assurant
Employee Benefits, we distribute our products primarily through
our sales representatives who work through independent employee
benefits advisors, including brokers and other intermediaries.
In Assurant PreNeed, we have an exclusive distribution
relationship with Service Corporation International (SCI), the
largest funeral provider in North America, as well as
relationships with approximately 2,000 funeral homes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the six months ended June&nbsp;30, 2003, we
generated total revenues of $3,455&nbsp;million and net income
of $164&nbsp;million. For the year ended December&nbsp;31, 2002,
we generated total revenues of $6,532&nbsp;million and net
income before cumulative effect of change in accounting
principle of $260&nbsp;million. As of June&nbsp;30, 2003, we had
total assets of $22,738&nbsp;million, including separate
accounts. For the six months ended June&nbsp;30, 2003, we had
total revenues of $1,288&nbsp;million in Assurant Solutions,
$1,009&nbsp;million in Assurant Health, $726&nbsp;million in
Assurant Employee Benefits and $367&nbsp;million in Assurant
PreNeed. For the year ended December&nbsp;31, 2002, we had total
revenues of $2,401&nbsp;million in Assurant Solutions,
$1,912&nbsp;million in Assurant Health, $1,455&nbsp;million in
Assurant Employee Benefits and $727&nbsp;million in Assurant
PreNeed.
</FONT>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe our competitive strengths include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Leadership Positions in Specialized Markets.
    </FONT></I><FONT size="2">We are a market leader in many of our
    chosen markets, and we believe that our leadership positions
    provide us with the opportunity to generate high returns in
    these niche markets.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Strong Relationships with Key Clients and
    Distributors. </FONT></I><FONT size="2">As a result of our
    expertise in business-to-business management, we have created
    strong relationships with our distributors and clients in each
    of the niche markets we serve. We believe these relationships
    enable us to market our products and services to our customers
    in an effective and efficient manner that would be difficult for
    our competitors to replicate.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">History of Product Innovation and Ability to
    Adapt to Changing Market Conditions.
    </FONT></I><FONT size="2">We are able to adapt quickly to
    changing market conditions by tailoring our product and service
    offerings to the specific needs of our clients. By understanding
    the dynamics of our core markets, we design innovative products
    and services to seek to sustain profitable growth and market
    leading positions.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Disciplined Approach to Underwriting and Risk
    Management. </FONT></I><FONT size="2">We focus on generating
    profitability through careful analysis of risks, drawing on our
    experience in core specialized markets and continually seeking
    to improve and redesign our product offerings based on our
    underwriting experience. In addition, we closely monitor
    regulatory and market developments and adapt our approach as we
    deem necessary to achieve our underwriting and risk management
    goals.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Prudent Capital Management.
    </FONT></I><FONT size="2">We focus on generating above-average
    returns on a risk-adjusted basis from our operating activities.
    We believe we have benefited from having the discipline and
    flexibility to deploy capital opportunistically and prudently to
    maximize returns to our stockholders. We invest capital in our
    business segments when we identify attractive profit
    opportunities in our target markets and also take a disciplined
    approach towards withdrawing capital when businesses are no
    longer anticipated to meet our expectations.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Diverse Business Mix and Superior Financial
    Strength. </FONT></I><FONT size="2">We have four operating
    business segments, which are generally not affected in the same
    way by economic and operating trends. Our domestic operating
    subsidiaries have financial strength ratings of A
    (&#147;Excellent&#148;) or A-&nbsp;(&#147;Excellent&#148;) from
    A.M. Best Company (A.M. Best), and two of our domestic operating
    subsidiaries have financial strength ratings of A2
    (&#147;Good&#148;) and A3 (&#147;Good&#148;), respectively, from
    Moody&#146;s Investor Services (Moody&#146;s). We believe our
    solid capital base and overall financial strength allow us to
    distinguish ourselves from our competitors and continue to
    enable us to attract clients that are seeking long-term
    financial stability.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Experienced Management Team with Proven Track
    Record and Entrepreneurial Culture.</FONT></I><FONT size="2"> We
    have a talented and experienced management team both at the
    corporate level and at each of our business segments. Our
    management team has successfully managed our business and
    executed our specialized niche strategy through numerous
    business cycles and political and regulatory challenges.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Growth Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to achieve superior financial
performance by enhancing our leading positions in our
specialized niche insurance and related businesses. We intend to
achieve this objective by continuing to execute the following
strategies in pursuit of profitable growth:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Enhance Market Position in Our Business Lines.
    </FONT></I><FONT size="2">We have been selective in developing
    our product and service offerings and will continue to focus on
    providing products and services to those markets that we believe
    offer attractive growth opportunities. We will also seek to
    continue penetrating our target markets and expand our market
    positions by developing and introducing new products and
    services that are tailored to the specific needs of our clients.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Develop New Distribution Channels and
    Strategic Alliances. </FONT></I><FONT size="2">Our strong,
    multi-channel distribution network comprised of leading market
    participants has been critical to our market penetration and
    growth. We will continue to be selective in developing new
    distribution channels as we seek to expand our market share,
    enter new geographic markets and develop new niche businesses.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Deploy Capital and Resources to Maintain
    Flexibility and Establish or Enhance Market Leading Positions.
    </FONT></I><FONT size="2">We seek to deploy our capital and
    resources in a manner that provides us with the flexibility to
    grow internally through product development, new distribution
    relationships and investments in technology, as well as to
    pursue acquisitions. As we expand through internal growth and
    acquisitions, we intend to leverage our expertise in risk
    management, underwriting and business-to-business management, as
    well as our technological capabilities in running complex
    administration systems and support services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Maintain Disciplined Pricing Approach.
    </FONT></I><FONT size="2">We intend to maintain our disciplined
    pricing approach by seeking to focus on profitable products and
    markets and by pursuing a flexible approach to product design.
    We will continue to pursue pricing strategies and adjust our mix
    of businesses by geography and by product so that we can
    maintain attractive pricing and margins.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Continue to Manage Capital Prudently.
    </FONT></I><FONT size="2">We intend to manage our capital
    prudently relative to our risk exposure to maximize
    profitability and long-term growth in stockholder value. Our
    capital management strategy is to maintain financial strength
    through conservative and disciplined risk management practices.
    We will also maintain our conservative investment portfolio
    management philosophy and properly manage our invested assets in
    order to match the duration of our insurance product liabilities.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Risks Relating to Our Company</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of your evaluation of our Company, you
should take into account the risks associated with our business.
These risks include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="2%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Reliance on Relationships with Significant
    Clients, Distribution Partners and Other Parties.
    </FONT></I><FONT size="2">If our significant clients,
    distribution partners and other parties with which we do
    business decline to renew or seek to terminate our relationships
    or contractual arrangements, our results of operations and
    financial condition could be materially adversely affected. We
    are also subject to the risk that these parties may face
    financial difficulties, reputational issues or problems with
    respect to their own products and services, which may lead to
    decreased sales of products and services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Failure to Attract and Retain Sales
    Representatives or Develop and Maintain Distribution Sources.
    </FONT></I><FONT size="2">An interruption in, or changes to, our
    relationships with various third-party distributors or our
    inability to respond to regulatory changes could impair our
    ability to compete and market our insurance products and
    services and materially adversely affect our results of
    operations and financial condition.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Effect of General Economic, Financial Market
    and Political Conditions.</FONT></I><FONT size="2"> Our results
    of operations and financial condition may be materially
    adversely affected by general economic, financial market and
    political conditions, including insurance industry cycles,
    levels of employment, levels of consumer lending, levels of
    inflation and movements of the financial markets, as well as
    fluctuations in interest rates, monetary policy, demographics,
    and legislative and competitive factors.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Failure to Accurately Predict Benefits and
    Other Costs and Claims. </FONT></I><FONT size="2">We may be
    unable to accurately predict benefits, <B>claims</B> and other
    costs or to manage such costs through our loss limitation
    methods, which could have a material adverse effect on our
    results of operations and financial condition if claims
    substantially exceed our expectations.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Changes in
    Regulation.</FONT></I><FONT size="2"> Legislation or other
    regulatory reform that increases the regulatory requirements
    imposed on us or that changes the way we are able to do business
    may significantly harm our business or results of operations in
    the future.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For more information about these and other risks,
see &#147;Risk Factors&#148; beginning on page&nbsp;10. You
should carefully consider these risk factors together with all
the other information included in this prospectus.
</FONT>

<!-- link1 "OUR CORPORATE STRUCTURE AND REORGANIZATION" -->

<P align="center">
<B><FONT size="2">OUR CORPORATE STRUCTURE AND
REORGANIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant, Inc. is a Delaware corporation and is
currently a wholly owned subsidiary of Fortis, Inc. Assurant,
Inc. has had no operations and nominal financial activity and
will be used solely for the purpose of the reincorporation of
Fortis, Inc., which is organized as a Nevada corporation and of
which 100% of the outstanding common stock is currently
indirectly owned by Fortis N.V. and Fortis SA/NV. Prior to the
closing of this offering, we will effectuate a merger of Fortis,
Inc. with and into Assurant, Inc. for the purpose of
reincorporating Fortis, Inc. in Delaware. As a result of the
reorganization, Assurant, Inc. will be domiciled in Delaware and
will be the successor to the business, operations and
obligations of Fortis, Inc. After the reorganization, our
Company will use the name Assurant, Inc. The ongoing operations
of Assurant, Inc. will be comprised of the existing operations
of Fortis, Inc. and its subsidiaries. Our existing Class&nbsp;A
Common Stock will become Common Stock of Assurant, Inc. in
connection with the merger.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant, Inc. was incorporated in October 2003.
Fortis, Inc. was incorporated in April 1969. Our principal
executive offices are located at One Chase Manhattan Plaza,
41st&nbsp;Floor, New York, New York 10005. Our telephone number
is 212-859-7000.
</FONT>

<P align="center"><FONT size="2">4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">OUR RELATIONSHIP WITH FORTIS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis currently indirectly owns 100% of our
outstanding common stock. Upon completion of this offering,
Fortis will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our outstanding common stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
if the underwriters exercise their over-allotment option in
full. Fortis will have the right to nominate designees to our
board of directors and, subject to limited exceptions, our board
of directors will nominate those designees as follows:
(i)&nbsp;so long as Fortis owns at least 50% of our outstanding
common stock, five designees and (ii)&nbsp;so long as Fortis
owns less than 50% but at least 10% of our outstanding common
stock, two designees. In addition, as long as Fortis holds 50%
or more of our outstanding common stock, certain significant
corporate actions may only be taken with the approval of a
supermajority of our directors, which will require approval of
two or more Fortis directors. In addition, we may have conflicts
of interest with Fortis that may be resolved in a manner that is
unfavorable to us. See &#147;Risk Factors&#151; Risks Related to
Our Relationship with and Separation from Fortis,&#148;
&#147;Description of Share Capital&#151; Anti-takeover Effects
of Certain Provisions of the Certificate of Incorporation,
By-Laws and Delaware General Corporation Law&#151; Certificate
of Incorporation and By-Laws&#148; and
&#147;&#151;Shareholders&#146; Agreement&#148; and &#147;Certain
Relationships and Related Transactions&#151; Shareholders&#146;
Agreement&#148; and &#147;&#151;Cooperation Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis has advised us that it intends to divest
its ownership interest in our Company completely over a period
of time. However, Fortis is not subject to any contractual
obligation to sell any additional shares of our common stock and
may not sell or otherwise dispose of any shares for a period of
180 days after the date of this prospectus without the prior
written consent of Morgan Stanley&nbsp;&#38; Co. Incorporated on
behalf of the underwriters. See &#147;Certain Relationships and
Related Transactions,&#148; &#147;Description of Share
Capital&#151;Shareholders Agreement&#148; and
&#147;&#151;Registration Rights,&#148; &#147;Shares Eligible For
Future Sale&#148; and &#147;Underwriting.&#148;
</FONT>

<P align="center"><FONT size="2">5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">THE OFFERING</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="36%"></TD>
    <TD width="1%"></TD>
    <TD width="63%"></TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock offered by the selling <BR>
     stockholder
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Common stock to be outstanding after this offering
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Over-allotment option
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    to be offered by the selling stockholder if the underwriters
    exercise the over-allotment option in full.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Use of proceeds
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">We will not receive any of the proceeds from the
    sale of shares by the selling stockholder. The selling
    stockholder will receive all net proceeds from the sale of the
    shares of our common stock in this offering.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Dividend policy
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Our board of directors does not currently intend
    to authorize the payment of a dividend on our Common Stock. Any
    determination to pay dividends will be at the discretion of our
    board of directors and will be dependent upon our
    subsidiaries&#146; payment of dividends and/or other statutorily
    permissible payments to us, our results of operations and cash
    flows, our financial position and capital requirements, general
    business conditions, any legal, tax, regulatory and contractual
    restrictions on the payment of dividends and any other factors
    our board of directors deems relevant.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <FONT size="2">Proposed New York Stock Exchange symbol
    </FONT></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">AIZ
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares of common stock shown to be
outstanding after the offering is based upon
8,300,002&nbsp;shares of common stock outstanding as of
June&nbsp;30, 2003.
</FONT>

<P align="center"><FONT size="2">6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">SUMMARY CONSOLIDATED FINANCIAL
INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our summary
historical consolidated financial information for the periods
ended and as of the dates indicated. Assurant, Inc. is a
Delaware corporation and is currently a wholly owned subsidiary
of Fortis, Inc. Assurant, Inc. has had no operations and nominal
financial activity and will be used solely for the purpose of
the reincorporation of Fortis, Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis N.V. and Fortis
SA/NV. Prior to the closing of this offering, we will effectuate
a merger of Fortis, Inc. with and into Assurant, Inc. for the
purpose of reincorporating Fortis, Inc. in Delaware. As a result
of the reorganization, Assurant, Inc. will be domiciled in
Delaware and will be the successor to the business, operations
and obligations of Fortis, Inc. In connection with the
reorganization, our Company will use the name Assurant, Inc. The
ongoing operations of Assurant, Inc. will effectively be
comprised of the existing operations of Fortis, Inc. and its
subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The summary consolidated statement of operations
data for each of the three years ended December&nbsp;31, 2002
are derived from the audited consolidated financial statements
of Fortis, Inc. and its consolidated subsidiaries included
elsewhere in this prospectus, which have been prepared in
accordance with <B>generally accepted accounting principles
</B>in the United States <B>(GAAP)</B>. The summary consolidated
statement of operations data for the six months ended
June&nbsp;30, 2003 and June&nbsp;30, 2002 and the summary
consolidated balance sheet data as of June&nbsp;30, 2003 are
derived from the unaudited interim financial statements of
Fortis, Inc. and its consolidated subsidiaries included
elsewhere in this prospectus. The unaudited interim financial
statements have been prepared on the same basis as the audited
consolidated financial statements of Fortis, Inc. and in our
opinion, include all adjustments consisting only of normal
recurring adjustments, that we consider necessary for a fair
statement of our results of operations and financial condition
for these periods and as of such dates. These historical results
are not necessarily indicative of expected results for any
future period. The results for the six months ended
June&nbsp;30, 2003 are not necessarily indicative of results to
be expected for the full year. You should read the following
summary consolidated financial information together with the
other information contained in this prospectus, including
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the consolidated
financial statements and related notes included elsewhere in
this prospectus.
</FONT>

<P align="center"><FONT size="2">7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="32%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in thousands, except share amounts and per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Summary Consolidated Statement of Operations
    Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Revenues</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,787,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">305,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains (losses) on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,224,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,186,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,211,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Benefits, losses and expenses</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,774,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,678,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">443,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">766,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">794,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">842,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,738,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,620,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,023,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,161,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,981,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,017,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income before cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per Share Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134.85</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average of basic and diluted shares of
    common stock outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,208,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common Stock(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B Common Stock(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C Common Stock(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands, except</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">share amounts and</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">per share data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Summary Consolidated Balance Sheet
    Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents and investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,138,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,738,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy liabilities(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,632,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,778,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per Share Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity per share(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods and dates presented,
    7,750,000&nbsp;shares of our Class&nbsp;A Common Stock were
    issued and outstanding; these shares are held by Fortis
    Insurance N.V., Fortis (US) Funding Partners&nbsp;I LP and
    Fortis (US) Funding Partners&nbsp;II LP. Our existing
    Class&nbsp;A Common Stock will become Common Stock of Assurant,
    Inc. in connection with the merger of Fortis, Inc. with and into
    Assurant, Inc.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods and dates presented,
    150,001&nbsp;shares of our Class&nbsp;B Common Stock were issued
    and outstanding, which were issued as a stock dividend; these
    shares are held by Fortis (US) Funding Partners&nbsp;I LP. See
    &#147;Description of Share Capital&nbsp;&#151; Class&nbsp;B and
    Class&nbsp;C Common Stock&#148; for information relating to the
    issuance and ownership of these shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods and dates presented,
    400,001&nbsp;shares of our Class&nbsp;C Common Stock were issued
    and outstanding, which were issued as a stock dividend; these
    shares are held by Fortis (US) Funding Partners&nbsp;II LP. See
    &#147;Description of Share Capital&nbsp;&#151; Class&nbsp;B and
    Class&nbsp;C Common Stock&#148; for information relating to the
    issuance and ownership of these shares.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Policy liabilities include future policy benefits
    and expenses, unearned premiums and claims and benefits payable.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The proceeds from the sale of each of these
    securities were used by the applicable subsidiary trusts to
    purchase our subordinated debentures, which are eliminated upon
    consolidation. See &#147;Description of Other Securities.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on total stockholders&#146; equity divided
    by 8,300,002 shares issued and outstanding.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "RISK FACTORS" -->

<P align="center">
<B><FONT size="2">RISK FACTORS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">An investment in our common stock involves a
number of risks. You should carefully consider the following
information about these risks, together with the other
information contained in this prospectus, before investing in
our common stock. The risks described below may not be the only
risks we face. Additional risks of which we are not yet aware or
that we currently think are immaterial may also impair our
business, results of operations or financial condition. Any of
the events or circumstances described as risks below could
result in a significant or material adverse effect on our
business, results of operations or financial condition and a
corresponding decline in the market price of our common
stock.</FONT></I>

<P align="left">
<B><I><FONT size="2">Risks Related to Our Company</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our profitability may decline if we are unable
to maintain our relationships with significant clients,
distribution partners and other parties important to the success
of our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our relationships and contractual arrangements
with significant clients, distribution partners and other
parties with which we do business are important to the success
of our business segments. Many of these arrangements are
exclusive. For example, in Assurant Solutions, we have exclusive
relationships with several mortgage lenders and servicers,
retailers, credit card issuers and other financial institutions
through which we distribute our products. In Assurant Health, we
have exclusive distribution relationships for our individual
health insurance products with Insurance Placement Services,
Inc. (IPSI), a wholly owned subsidiary of State Farm Mutual
Automobile Insurance Company (State Farm), United Services
Automobile Association (USAA)&nbsp;and Mutual of Omaha, as well
as a relationship with Health Advocates Alliance, the
<B>association </B>through which we provide many of our
individual health insurance products. We also maintain
contractual relationships with several separate networks of
health and dental care providers, each referred to as a PPO,
through which we obtain discounts. In Assurant PreNeed, we have
an exclusive distribution relationship with SCI. Many of these
arrangements have one to five-year terms. If these parties
decline to renew or seek to terminate these arrangements, our
results of operations and financial condition could be
materially adversely affected. In addition, we are subject to
the risk that these parties may face financial difficulties,
reputational issues or problems with respect to their own
products and services, which may lead to decreased sales of our
products and services. Moreover, if one or more of our clients
or distribution partners consolidate or partner with other
companies, we may lose business or suffer decreased revenues. A
loss of the discount arrangements with PPOs could also lead to
higher medical or dental costs and/or a loss of members to other
medical or dental plans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Sales of our products and services may be
reduced if we are unable to attract and retain sales
representatives or develop and maintain distribution
sources.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We distribute our insurance products and services
through a variety of distribution channels, including our
employed sales representatives, independent employee benefits
specialists, brokers, managing general agents, independent life
agents, financial institutions, independent funeral directors,
association groups and other third-party marketing
organizations. Our relationships with these various distributors
are significant both for our revenues and profits. In Assurant
Solutions and Assurant PreNeed, we depend in large part on sales
representatives to develop and maintain client relationships. In
Assurant Health, we depend in large part on the services of
independent agents and brokers and on associations, including
Health Advocates Alliance, in the marketing of our products. In
Assurant Employee Benefits, we depend on our sales
representatives to form relationships with the independent
agents and brokers who act as advisors to our customers and
market and distribute our products with our sales
representatives. Independent agents and brokers are typically
not exclusively dedicated to our Company and usually also market
products of our competitors. Strong competition exists among
insurers to employ effective sales representatives and form
relationships with agents and brokers of demonstrated ability.
We compete with other insurers for sales representatives, agents
and brokers primarily on the basis of our financial position,
support services, compensation and product features. In
addition, where we rely on independent agents and brokers to
distribute products for us, we face continued competition from
our competitors&#146; products. Moreover, our ability to market
our products and services depends on our ability to tailor our
channels of distribution to comply with changes in the regulatory
</FONT>

<P align="center"><FONT size="2">10
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">environment. Recently, the marketing of health
insurance through association groups has come under increased
scrutiny. An interruption in, or changes to, our relationships
with various third-party distributors or our inability to
respond to regulatory changes could impair our ability to
compete and market our insurance products and services and
materially adversely affect our results of operations and
financial condition.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">General economic, financial market and
political conditions may adversely affect our results of
operations and financial condition.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our results of operations and financial condition
may be materially adversely affected from time to time by
general economic, financial market and political conditions.
These conditions include economic cycles such as insurance
industry cycles, levels of employment, levels of consumer
lending, levels of inflation and movements of the financial
markets. Fluctuations in interest rates, monetary policy,
demographics, and legislative and competitive factors also
influence our performance. During periods of economic downturn:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">individuals and businesses may choose not to
    purchase our insurance products and other related products and
    services, may terminate existing policies or contracts or permit
    them to lapse, may choose to reduce the amount of coverage
    purchased or, in Assurant Employee Benefits and in small group
    employer health insurance in Assurant Health, may have fewer
    employees requiring insurance coverage due to rising
    unemployment levels;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">new <B>disability insurance </B>claims and claims
    on other specialized insurance products tend to rise;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">there is a higher <B>loss ratio</B> on credit
    card and installment loan insurance due to rising unemployment
    levels; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">insureds tend to increase their utilization of
    health and dental benefits if they anticipate becoming
    unemployed or losing benefits.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, general inflationary pressures may
affect the costs of medical and dental care, as well as repair
and replacement costs on our real and personal property lines,
increasing the costs of paying claims. Inflationary pressures
may also affect the costs associated with our pre-funded funeral
insurance policies, particularly those that are guaranteed to
grow with the <B>Consumer Price Index</B>.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our actual claims losses may exceed our
reserves for claims, which may require us to establish
additional reserves that may materially reduce our earnings,
profitability and capital.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain <B>reserves</B> to cover our
estimated ultimate exposure for claims and claim adjustment
expenses with respect to reported and unreported claims incurred
but not reported as of the end of each accounting period.
Reserves, whether calculated under GAAP or <B>statutory
accounting principles (SAP)</B>, do not represent an exact
calculation of exposure, but instead represent our best
estimates, generally involving actuarial projections at a given
time, of what we expect the ultimate settlement and
administration of a claim or group of claims will cost based on
our assessment of facts and circumstances then known. The
adequacy of reserves will be impacted by future trends in claims
severity, frequency, judicial theories of liability and other
factors. These variables are affected by both external and
internal events, such as changes in the economic cycle, changes
in the social perception of the value of work, emerging medical
perceptions regarding physiological or psychological causes of
disability, emerging health issues and new methods of treatment
or accommodation, inflation, judicial trends, legislative
changes and claims handling procedures. Many of these items are
not directly quantifiable, particularly on a prospective basis.
Reserve estimates are refined as experience develops.
Adjustments to reserves, both positive and negative, are
reflected in the statement of operations of the period in which
such estimates are updated. Because establishment of reserves is
an inherently uncertain process involving estimates of future
losses, there can be no certainty that ultimate losses will not
exceed existing claims reserves. Future loss development could
require reserves to be increased, which could have a material
adverse effect on our earnings in the periods in which such
increases are made.
</FONT>

<P align="center"><FONT size="2">11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We may be unable to accurately predict
benefits, claims and other costs or to manage such costs through
our loss limitation methods, which could have a material adverse
effect on our results of operations and financial
condition.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends in large part on
accurately predicting benefits, claims and other costs,
including medical and dental costs, and predictions regarding
the frequency and magnitude of claims on our disability and
property coverages. It also depends on our ability to manage
future benefit and other costs through product design,
underwriting criteria, <B>utilization review </B>or <B>claims
management </B>and, in health and dental insurance, negotiation
of favorable provider contracts. The aging of the population and
other demographic characteristics and advances in medical
technology continue to contribute to rising health care costs.
Changes in health and dental care practices, inflation, new
technologies, the cost of prescription drugs, clusters of high
cost cases, changes in the regulatory environment, economic
factors, the occurrence of catastrophes and numerous other
factors affecting the cost of health and dental care and the
frequency and severity of claims in all our business segments
may adversely affect our ability to predict and manage costs and
claims, as well as our business, results of operations and
financial condition. The judicial and regulatory environments,
changes in the composition of the kinds of work available in the
economy, market conditions and numerous other factors may also
materially adversely affect our ability to manage claim costs.
As a result of one or more of these factors or other factors,
claims could substantially exceed our expectations, which could
have a material adverse effect on our results of operations and
financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As industry practices and legal, judicial, social
and other environmental conditions change, unexpected and
unintended issues relating to claims and coverage may emerge.
These issues could materially adversely affect our results of
operations and financial condition by either extending coverage
beyond our underwriting intent or by increasing the number or
size of claims or both. We may be limited in our ability to
respond to such changes, by insurance regulations, existing
contract terms, contract filing requirements, market conditions
or other factors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our investment portfolio is subject to several
risks that may diminish the value of our invested assets and
affect our sales and profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Our investment portfolio may suffer reduced
returns or losses that could reduce our profitability.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment returns are an important part of our
overall profitability and significant fluctuations in the fixed
income market could impair our profitability, financial
condition and/or cash flows. Our investments are subject to
market-wide risks and fluctuations, as well as to risks inherent
in particular securities. In particular, volatility of claims
may force us to liquidate securities prior to maturity, which
may cause us to incur capital losses. If we do not structure our
investment portfolio so that it is appropriately matched with
our insurance liabilities, we may be forced to liquidate
investments prior to maturity at a significant loss to cover
such liabilities. For the six month period ended June&nbsp;30,
2003, our net investment income was $306&nbsp;million and our
net realized gains on investments were $7&nbsp;million, which
collectively accounted for approximately 9% of our total
revenues during such period. For the year ended
December&nbsp;31, 2002, our net investment income was
$632&nbsp;million and our net realized losses on investments
were $118&nbsp;million, which collectively accounted for
approximately 8% of our total revenues during such period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The performance of our investment portfolio is
subject to fluctuations due to changes in interest rates and
market conditions.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Changes in interest rates can negatively affect
the performance of some of our investments. Interest rate
volatility can reduce unrealized gains or create unrealized
losses in our portfolios. Interest rates are highly sensitive to
many factors, including governmental monetary policies, domestic
and international economic and political conditions and other
factors beyond our control. Fluctuations in interest rates
affect our returns on, and the market value of, fixed maturity
and short-term investments, which comprised $9,212&nbsp;million,
or 86%, of the fair value of our total investments as of
June&nbsp;30, 2003 and $8,719&nbsp;million, or 87%, as of
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair market value of the fixed maturity
securities in our portfolio and the investment income from these
securities fluctuate depending on general economic and market
conditions. The fair market value
</FONT>

<P align="center"><FONT size="2">12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">generally increases or decreases in an inverse
relationship with fluctuations in interest rates, while net
investment income realized by us from future investments in
fixed maturity securities will generally increase or decrease
with interest rates. In addition, actual net investment income
and/or cash flows from investments that carry prepayment risk,
such as mortgage-backed and other asset-backed securities, may
differ from those anticipated at the time of investment as a
result of interest rate fluctuations. In periods of declining
interest rates, mortgage prepayments generally increase and
mortgage-backed securities, commercial mortgage obligations and
bonds in our investment portfolio are more likely to be prepaid
or redeemed as borrowers seek to borrow at lower interest rates,
and we may be required to reinvest those funds in lower
interest-bearing investments. As of June&nbsp;30, 2003,
mortgage-backed and other asset-backed securities represented
approximately $2,100&nbsp;million, or 20%, of the fair value of
our total investments.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Because substantially all of our fixed maturity
securities are classified as available for sale, changes in the
market value of these securities are reflected in our balance
sheet. Similar treatment is not available for liabilities.
Therefore, interest rate fluctuations affect the value of our
investments and could materially adversely affect our results of
operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We employ asset/ liability matching strategies to
reduce the adverse effects of interest rate volatility and to
ensure that cash flows are available to pay claims as they
become due. Our asset/ liability matching strategies include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">asset/liability duration management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">structuring our bond and commercial mortgage loan
    portfolios to limit the effects of prepayments; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">consistent monitoring of, and appropriate changes
    to, the pricing of our products.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">However, these strategies may fail to eliminate
or reduce the adverse effects of interest rate volatility, and
no assurances can be given that significant fluctuations in the
level of interest rates will not have a material adverse effect
on our results of operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Assurant PreNeed generally writes
whole life insurance policies with increasing death benefits and
obtains much of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. As of June&nbsp;30, 2003,
approximately 70% of Assurant PreNeed&#146;s in force insurance
policy reserves related to policies that provide for death
benefit growth, some of which provide for minimum death benefit
growth pegged to changes in the Consumer Price Index. In
extended periods of declining interest rates or high inflation,
there may be compression in the spread between Assurant
PreNeed&#146;s death benefit growth rates and its investment
earnings. As a result, declining interest rates or high
inflation rates may have a material adverse effect on our
results of operations and our overall financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Employee Benefits calculates reserves
for long-term disability and life <B>waiver of premium
</B>claims using net present value calculations based on current
interest rates at the time claims are funded and expectations
regarding future interest rates. If interest rates decline,
reserves for open and/or new claims would need to be calculated
using lower discount rates thereby increasing the net present
value of those claims and the required reserves. Depending on
the magnitude of the decline, this could have a material adverse
effect on our results of operations and financial condition. In
addition, investment income may be lower than that assumed in
setting premium rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Our investment portfolio is subject to credit
risk.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to credit risk in our investment
portfolio, primarily from our investments in corporate bonds and
preferred stocks. Defaults by third parties in the payment or
performance of their obligations could reduce our investment
income and realized investment gains or result in investment
losses. Further, the value of any particular fixed maturity
security is subject to impairment based on the creditworthiness
of a given issuer. As of June&nbsp;30, 2003, we held
$8,766&nbsp;million of fixed maturity securities, or 82% of the
fair value of our total invested assets at such date. Our fixed
maturity portfolio also includes below investment grade
securities, which comprised 6% of the fair value of our total
fixed maturity securities at June&nbsp;30, 2003 and
December&nbsp;31,
</FONT>

<P align="center"><FONT size="2">13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">2002. These investments generally provide higher
expected returns but present greater risk and can be less liquid
than investment grade securities. A significant increase in
defaults and impairments on our fixed maturity securities
portfolio could materially adversely affect our results of
operations and financial condition. Other than temporary
impairment losses on our available for sale securities totaled
$13&nbsp;million for the six months ended June&nbsp;30, 2003 and
$85&nbsp;million for the year ended December&nbsp;31, 2002.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, less than 1% of the
fair value of our total investments was invested in common
stock; however, we have had higher percentages in the past and
may make more such investments in the future. Investments in
common stock generally provide higher expected total returns,
but present greater risk to preservation of principal than our
fixed income investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, while currently we do not utilize
derivative instruments to hedge or manage our interest rate or
equity risk, we may do so in the future. Derivative instruments
generally present greater risk than fixed income investments or
equity investments because of their greater sensitivity to
market fluctuations. Effective as of July&nbsp;1, 2003, we
utilize derivative instruments in managing Assurant
PreNeed&#146;s exposure to inflation risk. While these
instruments seek to protect a portion of Assurant PreNeed&#146;s
existing business that is tied to the Consumer Price Index, a
sharp increase in inflation could have a material adverse effect
on our results of operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Our commercial mortgage loans and real estate
investments subject us to liquidity risk.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, commercial mortgage
loans on real estate investments represented approximately 8% of
the fair value of our total investments. These types of
investments are relatively illiquid, thus increasing our
liquidity risk. In addition, if we require extremely large
amounts of cash on short notice, we may have difficulty selling
these investments at attractive prices, in a timely manner, or
both.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">The risk parameters of our investment
portfolio may not target an appropriate level of risk, thereby
reducing our profitability and diminishing our ability to
compete and grow.</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We seek to earn returns on our investments to
enhance our ability to offer competitive rates and prices to our
customers. Accordingly, our investment decisions and objectives
are a function of the underlying risks and product profiles of
each of our business segments. However, we may not succeed in
targeting an appropriate overall risk level for our investment
portfolio. As a result, the return on our investments may be
insufficient to meet our profit targets over the long-term,
thereby reducing our profitability. If in response we choose to
increase our product prices to maintain profitability, we may
diminish our ability to compete and grow.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Catastrophe losses, including man-made
catastrophe losses, could materially reduce our profitability
and have a material adverse effect on our results of operations
and financial condition.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our insurance operations expose us to claims
arising out of catastrophes, particularly in our homeowners,
life and other personal business lines. We have experienced, and
expect in the future to experience, catastrophe losses that may
materially reduce our profitability or have a material adverse
effect on our results of operations and financial condition.
Catastrophes can be caused by various natural events, including
hurricanes, windstorms, earthquakes, hailstorms, severe winter
weather, fires and epidemics, or can be man-made catastrophes,
including terrorist attacks or accidents such as airplane
crashes. The frequency and severity of catastrophes are
inherently unpredictable. Catastrophe losses can vary widely and
could significantly exceed our recent historic results. It is
possible that both the frequency and severity of man-made
catastrophes will increase and that we will not be able to
implement exclusions from coverage in our policies or obtain
<B>reinsurance </B>for such catastrophes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The extent of losses from a catastrophe is a
function of both the total amount of insured exposure in the
area affected by the event and the severity of the event. Most
of our catastrophe claims in the past have related to homeowners
and other personal lines coverages, which for the six months
ended June&nbsp;30, 2003 represented approximately 23% of our
<B>net earned premiums and other considerations</B> in our
Assurant Solutions segment. In addition, as of June&nbsp;30,
2003, approximately 27% of the insurance in force in our
homeowners and other personal lines related to properties
located in California, Florida and Texas. As a result of our
creditor-placed homeowners insurance product, our concentration
in these areas may increase in the future. This is because in
</FONT>

<P align="center"><FONT size="2">14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">our creditor-placed homeowners insurance line, we
agree to provide homeowners insurance coverage automatically. If
other insurers withdraw coverage in these or other states, this
may lead to <B>adverse selection </B>and increased utilization
of our creditor-placed homeowners insurance in these areas.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Claims resulting from natural or man-made
catastrophes could cause substantial volatility in our financial
results for any fiscal quarter or year and could materially
reduce our profitability or harm our financial condition. Our
ability to write new business also could be affected. Increases
in the value and geographic concentration of insured property
and the effects of inflation could increase the severity of
claims from catastrophes in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our group life and health insurance
operations could be materially impacted by man-made catastrophes
such as terrorist attacks or by an epidemic that causes a
widespread increase in <B>mortality</B>, <B>morbidity</B> or
disability rates or that causes an increase in the need for
medical care. For example, the influenza epidemic of 1918 caused
several million deaths. Losses due to man-made catastrophes
would not generally be covered by reinsurance and could have a
material adverse effect on our results of operations and
financial condition. In addition, in Assurant PreNeed the
average age of policyholders is in excess of 70&nbsp;years. This
group is more susceptible to epidemics than the overall
population, and an epidemic resulting in a higher incidence of
mortality could have a material adverse effect on our results of
operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our ability to manage these risks depends in part
on our successful utilization of catastrophic property and life
reinsurance to limit the size of property and life losses from a
single event or multiple events, and life and disability
reinsurance to limit the size of life or disability insurance
exposure on an individual insured life. It also depends in part
on state regulation that may prohibit us from excluding such
risks or from withdrawing from or increasing premium rates in
catastrophe-prone areas. As discussed further below, catastrophe
reinsurance for our <B>group insurance </B>lines is not
currently widely available. This means that the occurrence of a
significant catastrophe could materially reduce our
profitability and have a material adverse effect on our results
of operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Reinsurance may not be available or adequate
to protect us against losses, and we are subject to the credit
risk of reinsurers.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our overall risk and capacity
management strategy, we purchase reinsurance for certain risks
underwritten by our various business segments. Market conditions
beyond our control determine the availability and cost of the
reinsurance protection we purchase. For example, subsequent to
the terrorist assaults of September&nbsp;11, 2001, reinsurance
for man-made catastrophes became generally unavailable due to
capacity constraints and, to the limited extent available, much
more expensive. The high cost of reinsurance or lack of
affordable coverage could adversely affect our results. If we
fail to obtain sufficient reinsurance, it could adversely affect
our ability to write future business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our business, we have reinsured
certain life, property and casualty and health risks to
reinsurers. Although the reinsurer is liable to us to the extent
of the <B>ceded </B>reinsurance, we remain liable as the direct
insurer on all risks reinsured. As a result, ceded reinsurance
arrangements do not eliminate our obligation to pay claims. We
are subject to credit risk with respect to our ability to
recover amounts due from reinsurers. Our reinsurers may not pay
the reinsurance recoverables that they owe to us or they may not
pay such recoverables on a timely basis. A reinsurer&#146;s
insolvency, underwriting results or investment returns may
affect its ability to fulfill reinsurance obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our reinsurance facilities are generally subject
to annual renewal. We may not be able to maintain our current
reinsurance facilities and, even where highly desirable or
necessary, we may not be able to obtain other reinsurance
facilities in adequate amounts and at favorable rates. If we are
unable to renew our expiring facilities or to obtain new
reinsurance facilities, either our net exposures would increase
or, if we are unwilling to bear an increase in net exposures, we
may have to reduce the level of our underwriting commitments.
Either of these potential developments could materially
adversely affect our results of operations and financial
condition.
</FONT>

<P align="center"><FONT size="2">15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We have sold businesses through reinsurance
that could again become our direct financial and administrative
responsibility if the purchasing companies were to become
insolvent.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have sold businesses through reinsurance ceded
to third parties, such as our 2001 sale of the insurance
operations of our Fortis Financial Group (FFG) division to The
Hartford Financial Services Group Inc. (The Hartford). The
assets backing the liabilities on these businesses are held in a
trust, and the <B>separate accounts </B>relating to the FFG
business are still reflected on our balance sheet. However, we
would be responsible for administering this business in the
event of a default by the reinsurer. We do not have the
administrative systems and capabilities to process this business
today. Accordingly, we would need to obtain those capabilities
in the event of an insolvency of one or more of the reinsurers
of these businesses. We might be forced to obtain such
capabilities on unfavorable terms, with a resulting material
adverse effect on our results of operations and financial
condition. In addition, under the reinsurance agreement, The
Hartford is obligated to contribute funds to increase the value
of the separate accounts relating to the business sold if such
value declines. If The Hartford fails to fulfill these
obligations, we will be obligated to make these payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We are exposed to the credit risk of our
agents in Assurant PreNeed and our clients in Assurant
Solutions.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We advance agents&#146; commissions as part of
our pre-funded funeral insurance product offerings. These
advances are a percentage of the total face amount of coverage
as opposed to a percentage of the first-year premium paid, a
formula that is more common in other life insurance markets.
There is a one-year payback provision against the agency if
death or lapse occurs within the first policy year. There is a
very large producer within Assurant PreNeed and if it were
unable to fulfill its payback obligations, it could have an
adverse effect on our results of operations and financial
condition. In addition, we are subject to the credit risk of the
parties with which we contract in Assurant Solutions. If these
parties fail to remit payments owed to us or pass on payments
they collect on our behalf, it could have an adverse effect on
our results of operations. For example, the affiliate of a
client with whom we do business has declared bankruptcy. In the
event that this client&#146;s reinsurer does not honor its
claims obligation, we would be liable for making payment, which
we estimate to be approximately $16&nbsp;million, net of
offsetting collateral.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The financial strength of our insurance
company subsidiaries is rated by A.M. Best and Moody&#146;s, and
a decline in these ratings could affect our standing in the
insurance industry and cause our sales and earnings to
decrease.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Ratings have become an increasingly important
factor in establishing the competitive position of insurance
companies. All of our domestic operating subsidiaries are rated
by A.M. Best and two of our domestic operating subsidiaries,
Fortis Benefits Insurance Company (which entity&#146;s name will
be changed subsequent to the offering contemplated by this
prospectus) and John Alden Life Insurance Company (John Alden),
are rated by Moody&#146;s. The ratings reflect A.M. Best&#146;s
and Moody&#146;s opinions of our subsidiaries&#146; financial
strength, operating performance, strategic position and ability
to meet their obligations to policyholders. The ratings are not
evaluations directed to investors and are not recommendations to
buy, sell or hold our securities. These ratings are subject to
periodic review by A.M. Best and Moody&#146;s, and we cannot
assure you that we will be able to retain these ratings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;25, 2003, most of our
domestic operating subsidiaries had A.M. Best financial strength
ratings of A (&#147;Excellent&#148;), which is the second
highest of ten ratings categories and the highest within the
category based on modifiers (i.e., A and A- are
&#147;Excellent&#148;). As of that same date, our other domestic
operating subsidiaries had A.M. Best financial strength ratings
of A-(&#147;Excellent&#148;), which is the second highest of ten
ratings categories and the lowest within the category based on
modifiers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Moody&#146;s financial strength rating as of
September&nbsp;25, 2003 was A2 (&#147;Good&#148;) for Fortis
Benefits Insurance Company, which is the third highest of nine
ratings categories and mid-range within the category based on
modifiers (i.e., A1, A2 and A3 are &#147;Good&#148;), and A3
(&#147;Good&#148;) for John Alden, which is the third highest of
nine ratings categories and the lowest within the category based
on modifiers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rating agencies review their ratings periodically
and our current ratings may not be maintained in the future. If
our ratings are reduced from their current levels by A.M. Best
or Moody&#146;s, or placed under
</FONT>

<P align="center"><FONT size="2">16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">surveillance or review with possible negative
implications, our competitive position in the respective
insurance industry segments could suffer and it could be more
difficult for us to market our products. Due to the competitive
environment in the insurance industry, which may adversely
affect our revenues, the inherent uncertainty in determining
reserves for future claims, which may cause us to increase our
reserves for claims, the outcome of pending litigation and
regulatory investigations, which may adversely affect our
financial position and reputation, and possible changes in the
methodology or criteria applied by the rating agencies, rating
agencies may take action to lower our ratings in the future. As
customers and their advisors place importance on our financial
strength ratings, we may lose customers and compete less
successfully if we are downgraded. In addition, ratings impact
our ability to attract investment capital on favorable terms. If
our financial strength ratings are reduced from their current
levels by A.M. Best or Moody&#146;s, our cost of borrowing would
likely increase, our sales and earnings could decrease and our
results of operations and financial condition could be
materially adversely affected.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The failure to effectively maintain and
modernize our information systems could adversely affect our
business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is dependent upon our ability to
keep up to date with technological advances. This is
particularly important in Assurant Solutions, where our systems,
including our ability to keep our systems fully integrated with
those of our distribution partners, are critical to the
operation of our business. Our failure to update our systems to
reflect technological advancements may adversely affect our
relationships and ability to do business with our client
partners.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, our business depends significantly
on effective information systems, and we have many different
information systems for our various businesses. We must commit
significant resources to maintain and enhance our existing
information systems and develop new information systems in order
to keep pace with continuing changes in information processing
technology, evolving industry and regulatory standards and
changing customer preferences. As a result of our acquisition
activities, we have acquired additional information systems. Our
failure to maintain effective and efficient information systems,
or our failure to efficiently and effectively consolidate our
information systems to eliminate redundant or obsolete
applications, could have a material adverse effect on our
results of operations and financial condition. If we do not
maintain adequate systems we could experience adverse
consequences, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">inadequate information on which to base pricing,
    underwriting and reserving decisions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the loss of existing customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">difficulty in attracting new customers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">customer, provider and agent disputes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory problems, such as failure to meet
    prompt payment obligations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">litigation exposure; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increases in administrative expenses.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our management information, internal control and
financial reporting systems may need further enhancements and
development to satisfy the financial and other reporting
requirements of being a public company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Failure to properly maintain the integrity of
our proprietary information and information systems as well as
to protect our clients&#146; confidential information and
privacy could result in the loss of customers, reduction to our
profitability and/ or subject us to fines and
penalties</FONT></B><FONT size="2">.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business depends in part on our ability to
maintain, or access through outsourcing arrangements with third
parties, information systems and to ensure the continued
integrity of our proprietary information. A number of our
businesses are subject to privacy regulations and to
confidentiality obligations. For example, the collection and use
of patient data in our Assurant Health segment is the subject of
national and state legislation, including the Health Insurance
Portability and Accountability Act of 1996 (HIPAA),&nbsp;and
certain
</FONT>

<P align="center"><FONT size="2">17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">of the activities conducted by our Assurant
Solutions segment are subject to the privacy regulations of the
Gramm-Leach-Bliley Act. We also have contractual obligations to
protect certain confidential information we obtain from our
existing vendors and clients. These obligations generally
include protecting such confidential information in the same
manner and to the same extent as we protect our own confidential
and proprietary information. In addition, we must develop,
implement and maintain a comprehensive written information
security program with appropriate administrative, technical and
physical safeguards to protect such confidential information. If
we do not properly comply with privacy regulations and protect
confidential information we could experience adverse
consequences, including regulatory problems, loss of reputation
and client litigation.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Risks Related to Our Industry&#151;Cost
of compliance with privacy laws could adversely affect our
business and results of operations.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We may not find suitable acquisition
candidates or new insurance ventures and even if we do, we may
not successfully integrate any such acquired companies or
successfully invest in such ventures.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, we evaluate possible
acquisition transactions and the start-up of complementary
businesses, and at any given time, we may be engaged in
discussions with respect to possible acquisitions and new
ventures. We cannot assure you that we will be able to identify
suitable acquisition transactions or insurance ventures, that
such transactions will be financed and completed on acceptable
terms or that our future acquisitions or ventures will be
successful. The process of integrating any companies we do
acquire or investing in new ventures could have a material
adverse effect on our results of operations and financial
condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, implementation of an acquisition
strategy entails a number of risks, including, among other
things, inaccurate assessment of undisclosed liabilities,
difficulties in realizing projected efficiencies, synergies and
cost savings, failure to achieve anticipated revenues, earnings
or cash flow, and increase in our indebtedness and a limitation
in our ability to access additional capital when needed. Our
failure to adequately address these acquisition risks could
materially adversely affect our results of operations and
financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The inability of our subsidiaries to pay
dividends to us in sufficient amounts could harm our ability to
meet our obligations and pay future stockholder
dividends.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a holding company whose principal assets are
the capital stock of our subsidiaries, we rely primarily on
dividends and other statutorily permissible payments from our
subsidiaries to meet our obligations for payment of interest and
principal on outstanding debt obligations, dividends to
stockholders (including any dividends on our common stock) and
corporate expenses. The ability of our subsidiaries to pay
dividends and to make such other payments in the future will
depend on their <B>statutory surplus,</B> future <B>statutory
earnings </B>and regulatory restrictions. Except to the extent
that we are a creditor with recognized claims against our
subsidiaries, claims of the subsidiaries&#146; creditors,
including policyholders, have priority with respect to the
assets and earnings of the subsidiaries over the claims of our
creditors. If any of our subsidiaries should become insolvent,
liquidate or otherwise reorganize, our creditors and
stockholders will have no right to proceed against the assets of
that subsidiary or to cause the liquidation, bankruptcy or
winding-up of the subsidiary under applicable liquidation,
bankruptcy or winding-up laws. The applicable insurance laws of
the jurisdiction where each of our insurance subsidiaries is
domiciled would govern any proceedings relating to that
subsidiary. The insurance authority of that jurisdiction would
act as a liquidator or rehabilitator for the subsidiary. Both
creditors and policyholders of the subsidiary would be entitled
to payment in full from the subsidiary&#146;s assets before we,
as a stockholder, would be entitled to receive any distribution
from the subsidiary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payment of dividends to us by any of our
operating subsidiaries in excess of a certain amount (i.e.,
extraordinary dividends) must be approved by the
subsidiary&#146;s domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which our subsidiaries are domiciled is the lesser
of (i)&nbsp;10% of the statutory surplus as of the end of the
prior year or (ii)&nbsp;the prior year&#146;s <B>statutory net
income</B>. In some states, the formula is the greater amount of
clauses (i)&nbsp;and (ii). Some states, however, have an
additional stipulation that dividends may only be paid out of
earned surplus. In addition, we
</FONT>

<P align="center"><FONT size="2">18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">have entered into an agreement with the Florida
Insurance Department pursuant to which, until August of 2004,
two of our subsidiaries have agreed to limit the amount of
ordinary dividends they would pay to us to an amount no greater
than 50% of the amount otherwise permitted under Florida law.
Likewise, one of our subsidiaries, First Fortis Life Insurance
Company (which entity&#146;s name will be changed subsequent to
the offering contemplated by this prospectus), has entered into
an agreement with the New York Insurance Department pursuant to
which it has agreed not to pay any ordinary dividends to us
until fiscal year 2004. See &#147;Regulation&#151;United
States&#151;State Regulation&#151;Insurance
Regulation&nbsp;Concerning Dividends.&#148; If insurance
regulators determine that payment of an ordinary dividend or any
other payments by our insurance subsidiaries to us (such as
payments under a tax sharing agreement or payments for employee
or other services) would be adverse to policyholders or
creditors, the regulators may block such payments that would
otherwise be permitted without prior approval. No assurance can
be given that there will not be further regulatory actions
restricting the ability of our insurance subsidiaries to pay
dividends. Based on the dividend restrictions under applicable
laws and regulations, the maximum amount of dividends that our
subsidiaries could pay to us in 2003 without regulatory approval
is approximately $290&nbsp;million, of which approximately
$19&nbsp;million had been paid as of June&nbsp;30, 2003. We
expect that as a result of statutory accounting for our sold
businesses, the maximum amount of dividends our subsidiaries
will be able to pay to us will be significantly lower in 2004.
If the ability of insurance subsidiaries to pay dividends or
make other payments to us is materially restricted by regulatory
requirements, it could adversely affect our ability to pay any
dividends on our common stock and/ or service our debt and pay
our other corporate expenses.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Risks Related to Our Industry</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We face significant competitive pressures in
our businesses, which may reduce premium rates and prevent us
from pricing our products at rates that will allow us to be
profitable.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In each of our lines of business, we compete with
other insurance companies or service providers, depending on the
line and product, although we have no single competitor who
competes against us in all of the business lines in which we
operate. Competition in our businesses is based on many factors,
including quality of service, product features, price, scope of
distribution, scale, financial strength ratings and name
recognition. We compete, and will continue to compete, for
customers and distributors with many insurance companies and
other financial services companies. We compete not only for
business and individual customers, employer and other group
customers, but also for agents and distribution partners. Some
of our competitors may offer a broader array of products than
our specific subsidiaries with which they compete in particular
markets, may have a greater diversity of distribution resources,
may have better brand recognition, may from time to time have
more competitive pricing, may have lower cost structures or,
with respect to insurers, may have higher financial strength or
claims paying ratings. Some may also have greater financial
resources with which to compete. As a result of judicial
developments and changes enacted by the Office of the
Comptroller of the Currency, financial institutions are now able
to offer a substitute product similar to credit insurance as
part of their basic loan agreement with customers without being
subject to insurance regulations. Also, as a result of the
Gramm-Leach-Bliley Act, which was enacted in November 1999,
financial institutions are now able to affiliate with other
insurance companies to offer services similar to our own. This
has resulted in new competitors with significant financial
resources entering some of our markets. Moreover, some of our
competitors may have a lower target for returns on capital
allocated to their business than we do, which may lead them to
price their products and services lower than we do. In addition,
from time to time, companies enter and exit the markets in which
we operate, thereby increasing competition at times when there
are new entrants. For example, several large insurance companies
have recently entered the market for individual health insurance
products. We may lose business to competitors offering
competitive products at lower prices, or for other reasons,
which could materially adversely affect our results of
operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In certain markets, we compete with organizations
that have a substantial market share. In addition, with regard
to Assurant Health, organizations with sizable market share or
provider-owned plans may be able to obtain favorable financial
arrangements from health care providers that are not available
to us. Without our own similar arrangements, we may not be able
to compete effectively in such markets.
</FONT>

<P align="center"><FONT size="2">19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">New competition could also cause the supply of
insurance to change, which could affect our ability to price our
products at attractive rates and thereby adversely affect our
underwriting results. Although there are some impediments facing
potential competitors who wish to enter the markets we serve,
the entry of new competitors into our markets can occur,
affording our customers significant flexibility in moving to
other insurance providers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The insurance industry is cyclical, which may
impact our results.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The insurance industry is cyclical. The segments
of the insurance markets in which we operate tend not to be
correlated to each other, with each segment having its own
cyclicality. Periods of intense price competition due to
excessive underwriting capacity, periods when shortages of
underwriting capacity permit more favorable rate levels,
consequent fluctuations in underwriting results and the
occurrence of other losses characterize the conditions in these
markets. Historically, insurers have experienced significant
fluctuations in operating results due to volatile and sometimes
unpredictable developments, many of which are beyond the direct
control of the insurer, including competition, frequency of
occurrence or severity of catastrophic events, levels of
capacity, general economic conditions and other factors. This
may cause a decline in revenue at times in the cycle if we
choose not to reduce our product prices in order to maintain our
market position, because of the adverse effect on profitability
of such a price reduction. We can be expected therefore to
experience the effects of such cyclicality and changes in
customer expectations of appropriate premium levels, the
frequency or severity of claims or other loss events or other
factors affecting the insurance industry that generally could
have a material adverse effect on our results of operations and
financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The insurance and related businesses in which
we operate may be subject to periodic negative publicity, which
may negatively impact our financial results.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The nature of the market for the insurance and
related products and services we provide is that we interface
with and distribute our products and services ultimately to
individual consumers. There may be a perception that these
purchasers may be unsophisticated and in need of consumer
protection. Accordingly, from time to time, consumer advocate
groups or the media may focus attention on our products and
services, thereby subjecting our industries to periodic negative
publicity. We may also be negatively impacted if another company
in one of our industries engages in practices resulting in
increased public attention to our businesses. Negative publicity
may result in increased regulation and legislative scrutiny of
industry practices as well as increased litigation, which may
further increase our costs of doing business and adversely
affect our profitability by impeding our ability to market our
products and services, requiring us to change our products or
services or increasing the regulatory burdens under which we
operate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our business is subject to risks related to
litigation and regulatory actions.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to the occasional employment-related
litigation to which all businesses are subject, we are a
defendant in actions arising out of, and are involved in various
regulatory investigations and examinations relating to, our
insurance and other related business operations. We may from
time to time be subject to a variety of legal and regulatory
actions relating to our current and past business operations,
including, but not limited to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes over coverage or claims adjudication;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes regarding sales practices, disclosures,
    premium refunds, licensing, regulatory compliance and
    compensation arrangements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes with our agents, producers or network
    providers over compensation and termination of contracts and
    related claims;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes concerning past premiums charged by
    companies acquired by us for coverage that may have been based
    on factors such as race;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes relating to customers regarding the
    ratio of premiums to benefits in our various business segments;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes alleging packaging of credit insurance
    products with other products provided by financial institutions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes relating to certain <B>excess of
    loss</B> programs in the London market;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes with taxing authorities regarding our
    tax liabilities; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disputes relating to certain businesses acquired
    or disposed of by us.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, plaintiffs continue to bring new
types of legal claims against insurance and related companies.
Current and future court decisions and legislative activity may
increase our exposure to these types of claims. Multiparty or
class action claims may present additional exposure to
substantial economic, non-economic or punitive damage awards.
The loss of even one of these claims, if it resulted in a
significant damage award or a judicial ruling that was otherwise
detrimental, could have a material adverse effect on our results
of operations and financial condition. This risk of potential
liability may make reasonable settlements of claims more
difficult to obtain. We cannot determine with any certainty what
new theories of recovery may evolve or what their impact may be
on our businesses. We believe we have made adequate reserves in
our financial statements against all litigation known to us, but
we cannot be certain our estimates of probable outcomes of such
litigation will prove to be accurate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are various governmental and administrative
investigations and proceedings pending against us. For example,
an indictment has been issued in Minnesota alleging that one of
our subsidiaries and two corporate officers of Assurant
Solutions each violated the Minnesota Fair Campaign Practices
Act. The outcome of these investigations and proceedings cannot
be predicted, and no assurances can be given that such
investigations or proceedings or any litigation would not
materially adversely affect our results of operations and
financial condition. In addition, if we were to experience
difficulties with our relationship with a regulatory body in a
given jurisdiction, it could have a material adverse effect on
our ability to do business in that jurisdiction. See
&#147;Business&#151;Legal Proceedings.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We are subject to extensive governmental
regulation, which increases our costs and could restrict the
conduct of our business.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operating subsidiaries are subject to
extensive regulation and supervision in the jurisdictions in
which they do business. Such regulation is generally designed to
protect the interests of policyholders, as opposed to
stockholders and other investors. To that end, the laws of the
various states establish insurance departments with broad powers
with respect to such things as:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">licensing companies to transact business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">authorizing lines of business;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mandating capital and surplus requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating underwriting limitations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposing dividend limitations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating changes in control;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">licensing agents and distributors of insurance
    products;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">placing limitations on the minimum and maximum
    size of life insurance contracts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricting companies&#146; ability to enter and
    exit markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">admitting <B>statutory assets</B>;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mandating certain insurance benefits;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricting companies&#146; ability to terminate
    or cancel coverage;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">requiring companies to provide certain types of
    coverage;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating premium rates, including the ability
    to increase premium rates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">approving policy forms;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating trade and claims practices;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposing privacy requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">establishing reserve requirements and solvency
    standards;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricting certain transactions between
    affiliates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating the content of disclosures to debtors
    in the credit insurance area;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating the type, amounts and valuation of
    investments;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">mandating assessments or other surcharges for
    <B>guaranty funds</B>;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulating market conduct and sales practices of
    insurers and agents; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricting contact with consumers, such as the
    recently created national &#147;do not call&#148; list, and
    imposing consumer protection measures.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Health is also required by some
jurisdictions to provide coverage to persons who would not
otherwise be considered eligible by insurers. Each of these
jurisdictions dictates the types of insurance and the level of
coverage that must be provided to such involuntary risks. Our
share of these involuntary risks is mandatory and generally a
function of our respective share of the voluntary market by line
of insurance in each jurisdiction. Assurant Health is exposed to
some risk of losses in connection with mandated participation in
such schemes in those jurisdictions in which they are still
effective. In addition, HIPAA imposed insurance reform
provisions as well as requirements relating to the privacy of
individuals. HIPAA requires certain guaranteed issuance and
renewability of health insurance coverage for individuals and
small groups (generally 50 or fewer employees) and limits
exclusions based on pre-existing conditions. Most of the
insurance reform provisions of HIPAA became effective for plan
years beginning July&nbsp;1, 1997. See also &#147;Risks Related
to Our Industry&#151;Costs of compliance with privacy laws could
adversely affect our business and results of operations.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If regulatory requirements impede our ability to
raise premium rates, utilize new policy forms or terminate, deny
or cancel coverage in any of our businesses, our results of
operations and financial condition could be materially adversely
affected. The capacity for an insurance company&#146;s growth in
premiums is in part a function of its statutory surplus.
Maintaining appropriate levels of statutory surplus, as measured
by statutory accounting practices and procedures, is considered
important by insurance regulatory authorities and the private
agencies that rate insurers&#146; claims-paying abilities and
financial strength. Failure to maintain certain levels of
statutory surplus could result in increased regulatory scrutiny
and enforcement, action by regulatory authorities or a downgrade
by rating agencies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may be unable to maintain all required
licenses and approvals and our business may not fully comply
with the wide variety of applicable laws and regulations or the
relevant authority&#146;s interpretation of the laws and
regulations. Also, some regulatory authorities have relatively
broad discretion to grant, renew or revoke licenses and
approvals. If we do not have the requisite licenses and
approvals or do not comply with applicable regulatory
requirements, the insurance regulatory authorities could
preclude or temporarily suspend us from carrying on some or all
of our activities or monetarily penalize us. That type of action
could materially adversely affect our results of operations and
financial condition. See &#147;Regulation.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Changes in regulation may reduce our
profitability and limit our growth.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislation or other regulatory reform that
increases the regulatory requirements imposed on us or that
changes the way we are able to do business may significantly
harm our business or results of operations in the future. For
example, some states have imposed new time limits for the
payment of uncontested covered claims and require health care
and dental service plans to pay interest on uncontested claims
not paid promptly within the required time period. Some states
have also granted their insurance regulatory agencies additional
</FONT>

<P align="center"><FONT size="2">22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">authority to impose monetary penalties and other
sanctions on health and dental plans engaging in certain
&#147;unfair payment practices.&#148; If we were to be unable
for any reason to comply with these requirements, it could
result in substantial costs to us and may materially adversely
affect our results of operations and financial condition.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislative or regulatory changes that could
significantly harm us and our subsidiaries include, but are not
limited to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">legislation that holds insurance companies or
    managed care companies liable for adverse consequences of
    medical or dental decisions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limitations on premium levels or the ability to
    raise premiums on existing policies;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increases in minimum capital, reserves and other
    financial viability requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">impositions of fines, taxes or other penalties
    for improper licensing, the failure to &#147;promptly&#148; pay
    claims, however defined, or other regulatory violations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased licensing requirements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">prohibitions or limitations on provider financial
    incentives and provider risk-sharing arrangements;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">imposition of more stringent standards of review
    of our coverage determinations;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">new benefit mandates;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">increased regulation relating to the use of
    associations and trusts in the sale of individual health
    insurance;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limitations on our ability to build appropriate
    provider networks and, as a result, manage health care and
    utilization due to &#147;any willing provider&#148; legislation,
    which requires us to take any provider willing to accept our
    reimbursement;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limitations on the ability to manage health care
    and utilization due to direct access laws that allow insureds to
    seek services directly from specialty medical providers without
    referral by a primary care provider; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restriction of solicitation of pre-funded funeral
    insurance consumers by funeral board laws.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State legislatures regularly enact laws that
alter and, in many cases, increase state authority to regulate
insurance companies and insurance holding companies. Further,
state insurance regulators regularly reinterpret existing laws
and regulations and the <B>National Association of Insurance
Commissioners (NAIC) </B>regularly undertakes regulatory
projects, all of which can affect our operations. In recent
years, the state insurance regulatory framework has come under
increased federal scrutiny and some state legislatures have
considered or enacted laws that may alter or increase state
authority to regulate insurance companies and insurance holding
companies. Further, the NAIC and state insurance regulators are
re-examining existing laws and regulations, specifically
focusing on modifications to holding company regulations,
interpretations of existing laws and the development of new laws.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although the U.S. federal government does not
directly regulate the insurance business, changes in federal
legislation and administrative policies in several areas,
including changes in the Gramm-Leach-Bliley Act, financial
services regulation and federal taxation, could significantly
harm the insurance industry and us. Federal legislation and
administrative policies in areas such as employee benefit plan
regulation, financial services regulation and federal taxation
can reduce our profitability. In addition, state legislatures
and the U.S.&nbsp;Congress continue to focus on health care
issues. The U.S. Congress is considering Patients&#146; Bill of
Rights legislation, which, if adopted, would permit health plans
to be sued in state court for coverage determinations and could
fundamentally alter the treatment of coverage decisions under
Employee Retirement Income Security Act of 1974, as amended
(ERISA). There recently have been legislative attempts to limit
ERISA&#146;s preemptive effect on state laws. For example, the
U.S. Congress has, from time to time, considered legislation
relating to changes in ERISA to permit application of state law
remedies, such as
</FONT>

<P align="center"><FONT size="2">23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">consequential and punitive damages, in lawsuits
for wrongful denial of benefits, which, if adopted, could
increase our liability for damages in future litigation.
Additionally, new interpretations of existing laws and the
passage of new legislation may harm our ability to sell new
policies and increase our claims exposure on policies we issued
previously.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A number of legislative proposals have been made
at the federal level over the past several years that could
impose added burdens on Assurant Health. These proposals would,
among other things, mandate benefits with respect to certain
diseases or medical procedures, require plans to offer an
independent external review of certain coverage decisions and
establish a national health insurance program. Any of these
proposals, if implemented, could adversely affect our results of
operations or financial condition. Federal changes in Medicare
and Medicaid that reduce provider reimbursements could have
negative implications for the private sector due to cost
shifting. When the government reduces reimbursement rates for
Medicare and Medicaid, providers often try to recover shortfalls
by raising the prices charged to privately insured customers.
State small employer group and individual health insurance
market reforms to increase access and affordability could also
reduce profitability by precluding us from appropriately pricing
for risk in our individual and small employer group health
insurance policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the U.S.&nbsp;Congress and some
federal agencies from time to time investigate the current
condition of insurance regulation in the United States to
determine whether to impose federal regulation or to allow an
optional federal incorporation, similar to banks. Bills have
been introduced in the U.S.&nbsp;Congress from time to time that
would provide for a federal scheme of chartering insurance
companies or an optional federal charter for insurance
companies. Meanwhile, the federal government has granted
charters in years past to insurance-like organizations that are
not subject to state insurance regulations, such as risk
retention groups. See &#147;Regulation&#151;United
States&#151;Federal Regulation&#151;Legislative
Developments.&#148; Thus, it is hard to predict the likelihood
of a federal chartering scheme and its impact on the industry or
on us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We cannot predict with certainty the effect any
proposed or future legislation, regulations or NAIC initiatives
may have on the conduct of our business. In addition, the
insurance laws or regulations adopted or amended from time to
time may be more restrictive or may result in materially higher
costs than current requirements. See &#147;Regulation.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Costs of compliance with privacy laws could
adversely affect our business and results of
operations.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The privacy of individuals has been the subject
of recent state and federal legislation. State privacy laws,
particularly those with &#147;opt-in&#148; clauses, can affect
the pre-funded funeral insurance business. These laws make it
harder to share information for marketing purposes, such as
generating new sales leads. Similarly, the recently created
&#147;do not call&#148; list would restrict our ability to
contact customers and, in Assurant Solutions, has lowered our
expectations for growth in our direct-marketed consumer credit
insurance products in the United States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HIPAA and the implementing regulations that have
thus far been adopted impose new obligations for issuers of
health and dental insurance coverage and health and dental
benefit plan sponsors. HIPAA also establishes new requirements
for maintaining the confidentiality and security of individually
identifiable health information and new standards for electronic
health care transactions. The Department of Health and Human
Services promulgated final HIPAA regulations in 2002. The
privacy regulations required compliance by April 2003, the
electronic transactions regulations by October 2003 and the
security regulations by April 2005. As have other entities in
the health care industry, we have incurred substantial costs in
meeting the requirements of these HIPAA regulations and expect
to continue to incur costs to achieve and to maintain
compliance. We have been working diligently to comply with these
regulations in the time periods required. However, there can be
no assurances that we will achieve such compliance with all of
the required transactions or that other entities with which we
interact will take appropriate action to meet the compliance
deadlines. Moreover, as a consequence of these new standards for
electronic transactions, we may see an increase in the number of
health care transactions that are submitted to us in paper
format, which could increase our costs to process medical claims.
</FONT>

<P align="center"><FONT size="2">24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HIPAA is far-reaching and complex and proper
interpretation and practice under the law continue to evolve.
Consequently, our efforts to measure, monitor and adjust our
business practices to comply with HIPAA are ongoing. Failure to
comply could result in regulatory fines and civil lawsuits.
Knowing and intentional violations of these rules may also
result in federal criminal penalties.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Gramm-Leach-Bliley Act requires
that we deliver a notice regarding our privacy policy both at
the delivery of the insurance policy and annually thereafter.
Certain exceptions are allowed for sharing of information under
joint marketing agreements. However, certain state laws may
require individuals to opt in to information sharing instead of
being immediately included. This could significantly increase
costs of doing business. Additionally, when final
U.S.&nbsp;Treasury Department regulations are promulgated in
connection with the USA PATRIOT Act, we will likely have to
expend additional resources to tailor our existing anti-fraud
efforts to the new rules.
</FONT>

<P align="left">
<B><I><FONT size="2">Risks Related to Our Relationship with and
Separation from Fortis</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Fortis will continue to have representation on
our board of directors and influence our affairs for as long as
it remains a significant stockholder.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After the completion of this offering, Fortis,
through Fortis Insurance N.V., its wholly owned subsidiary, will
own in excess of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of the voting
power of our outstanding common stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% if the underwriters exercise
their over-allotment option in full. As a result, for as long as
Fortis continues to own shares of common stock representing more
than 50% of the voting power of our outstanding common stock
and, in some cases more than one-third of our outstanding common
stock, it will be able to determine the outcome of corporate
actions requiring stockholder approval. Fortis may have
interests that differ from yours and may vote in a way with
which you disagree and which may be adverse to your interests.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to the consummation of this offering, we
expect to enter into a shareholders&#146; agreement with Fortis
pursuant to which Fortis will have the right to nominate
designees to our board of directors and, subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i)&nbsp;so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii)&nbsp;so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. In addition, the shareholders&#146;
agreement is also expected to provide that as long as Fortis
owns at least 50% of our common stock, certain significant
corporate actions may only be taken with the approval of a
supermajority of our directors, which will require approval of
two or more Fortis directors. These actions include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">a recapitalization or reorganization;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">voluntary bankruptcy or liquidation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">acquisitions and dispositions in excess of
    $500&nbsp;million;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">issuing debt to the extent all outstanding debt
    would exceed $1.5&nbsp;billion; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">equity offerings representing more than 10% of
    our outstanding common stock or that would reduce Fortis&#146;
    interest in our Company below 50%.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, although Fortis has advised us that
it intends to divest all of its shares of our common stock over
a period of time, Fortis is under no obligation to do so.
Subject to the terms of the lock-up agreement, Fortis has the
sole discretion to determine the timing of any such divestiture.
See &#147;Certain Relationships and Related Transactions,&#148;
&#147;Description of Share Capital&#151;Shareholders
Agreement&#148; and &#147;&#151;Registration Rights,&#148;
&#147;Shares Eligible for Future Sale&#148; and
&#147;Underwriting&#148; for additional information on lock-up
agreements and related party transactions between our Company
and Fortis.
</FONT>

<P align="center"><FONT size="2">25
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Because Fortis will control us, conflicts of
interest between Fortis and us could be resolved in a manner
unfavorable to us.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Various conflicts of interest between Fortis and
us could arise which may be resolved in a manner that is
unfavorable to us, including, but not limited to, the following
areas:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cross-Directorships and Stock
Ownership.</FONT></I><FONT size="2"> Service as a director or
officer of both our Company and Fortis or ownership interests of
directors or officers of our Company in the stock of Fortis
could create or appear to create potential conflicts of interest
when directors and officers are faced with decisions that could
have different implications for the two companies. Our directors
who are also directors or officers of Fortis will have
obligations to both companies and may have conflicts of interest
with respect to matters potentially or actually involving or
affecting us. For example, these decisions could relate to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">disagreement over the desirability of a potential
    acquisition or disposition opportunity;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">corporate finance decisions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">employee retention or recruiting; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our dividend policy.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Allocation of Business Opportunities.
</FONT></I><FONT size="2">There may be business opportunities
that are suitable for both Fortis and us. So long as Fortis
controls us, it will be able to make decisions regarding the
allocation of such opportunities that may be unfavorable to us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">The loss of the Fortis name in Assurant
Health, Assurant Employee Benefits and Assurant PreNeed may
affect our profitability.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our separation from Fortis, we
will change our name and the names of our business units to
Assurant, Inc. and other Assurant names and launch a re-branding
initiative pursuant to which we will change our brand name and
most of the trademarks and trade names under which we conduct
our business. The transition to our new name in each of our
business segments and subsidiaries will occur rapidly in the
case of some products and business segments and over specified
periods in the case of other products and business segments.
Under the terms of a license from Fortis, we will have only a
limited amount of time to continue to use the Fortis name.
Assurant Health, Assurant Employee Benefits and Assurant PreNeed
have expended substantial resources to establish the Fortis name
and reputation in the health, employee benefits and pre-funded
funeral insurance marketplace, particularly among brokers and
consultants acting as advisors in the health and benefits market
and with funeral directors in the pre-funded funeral market. The
impact of the change in trademarks and trade names and other
changes (including, without limitation, the name change) on our
business and operations cannot be fully predicted, and the lack
of an established brand image for the Assurant name in the
health, benefits and pre-funded funeral insurance marketplace
may cause a disruption in sales and <B>persistency </B>and thus
affect profitability. Any such disruption could also cause
rating agencies to lower our financial strength and other
ratings in the future. In addition, the costs of effecting the
name change and branding initiative will be substantial and are
currently estimated to be approximately $10&nbsp;million. In
certain states we may be required to notify policyholders of our
name change and in certain instances new certificates may need
to be issued. This might result in increased lapses of our
insurance policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Because Fortis operates U.S. branch offices,
we are subject to regulation and oversight by the Federal
Reserve Board under the U.S. Bank Holding Company Act
(BHCA).</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis Bank SA/ NV (Fortis Bank), which is a
subsidiary of Fortis, obtained approval in 2002 from state
banking authorities and the Federal Reserve Board to establish
branch offices in Connecticut and New York. By virtue of the
opening of these offices, the U.S.&nbsp;operations of Fortis,
including our operations, became subject to the nonbanking
prohibitions of Section&nbsp;4 of the BHCA. In order to continue
to operate its U.S.&nbsp;nonbanking operations, including the
insurance activities conducted by our subsidiaries, Fortis
notified the Federal Reserve Board of its election to be a
financial holding company for purposes of the BHCA and the
Federal Reserve Board&#146;s implementing regulations in
Regulation&nbsp;Y. Pursuant to Fortis&#146; status as a
financial holding company, Fortis and its subsidiaries,
including our subsidiaries, are permitted to engage in nonbanking
</FONT>

<P align="center"><FONT size="2">26
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">activities in the United States that are
&#147;financial in nature&#148; or &#147;incidental to a
financial activity&#148; as defined in Section&nbsp;4(k) of the
BHCA and in Regulation&nbsp;Y. In particular, Fortis&#146;
status as a financial holding company permits Fortis to engage
in the United States in both banking activities through the
U.S.&nbsp;branches of Fortis Bank and insurance activities
through our subsidiaries. Activities that are &#147;financial in
nature&#148; include, among other things, insuring, guaranteeing
or indemnifying against loss, harm, damage, illness, disability
or death, or providing and issuing annuities, and acting as
principal, agent or broker for purposes of the foregoing.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis will continue to qualify as a financial
holding company so long as Fortis Bank remains &#147;well
capitalized&#148; and &#147;well managed&#148; as those terms
are defined in Regulation&nbsp;Y. Generally, Fortis Bank will be
considered &#147;well capitalized&#148; if it maintains tier 1
and total risk-based capital ratios of at least 6% and 10%,
respectively, and will be considered &#147;well managed&#148; if
it has received at least a satisfactory composite rating of its
U.S.&nbsp;branch operations at its most recent examination. As a
general matter, as long as Fortis owns more than 5% of any class
of our voting shares, the BHCA does not permit us to engage in
nonfinancial activities such as manufacturing, distribution of
goods and real estate development. If the Federal Reserve Board
were to determine that any of our existing activities were not
insurance activities or not otherwise financial in nature or not
incidental to such activities, or if Fortis lost and was unable
to regain its financial holding company status, we could be
required to restructure our operations or divest some of these
operations, which could result in increased costs and reduced
profitability.
</FONT>

<P align="left">
<B><I><FONT size="2">Risks Related to Our Common Stock and This
Offering</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Applicable laws and our certificate of
incorporation and by-laws may discourage takeovers and business
combinations that our stockholders might consider in their best
interests.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State laws and our certificate of incorporation
and by-laws may delay, defer, prevent or render more difficult a
takeover attempt that our stockholders might consider in their
best interests. For instance, they may prevent our stockholders
from receiving the benefit from any premium to the market price
of our common stock offered by a bidder in a takeover context.
Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market
price of our common stock if they are viewed as discouraging
takeover attempts in the future.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State laws and our certificate of incorporation
and by-laws may also make it difficult for stockholders to
replace or remove our directors. These provisions may facilitate
directors entrenchment which may delay, defer or prevent a
change in our control, which may not be in the best interests of
our stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following provisions that will be included in
our certificate of incorporation and by-laws have anti-takeover
effects and may delay, defer or prevent a takeover attempt that
our stockholders might consider in their best interests. In
particular, our certificate of incorporation and by-laws will:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">permit our board of directors to issue one or
    more series of preferred stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">divide our board of directors into three classes;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">limit the ability of stockholders to remove
    directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">except for Fortis, prohibit stockholders from
    filling vacancies on our board of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">prohibit stockholders from calling special
    meetings of stockholders;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">impose advance notice requirements for
    stockholder proposals and nominations of directors to be
    considered at stockholder meetings;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">require the approval of at least two-thirds of
    our outstanding common stock to approve mergers and
    consolidations or the sale of all or substantially all of our
    assets; and
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">require the approval by the holders of at least
    two-thirds of our outstanding common stock for the amendment of
    our by-laws and provisions of our certificate of incorporation
    governing:
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2"> &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
classified board;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2"> &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
approval of mergers; and
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2"> &#149; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;the
liability of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Section&nbsp;203 of the General
Corporation Law of the State of Delaware may limit the ability
of an &#147;interested stockholder&#148; to engage in business
combinations with us. An interested stockholder is defined to
include persons owning 15% or more of our outstanding voting
stock. See &#147;Description of Share Capital&#148; for
additional information on the anti-takeover measures applicable
to us.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Applicable insurance laws may make it
difficult to effect a change of control of our
Company.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before a person can acquire control of a U.S.
insurance company, prior written approval must be obtained from
the insurance commissioner of the state where the domestic
insurer is domiciled. Generally, state statutes provide that
control over a domestic insurer is presumed to exist if any
person, directly or indirectly, owns, controls, holds with the
power to vote, or holds proxies representing, 10% or more of the
voting securities of the domestic insurer. However, the State of
Florida, in which certain of our insurance subsidiaries are
domiciled, defines control as 5% or more. Because a person
acquiring 5% or more of shares of our common stock would
indirectly control the same percentage of the stock of our
Florida subsidiaries, the insurance change of control laws of
Florida would apply to such transaction and at 10%, the laws of
many other states would likely apply to such a transaction.
Prior to granting approval of an application to acquire control
of a domestic insurer, a state insurance commissioner will
typically consider such factors as the financial strength of the
applicant, the integrity of the applicant&#146;s board of
directors and executive officers, the applicant&#146;s plans for
the future operations of the domestic insurer and any
anti-competitive results that may arise from the consummation of
the acquisition of control.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">We do not currently intend to pay dividends on
our Common Stock in the foreseeable future.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors does not currently intend
to pay dividends to holders of our Common Stock. It is uncertain
when, if ever, we will declare dividends to our stockholders.
Our ability to pay dividends is limited by our Class&nbsp;B and
Class&nbsp;C Common Stock and our Series&nbsp;B and
Series&nbsp;C Preferred Stock, which restrict our ability to pay
dividends on our Common Stock if dividends on those shares are
not paid. In addition, the terms of certain of our securities
prohibit us from paying dividends on our Common Stock if we
elect to defer payments on such securities. See &#147;Dividend
Policy,&#148; &#147;Description of Share Capital&#148; and
&#147;Description of Other Securities.&#148; You should not rely
on an investment in our Company if you require dividend income.
In the foreseeable future, the only possible return on an
investment in us would come from the appreciation of our common
stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Our stock and the stocks of other companies in
the insurance industry are subject to stock price and trading
volume volatility.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">From time to time, the stock price and the number
of shares traded of companies in the insurance industry
experience periods of significant volatility. Company-specific
issues and developments generally in the insurance industry and
in the regulatory environment may cause this volatility. Our
stock price may fluctuate in response to a number of events and
factors, including:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">quarterly variations in operating results;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">natural disasters and terrorist attacks;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in financial estimates and
    recommendations by securities analysts;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">operating and stock price performance of other
    companies that investors may deem comparable;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">press releases or publicity relating to us or our
    competitors or relating to trends in our markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">regulatory changes;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">sales of stock by insiders; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">changes in our financial strength ratings.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">You may be unable to resell your shares of our
common stock at or above the initial public offering price.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, broad market and industry
fluctuations may adversely affect the trading price of our
common stock, regardless of our actual operating performance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">There may not be an active trading market for
shares of our common stock, which may cause our common stock to
trade at a discount and make it difficult to sell the shares you
purchase.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
trading market for shares of our common stock. It is possible
that, after this offering, an active trading market will not
develop or continue. The initial public offering price per share
of our common stock will be determined by agreement among us,
Fortis and the representative of the underwriters, and may not
be indicative of the price at which the shares of our common
stock will trade in the public market after this offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Sales of a substantial number of shares of our
common stock following this offering may adversely affect the
market price of our common stock and the issuance of additional
shares will dilute all other stockholdings.</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Sales of a substantial number of shares of our
common stock in the public market or otherwise following this
offering, or the perception that such sales could occur, could
adversely affect the market price of our common stock. After
completion of this offering, Fortis, through Fortis Insurance
N.V., will
own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock, assuming there is no exercise of the
underwriters&#146; over-allotment option, and has advised us
that it intends to divest all of its shares of our common stock
over a period of time, subject to the lock-up agreement referred
to below. In addition, concurrently with the offering
contemplated by this prospectus, we will grant Fortis Insurance
N.V. and its affiliates certain demand and piggyback
registration rights with respect to all of the shares of our
common stock owned by them. Pursuant to this agreement, after
completion of this offering and subject to the lock-up
agreement, Fortis will have the right to require us to register
its shares of our common stock under the Securities Act of 1933,
as amended (Securities Act) for sale into the public markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After completion of this offering, there will
be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding. Of our outstanding shares, the
shares of common stock sold in this offering will be freely
tradable in the public market, except for any shares sold to our
&#147;affiliates,&#148; as that term is defined in Rule&nbsp;144
under the Securities Act, and any other shares purchased through
the directed share program, which will also be subject to
180-day lock-up agreements and certain National Association of
Securities Dealers (NASD) restrictions. In addition, our
certificate of incorporation permits the issuance of up to
80&nbsp;million shares of common stock. After this offering, we
will have an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock authorized but unissued. Thus, we have the
ability to issue substantial amounts of common stock in the
future, which would dilute the percentage ownership held by the
investors who purchase our shares in this offering. See
&#147;Shares Eligible for Future Sale&#148; for further
information regarding circumstances under which additional
shares of our common stock may be sold.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV and Fortis Insurance N.V. have
agreed, with limited exceptions, that we and they will not,
without the prior written consent of Morgan Stanley &#38; Co.
Incorporated on behalf of the underwriters, during the period
ending 180&nbsp;days after the date of this prospectus, directly
or indirectly, offer to sell, sell or otherwise dispose of any
of shares of our common stock or file a registration statement
with the Securities and Exchange Commission (SEC) relating to
the offering of any shares of our common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to the exercise of any future issued and
outstanding options, if any, shares registered under a
registration statement on Form&nbsp;S-8 to be filed by us will
be available for sale into the public markets after the
expiration of the lock-up agreements.
</FONT>

<P align="center"><FONT size="2">29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "FORWARD-LOOKING STATEMENTS" -->

<P align="center">
<B><FONT size="2">FORWARD-LOOKING STATEMENTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some of the statements under &#147;Prospectus
Summary,&#148; &#147;Risk Factors,&#148; &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations,&#148; &#147;Business&#148; and elsewhere in this
prospectus may contain forward-looking statements which reflect
our current views with respect to, among other things, future
events and financial performance. You can identify these
forward-looking statements by the use of forward-looking words
such as &#147;outlook,&#148; &#147;believes,&#148;
&#147;expects,&#148; &#147;potential,&#148;
&#147;continues,&#148; &#147;may,&#148; &#147;will,&#148;
&#147;should,&#148; &#147;seeks,&#148;
&#147;approximately,&#148; &#147;predicts,&#148;
&#147;intends,&#148; &#147;plans,&#148; &#147;estimates,&#148;
&#147;anticipates&#148; or the negative version of those words
or other comparable words. Any forward-looking statements
contained in this prospectus are based upon our historical
performance and on current plans, estimates and expectations.
The inclusion of this forward-looking information should not be
regarded as a representation by us, the underwriters or any
other person that the future plans, estimates or expectations
contemplated by us will be achieved. Such forward-looking
statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those
indicated in these statements. We believe that these factors
include but are not limited to those described under &#147;Risk
Factors.&#148; These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this prospectus. We
undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new
information, future developments or otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If one or more of these or other risks or
uncertainties materialize, or if our underlying assumptions
prove to be incorrect, actual results may vary materially from
what we projected. Any forward-looking statements you read in
this prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, financial condition, growth strategy and liquidity.
You should specifically consider the factors identified in this
prospectus that could cause actual results to differ before
making an investment decision.
</FONT>

<P align="center"><FONT size="2">30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "USE OF PROCEEDS" -->

<P align="center">
<B><FONT size="2">USE OF PROCEEDS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We will not receive any of the proceeds from the
sale of shares of our common stock by the selling stockholder.
The selling stockholder will receive all net proceeds from the
sale of the shares of our common stock in this offering.
</FONT>

<!-- link1 "DIVIDEND POLICY" -->

<P align="center">
<B><FONT size="2">DIVIDEND POLICY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors does not currently intend
to pay dividends to holders of our Common Stock. Any
determination to pay dividends will be at the discretion of our
board of directors and will be dependent upon our
subsidiaries&#146; payment of dividends and/or other statutorily
permissible payments to us, our results of operations and cash
flows, our financial position and capital requirements, general
business conditions, any legal, tax, regulatory and contractual
restrictions on the payment of dividends and any other factors
our board of directors deems relevant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are a holding company and, therefore, our
ability to pay dividends, service our debt and meet our other
obligations depends primarily on the ability of our insurance
subsidiaries to pay dividends and make other statutorily
permissible payments to us. Our insurance subsidiaries are
subject to significant regulatory and contractual restrictions
limiting their ability to declare and pay dividends. See
&#147;Risk Factors&#151;Risks Relating to Our Company&#151;The
inability of our subsidiaries to pay dividends to us in
sufficient amounts could harm our ability to meet our
obligations and pay future stockholder dividends&#148; and
&#147;Risk Factors&nbsp;&#151; Risks Related to Our Common Stock
and This Offering&nbsp;&#151; We do not currently intend to pay
dividends on our Common Stock in the foreseeable future.&#148;
For the calendar year 2003, the maximum amount of dividends that
our subsidiaries could pay to us under applicable laws and
regulations without prior regulatory approval is approximately
$290&nbsp;million, of which approximately $19&nbsp;million had
been paid as of June&nbsp;30, 2003. We expect that as a result
of statutory accounting for our businesses sold, the maximum
amount of dividends our subsidiaries will be able to pay to us
will be significantly lower in 2004. In addition, we have
entered into an agreement with the Florida Insurance Department
pursuant to which two of our subsidiaries, American Bankers
Insurance Company and American Bankers Life Assurance Company,
have agreed to limit the amount of ordinary dividends they would
pay to us to an amount no greater than 50% of the amount
otherwise permitted under Florida law. This agreement expires in
August 2004. One of our subsidiaries, First Fortis Life
Insurance Company, has also entered into an agreement with the
New York Insurance Department pursuant to which First Fortis
Life Insurance Company has agreed not to pay any ordinary
dividends to us until fiscal year 2004. For more information
regarding restrictions on the payment of dividends by us and our
insurance subsidiaries, including pursuant to the terms of our
Series&nbsp;B and Series&nbsp;C Preferred Stock, our
Class&nbsp;B and Class&nbsp;C Common Stock and certain of our
other securities, see &#147;Regulation&#151; United States&#151;
State Regulation&#151; Insurance Regulation&nbsp;Concerning
Dividends&#148; and &#147;&#151;Statutory Accounting Practices
(SAP),&#148; &#147;Description of Share Capital&#148; and
&#147;Description of Other Securities.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;27, 2003, we paid the holders of our
Class&nbsp;A Common Stock a cash dividend in the aggregate
amount of $139&nbsp;million. Our Class&nbsp;A Common Stock will
become Common Stock of Assurant, Inc. in connection with the
closing of this offering. We also paid dividends on our
Class&nbsp;A Common Stock totaling $67&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On September&nbsp;2, 2003 and March&nbsp;3, 2003,
we paid the holders of our Class&nbsp;B Common Stock cash
dividends totaling $5.6&nbsp;million on each such date. We also
paid dividends on our Class&nbsp;B Common Stock totaling
$11&nbsp;million in each of 2002 and 2001. On September&nbsp;2,
2003 and March&nbsp;3, 2003, we paid the holders of our
Class&nbsp;C Common Stock cash dividends totaling
$15.4&nbsp;million and $15.3&nbsp;million, respectively. We also
paid dividends on our Class&nbsp;C Common Stock totaling
$31&nbsp;million in each of 2002 and 2001.
</FONT>

<P align="center"><FONT size="2">31
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "CORPORATE STRUCTURE AND REORGANIZATION" -->

<P align="center">
<B><FONT size="2">CORPORATE STRUCTURE AND
REORGANIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant,&nbsp;Inc. is a Delaware corporation and
is currently a wholly owned subsidiary of Fortis,&nbsp;Inc.
Assurant,&nbsp;Inc. has had no operations and nominal financial
activity and will be used solely for the purpose of the
reincorporation of Fortis,&nbsp;Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis&nbsp;N.V. and
Fortis&nbsp;SA/NV. Prior to the closing of this offering, we
will effectuate a merger of Fortis,&nbsp;Inc. with and into
Assurant,&nbsp;Inc. for the purpose of reincorporating Fortis,
Inc. in Delaware. As a result of the reorganization,
Assurant,&nbsp;Inc. will be domiciled in Delaware and will be
the successor to the business, operations and obligations of
Fortis,&nbsp;Inc. In connection with the reorganization, our
Company will use the name Assurant,&nbsp;Inc. The ongoing
operations of Assurant,&nbsp;Inc. will effectively be comprised
of the existing operations of Fortis,&nbsp;Inc. and its
subsidiaries. Our Class&nbsp;A Common Stock will become Common
Stock of Assurant,&nbsp;Inc. in connection with the merger.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In connection with our separation from Fortis, we
will change our name and the names of our business segments and
operating subsidiaries to include the name &#147;Assurant,&#148;
and we will cease using the Fortis name after a transition
period. Under the terms of a license from Fortis, we will have
only a limited amount of time to continue to use the Fortis
name. We will launch a re-branding initiative pursuant to which
we will change our brand name and most of our trademarks and
trade names under which we conduct our business.
</FONT>

<P align="center"><FONT size="2">32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "CAPITALIZATION" -->

<P align="center">
<B><FONT size="2">CAPITALIZATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our consolidated
capitalization as of June&nbsp;30, 2003. We will not receive any
proceeds from the sale of shares in this offering by the selling
stockholder.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">You should read this table in conjunction with
&#147;Selected Consolidated Financial Information&#148; and
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#148; and the consolidated
financial statements and related notes that are included
elsewhere in this prospectus. See also &#147;Certain
Relationships and Related Transactions,&#148; &#147;Description
of Share Capital&#148; and &#147;Description of Other
Securities.&#148;
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of June 30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(unaudited)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in thousands,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">except share numbers)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Debt Outstanding:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Long-term senior debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts(1)(2):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000 trust capital securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">550,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1999 trust capital securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">699,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1997 capital securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total mandatorily redeemable preferred securities
    of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Mandatorily redeemable preferred stock, par
    value $1.00 per share(1)
    </FONT></B><FONT size="2">(20,000,000&nbsp;shares authorized;
    19,160&nbsp;shares of Series&nbsp;B Preferred Stock and
    5,000&nbsp;shares of Series&nbsp;C Preferred Stock issued and
    outstanding)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; Equity:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $.10 per share
    (80,000,000&nbsp;shares of common stock authorized):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A (7,750,000 shares issued and
    outstanding)(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B (150,001 shares issued and
    outstanding)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C (400,001 shares issued and
    outstanding)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">465,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,778,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total Capitalization</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,249,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">These securities will be reclassified as debt
    upon adoption by the Company in the third quarter of 2003 of
    Financial Accounting Standards No.&nbsp;150, <I>Accounting for
    Certain Financial Instruments with Characteristics of Both
    Liabilities and Equity.</I>
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The proceeds from the sale of preferred
    securities by each of the subsidiary trusts were used by the
    applicable trusts to purchase our subordinated debentures, which
    are eliminated upon consolidation. See &#147;Description of
    Other Securities.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Our Class&nbsp;A Common Stock will become Common
    Stock, par value $.01 per share, of Assurant, Inc. in connection
    with the merger.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "SELECTED CONSOLIDATED FINANCIAL INFORMATION" -->

<P align="center">
<B><FONT size="2">SELECTED CONSOLIDATED FINANCIAL
INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our selected
historical consolidated financial information for the periods
ended and as of the dates indicated. Assurant, Inc. is a
Delaware corporation and is currently a wholly owned subsidiary
of Fortis, Inc. Assurant, Inc. has had no operations and nominal
financial activity and will be used solely for the purpose of
the reincorporation of Fortis, Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis N.V. and Fortis
SA/NV. Prior to the closing of this offering, we will effectuate
a merger of Fortis, Inc. with and into Assurant, Inc. for the
purpose of reincorporating Fortis, Inc. in Delaware. As a result
of the reorganization, Assurant, Inc. will be domiciled in
Delaware and will be the successor to the business, operations
and obligations of Fortis, Inc. In connection with the
reorganization, our Company will use the name Assurant, Inc. The
ongoing operations of Assurant, Inc. will effectively be
comprised of the existing operations of Fortis, Inc. and its
subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selected consolidated statement of operations
data for each of the five years ended December&nbsp;31, 2002 and
the selected consolidated balance sheet data as of
December&nbsp;31, 2002, 2001, 2000, 1999 and 1998 are derived
from the audited consolidated financial statements of Fortis,
Inc. and its subsidiaries, which have been prepared in
accordance with GAAP. The audited consolidated financial
statements of Fortis, Inc. and its subsidiaries for the three
years in the period ended December&nbsp;31, 2002 and as of
December&nbsp;31, 2002 and 2001 have been included elsewhere in
this prospectus. The selected consolidated statement of
operations data for the six months ended June&nbsp;30, 2003 and
the selected consolidated balance sheet data as of June&nbsp;30,
2003 are derived from the unaudited interim financial statements
of Fortis, Inc. and its subsidiaries included elsewhere in this
prospectus. The unaudited interim financial statements have been
prepared on the same basis as the audited consolidated financial
statements of Fortis, Inc. and in our opinion, include all
adjustments consisting only of normal recurring adjustments,
that we consider necessary for a fair statement of our results
of operations and financial condition for these periods and as
of such dates. These historical results are not necessarily
indicative of expected results for any future period. The
results for the six months ended June&nbsp;30, 2003 are not
necessarily indicative of results to be expected for the full
year. You should read the following selected consolidated
financial information together with the other information
contained in this prospectus, including &#147;Management&#146;s
Discussion and Analysis of Financial Condition and Results of
Operations&#148; and the consolidated financial statements and
related notes included elsewhere in this prospectus.
</FONT>

<P align="center"><FONT size="2">34
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">For the Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="27" align="center" nowrap><B><FONT size="1">(in thousands, except share amounts and per share data)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="27"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Selected Consolidated Statement of Operations
    Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Revenues</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,787,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,508,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,056,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">305,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">590,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">491,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains (losses) on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">357,878</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">307,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,224,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,186,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,211,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,470,776</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,944,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><I><FONT size="2">Benefits, losses and expenses</FONT></I></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,774,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,678,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,061,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,223,113</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">443,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">766,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">494,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">794,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">842,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,738,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,620,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,649,811</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,270,854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,824</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,023,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,161,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,981,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,017,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,356,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,771,164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">114,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income before cumulative effect of change in
    accounting<BR>
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect of discontinued operations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,979</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,380</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per Share Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134.85</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.08</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average of basic and diluted shares of
    common stock outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,208,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,145,883</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common Stock(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B Common Stock(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C Common Stock(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1999</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">1998</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands, except share amounts and per share data)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Selected Consolidated Balance Sheet
    Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents and investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,138,227</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,578,415</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,159,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,750,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,110,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,027,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,738,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,449,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,115,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,216,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,577,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy liabilities(4)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,632,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,388,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,064,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,534,891</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,336,265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,316,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Debt
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">238,983</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,007,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts(5)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,449,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">899,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,778,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,452,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,367,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,164,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,765,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Per Share Data:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity per share(6)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">307.84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">415.95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410.28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">514.86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">353.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods (other than the year
    ended December&nbsp;31, 1998) and dates (other than
    December&nbsp;31, 1998) presented, 7,750,000 shares of our
    Class&nbsp;A Common Stock were issued and outstanding; these
    shares are held by Fortis Insurance N.V., Fortis (US) Funding
    Partners&nbsp;I LP and Fortis (US) Funding Partners&nbsp;II LP.
    For the year ended December&nbsp;31, 1998 and as of
    December&nbsp;31, 1998, 5,000,000&nbsp;shares of our
    Class&nbsp;A Common Stock were issued and outstanding. See
    &#147;Description of Share Capital&nbsp;&#151; Class&nbsp;B and
    Class&nbsp;C Common Stock.&#148; Our existing Class&nbsp;A
    Common Stock will become Common Stock of Assurant, Inc. in
    connection with the merger of Fortis, Inc. with and into
    Assurant, Inc.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods (other than the years
    ended December&nbsp;31, 1999 and December&nbsp;31, 1998) and
    dates (other than December&nbsp;31, 1999 and December&nbsp;31,
    1998) presented, 150,001 shares of our Class&nbsp;B Common Stock
    were issued and outstanding; these shares are held by Fortis
    (US) Funding Partners&nbsp;I LP. No shares of our Class&nbsp;B
    Common Stock were issued and outstanding for the years ended
    December&nbsp;31, 1999 and December&nbsp;31, 1998 or as of
    December&nbsp;31, 1999 and December&nbsp;31, 1998. See
    &#147;Description of Share Capital&nbsp;&#151; Class&nbsp;B and
    Class&nbsp;C Common Stock.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">For each of the periods (other than the years
    ended December&nbsp;31, 1999 and December&nbsp;31, 1998) and
    dates (other than December&nbsp;31, 1999 and December&nbsp;31,
    1998) presented, 400,001 shares of our Class&nbsp;C Common Stock
    were issued and outstanding; these shares are held by Fortis
    (US) Funding Partners&nbsp;II LP. No shares of our Class&nbsp;C
    Common Stock were issued and outstanding for the years ended
    December&nbsp;31, 1999 and December&nbsp;31, 1998 or as of
    December&nbsp;31, 1999 and December&nbsp;31, 1998.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Policy liabilities include future policy benefits
    and expenses, unearned premiums and claims and benefits payable.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The proceeds from the sale of each of these
    securities were used by the applicable subsidiary trusts to
    purchase our subordinated debentures, which are eliminated upon
    consolidation. See &#147;Description of Other Securities.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(6)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Based on total stockholders&#146; equity divided
    by basic shares issued and outstanding.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

<P align="center">
<B><FONT size="2">MANAGEMENT&#146;S DISCUSSION AND
ANALYSIS</FONT></B>

<DIV align="center">
<B><FONT size="2">OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following discussion and analysis of our
financial condition and results of operations should be read in
conjunction with our consolidated financial statements and
accompanying notes which appear elsewhere in this prospectus. It
contains forward-looking statements that involve risks and
uncertainties. Please see &#147;Forward-Looking Statements&#148;
for more information. Our actual results could differ materially
from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and
elsewhere in this prospectus, particularly under the headings
&#147;Risk Factors&#148; and &#147;Forward-Looking
Statements.&#148;
</FONT>

<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed homeowners insurance,
manufactured housing homeowners insurance, debt protection
administration, credit insurance, warranties and extended
service contracts, individual health and small employer group
health insurance, group dental insurance, group disability
insurance, group life insurance and pre-funded funeral
insurance. The markets we target are generally complex, have a
relatively limited number of competitors and, we believe, offer
attractive profit opportunities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We report our results through five segments:
Assurant Solutions, Assurant Health, Assurant Employee Benefits,
Assurant PreNeed and Corporate and Other. The Corporate and
Other segment includes activities of the holding company,
financing expenses, realized gains (losses) on investments and
interest income not allocated to other segments. The Corporate
and Other segment also includes (i)&nbsp;the results of
operations of FFG, a business we sold on April&nbsp;2, 2001, and
(ii)&nbsp;long-term care (LTC), a business we sold on
March&nbsp;1, 2000, for the periods prior to their disposition,
and amortization of deferred gains associated with the portions
of the sales of FFG and LTC sold through reinsurance agreements
as described below.
</FONT>

<P align="left">
<B><FONT size="2">Critical Factors Affecting Results</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends on the adequacy of our
product pricing, underwriting and the accuracy of our
methodology for the establishment of reserves for future
policyholder benefits and claims, returns on invested assets and
our ability to manage our expenses. As such, factors affecting
these items may have a material adverse effect on our results of
operations or financial condition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Revenues</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We derive our revenues primarily from the sale of
our insurance policies and, to a lesser extent, fee income by
providing administrative services to certain clients. Sales of
insurance policies are recognized in revenue as earned premiums
while sales of administrative services are recognized as fee
income. In late 2000, the majority of our credit insurance
clients began a transition from the purchase of our credit
insurance products from which we earned premium revenue to debt
protection administration programs, from which we earn fee
income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our premium and fee income is supplemented by
income earned from our investment portfolio. We recognize
revenue from interest payments, dividends and sales of
investments. Our investment portfolio is currently primarily
invested in fixed maturity securities. Both investment income
and realized capital gains on these investments can be
significantly impacted by changes in interest rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest rate volatility can reduce unrealized
gains or create unrealized losses in our portfolios. Interest
rates are highly sensitive to many factors, including
governmental monetary policies, domestic and international
economic and political conditions and other factors beyond our
control. Fluctuations in interest rates affect our returns on,
and the market value of, fixed maturity and short-term
investments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair market value of the fixed maturity
securities in our portfolio and the investment income from these
securities fluctuate depending on general economic and market
conditions. The fair market value
</FONT>

<P align="center"><FONT size="2">37
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">generally increases or decreases in an inverse
relationship with fluctuations in interest rates, while net
investment income realized by us from future investments in
fixed maturity securities will generally increase or decrease
with interest rates. In addition, actual net investment income
and/or cash flows from investments that carry prepayment risk,
such as mortgage-backed and other asset-backed securities, may
differ from those anticipated at the time of investment as a
result of interest rate fluctuations. In periods of declining
interest rates, mortgage prepayments generally increase and
mortgage-backed securities, commercial mortgage obligations and
bonds in our investment portfolio are more likely to be prepaid
or redeemed as borrowers seek to borrow at lower interest rates,
and we may be required to reinvest those funds in lower
interest-bearing investments.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, Assurant PreNeed generally writes
whole life insurance policies with increasing death benefits and
obtains much of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. As of June&nbsp;30, 2003,
approximately 70% of Assurant PreNeed&#146;s in force insurance
policy reserves related to policies that provide for death
benefit growth, some of which provide for minimum death benefit
growth pegged to changes in the Consumer Price Index. In
extended periods of declining interest rates or high inflation,
there may be compression in the spread between Assurant
PreNeed&#146;s death benefit growth rates and its investment
earnings. As a result, declining interest rates or high
inflation rates may have a material adverse effect on our
results of operations and our overall financial condition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Expenses</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our expenses primarily consist of policyholder
benefits, underwriting, general and administrative expenses, and
distributions on preferred securities of subsidiary trusts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
consist primarily of commissions, premium taxes, licenses, fees,
amortization of deferred acquisition costs (DAC) and value of
businesses acquired (VOBA) and general operating expenses. For a
description of DAC and VOBA, see Notes&nbsp;2, 17 and 18 of the
Notes to Consolidated Financial Statements included elsewhere in
this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our profitability depends in large part on
accurately predicting benefits, claims and other costs,
including medical and dental costs. It also depends on our
ability to manage future benefit and other costs through product
design, underwriting criteria, utilization review or claims
management and, in health and dental insurance, negotiation of
favorable provider contracts. Changes in the composition of the
kinds of work available in the economy, market conditions and
numerous other factors may also materially adversely affect our
ability to manage claim costs. As a result of one or more of
these factors or other factors, claims could substantially
exceed our expectations, which could have a material adverse
effect on our business, results of operations and financial
condition.
</FONT>

<P align="left">
<B><I><FONT size="2">Regulation</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislation or other regulatory reform that
increases the regulatory requirements imposed on us or that
changes the way we are able to do business may significantly
harm our business or results of operations in the future. For
example, some states have imposed new time limits for the
payment of uncontested covered claims and require health care
and dental service plans to pay interest on uncontested claims
not paid promptly within the required time period. Some states
have also granted their insurance regulatory agencies additional
authority to impose monetary penalties and other sanctions on
health and dental plans engaging in certain &#147;unfair payment
practices.&#148; If we were to be unable for any reason to
comply with these requirements, it could result in substantial
costs to us and may materially adversely affect our results of
operations and financial condition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For other factors affecting our results of
operations or financial condition, see &#147;Risk Factors.&#148;
</FONT>

<P align="center"><FONT size="2">38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Acquisitions and Dispositions of
Businesses</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our results of operations were affected by the
following transactions:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;10, 2002, we sold the Peer Review
and Analysis division (PRA) of CORE, Inc. (CORE) to MCMC, LLC,
an independent provider of medical analysis services. No gain or
loss was recognized on the sale of PRA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;28, 2002, we sold our 50% ownership
in Neighborhood Health Partnership (NHP) to NHP Holding LLC. We
recorded a pre-tax gain on sale of $11&nbsp;million, which was
included in the Corporate and Other segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;31, 2001, we acquired Protective
Life Corporation&#146;s Dental Benefits Division (DBD),
including the acquisition through reinsurance of
Protective&#146;s <B>indemnity</B> dental, life and disability
business and its prepaid dental subsidiaries. Total revenues of
$305&nbsp;million and income after tax of $15&nbsp;million were
generated by the DBD operations for the year ended
December&nbsp;31, 2002. DBD is included in the Assurant Employee
Benefits segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;12, 2001, we acquired CORE, a
national provider of employee absence management services. Total
revenues of $31&nbsp;million and income after tax of
$0.7&nbsp;million were generated by the CORE operations from
July&nbsp;12, 2001 through December&nbsp;31, 2001, as compared
to total revenues of $66&nbsp;million and income after tax of
$3&nbsp;million in 2002. CORE is included in the Assurant
Employee Benefits segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;2, 2001, we sold our FFG business
to The Hartford primarily through a reinsurance arrangement.
Total revenues of $146&nbsp;million and income after tax of
$8&nbsp;million were generated by the FFG operations for the
three months ended March&nbsp;31, 2001, compared to total
revenues of $679&nbsp;million and income after tax of
$75&nbsp;million during 2000. FFG included certain individual
life insurance policies, annuities and mutual fund operations.
The sale of the mutual fund operations resulted in
$62&nbsp;million of pre-tax gains. The sale via reinsurance of
the individual life insurance policies and annuities resulted in
$558&nbsp;million of pre-tax gains, which were deferred upon
closing and are being amortized over the remaining life of the
contracts. All activities related to FFG are included in the
Corporate and Other segment. See &#147;&#151;&nbsp;Critical
Accounting Policies.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to April&nbsp;2, 2001, FFG had issued
<B>variable insurance</B> products that are required to be
registered as securities under the Securities Act. These
registered insurance contracts, which are no longer being sold,
have been 100% reinsured with The Hartford through <B>modified
coinsurance</B> agreements. The Hartford administers this closed
block of business pursuant to a third party administration
agreement. Since this block of business was sold through
modified coinsurance agreements, separate account assets and
separate account liabilities associated with these products
continue to be reflected in our financial statements. See the
line items entitled &#147;Assets held in separate accounts&#148;
and &#147;Liabilities related to separate accounts&#148; in our
consolidated balance sheets. The liabilities created by these
variable insurance policies are tied to the performance of
underlying investments held in separate accounts of the
insurance company that originally issued such policies. While we
own the separate account assets, the laws governing separate
accounts provide that the income, gains and losses from assets
in the separate account are credited to or charged against the
separate account without regard to other income, gains or losses
of the insurer. Further, the laws provide that the separate
account will not be charged with liabilities arising out of any
other business the insurer may conduct. The result of this
structure is that the assets held in the separate account
correspond to and are equal to the liabilities created by the
variable insurance contracts. At June&nbsp;30, 2003, we had
separate account assets and liabilities of $3,531&nbsp;million
compared to $4,809&nbsp;million on April&nbsp;2, 2001, the date
of the FFG sale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2000, we acquired American
Memorial Life Insurance Company (AMLIC), a provider of
pre-funded funeral insurance products, from SCI. Total revenues
of $76&nbsp;million and income after tax of $6&nbsp;million were
generated by AMLIC from October&nbsp;1, 2000 through
December&nbsp;31, 2000, as compared to total revenues of
$343&nbsp;million and income after tax of $26&nbsp;million in
2001. AMLIC is included in the Assurant PreNeed segment.
</FONT>

<P align="center"><FONT size="2">39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;11, 2000, we sold Associated
California State Insurance Agencies, Inc. and Ardiel Insurance
Services, Inc. (together, ACSIA), our wholly owned subsidiaries,
to Conseco Corporation. ACSIA is a distributor of long-term care
insurance. We recorded $12&nbsp;million of pre-tax gains on the
sale. Total revenues of $7&nbsp;million and a loss after tax of
$1&nbsp;million were generated by ACSIA from January&nbsp;1,
2000 through May&nbsp;11, 2000. All activities related to ACSIA
are included in the Corporate and Other segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;1, 2000, we sold our LTC insurance
business to John Hancock. The business was sold via a 100%
<B>coinsurance</B> agreement whereby we ceded to John Hancock
substantially all assets and liabilities related to our LTC
business. The transaction resulted in an after-tax deferred gain
of approximately $34&nbsp;million, which is being amortized over
the remaining lives of the related contracts. Total revenues of
$26&nbsp;million and income after tax of $0 were generated by
our LTC business from January&nbsp;1, 2000 through March&nbsp;1,
2000. All activities related to LTC are included in the
Corporate and Other segment. See &#147;&#151;&nbsp;Critical
Factors Affecting Results&nbsp;&#151; Acquisitions and
Dispositions of Businesses.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comparing our results from period to period
requires taking into account these acquisitions and
dispositions. For a more detailed description of these
acquisitions and dispositions, see Notes&nbsp;3 and 4 of the
Notes to Consolidated Financial Statements included elsewhere in
this prospectus.
</FONT>

<P align="left">
<B><FONT size="2">Critical Accounting Policies</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are certain accounting policies that we
consider to be critical due to the amount of judgment and
uncertainty inherent in the application of those policies. In
calculating financial statement estimates, the use of different
assumptions could produce materially different estimates. In
addition, if factors such as those described above or in
&#147;Risk Factors&#148; cause actual events to differ from the
assumptions used in applying the accounting policies and
calculating financial estimates, there could be a material
adverse effect on our results of operations, financial condition
and liquidity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe the following critical accounting
policies require significant estimates which, if such estimates
are not materially correct, could affect the preparation of our
consolidated financial statements.
</FONT>

<P align="left">
<B><I><FONT size="2">Premiums</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our short duration contracts are those on which
we recognize revenue on a pro rata basis over the contract term.
Our short duration contracts primarily include group term life,
group disability, medical and dental, property, credit
insurance, warranties and extended service contracts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, our long duration contracts being sold
are pre-funded life insurance and annuities. Revenue is
recognized on the life insurance contracts when due over the
premium paying period. For annuity contracts, revenues consist
of charges assessed against policy balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For universal life insurance and annuity
contracts, no longer offered, revenues also consist of charges
assessed against policy balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the FFG and LTC businesses previously sold,
all revenue is ceded to The Hartford and John Hancock,
respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Reinsurance Assumed</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance premiums assumed are estimated based
on information received from ceding companies and any subsequent
differences arising on such estimates are recorded in the period
in which they are determined.
</FONT>

<P align="center"><FONT size="2">40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Fee Income</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We derive income from fees received from
providing administration services. Fee income is earned when
services are performed.
</FONT>

<P align="left">
<B><I><FONT size="2">Reserves</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reserves are established according to generally
accepted actuarial principles and are based on a number of
factors. These factors include experience derived from
historical claim payments and actuarial assumptions to arrive at
loss development factors. Such assumptions and other factors
include trends, the incidence of incurred claims, the extent to
which all claims have been reported and internal claims
processing charges. The process used in computing reserves
cannot be exact, particularly for liability coverages, since
actual claim costs are dependent upon such complex factors as
inflation, changes in doctrines of legal liability and damage
awards. The methods of making such estimates and establishing
the related liabilities are periodically reviewed and updated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reserves, whether calculated under GAAP or
statutory accounting principles, do not represent an exact
calculation of exposure, but instead represent our best
estimates, generally involving actuarial projections at a given
time, of what we expect the ultimate settlement and
administration of a claim or group of claims will cost based on
our assessment of facts and circumstances then known. The
adequacy of reserves will be impacted by future trends in claims
severity, frequency, judicial theories of liability and other
factors. These variables are affected by both external and
internal events, such as changes in the economic cycle, changes
in the social perception of the value of work, emerging medical
perceptions regarding physiological or psychological causes of
disability, emerging health issues and new methods of treatment
or accommodation, inflation, judicial trends, legislative
changes and claims handling procedures. Many of these items are
not directly quantifiable, particularly on a prospective basis.
Reserve estimates are refined as experience develops.
Adjustments to reserves, both positive and negative, are
reflected in the statement of operations of the period in which
such estimates are updated. Because establishment of reserves is
an inherently uncertain process involving estimates of future
losses, there can be no certainty that ultimate losses will not
exceed existing claims reserves. Future loss development could
require reserves to be increased, which could have a material
adverse effect on our earnings in the periods in which such
increases are made.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For short duration contracts, claims and benefits
payable reserves are recorded when insured events occur. The
liability is based on the expected ultimate cost of settling the
claims. The claims and benefits payable reserves include
(1)&nbsp;case base reserves for known but unpaid claims as of
the balance sheet date; (2)&nbsp;<B>incurred but not reported
(IBNR) reserves</B> for claims where the insured event has
occurred but has not been reported to us as of the balance sheet
date; and (3)&nbsp;loss adjustment expense reserves for the
expected handling costs of settling the claims.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For group disability, the case base reserves and
the IBNR are recorded at an amount equal to the net present
value of the expected claims future payments. Group long-term
disability reserves are discounted to the valuation date at the
valuation interest rate. The valuation interest rate is
determined by taking into consideration actual and expected
earned rates on our asset portfolio, with adjustments for
investment expenses and provisions for adverse deviation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unearned premium reserves are maintained for the
portion of the premiums on short duration contracts that is
related to the unexpired period of the policy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have exposure to asbestos, environmental and
other general liability claims arising from our participation in
various reinsurance pools from 1971 through 1983. This exposure
arose from a short duration contract that we discontinued
writing many years ago. We carried case reserves for these
liabilities as recommended by the various pool managers and bulk
reserves for IBNR of $40&nbsp;million (before reinsurance) and
$39&nbsp;million (after reinsurance) in the aggregate at
December&nbsp;31, 2002. It is not possible to make a reasonable
actuarial estimate of the ultimate liabilities due to the
general lack of sufficiently detailed data, reporting delays,
and absence of a generally accepted actuarial methodology for
those exposures. There are
</FONT>

<P align="center"><FONT size="2">41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">significant unresolved industry legal issues,
including such items as whether coverage exists and what
constitutes an occurrence. In addition, the determination of
ultimate damages and the final allocation of losses to
financially responsible parties are highly uncertain.
Accordingly, any estimation of these liabilities is subject to
greater than normal variation and uncertainty.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefits and expense reserves on
LTC, life insurance policies and annuity contracts that are no
longer offered, individual medical and the traditional life
insurance contracts within FFG are recorded at the present value
of future benefits to be paid to policyholders and related
expenses less the present value of the future net premiums.
These amounts are estimated and include assumptions as to the
expected investment yield, inflation, mortality, morbidity and
withdrawal rates as well as other assumptions that are based on
our experience. These assumptions reflect anticipated trends and
include provisions for possible unfavorable deviations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefits and expense reserves for
pre-funded funeral annuities, universal life insurance policies
and annuity contracts that are no longer offered, and the
variable life insurance and annuity contracts in FFG consist of
policy account balances before applicable <B>surrender charges
</B>and certain deferred policy initiation fees that are being
recognized in income over the terms of the policies. Policy
benefits charged to expense during the period include amounts
paid in excess of policy account balances and interest credited
to policy account balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The benefit liability for pre-funded funeral life
insurance contracts includes the amount of gross premium that is
received in excess of the net premium and accounted for as
unearned premium revenue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;&#151;&nbsp;Reserves&#148; below.
</FONT>

<P align="left">
<B><I><FONT size="2">Deferred Acquisition Costs
(DAC)</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The costs of acquiring new business that vary
with and are primarily related to the production of new business
have been deferred to the extent that such costs are deemed
recoverable from future premiums or gross profits. Acquisition
costs primarily consist of commissions, policy issuance
expenses, premium tax and certain direct marketing expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A premium deficiency is recognized immediately by
a charge to the statement of operations as a reduction of DAC to
the extent that future policy premiums, including anticipation
of interest income, are not adequate to recover all DAC and
related claims, benefits and expenses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">DAC relating to property contracts, warranty and
extended service contracts and single premium credit insurance
contracts are amortized over the term of the contracts in
relation to premiums earned.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs relating to monthly pay credit
insurance business consist mainly of direct marketing costs and
are deferred and amortized over the estimated average terms of
the underlying contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs on small group medical, group
term life and group disability consist primarily of commissions
to agents and brokers, which are level, and compensation to
representatives, which is spread out and is not front-end
loaded. These costs do not vary with the production of new
business. As a result, these costs are not deferred but rather
are recorded in the statement of operations in the period in
which they are incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs for pre-funded funeral life
insurance policies and life insurance policies no longer offered
are deferred and amortized in proportion to anticipated premiums
over the premium-paying period.
</FONT>

<P align="center"><FONT size="2">42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For pre-funded funeral annuity contracts and
universal life insurance policies and annuity contracts that are
no longer offered, DAC is amortized in proportion to the present
value of estimated gross margins or profits from investment,
mortality, expense margins and surrender charges over the
estimated life of the policy or contract. The assumptions used
for the estimates are consistent with those used in computing
the policy or contract liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs relating to individual medical
contracts are deferred and amortized over the estimated average
terms of the underlying contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs on the FFG and LTC disposed
businesses were written off when the businesses were sold.
</FONT>

<P align="left">
<B><I><FONT size="2">Investments</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We regularly monitor our investment portfolio to
ensure that investments that may be other than temporarily
impaired are identified in a timely fashion and properly valued
and that any impairments are charged against earnings in the
proper period. Our methodology to identify potential impairments
requires professional judgment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to our impairment process, each month
the portfolio holdings are screened for securities whose market
price is equal to 85% or less of their original purchase price.
Management then makes their assessment as to which of these
securities are other than temporarily impaired. Assessment
factors include, but are not limited to, the financial condition
and rating of the issuer, any collateral held and the length of
time the market value of the security has been below cost. Each
month the watchlist is discussed at a meeting attended by
members of our investment, accounting and finance departments.
Each quarter any security whose price decrease is deemed to have
been other than temporarily impaired is written down to its then
current market level, with the amount of the writedown reflected
in our statement of operations for that quarter. Previously
impaired issues are also monitored monthly, with additional
writedowns taken quarterly if necessary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inherently, there are risks and uncertainties
involved in making these judgments. Changes in circumstances and
critical assumptions such as a continued weak economy, a more
pronounced economic downturn or unforeseen events which affect
one or more companies, industry sectors or countries could
result in additional writedowns in future periods for
impairments that are deemed to be other than temporary. See also
&#147;Investments&#148; in Note&nbsp;2 of the Notes to
Consolidated Financial Statements included elsewhere in this
prospectus.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reinsurance</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance recoverables include amounts related
to paid benefits and estimated amounts related to unpaid policy
and contract claims, future policyholder benefits and
policyholder contract deposits. The cost of reinsurance is
accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account
for the policies. Amounts recoverable from reinsurers are
estimated in a manner consistent with claim and claim adjustment
expense reserves or future policy benefits reserves and are
reported in our consolidated balance sheets. The cost of
reinsurance related to long duration contracts is accounted for
over the life of the underlying reinsured policies. The ceding
of insurance does not discharge our primary liability to our
insureds. An estimated allowance for doubtful accounts is
recorded on the basis of periodic evaluations of balances due
from reinsurers, reinsurer solvency, management&#146;s
experience and current economic conditions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Accounting Policies</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For a description of other accounting policies
applicable to the periods covered by this prospectus, see
Note&nbsp;2 of the Notes to Consolidated Financial Statements
included elsewhere in this prospectus.
</FONT>

<P align="center"><FONT size="2">43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">New Accounting Standard</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On January&nbsp;1, 2002, we adopted Statement of
Financial Accounting Standards No.&nbsp;142, <I>Goodwill and
Other Intangible Assets </I>(FAS&nbsp;142). As of our adoption
of FAS&nbsp;142, we ceased amortizing goodwill. In addition, we
were required to subject our goodwill to an initial impairment
test. As a result of FAS&nbsp;142, we are required to conduct
impairment testing on an annual basis and between annual tests
if an event occurs or circumstances change indicating a possible
goodwill impairment. In the absence of an impairment event, our
net income will be higher as a result of not having to amortize
goodwill.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of this initial impairment test, we
recognized a non-cash goodwill impairment charge of
$1,261&nbsp;million. The impairment charge was recorded as a
cumulative effect of a change in accounting principle as of
January&nbsp;1, 2002. The impairment charge had no impact on
cash flows or the statutory-basis capital and surplus of our
insurance subsidiaries. We also performed a January&nbsp;1, 2003
impairment test during the six months ended June&nbsp;30, 2003
and concluded that goodwill was not further impaired.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;New Accounting Pronouncements&#148; in
Note&nbsp;2 of the Notes to Consolidated Financial Statements
included elsewhere in this prospectus for a description of
additional new accounting standards that are applicable to us.
</FONT>

<P align="center"><FONT size="2">44
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Results of Operations</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Consolidated Overview</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below presents information regarding
our consolidated results of operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">632</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains (losses)&nbsp;on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,774</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,679</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,429</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,239</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,208</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,374</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,285</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,615</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,568</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(113</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(107</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(110</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,207</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,023</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,162</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,981</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6,018</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Income before income taxes</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(84</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(60</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(110</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(108</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(104</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income before cumulative effect of change
    in accounting principle</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Cumulative effect of change in accounting
    principle</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,261</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,261</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">164</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes amortization of DAC and VOBA and
    underwriting, general and administrative expenses.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">Note:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The table above includes amortization of goodwill
    in 2001 and 2000 and the cumulative effect of change in
    accounting principle in 2002 and for the six months ended
    June&nbsp;30, 2002. These items are only included in this
    Consolidated Overview. As a result, the tables presented under
    the segment discussions do not total to the same amounts shown
    on this consolidated overview table. See Note&nbsp;19 of the
    Notes to Consolidated Financial Statements included elsewhere in
    this prospectus.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
    to Six Months Ended June&nbsp;30, 2002</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $230&nbsp;million, or
7%, from $3,225&nbsp;million for the six month period ended
June&nbsp;30, 2002, to $3,455&nbsp;million for the six months
ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $199&nbsp;million, or 7%, from $2,788&nbsp;million
for the six month period ended June&nbsp;30, 2002, to
$2,987&nbsp;million for the six month period ended June&nbsp;30,
2003, largely as a result of increases in net earned premiums
from Assurant Solutions and Assurant Health. Net
</FONT>

<P align="center"><FONT size="2">45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">earned premiums and other considerations
increased by $129&nbsp;million, or 13%, in Assurant Solutions
and net earned premiums and other considerations also increased
by $65&nbsp;million, or 7%, in Assurant Health.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$4&nbsp;million, or 1%, from $310&nbsp;million for the six
months ended June&nbsp;30, 2002, to $306&nbsp;million for the
six months ended June&nbsp;30, 2003. The decrease was primarily
due to a decrease in achieved investment yields, driven by the
lower interest rate environment. The yield on average invested
assets was 5.94% (annualized)&nbsp;for the six months ended
June&nbsp;30, 2003, as compared to 6.31% (annualized)&nbsp;for
the six months ended June&nbsp;30, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized gains on investments increased by
$56&nbsp;million from net realized losses on investments of
$49&nbsp;million for the six months ended June&nbsp;30, 2002, to
net realized gains of $7&nbsp;million for the six months ended
June&nbsp;30, 2003. Net realized losses on investments are
comprised of both other-than-temporary impairments and realized
capital gains/losses on sales of securities. For the six months
ended June&nbsp;30, 2003, we had other-than-temporary
impairments of $16&nbsp;million, as compared to $38&nbsp;million
for the six months ended June&nbsp;30, 2002. There were no
individual impairments in excess of $10&nbsp;million for the six
months ended June&nbsp;30, 2003. Impairments of available for
sale securities in excess of $10&nbsp;million during the six
months ended June&nbsp;30, 2002 consisted of a $12&nbsp;million
writedown of fixed maturity investments in AT&#38;T Canada Inc.
(AT&#38;T Canada) and an $11&nbsp;million writedown of fixed
maturity investments in MCI WorldCom Inc. (MCI WorldCom).
Excluding the effect of other than temporary impairments, we
recorded an increase in net realized gains of $31&nbsp;million
in the Corporate and Other segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gain on disposal of
businesses decreased by $5&nbsp;million, or 13%, from
$40&nbsp;million for the six months ended June&nbsp;30, 2002, to
$35&nbsp;million for the six months ended June&nbsp;30, 2003.
The decrease was consistent with the run-off of the business
ceded to The Hartford and John Hancock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gain on disposal of businesses decreased by
$11&nbsp;million, or 100%, from $11&nbsp;million for the six
months ended June&nbsp;30, 2002 to $0 for the six months ended
June&nbsp;30, 2003. On June&nbsp;28, 2002, we sold our
investment in NHP, which resulted in pre-tax gains of
$11&nbsp;million for the six months ended June&nbsp;30, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$5&nbsp;million, or 4%, from $125&nbsp;million for the six
months ended June&nbsp;30, 2002 to $120&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$184&nbsp;million, or 6%, from $3,023&nbsp;million for the six
months ended June&nbsp;30, 2002 to $3,207&nbsp;million for the
six months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$95&nbsp;million, or 6%, from $1,679&nbsp;million for the six
months ended June&nbsp;30, 2002, to $1,774&nbsp;million for the
six months ended June&nbsp;30, 2003. The increase was primarily
due to a $64&nbsp;million increase in the Assurant Solutions
segment and a $28&nbsp;million increase in Assurant Health.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
primarily consist of commissions, premium taxes, licenses, fees,
amortization of DAC and VOBA and general operating expenses.
These expenses increased by $89&nbsp;million, or 7%, from
$1,285&nbsp;million for the six months ended June&nbsp;30, 2002,
to $1,374&nbsp;million for the six months ended June&nbsp;30,
2003. The Assurant Solutions and Assurant Health segments
together contributed $84&nbsp;million of this increase primarily
due to additional commission costs as a result of growth in
their businesses, partially offset by a $3&nbsp;million decrease
at Assurant Employee Benefit&#146;s CORE line of business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts during the six months ended June&nbsp;30, 2003
remained unchanged from the six months ended June&nbsp;30, 2002
at $59&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Net Income</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net income increased $1,283&nbsp;million from a
loss of $1,119&nbsp;million for the six months ended
June&nbsp;30, 2002, to a profit of $164&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $24&nbsp;million, or
40%, from $60&nbsp;million for the six months ended
June&nbsp;30, 2002, to $84&nbsp;million for the six months ended
June&nbsp;30, 2003. The effective tax rate for the six months
ended June&nbsp;30,
</FONT>

<P align="center"><FONT size="2">46
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">2002 was 29.7% compared to 33.9% for the six
months ended June&nbsp;30, 2003. The change in the effective
rate is principally due to the release of approximately
$6&nbsp;million in the six months ended June&nbsp;30, 2002 of
previously provided tax accruals which were no longer considered
necessary based on the resolution of certain domestic tax
matters.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A cumulative effect (expense)&nbsp;of changes in
accounting principles of $1,261&nbsp;million was recognized for
the six months ended June&nbsp;30, 2002, as compared to $0
recognized for the six months ended June&nbsp;30, 2003.
Effective January&nbsp;1, 2002, we adopted FAS 142, pursuant to
which we ceased amortization of goodwill. See &#147;&#151;New
Accounting Standard&#148; and Note&nbsp;2 of the Notes to
Consolidated Financial Statements included elsewhere in this
prospectus for a discussion of this new accounting standard.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
    December&nbsp;31, 2001</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $345&nbsp;million, or
6%, from $6,187&nbsp;million in 2001 to $6,532&nbsp;million in
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $439&nbsp;million, or 8%, from $5,242&nbsp;million
in 2001 to $5,681&nbsp;million in 2002. Excluding the effect of
the various acquisitions and dispositions described above, net
earned premiums and other considerations increased mainly due to
strong growth in Assurant Solutions primarily as a result of
growth in new business and in Assurant PreNeed primarily due to
an increase in the average size of policies sold by the AMLIC
division.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$80&nbsp;million, or 11%, from $712&nbsp;million in 2001 to
$632&nbsp;million in 2002. The decrease was primarily due to a
decrease in achieved investment yields, driven by the lower
interest rate environment and a decrease in average invested
assets of $290&nbsp;million. The yield on average invested
assets was 6.27% for the year ended December&nbsp;31, 2002 as
compared to 6.86% for the year ended December&nbsp;31, 2001.
This reflected lower yields on fixed maturity securities and
commercial mortgages.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized losses on investments decreased by
$1&nbsp;million, or 1%, from $119&nbsp;million in 2001 to
$118&nbsp;million in 2002. In 2002, we had other-than-temporary
impairments of $85&nbsp;million, as compared to $78&nbsp;million
in 2001. Impairments of available for sale securities in excess
of $10&nbsp;million in 2002 consisted of an $18&nbsp;million
writedown of fixed maturity investments in NRG Energy Inc. (NRG
Energy), a $12&nbsp;million writedown of fixed maturity
investments in AT&#38;T Canada and an $11&nbsp;million writedown
of fixed maturity investments in MCI WorldCom. Impairments of
available for sale securities in excess of $10&nbsp;million in
2001 consisted of a $22&nbsp;million writedown of fixed maturity
investments in Enron Corp. (Enron).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gain on disposal of
businesses increased by $12&nbsp;million, or 18%, from
$68&nbsp;million in 2001 to $80&nbsp;million in 2002. The
increase was primarily due to a full year of amortization of the
deferred gain on the sale of FFG as compared to nine months in
2001. This deferred gain on sale is discussed in more detail
under &#147;&#151;Corporate and Other&#148; below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gain on disposal of businesses decreased by
$51&nbsp;million, or 82%, from $62&nbsp;million in 2001 to
$11&nbsp;million in 2002. The $62&nbsp;million reflects the gain
on the sale of FFG&#146;s mutual fund operations. The
$11&nbsp;million reflected the pre-tax gain on the sale of NHP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$24&nbsp;million, or 11%, from $222&nbsp;million in 2001 to
$246&nbsp;million in 2002. The increase was primarily due to a
full year of fee income from CORE and an increase in fee income
from the Assurant Solutions segment, mainly from their credit
insurance business transitioning to debt protection
administration. In late 2000, the majority of Assurant
Solutions&#146; credit insurance clients began a transition from
use of our credit insurance products to debt protection
administration programs, from which we earn fee income rather
than net earned premiums and where margins are lower than in the
traditional credit insurance programs. However, because debt
protection administration is not an insurance product, certain
costs such as regulatory costs and cost of capital are expected
to be eliminated as the transition from credit insurance to debt
protection administration services continues. The fees from debt
protection administration did not fully compensate for the
decrease in credit insurance premiums. See
&#147;Business&#151;Operating Business Segments&#151;Assurant
Solutions&#151;Consumer Protection Solutions.&#148; The increases
</FONT>

<P align="center"><FONT size="2">47
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">were partially offset by a $42&nbsp;million, or
63%, decrease from the Corporate and Other segment due to the
sale of FFG (partially through reinsurance), which had
$65&nbsp;million of fee income (generated from mutual fund
operations included in such sale) in the first quarter of 2001.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$181&nbsp;million, or 3%, from $5,981&nbsp;million in 2001 to
$6,162&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$190&nbsp;million, or 6%, from $3,239&nbsp;million in 2001 to
$3,429&nbsp;million in 2002. The increase was primarily due to
the effects of the acquisitions and dispositions described
above. The increases were also partially offset by a
$84&nbsp;million, or 6%, decrease from the Assurant Health
segment, primarily due to higher mix of individual health
insurance business, which generally has a lower expected loss
ratio relative to small employer group business, disciplined
pricing and product design changes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $118&nbsp;million, or 5%, from $2,497&nbsp;million
in 2001 to $2,615&nbsp;million in 2002. The Assurant Employee
Benefits segment contributed $106&nbsp;million of this increase,
primarily due to the DBD and CORE acquisitions. This increase
was offset by a $65&nbsp;million decrease in the Corporate and
Other segment due to the sale of FFG. The Assurant Health
segment increased by $50&nbsp;million, primarily due to an
increase in the amortization of DAC and due to costs associated
with higher employee compensation and investments in technology.
Also, the Assurant PreNeed segment increased by
$22&nbsp;million, primarily due to increase in amortization of
DAC and VOBA as a result of an increase in sales of single pay
policies and increases in general expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of goodwill was $0 in 2002 compared
to $113&nbsp;million in 2001, as a result of our adoption of
FAS&nbsp;142 as described above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense decreased from $14&nbsp;million
in 2001 to $0 in 2002. In April 2001, we used a portion of the
FFG sale proceeds to repay $225&nbsp;million of outstanding debt
owed to Fortis Finance N.V. (Fortis Finance), a wholly owned
subsidiary of Fortis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts in 2002 remained unchanged from 2001 at
$118&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Net Income</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net income decreased by $1,099&nbsp;million from
a profit of $98&nbsp;million in 2001 to a loss of
$1,001&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $2&nbsp;million, or 2%,
from $108&nbsp;million in 2001 to $110&nbsp;million in 2002. The
effective tax rate for 2002 was 29.7% compared to 52.4% in 2001.
The change in the effective tax rate primarily related to the
elimination of amortization of goodwill in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">When we adopted FAS&nbsp;142 in 2002, we
recognized a cumulative effect (expense) of change in accounting
principle of $1,261&nbsp;million in 2002 as compared to $0
recognized in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues decreased by $25&nbsp;million, or
0.4%, from $6,212&nbsp;million in 2000 to $6,187&nbsp;million in
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $98&nbsp;million, or 2%, from $5,144&nbsp;million
in 2000 to $5,242&nbsp;million in 2001. Excluding the
$71&nbsp;million increase as a result of the acquisitions and
dispositions described above, net earned premiums and other
considerations increased by $27&nbsp;million due to a
$126&nbsp;million increase at Assurant Solutions and a
$23&nbsp;million increase in 2001 in dental products issued by
Assurant Employee Benefits. Offsetting these increases was a
$129&nbsp;million decrease in 2001 in net earned premiums and
other considerations in Assurant Health due to declining
membership in its small employer group health insurance product
line.
</FONT>

<P align="center"><FONT size="2">48
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$21&nbsp;million, or 3%, from $691&nbsp;million in 2000 to
$712&nbsp;million in 2001. The increase was primarily due to an
increase in investment yields in 2001. The yield on average
invested assets and cash was 6.86% for the year ended
December&nbsp;31, 2001, compared to 6.55% for the year ended
December&nbsp;31, 2000. This reflected higher yields on fixed
maturity securities and commercial mortgage loans due in part to
a higher interest rate environment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized losses on investments increased by
$74&nbsp;million, or 164%, from $45&nbsp;million in 2000 to
$119&nbsp;million in 2001. In 2001, we had other-than-temporary
impairments on fixed maturity securities of $78&nbsp;million, as
compared to $5&nbsp;million in 2000. Impairments of available
for sale securities in excess of $10&nbsp;million in 2001
consisted of a $22&nbsp;million writedown of fixed maturity
investments in Enron.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gains on disposal of
businesses increased by $58&nbsp;million, from $10&nbsp;million
in 2000 to $68&nbsp;million in 2001, mainly due to the
recognition of nine months of amortization of the FFG deferred
gain compared to $0 in 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gain on disposal of business increased by
$50&nbsp;million from $12&nbsp;million in 2000 to
$62&nbsp;million in 2001. The increase was due to
$62&nbsp;million of gains recognized on the sale of FFG&#146;s
mutual fund management operations in 2001, as compared to
$12&nbsp;million of gains recognized on the sale of ACSIA in
2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$178&nbsp;million, or 45%, from $400&nbsp;million in 2000 to
$222&nbsp;million in 2001. Excluding the $211&nbsp;million
decrease as a result of the acquisitions and dispositions
described above, fees and other income increased by
$36&nbsp;million largely as a result of increased fees generated
by our mortgage servicing business and fees from administering
debt protection programs in Assurant Solutions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$37&nbsp;million, or 1.6%, from $6,018&nbsp;million in 2000 to
$5,981&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$31&nbsp;million, or 1%, from $3,208&nbsp;million in 2000 to
$3,239&nbsp;million in 2001. Excluding the $10&nbsp;million
decrease as a result of the acquisitions and dispositions
described above, policyholder benefits increased by
$41&nbsp;million due to a $115&nbsp;million increase at Assurant
Solutions as a result of growth in its business. Assurant
Employee Benefits contributed an additional increase of
$36&nbsp;million due to corresponding growth in its dental and
disability product businesses. Offsetting these increases was a
$192&nbsp;million decrease in Assurant Health as a result of
improved loss experience and decreases in its small employer
group health insurance business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
decreased by $71&nbsp;million, or 3%, from $2,568&nbsp;million
in 2000 to $2,497&nbsp;million in 2001. Excluding the
$159&nbsp;million decrease as a result of the acquisitions and
dispositions described above, selling, underwriting and general
expenses increased by $88&nbsp;million, mainly due to a
$140&nbsp;million increase at Assurant Solutions attributable to
additional commission expenses associated with growth in sales
of its warranty and extended service contract products. The
Corporate and Other segment offset the increase by $43 million,
primarily due to two months of selling, underwriting and general
expenses in 2000 associated with our LTC operations which were
sold to John Hancock on March&nbsp;1, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of goodwill increased by
$6&nbsp;million, or 6%, from $107&nbsp;million in 2000 to
$113&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense decreased by $11&nbsp;million,
or 44%, from $25&nbsp;million in 2000 to $14&nbsp;million in
2001 mainly due to less debt outstanding during 2001 compared to
2000. In April 2001, we used a portion of the FFG sale proceeds
to repay $225&nbsp;million of debt owed to Fortis Finance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts increased by $8&nbsp;million, or 7%, from
$110&nbsp;million in 2000 to $118&nbsp;million in 2001, mainly
due to twelve months of interest related to trust originated
preferred securities, which were issued in March 2000.
</FONT>

<P align="center"><FONT size="2">49
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Net Income</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net income increased by $8&nbsp;million, or 9%,
from $90&nbsp;million in 2000 to $98&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $4&nbsp;million, or 4%,
from $104&nbsp;million in 2000 to $108&nbsp;million in 2001. The
increase was consistent with the 6% increase in income before
income taxes.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Assurant Solutions</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below presents information regarding
Assurant Solutions&#146; results of operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,401</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(410</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(346</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(755</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(640</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(525</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(710</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,449</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,444</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,304</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,186</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,056</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,084</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,829</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">231</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(65</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net earned premiums and other considerations
    by major product groupings:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Specialty Property Solutions(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consumer Protection Solutions(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;Specialty Property Solutions&#148; includes
    a variety of specialized property insurance programs that are
    coupled with unique administrative capabilities.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">&#147;Consumer Protection Solutions&#148;
    includes an array of debt protection administration services,
    credit insurance programs and warranties and extended service
    contracts.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
    to Six Months Ended June&nbsp;30, 2002</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $135&nbsp;million, or
12%, from $1,153&nbsp;million for the six months ended
June&nbsp;30, 2002, to $1,288&nbsp;million for the
six&nbsp;months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $129&nbsp;million, or 13%, from $995&nbsp;million
for the six months ended June&nbsp;30, 2002, to
$1,124&nbsp;million for the six months ended June&nbsp;30, 2003.
This increase was primarily due to $87&nbsp;million of
additional net earned premiums and other considerations
attributable to our specialty property solutions products,
including approximately $60&nbsp;million from our
creditor-placed and voluntary homeowners insurance and
manufactured housing homeowners insurance lines from new clients
and
</FONT>

<P align="center"><FONT size="2">50
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">increased sales through growth in existing
clients. Consumer protection solutions also contributed
$42&nbsp;million in net earned premiums and other considerations
primarily from growth in our warranty and extended service
contracts business.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$5&nbsp;million, or 5%, from $101&nbsp;million for the six
months ended June&nbsp;30, 2002, to $96&nbsp;million for the six
months ended June&nbsp;30, 2003. The average portfolio yield
dropped 32 basis points from 6.04% (annualized) for the six
months ended June&nbsp;30, 2002, to 5.72% (annualized) for the
six months ended June&nbsp;30, 2003 due to the lower interest
rate environment. The average invested assets remained
relatively flat.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$11&nbsp;million, or 19%, from $57&nbsp;million for the six
months ended June&nbsp;30, 2002, to $68&nbsp;million for the six
months ended June&nbsp;30, 2003, mainly from the continuing
transition of our credit insurance business to our debt
protection administration business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$130&nbsp;million, or 12%, from $1,056&nbsp;million for the six
months ended June&nbsp;30, 2002 to $1,186&nbsp;million for the
six months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$64&nbsp;million, or 19%, from $346&nbsp;million for the six
months ended June&nbsp;30, 2002, to $410&nbsp;million for the
six months ended June&nbsp;30, 2003. This increase was due in
part to $41&nbsp;million in growth in our creditor-placed and
voluntary homeowners insurance and our manufactured housing
homeowners insurance lines. Our consumer protection solutions
products also contributed $19&nbsp;million, primarily related to
the increase in business in our extended service and warranty
products business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $66&nbsp;million, or 9%, from $710&nbsp;million for
the six months ended June&nbsp;30, 2002, to $776&nbsp;million
for the six months ended June&nbsp;30, 2003. Commissions, taxes,
licenses and fees increased by $52&nbsp;million primarily due to
$38&nbsp;million of growth in our extended service and warranty
products and $11&nbsp;million in growth in our manufactured
housing homeowners insurance and creditor-placed and voluntary
homeowners insurance lines. General expenses increased by
$14&nbsp;million, primarily from start up costs related to new
clients in the creditor-placed homeowners insurance area.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$4&nbsp;million, or 6%, from $65&nbsp;million for the six months
ended June&nbsp;30, 2002, to $69&nbsp;million for the six months
ended June&nbsp;30, 2003. Excluding the decrease in investment
income of $3&nbsp;million after-tax, the segment income after
tax increased by $7&nbsp;million, or 11%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $1&nbsp;million, or 3%,
from $32&nbsp;million for the six months ended June&nbsp;30,
2002, to $33&nbsp;million for the six months ended June&nbsp;30,
2003. This increase was due primarily to the increase in segment
income before income tax of $5&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
    December&nbsp;31, 2001</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $179&nbsp;million, or
8%, from $2,222&nbsp;million in 2001 to $2,401&nbsp;million in
2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $171&nbsp;million, or 9%, from $1,906&nbsp;million
in 2001 to $2,077&nbsp;million in 2002. The increase was
primarily due to approximately $100&nbsp;million of additional
net earned premiums from our specialty property solutions
products, including approximately $86&nbsp;million from the
growth of our creditor-placed and voluntary homeowners
insurance, <B>flood insurance</B> and manufactured housing
related property coverages. Consumer protection solutions
contributed an additional $71&nbsp;million to the increase in
net earned premiums due to the growth of $56&nbsp;million
attributable to our warranty and extended service contracts
business and $58&nbsp;million from an <B>accidental death and
dismemberment</B> product, which we started selling in 2001 and
stopped selling in 2002. These increases were partly offset by
the decrease in credit insurance products of approximately
$60&nbsp;million as the transition from credit insurance
products to debt protection administration programs continued
and fees from debt protection administration programs did not
</FONT>

<P align="center"><FONT size="2">51
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">fully compensate for the decrease in credit
insurance premiums. See &#147;Business&#151;Operating Business
Segments&#151; Assurant Solutions&#151;Consumer Protection
Solutions&#148;.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$13&nbsp;million, or 6%, from $218&nbsp;million in 2001 to
$205&nbsp;million in 2002. The average portfolio yield dropped
39&nbsp;basis points from 6.51% in 2001 to 6.12% in 2002 due to
the lower interest rate environment. This decrease was partially
offset by the reinvestment of tax advantaged investments, such
as preferred stock, low-income housing tax credit investments
and tax-exempt municipal bonds, into higher yield taxable
investments. Average invested assets remained relatively flat.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$21&nbsp;million, or 21%, from $98&nbsp;million in 2001 to
$119&nbsp;million in 2002, including $13&nbsp;million in
additional fee income resulting from our credit insurance
business transitioning to debt protection administration
services.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$120&nbsp;million, or 6%, from $2,084&nbsp;million in 2001 to
$2,204&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$115&nbsp;million, or 18%, from $640&nbsp;million in 2001 to
$755&nbsp;million in 2002. Consumer protection solutions
benefits contributed $98&nbsp;million of this increase due to
approximately $52&nbsp;million from the warranty and extended
service contracts business and $58&nbsp;million from an
accidental death and disability product. The increase was partly
offset by the decrease in benefits in credit insurance products
of approximately $14&nbsp;million, which related to the decrease
in premiums resulting from the transition to debt protection
administration products. The growth of our specialty property
solutions product lines also contributed a further
$17&nbsp;million to the increase in policyholder benefits in
2002, including approximately $10&nbsp;million of losses related
to Hurricane Lili and Arizona wildfires.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $5&nbsp;million, or less than 1%, from
$1,444&nbsp;million in 2001 to $1,449&nbsp;million in 2002.
Commissions, taxes, licenses and fees contributed
$22&nbsp;million to the increase. The increase was primarily in
our specialty property solutions business from the growth in the
creditor-placed homeowners and manufactured housing homeowners
insurance products. This increase was offset by a decrease in
general expenses of $16&nbsp;million in the six months ended
June&nbsp;30, 2003, primarily due to a non-recurring cost
incurred in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of the foregoing, segment income
after tax increased by $34&nbsp;million, or 35%, from
$98&nbsp;million in 2001 to $132&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased $25&nbsp;million, or 62%,
from $40&nbsp;million in 2001 to $65&nbsp;million in 2002. The
increase was primarily due to a 43% increase in segment income
before income tax. The majority of the remaining increase was
due to an increase in our effective tax rate primarily due to
our decision to reduce our ownership of tax-advantaged
investments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $162&nbsp;million, or
8%, from $2,060&nbsp;million in 2000 to $2,222&nbsp;million in
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $126&nbsp;million, or 7%, from $1,780&nbsp;million
in 2000 to $1,906&nbsp;million in 2001. The increase was
primarily due to $87&nbsp;million of additional earned premiums
in our consumer protection solutions products, including
approximately $120&nbsp;million from our extended service and
warranty contract products mainly resulting from the addition of
a new client in late 2000. This increase was largely offset by a
$68&nbsp;million decrease in our credit insurance products as
result of the transition from use of our credit insurance
products to debt protection administration programs.
</FONT>

<P align="center"><FONT size="2">52
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums in our specialty property
solutions business increased by $39&nbsp;million from 2000 to
2001, primarily from new business growth in our creditor-placed
homeowners insurance and manufactured housing homeowners
insurance product lines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$6&nbsp;million, or 3%, from $212&nbsp;million in 2000 to
$218&nbsp;million in 2001. The average portfolio yield dropped
18&nbsp;basis points from 6.69% in 2000 to 6.51% in 2001 due to
the lower interest rate environment. Average invested assets
increased by approximately 6% in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$30&nbsp;million, or 44%, from $68&nbsp;million in 2000 to
$98&nbsp;million in 2001. The increase was primarily due to an
increase of $6&nbsp;million in administrative services fees in
the mortgage services area and $9&nbsp;million due to growth in
the warranty and extended service contracts business. An
additional $8&nbsp;million increase was recorded as a result of
customers transitioning to our debt protection administration
services.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$255&nbsp;million, or 14%, from $1,829&nbsp;million in 2000 to
$2,084&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$115&nbsp;million, or 22%, from $525&nbsp;million in 2000 to
$640&nbsp;million in 2001. Consumer protection solutions
benefits increased by $87&nbsp;million primarily related to the
growth in our extended service and warranty contract products.
Specialty property solutions benefits increased by
$27&nbsp;million in 2001 primarily due to new clients and growth
in business at existing clients in the creditor-placed
homeowners insurance and manufactured housing homeowners
insurance product lines.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $140&nbsp;million, or 11%, from $1,304&nbsp;million
in 2000 to $1,444&nbsp;million in 2001. Commissions, taxes,
licenses and fees increased by $67&nbsp;million, or 8%. The
increase was attributable to $59&nbsp;million of commissions
from growth in the warranty and extended service contracts
business, offset by a decrease of approximately $14&nbsp;million
in commissions payable on distribution of credit insurance
products due to the decrease in net earned premiums in this
product line. General expenses increased $72&nbsp;million, or
15%, from 2000 to 2001. In 2001, we made a strategic decision to
exit certain lines of business that were determined not to be
core products. Additionally, we decided to close two separate
sites to eliminate duplicate costs and consolidate them in our
home office with existing staff. We incurred non-recurring
expenses of $37&nbsp;million in 2001, including $14&nbsp;million
in employee separation costs related to these decisions.
Furthermore, our expenses increased by $22&nbsp;million in 2001
due to additional costs related to growth in our creditor-placed
homeowners insurance business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax decreased by
$57&nbsp;million, or 37%, from $155&nbsp;million in 2000 to
$98&nbsp;million in 2001. Assurant Solutions overall results in
2001 were affected by our decision to exit certain lines of
business and close separate sites and also by the increase in
expenses related to the growth in the creditor-placed homeowners
insurance product. The majority of the remaining decrease was
attributable to the transition from credit insurance to debt
protection administration services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes decreased by $36&nbsp;million, or
47%, from $76&nbsp;million in 2000 to $40&nbsp;million in 2001.
The decrease was due primarily to the decrease in segment income
before income tax of $93&nbsp;million in 2001.
</FONT>

<P align="center"><FONT size="2">53
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Assurant Health</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below presents information regarding
Assurant Health&#146;s results of operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions except membership data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(602</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,222</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,306</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,498</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(283</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(265</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(546</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(496</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(471</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(913</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(867</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,768</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,802</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,969</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss ratio(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expense ratio(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined ratio(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Membership by product line (in
    thousands):</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Individual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Small employer group
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,085</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The combined ratio is equal to total benefits,
    losses and expenses divided by net earned premiums and other
    considerations and fees and other income.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
    to Six Months Ended June&nbsp;30, 2002</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $67&nbsp;million, or
7%, from $942&nbsp;million for the six months ended
June&nbsp;30, 2002 to $1,009&nbsp;million for the six months
ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $65&nbsp;million, or 7%, from $904&nbsp;million for
the six months ended June&nbsp;30, 2002, to $969&nbsp;million
for the six months ended June&nbsp;30, 2003. An increase of
$74&nbsp;million in the net earned premiums attributable to our
individual health insurance products in the six months ended
June&nbsp;30, 2003 was offset by a decrease of $9&nbsp;million
attributable to our small employer group health insurance
products in the six months ended June&nbsp;30, 2003. Net earned
premiums attributable to our individual health insurance
business increased due to membership growth, premium rate
increases and favorable lapse experience on renewal business.
Net earned premiums attributable to our small employer group
health insurance business decreased due to declining membership
largely, we believe, as employers reduced the number of their
employees. We instituted premium rate increases in selected
markets to
</FONT>

<P align="center"><FONT size="2">54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">sufficiently price for the underlying medical
costs of existing business and for anticipated future medical
trends.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$3&nbsp;million, or 11%, from $28&nbsp;million for the six
months ended June&nbsp;30, 2002, to $25&nbsp;million for the six
months ended June&nbsp;30, 2003. There was a 70&nbsp;basis point
decrease in yield on the investment portfolio from 6.60%
(annualized)&nbsp;for the six months ended June&nbsp;30, 2002,
to 5.90% (annualized)&nbsp;for the six months ended
June&nbsp;30, 2003, due to the lower interest rate environment.
Offsetting the decrease in yield was a 3% increase in average
invested assets for the six months ended June&nbsp;30, 2003,
over the comparable period in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$5&nbsp;million, or 50%, from $10&nbsp;million for the six
months ended June&nbsp;30, 2002, to $15&nbsp;million for the six
months ended June&nbsp;30, 2003, due to additional insurance
policy fees and higher fee-based product sales in our individual
health insurance business, such as sales of our non-insurance
health access discount cards.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$46&nbsp;million, or 5%, from $867&nbsp;million for the six
months ended June&nbsp;30, 2002, to $913&nbsp;million for the
six months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$28&nbsp;million, or 5%, from $602&nbsp;million for the six
months ended June&nbsp;30, 2002 to $630&nbsp;million for the six
months ended June&nbsp;30, 2003. This increase was consistent
with the increase in earned premiums. The loss ratio improved
160&nbsp;basis points from 66.6% for the six months ended
June&nbsp;30, 2002, to 65.0% for the six months ended
June&nbsp;30, 2003, due to our risk management activities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $18&nbsp;million, or 7%, from $265&nbsp;million for
the six months ended June&nbsp;30, 2002, to $283&nbsp;million
for the six months ended June&nbsp;30, 2003. Commissions
decreased by $8&nbsp;million reflecting a higher mix of first
year individual health insurance business, for which policy
acquisition costs are deferred and amortized in subsequent
years. Amortization of DAC increased by $14&nbsp;million in the
six months ended June&nbsp;30, 2003, due to higher sales of
individual health insurance products beginning in 2000. General
expenses increased by $12&nbsp;million due to higher employee
compensation and additional spending to improve claims
experience. The expense ratio improved 20&nbsp;basis points from
29.0% for the six months ended June&nbsp;30, 2002, to 28.8% for
the six months ended June&nbsp;30, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$13&nbsp;million, or 27%, from $49&nbsp;million for the six
months ended June&nbsp;30, 2002, to $62&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $8&nbsp;million, or
31%, from $26&nbsp;million for the six months ended
June&nbsp;30, 2002, to $34&nbsp;million for the six months ended
June&nbsp;30, 2003. The increase was consistent with the 28%
increase in segment income before income tax during the six
months ended June&nbsp;30, 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
    December&nbsp;31, 2001</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues remained virtually unchanged from
2001 to 2002, at $1,910&nbsp;million in 2001 as compared to
$1,912&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations also
remained stable from 2001 to 2002, at $1,838&nbsp;million in
2001 as compared to $1,834 in 2002, with an increase of
$142&nbsp;million in 2002 in the net earned premiums
attributable to our individual health insurance products being
offset by a decrease of $146&nbsp;million during such year in
net earned premiums attributable to our small employer group
health insurance products. Net earned premiums attributable to
our individual health insurance business increased due to
membership growth, premium rate increases and favorable lapse
experience on renewal business. Net earned premiums attributable
to our small employer group health insurance business decreased
due to declining membership, partially offset by small employer
group premium rate increases that we instituted in selected
markets to adequately price for the underlying medical costs of
existing business and for anticipated future medical trends.
</FONT>

<P align="center"><FONT size="2">55
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$3&nbsp;million, or 5%, from $58&nbsp;million in 2001 to
$55&nbsp;million in 2002. There was a 90 basis point decrease in
yield on the investment portfolio from 7.4% in 2001 to 6.5% in
2002 mainly due to the lower interest rate environment.
Partially offset by the decrease in yield was a 7% increase in
average invested assets in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$9&nbsp;million, or 64%, from $14&nbsp;million in 2001 to
$23&nbsp;million in 2002 due to additional insurance policy fees
and higher fee-based product sales in our individual health
insurance business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$34&nbsp;million, or 2%, from $1,802&nbsp;million in 2001 to
$1,768&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits decreased by
$84&nbsp;million, or 6%, from $1,306&nbsp;million in 2001 to
$1,222&nbsp;million in 2002. This decrease was principally due
to a higher mix of individual health insurance business which
had a lower loss ratio relative to small employer group health
insurance business, primarily due to disciplined pricing and
product design changes. The loss ratio improved 450 basis points
from 71.1% in 2001 to 66.6% in 2002 due to the higher mix of
individual health insurance business, increased premium rates
and product design changes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $50&nbsp;million, or 10%, from $496&nbsp;million in
2001 to $546&nbsp;million in 2002. Taxes, licenses and fees
increased by $5&nbsp;million in 2002, or 13%, due to a change in
the mix of business by state and legal entity, and the loss of
favorable consolidated premium tax return benefits triggered by
the disposition of FFG. The amortization of DAC increased by $21
million in 2002, or 49%, due to higher sales of individual
health insurance products beginning in 2000. General expenses
increased by $34&nbsp;million in 2002, or 13%, due to
investments in technology, higher employee compensation and
additional spending to achieve loss ratio improvements.
Partially offsetting these increases was a $10&nbsp;million, or
7%, decrease in commissions due to a higher mix of first year
individual health insurance business. Individual health
insurance policy acquisition costs are deferred and amortized in
subsequent years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expense ratio increased by 260 basis points
from 26.8% in 2001 to 29.4% in 2002. This increase was primarily
attributable to the higher commissions on the mix of business in
individual health insurance, investments in technology, higher
employee compensation and additional spending to achieve loss
ratio improvements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$24&nbsp;million, or 34%, from $71&nbsp;million in 2001 to
$95&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $12&nbsp;million, or
32%, from $37&nbsp;million in 2001 to $49&nbsp;million in 2002.
The increase was consistent with the 33% increase in segment
income before income tax in 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues decreased by $126&nbsp;million, or
6%, from $2,036&nbsp;million in 2000 to $1,910&nbsp;million in
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
decreased by $129&nbsp;million, or 7%, from $1,967&nbsp;million
in 2000 to $1,838&nbsp;million in 2001. A decrease of
$248&nbsp;million in 2001 in the net earned premiums
attributable to our small employer group health insurance
products was partially offset by an increase of
$119&nbsp;million in net earned premiums attributable to our
individual health insurance products in 2001. Net earned
premiums for small employer group health insurance products
decreased due to declining membership that resulted primarily
from premium increases required to restore profitability to the
block of business. Net earned premiums attributable to our
individual health insurance business increased due to premium
rate increases and membership growth.
</FONT>

<P align="center"><FONT size="2">56
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income remained unchanged at
$58&nbsp;million in 2001. A 40 basis point increase in yield on
the investment portfolio from 7.00% in 2000 to 7.40% in 2001
offset a 5% decrease in average invested assets in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$3&nbsp;million, or 27%, from $11&nbsp;million in 2000 to
$14&nbsp;million in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$167&nbsp;million, or 8%, from $1,969&nbsp;million in 2000 to
$1,802&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits decreased by
$192&nbsp;million, or 13%, from $1,498&nbsp;million in 2000 to
$1,306&nbsp;million in 2001. This decrease was due to a
reduction in persons insured, an increasing mix of individual
health insurance business and improved small employer group
health insurance loss experience. The loss ratio improved 510
basis points from 76.2% in 2000 to 71.1% in 2001 due to
increased premium rates, product design changes and the
increased mix of individual health insurance business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $25&nbsp;million, or 5%, from $471&nbsp;million in
2000 to $496&nbsp;million in 2001. The increase was driven by an
increase in general expenses of $35&nbsp;million, primarily due
to additional spending to achieve loss ratio improvements,
investments in technology and higher employee compensation.
Offsetting this increase was a decrease in commissions, taxes,
licenses and fees of $15&nbsp;million in 2001, principally due
to the decrease in small employer group health insurance
products sold.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expense ratio increased 290 basis points from
23.8% in 2000 to 26.8% in 2001 due to investments in technology
and additional spending to achieve loss ratio improvements.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$27&nbsp;million, or 61%, from $44&nbsp;million in 2000 to
$71&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $14&nbsp;million, or
61%, from $23&nbsp;million in 2000 to $37&nbsp;million in 2001.
The increase was consistent with the 61% increase in segment
income before income tax in 2001.
</FONT>

<P align="center"><FONT size="2">57
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Assurant Employee Benefits</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below presents information regarding
Assurant Employee Benefits&#146; results of operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="49%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,455</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(471</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(481</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(945</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(738</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(702</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(214</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(217</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(422</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(316</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(280</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(685</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(698</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,367</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,054</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(982</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Loss ratio(1)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Expense ratio(2)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Premium persistency ratio(3)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net earned premiums and other considerations
    by major product groupings:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group disability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The premium persistency ratio is equal to the
    year-to-date (not annualized) rate at which existing business
    for all issue years at the beginning of the period remains in
    force at the end of the period. Persistency is typically higher
    mid-year than at year-end. The calculations for the year ended
    December&nbsp;31, 2002 and the six months ended June&nbsp;30,
    2002 exclude DBD.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We acquired DBD on December&nbsp;31, 2001 and
CORE on July&nbsp;12, 2001; therefore, the results of DBD and
CORE are included in our Assurant Employee Benefits segment
financial results beginning in 2002 and July 2001, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
    to Six Months Ended June&nbsp;30, 2002</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $6&nbsp;million, or
0.8%, from $730&nbsp;million for the six months ended
June&nbsp;30, 2002, to $726&nbsp;million for the six months
ended June&nbsp;30, 2003.
</FONT>

<P align="center"><FONT size="2">58
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $2&nbsp;million, or 0.3%, from $621&nbsp;million
for the six months ended June&nbsp;30, 2002, to
$623&nbsp;million for the six months ended June&nbsp;30, 2003.
The increase was primarily due to $19&nbsp;million of growth in
the six months ended June&nbsp;30, 2003 in group disability
premiums driven by reinsurance assumed in our Disability
Reinsurance Management Services, Inc. (DRMS) pool as described
in &#147;Business&nbsp;&#151; Operating Business
Segments&nbsp;&#151; Assurant Employee Benefits&#148;. This was
partially offset by a decline in group life premiums of
$10&nbsp;million in the six months ended June&nbsp;30, 2003, due
to our non-renewal of certain unprofitable business and less new
business due to continued pricing discipline. In addition, group
dental premiums declined by $7&nbsp;million in the six months
ended June&nbsp;30, 2003 due to the non-renewal of a large
account. This resulted in an aggregate premium persistency of
88.5% for the six months ended June&nbsp;30, 2003, compared to
89.6% for the six months ended June&nbsp;30, 2002. Premium
persistency measures the proportionate premium levels remaining
after year-to-date lapse activity. The premium persistency ratio
encompasses the effects of rate increases, plan design changes
and benefit volume changes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$2&nbsp;million, or 3%, from $72&nbsp;million for the six months
ended June&nbsp;30, 2002, to $70&nbsp;million for the six months
ended June&nbsp;30, 2003. Investment yields decreased from 6.94%
(annualized) for the six months ended June&nbsp;30, 2002, to
6.44% (annualized) for the six months ended June&nbsp;30, 2003,
due to declining yields on new investments. Average invested
assets increased by 7% between reporting periods, driven by the
increase in disability revenues.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$4&nbsp;million, or 11%, from $37&nbsp;million for the six
months ended June&nbsp;30, 2002, to $33&nbsp;million for the six
months ended June&nbsp;30, 2003. The decrease was primarily due
to lower fee revenue from CORE. The fee revenues for CORE were
$32&nbsp;million for the six months ended June&nbsp;30, 2002
versus $28&nbsp;million for the same period in 2003.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$13&nbsp;million, or 2%, from $698&nbsp;million for the six
months ended June&nbsp;30, 2002 to $685&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits decreased by
$10&nbsp;million, or 2%, from $481&nbsp;million for the six
months ended June&nbsp;30, 2002, to $471&nbsp;million for the
six months ended June&nbsp;30, 2003. This was driven by
favorable development in group disability claims and lower
claims activity due to a reduction in group life and dental
earned premiums.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The loss ratio improved by 190 basis points from
77.5% for the six months ended June&nbsp;30, 2002 to 75.6% for
the six months ended June&nbsp;30, 2003. This was driven by
favorable group disability experience.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
decreased by $3&nbsp;million, or 1%, from $217&nbsp;million for
the six months ended June&nbsp;30, 2002, to $214&nbsp;million
for the six months ended June&nbsp;30, 2003. General expenses
decreased by $2&nbsp;million in the six months ended
June&nbsp;30, 2003, from the six months ended June&nbsp;30,
2002, due to decreased spending in the CORE line of business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expense ratio decreased by 40 basis points
from 33.0% for the six months ended June&nbsp;30, 2002 to 32.6%
for the six months ended June&nbsp;30, 2003. This was driven by
decreased spending at CORE, as well as a slight reduction in
commissions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$6&nbsp;million, or 29%, from $21&nbsp;million for the six
months ended June&nbsp;30, 2002, to $27&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $3&nbsp;million, or
27%, from $11&nbsp;million for the six months ended
June&nbsp;30, 2002, to $14&nbsp;million for the six months ended
June&nbsp;30, 2003. The increase was consistent with the 28%
increase in segment income before income tax.
</FONT>

<P align="center"><FONT size="2">59
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
    Year Ended December&nbsp;31, 2001</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $338&nbsp;million, or
30%, from $1,117 million in 2001 to $1,455&nbsp;million in 2002,
substantially all of which was attributable to the acquisition
of DBD.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $299&nbsp;million, or 32%, from $934&nbsp;million
in 2001 to $1,233&nbsp;million in 2002. Excluding the
$299&nbsp;million increase in net earned premiums due to the
acquisition of DBD, net earned premiums were unchanged at
$934&nbsp;million from 2001 to 2002, primarily because new
business was offset by non-renewal of certain unprofitable
business. An additional contributing factor was increased
pressure on ancillary employee benefits provided by employer
groups due to increased medical costs. Premium persistency
(excluding the DBD acquisition) decreased by 440 basis points
from 84.3% for 2001 to 79.9% for 2002 because of disciplined
underwriting and reduced employment in renewed groups.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$4&nbsp;million from $144&nbsp;million in 2001 to
$148&nbsp;million in 2002. The DBD acquisition contributed an
increase of $4&nbsp;million to investment income in 2002. This
increase was offset in part by a decrease of $1&nbsp;million as
a result of a decrease in investment yields by 54 basis points
from 7.53% in 2001 to 6.99% in 2002 due to the lower interest
rate environment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$35&nbsp;million, or 90%, from $39&nbsp;million in 2001 to
$74&nbsp;million in 2002 primarily due to a full year of fee
revenue from CORE, which was acquired on July&nbsp;12, 2001.
CORE fee revenue was $66&nbsp;million in 2002, as compared to
the half-year of revenue recorded in 2001 of $31&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$313&nbsp;million, or 30%, from $1,054&nbsp;million in 2001 to
$1,367&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$207&nbsp;million, or 28%, from $738&nbsp;million in 2001 to
$945&nbsp;million in 2002. Excluding the $197&nbsp;million
increase related to the acquisition of DBD, policyholder
benefits increased by $10&nbsp;million, or 1%, driven by growth
in group dental premiums. Our loss ratio improved 240&nbsp;basis
points from 79.0% in 2001 to 76.6% in 2002. Excluding the effect
of the DBD acquisition, the loss ratio in 2002 was 80.1%, which
was higher than in 2001 due to slight deterioration in group
dental and group life experience.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $106&nbsp;million, or 34%, from $316&nbsp;million
in 2001 to $422&nbsp;million in 2002 primarily due to the DBD
and CORE acquisitions. The expense ratio was virtually unchanged
between 2001 and 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$16&nbsp;million, or 39%, from $41&nbsp;million in 2001 to
$57&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $9&nbsp;million, or
41%, from $22&nbsp;million in 2001 to $31&nbsp;million in 2002.
The increase was consistent with the 40% increase in segment
income before income tax.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $70&nbsp;million, or
6%, from $1,047&nbsp;million in 2000 to $1,117&nbsp;million in
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $31&nbsp;million, or 3%, from $903&nbsp;million in
2000 to $934&nbsp;million in 2001. Net earned premiums
attributable to dental products increased $23&nbsp;million in
2001 primarily due to increased sales of recently developed
products with PPOs and lower-cost plan options. Group disability
products contributed a further $11&nbsp;million increase in 2001
to net earned premiums while net earned premiums attributable to
our group life products decreased by $3&nbsp;million in 2001.
The stable premium
</FONT>

<P align="center"><FONT size="2">60
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">level from 2000 to 2001 was primarily due to
non-renewal of certain unprofitable business. This led to an
aggregate premium persistency of 84.3% for 2001, which was 420
basis points below the prior year.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$8&nbsp;million, or 6%, from $136&nbsp;million in 2000 to
$144&nbsp;million in 2001. Invested assets increased by 6% and
investment yields increased by eight basis points from 7.45% in
2000 to 7.53% in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$31&nbsp;million from $8&nbsp;million in 2000 to
$39&nbsp;million in 2001 mainly due to fee income earned by CORE
in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$72&nbsp;million, or 7%, from $982&nbsp;million in 2000 to
$1,054&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$36&nbsp;million, or 5%, from $702&nbsp;million in 2000 to
$738&nbsp;million in 2001. The increase resulted from revenue
growth in the dental and disability product lines, as well as
unfavorable group life mortality experience compared to 2000,
when we experienced positive mortality results. The loss ratio
increased 130 basis points from 77.7% in 2000 to 79.0% in 2001.
The increased loss ratio was primarily due to unfavorable group
life mortality experience as compared to 2000, as explained
above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $36&nbsp;million, or 13%, from $280&nbsp;million in
2000 to $316&nbsp;million in 2001. The increase was primarily
due to the acquisition of CORE, which contributed
$31&nbsp;million to such expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The expense ratio increased 180 basis points from
30.7% in 2000 to 32.5% in 2001. Excluding the effect of the CORE
acquisition, the expense ratio was virtually unchanged between
2000 and 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax decreased by
$1&nbsp;million, or 2%, from $42&nbsp;million in 2000 to
$41&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes also decreased by $1&nbsp;million or
4%, from $23&nbsp;million in 2000 to $22&nbsp;million in 2001,
which was consistent with the decrease in segment income before
income tax in 2001.
</FONT>

<P align="center"><FONT size="2">61
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Assurant PreNeed</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below presents information regarding
Assurant PreNeed&#146;s results of operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">689</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">407</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(263</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(507</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(485</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(279</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(73</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(143</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(121</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(338</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(323</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(355</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net earned premiums and other considerations
    by channel:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMLIC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We acquired AMLIC on October&nbsp;1, 2000, and
therefore the results of AMLIC are included in our Assurant
PreNeed segment financial results beginning October&nbsp;1, 2000.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
    to Six Months Ended June&nbsp;30, 2002</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $3&nbsp;million, or
0.8%, from $364&nbsp;million for the six&nbsp;months ended
June&nbsp;30, 2002, to $367&nbsp;million for the six&nbsp;months
ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $3&nbsp;million, or 1%, from $268&nbsp;million for
the six&nbsp;months ended June&nbsp;30, 2002, to
$271&nbsp;million for the six&nbsp;months ended June&nbsp;30,
2003. Net earned premiums in our independent channel increased
by $8&nbsp;million in the six months ended June&nbsp;30, 2003
due to the shift towards more single premium business. This
increase was partially offset by a decrease in the six months
ended June&nbsp;30, 2003 of $5&nbsp;million of net earned
premiums in our AMLIC channel due to a decline of 26% in new
sales from SCI, AMLIC&#146;s principal customer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income of $93&nbsp;million
remained the same for the six&nbsp;months ended June&nbsp;30,
2003, compared to the six&nbsp;months ended June&nbsp;30, 2002.
A 9% increase in average invested assets was offset by a 50
basis point decrease in the annualized investment yield of 7.14%
at June&nbsp;30, 2002, to 6.64% at June&nbsp;30, 2003. This rate
decline reduced net investment income by $7&nbsp;million for the
six&nbsp;months ended June&nbsp;30, 2003, over 2002 levels. This
decline in yields was due to the lower interest rate environment
and the restructuring of the portfolio in 2002 to improve credit
quality.
</FONT>

<P align="center"><FONT size="2">62
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$15&nbsp;million, or 5%, from $323&nbsp;million for the
six&nbsp;months ended June&nbsp;30, 2002, to $338&nbsp;million
for the six&nbsp;months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$13&nbsp;million, or 5%, from $250&nbsp;million for the
six&nbsp;months ended June&nbsp;30, 2002, to $263&nbsp;million
for the six&nbsp;months ended June&nbsp;30, 2003. This was due
to the normal growth in the inforce block of business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $2&nbsp;million, or 3%, from $73&nbsp;million for
the six&nbsp;months ended June&nbsp;30, 2002, to
$75&nbsp;million for the six&nbsp;months ended June&nbsp;30,
2003. Amortization of DAC and VOBA increased by $6&nbsp;million
in the six months ended June&nbsp;30, 2003, principally due to a
larger in force block of business and the increased sales of
single pay policies versus plans paid over a three-, five- or
ten-year period. The acquisition costs on single pay plans are
amortized in the year of issue, causing the increase in expense
levels in the six months ended June&nbsp;30, 2003 over the
comparable period in 2002. Offsetting this increase was a
decrease of $6&nbsp;million in commission, taxes, licenses and
fees during the six&nbsp;months ended June&nbsp;30, 2003, due to
the drop in new sales. General expenses increased by
$3&nbsp;million during the six&nbsp;months ended June&nbsp;30,
2003, from the comparable period in 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax decreased by
$7&nbsp;million, or 27%, from $26&nbsp;million for the
six&nbsp;months ended June&nbsp;30, 2002, to $19&nbsp;million
for the six&nbsp;months ended June&nbsp;30, 2003. This was
caused primarily by smaller spreads between our investment
yields and rates we credited on pre-funded funeral insurance
policies. In extended periods of declining interest rates or
high inflation, the profits on pre-funded funeral insurance
policies are reduced as a result of the lower spread between
investment income earned and the fixed benefits credited to our
policyholders. As of June&nbsp;30, 2003, approximately 70% of
Assurant PreNeed&#146;s in force insurance policy reserves
related to policies that provide for death benefit growth, some
of which provide for minimum death benefit growth pegged to
changes in the Consumer Price Index.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes decreased by $5&nbsp;million, or
33%, from $15&nbsp;million for the six months ended
June&nbsp;30, 2002 to $10&nbsp;million for the six months ended
June&nbsp;30, 2003, largely consistent with the 29% decrease in
segment income before income tax.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
    December&nbsp;31, 2001</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $38&nbsp;million, or
6%, from $689&nbsp;million in 2001 to $727&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $31&nbsp;million, or 6%, from $507&nbsp;million in
2001 to $538&nbsp;million in 2002. The increase was primarily
driven by a $28&nbsp;million increase in net earned premiums in
2002 in our AMLIC channel due to an increase in the average size
of the policies sold. Policy size increased due to a change in
packaging of funerals sold by SCI.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$5&nbsp;million, or 3%, from $179&nbsp;million in 2001 to
$184&nbsp;million in 2002. An 8% increase in average invested
assets in 2002 resulting from the growth in inforce policies
resulted in $14&nbsp;million of additional investment income in
2002. Offsetting the increase in invested assets was a 36 basis
point decrease in yield on the investment portfolio from 7.29%
in 2001 to 6.93% in 2002 due to the lower interest rate
environment and restructuring of the investment portfolio to
enhance credit quality. The decline in yields reduced investment
income by $9&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income increased by
$2&nbsp;million, or 66%, from $3&nbsp;million in 2001 to
$5&nbsp;million in 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$44&nbsp;million, or 7%, from $606&nbsp;million in 2001 to
$650&nbsp;million in 2002.
</FONT>

<P align="center"><FONT size="2">63
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$22&nbsp;million, or 5%, from $485&nbsp;million in 2001 to
$507&nbsp;million in 2002. The increase in policyholder benefits
was consistent with the increase in business written, partially
offset by other factors. A portion of our pre-funded funeral
insurance policies uses a Consumer Price Index rate as a growth
rate credited on policies. The Consumer Price Index rate
decreased from 3.36% in 2001 to 1.97% in 2002. This reduced
policyholder benefits by $6&nbsp;million in 2002. In addition,
benefit expense increased by $3&nbsp;million from 2001 to 2002
related to higher customer utilization of an early pay off
feature that allows conversion from limited pay policies to
single pay policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $22&nbsp;million or 18% from $121&nbsp;million in
2001 to $143&nbsp;million in 2002. The primary reason for the
increase was an increase in amortization of DAC and VOBA of
$13&nbsp;million in 2002, as a result of the increased sales of
single pay policies versus plans paid over a three-, five- and
ten-year period. The acquisition costs on single pay policies
are amortized in the year of issue, thus causing the increase in
expense levels in 2002 over 2001. All other expenses increased
by $6&nbsp;million in 2002 from 2001 due primarily to the
increase in premiums.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax decreased
$4&nbsp;million, or 7%, from $54 million in 2001 to
$50&nbsp;million in 2002. This was caused primarily by smaller
spreads between our investment yields and rates we credited to
our policyholders. Also, profits were lower due to higher
utilization of the early pay off feature described above and
higher mortality, offset by the lower Consumer Price Index
credited growth.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes decreased by $2&nbsp;million, or 7%,
from $29&nbsp;million in 2001 to $27&nbsp;million in 2002 which
was largely consistent with the 7% decrease in segment income
before income tax in 2002.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $282&nbsp;million, or
69%, from $407&nbsp;million in 2000 to $689&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
increased by $230&nbsp;million, or 83%, from $277&nbsp;million
in 2000 to $507&nbsp;million. Excluding the increase to net
earned premiums of $218&nbsp;million due to the acquisition of
AMLIC, net earned premiums increased by $13&nbsp;million
primarily due to growth in our independent channel&#146;s
inforce block of business and to increased sales from the
signing of new large third-party marketing distributors. In late
2000, we began pursuing large third-party marketers as an
additional source of distribution, diversifying our traditional
channels of captive field representatives and independent agents
specializing in pre-funded funeral insurance products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment income increased by $51&nbsp;million,
or 40%, from $128&nbsp;million in 2000 to $179&nbsp;million in
2001. Excluding the net increase to investment income of
$47&nbsp;million due to the acquisition of AMLIC, investment
income increased by $4&nbsp;million. This was primarily due to
an increase in yield on the investment portfolio from 7.27% in
2000 to 7.36% in 2001 with the balance of the increase due to
growth in assets.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$251&nbsp;million, or 71%, from $355&nbsp;million in 2000 to
$606&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits increased by
$206&nbsp;million, or 74%, from $279&nbsp;million in 2000 to
$485&nbsp;million in 2001. Excluding the increase to
policyholder benefits of $196&nbsp;million as a result of the
acquisition of AMLIC, the policyholder benefits in our
independent channel increased by $10&nbsp;million in 2001, or
4%, consistent with the 6% increase in net earned premiums in
2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $45&nbsp;million, or 59%, from $76&nbsp;million in
2000 to $121&nbsp;million in 2001. The increase was primarily
due to the acquisition of AMLIC.
</FONT>

<P align="center"><FONT size="2">64
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Income After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment income after tax increased by
$20&nbsp;million, or 59%, from $34&nbsp;million in 2000 to
$54&nbsp;million in 2001. Increases of $20&nbsp;million after
tax contribution was due to the AMLIC acquisition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $11&nbsp;million, or
61%, from $18&nbsp;million in 2000 to $29&nbsp;million in 2001.
The increase in income tax expense was consistent with the 62%
increase in segment income before income tax in 2001.
</FONT>

<P align="left">
<B><I><FONT size="2">Corporate and Other</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Overview</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate and Other segment includes
activities of the holding company, financing expenses, realized
gains (losses) on investments and interest income not allocated
to other segments. The Corporate and Other segment also includes
(i)&nbsp;the results of operations of FFG (a business we sold on
April&nbsp;2, 2001) and (ii)&nbsp;LTC (a business we sold on
March&nbsp;1, 2000), for the periods prior to their disposition,
and amortization of deferred gains associated with the portions
of the sales of FFG and LTC sold through reinsurance agreements
as described above. The table below presents information
regarding our Corporate and Other segment&#146;s results of
operations:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains (losses)&nbsp;on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(45</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(55</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(437</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(110</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(84</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(80</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(173</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(114</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, we had approximately
$434&nbsp;million (pre-tax) of deferred gains that had not yet
been amortized. We expect that we will be amortizing deferred
gains from dispositions through 2031. The deferred gains are
being amortized in a pattern consistent with the expected future
reduction of the inforce blocks of business ceded to The
Hartford and John Hancock. This reduction is expected to be more
rapid in the first few years after sale and to be slower as the
liabilities in the block decrease.
</FONT>

<P align="center"><FONT size="2">65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Corporate and Other segment&#146;s financial
results were most affected by the April&nbsp;2, 2001 sale of
FFG. Below are the results of FFG that have been included in the
Corporate and Other segment from January 1, 2001 through
March&nbsp;31, 2001, and for 2000:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;


<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">679</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(211</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Selling, underwriting and general expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(86</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(360</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(571</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Reportable income results before income
    tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Reportable income results after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">Six Months Ended June&nbsp;30, 2003 Compared
to Six Months Ended June&nbsp;30, 2002</FONT></I>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues increased by $28&nbsp;million, or
76%, from $37&nbsp;million for the six months ended
June&nbsp;30, 2002, to $65&nbsp;million for the six months ended
June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income increased by
$6&nbsp;million, or 38%, from $16&nbsp;million for the six
months ended June&nbsp;30, 2002, to $22&nbsp;million for the six
months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized gains on investments improved by
$56&nbsp;million from net realized losses on investments of
$49&nbsp;million for the six months ended June&nbsp;30, 2002, to
net realized gains on investments of $7&nbsp;million for the six
months ended June&nbsp;30, 2003. Net realized losses on
investments are comprised of both other-than-temporary
impairments and sales of securities. For the six months ended
June&nbsp;30, 2003, we had other-than-temporary impairments of
$16&nbsp;million, as compared to $38&nbsp;million for the six
months ended June&nbsp;30, 2002. There were no individual
impairments in excess of $10&nbsp;million for the six months
ended June&nbsp;30, 2003. Impairments of available for sale
securities in excess of $10&nbsp;million for the six months
ended June&nbsp;30, 2002 consisted of a $12&nbsp;million
writedown of fixed maturity investments in AT&#38;T Canada and
an $11&nbsp;million writedown of fixed maturity investments in
MCI WorldCom.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gain on disposal of
businesses decreased by $5 million, or 13%, from
$40&nbsp;million for the six months ended June&nbsp;30, 2002, to
$35 million for the six months ended June&nbsp;30, 2003. This
decrease was consistent with the run-off of the business ceded
to The Hartford and John Hancock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gains on disposal of businesses decreased by
$11&nbsp;million, or 100%, from $11 million for the six months
ended June&nbsp;30, 2002, to $0 for the six months ended
June&nbsp;30, 2003. On June&nbsp;28, 2002, we sold our
investment in NHP, which resulted in pre-tax gains of
$11&nbsp;million in the six months ended June&nbsp;30, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$18&nbsp;million, or 95%, from $19&nbsp;million for the six
months ended June&nbsp;30, 2002 to $1&nbsp;million for the six
months ended June&nbsp;30, 2003. Fees and other income for the
six months ended June&nbsp;30, 2002 included approximately
$14&nbsp;million of income associated with a settlement true-up
of a
</FONT>

<P align="center"><FONT size="2">66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">1999 sale of a small block of business to a third
party and reversal of bad debt allowances due to successful
collection of receivables that had been previously written off.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses increased by
$4&nbsp;million, or 5%, from $80&nbsp;million for the six months
ended June&nbsp;30, 2002, to $84&nbsp;million for the six months
ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
increased by $4&nbsp;million, or 19%, from $21&nbsp;million for
the six months ended June&nbsp;30, 2002, to $25&nbsp;million for
the six months ended June&nbsp;30, 2003 mainly due to higher
corporate expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts during the six months ended June&nbsp;30, 2003
remained unchanged from the comparable period in 2002 at
$59&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Loss After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment loss after tax improved by
$8&nbsp;million, or 40%, from a loss of $20&nbsp;million for the
six months ended June&nbsp;30, 2002, to a loss of $12 million
for the six months ended June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes decreased by $16&nbsp;million from
an income tax benefit of $23&nbsp;million for the six months
ended June&nbsp;30, 2002, to an income tax benefit of
$7&nbsp;million for the six months ended June&nbsp;30, 2003.
During the six months ended June&nbsp;30, 2002, we recognized
the release of approximately $6&nbsp;million of previously
provided tax accruals which were no longer considered necessary
based on the resolution of certain domestic tax matters.
</FONT>

<P align="left">
<I><FONT size="2">Year Ended December&nbsp;31, 2002 Compared to
December&nbsp;31, 2001</FONT></I>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues decreased by $210&nbsp;million, or
85%, from $248&nbsp;million in 2001 to $38&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
decreased by $58&nbsp;million, or 100%, from $58&nbsp;million in
2001 to $0&nbsp;million in 2002 due to the sale of FFG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$72&nbsp;million, or 64%, from $112&nbsp;million in 2001 to
$40&nbsp;million in 2002. Excluding the $32&nbsp;million
reduction in investment income from the sale of FFG, net
investment income decreased in 2002 as a result of a decrease in
invested assets because we paid down debt and acquired CORE and
DBD.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized losses on investments decreased by
$1&nbsp;million from $119&nbsp;million from 2001 to
$118&nbsp;million in 2002. In 2002, we had other-than-temporary
impairments of $85&nbsp;million, as compared to $78&nbsp;million
in 2001. Impairments of available for sale securities in excess
of $10&nbsp;million in 2002 consisted of an $18&nbsp;million
writedown of fixed maturity investments in NRG Energy, a
$12&nbsp;million writedown of fixed maturity investments in
AT&#38;T Canada and an $11 million writedown of fixed maturity
investments in MCI WorldCom. Impairments of available for sale
securities in excess of $10&nbsp;million in 2001 consisted of a
$22&nbsp;million writedown of fixed maturity investments in
Enron.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gain on disposal of
businesses increased by $12 million, or 18%, from
$68&nbsp;million in 2001 to $80&nbsp;million in 2002, mainly due
a to full year of amortization of the deferred gain on the sale
of FFG as compared to nine months in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gains on disposal of businesses decreased by
$51&nbsp;million, or 82%, from $62 million in 2001 to
$11&nbsp;million in 2002. This decrease was due to the sale of
FFG&#146;s mutual fund operations. Also, on June&nbsp;28, 2002,
we sold our investment in NHP, which resulted in pre-tax gains
of $11&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$42&nbsp;million, or 63%, from $67&nbsp;million in 2001 to
$25&nbsp;million in 2002. Excluding the $65&nbsp;million
reduction in other income due to the sale of FFG, fees and other
income increased by $23&nbsp;million in 2002 mainly due to
approximately $15&nbsp;million of income associated with a
settlement true-
</FONT>

<P align="center"><FONT size="2">67
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">up of a 1999 sale of a small block of business to
a third party and reversal of bad debt allowances due to
successful collection of receivables that had been previously
written off.
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$149&nbsp;million, or 46%, from $322&nbsp;million in 2001 to
$173&nbsp;million in 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits decreased by
$70&nbsp;million, or 100%, from $70&nbsp;million in 2001 to $0
in 2002. The decrease was entirely due to the sale of FFG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense decreased from $14&nbsp;million
in 2001 to $0 in 2002. We used a portion of the FFG sale
proceeds to repay $225&nbsp;million of debt owed to Fortis
Finance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
decreased by $65&nbsp;million, or 54%, from $120&nbsp;million in
2001 to $55&nbsp;million in 2002. Excluding the $67 million
reduction in selling, underwriting and general expenses due to
the sale of FFG, these expenses increased by $2&nbsp;million
from 2001 to 2002 due to increased corporate overhead costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts in 2002 remained unchanged from 2001 at
$118&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Loss After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment loss after tax increased by
$21&nbsp;million, or 40%, from a $53&nbsp;million loss in 2001
to a $74&nbsp;million loss in 2002, primarily due to the sale of
FFG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes increased by $40&nbsp;million, or
190%, from $21&nbsp;million in 2001 to $61&nbsp;million in 2002.
Excluding the $4&nbsp;million reduction in income tax expenses
due to the sale of FFG, income tax benefit increased by
$44&nbsp;million in 2002. The change in the income tax benefit
was largely consistent with the increase in segment losses
before income tax. In 2002, we also recognized the release of
approximately $13&nbsp;million of previously provided tax
accruals, which were no longer considered necessary based on the
resolution of certain domestic tax matters.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Year Ended December&nbsp;31, 2001 Compared to
    December&nbsp;31, 2000</FONT></I></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Revenues</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total revenues decreased by $414&nbsp;million, or
63%, from $662&nbsp;million in 2000 to $248&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net earned premiums and other considerations
decreased by $159&nbsp;million, or 73%, from $217&nbsp;million
in 2000 to $58&nbsp;million in 2001. The decrease was primarily
due to the sale of FFG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income decreased by
$45&nbsp;million, or 29%, from $157&nbsp;million in 2000 to
$112&nbsp;million in 2001. Excluding the net decrease to
investment income of $147&nbsp;million due to the sale of FFG,
net investment income increased by $102&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net realized losses on investments increased by
$74&nbsp;million, or 164%, from $45 million in 2000 to
$119&nbsp;million in 2001. In 2001, we had other-than-temporary
impairments on fixed maturity securities of $78&nbsp;million, as
compared to $5 million in 2000. There were no impairments in
excess of $10&nbsp;million in 2000. Impairments of available for
sale securities in excess of $10 million in 2001 consisted of a
$22&nbsp;million writedown of fixed maturity investments in
Enron.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Amortization of deferred gain on disposal of
businesses increased by $58 million from $10&nbsp;million in
2000 to $68&nbsp;million in 2001, due primarily to the
recognition of nine months of amortization of the FFG deferred
gain as compared to $0 in 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Gains on disposal of businesses increased by
$50&nbsp;million from $12&nbsp;million in 2000 to
$62&nbsp;million in 2001. The increase was due to
$62&nbsp;million of gains recognized on the sale of FFG&#146;s
mutual fund management operations in 2001, as compared to
$12&nbsp;million of gains recognized on the sale of ACSIA in
2000.
</FONT>

<P align="center"><FONT size="2">68
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fees and other income decreased by
$244&nbsp;million, or 78%, from $311&nbsp;million in 2000 to
$67&nbsp;million in 2001. Excluding the net decrease in fees and
other income of $239&nbsp;million in 2001 due to the sale of
FFG, fees and other income decreased by $5&nbsp;million in 2001.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Total Benefits, Losses and Expenses</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Total benefits, losses and expenses decreased by
$454&nbsp;million, or 59%, from $776&nbsp;million in 2000 to
$322&nbsp;million in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policyholder benefits decreased by
$134&nbsp;million, or 66%, from $204&nbsp;million in 2000 to
$70&nbsp;million in 2001. The decrease was primarily due to the
sale of FFG.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Selling, underwriting and general expenses
decreased by $317&nbsp;million, or 73%, from $437&nbsp;million
in 2000 to $120&nbsp;million in 2001. Excluding the net decrease
of $274&nbsp;million in 2001 due to the sale of FFG, these
expenses decreased by $43&nbsp;million primarily due to two
months of selling, underwriting and general expenses in 2000
associated with LTC operations sold to John Hancock on
March&nbsp;1, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest expense decreased by $11&nbsp;million,
or 44%, from $25&nbsp;million in 2000 to $14&nbsp;million in
2001. This decrease was mainly due to the repayment of
$225&nbsp;million of debt in April 2000 owed to Fortis Finance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts increased by $8&nbsp;million, or 7%, from
$110&nbsp;million in 2000 to $118&nbsp;million in 2001. The
increase was primarily due to the reflection of twelve months of
distributions related to the trust capital securities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Segment Loss After Tax</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Segment loss after tax improved by
$25&nbsp;million from a $78 million loss in 2000 to a
$53&nbsp;million loss in 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Income taxes decreased $15&nbsp;million from a
benefit of $36&nbsp;million in 2000 to a benefit of
$21&nbsp;million in 2001. Excluding the net $29&nbsp;million
reduction in income tax expense due to the sale of FFG, income
tax increased by $20&nbsp;million. This increase was largely
consistent with the increase in pre-tax gains on disposal of
businesses in 2001.
</FONT>

<P align="left">
<B><FONT size="2">Investments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the carrying value of
our investments by type of security as of the dates indicated:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">82</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">869</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">447</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of our fixed maturity securities shown above, 71%
and 75% were invested in securities rated &#147;A&#148; or
better, as of June&nbsp;30, 2003 and December&nbsp;31, 2002,
respectively. As interest rates decrease, the market value of
fixed maturity securities increases.
</FONT>

<P align="center"><FONT size="2">69
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides the cumulative net
unrealized gains (pre-tax) on fixed maturity securities and
equity securities as of the dates indicated:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortized cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,471</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net unrealized gains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">265</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net unrealized gains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net unrealized gains on fixed maturity securities
increased by $295&nbsp;million, or 73%, from December&nbsp;31,
2002 to June&nbsp;30, 2003. The increase in net unrealized gains
was primarily due to decreases in market interest rates. Yields
on 10-year U.S.&nbsp;Treasury bonds decreased by 31&nbsp;basis
points from 3.82% at December&nbsp;31, 2002 to 3.51% at
June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net unrealized gains on fixed maturity securities
increased by $246&nbsp;million, or 155%, from December&nbsp;31,
2001 to December&nbsp;31, 2002. Again, this reflected the impact
of decreasing market interest rates. Yields on 10-year U.S.
Treasury bonds decreased by 121 basis points from 5.03% at
December&nbsp;31, 2001 to 3.82% at December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net unrealized gains on equity securities
increased by $17&nbsp;million, or 237%, from December&nbsp;31,
2002 to June&nbsp;30, 2003 and by $3&nbsp;million, or 75%, from
December&nbsp;31, 2001 to December&nbsp;31, 2002.
</FONT>

<P align="left">
<B><FONT size="2">Reserves</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents reserve information
as of the dates indicated:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Future policy benefits and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Claims and benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total policy liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,632</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,389</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefits and expenses increased by
$213&nbsp;million, or 4%, from December&nbsp;31, 2002 to
June&nbsp;30, 2003 and by $245&nbsp;million, or 5%, from
December&nbsp;31, 2001 to December&nbsp;31, 2002. The main
contributing factor to these increases was growth in underlying
business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unearned premiums decreased by $67&nbsp;million,
or 2%, from December&nbsp;31, 2002 to June&nbsp;30, 2003 and by
$59&nbsp;million, or 2%, from December&nbsp;31, 2001 to
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Claims and benefits payable increased by
$97&nbsp;million, or 3%, from December&nbsp;31, 2002 to
June&nbsp;30, 2003 and increased by $139&nbsp;million, or 4%,
from December&nbsp;31, 2001 to December&nbsp;31, 2002. The main
contributing factor to these increases was growth in underlying
business.
</FONT>

<P align="center"><FONT size="2">70
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides reserve information
by our major lines of business for the years ended
December&nbsp;31, 2002 and 2001 as of:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Future</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Future</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">policy</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Claims and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">policy</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Claims and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">benefits and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">benefits and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">premiums</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">payable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">premiums</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">payable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Long Duration Contracts:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pre-funded funeral life insurance policies and
    annuity contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Life insurance no longer offered
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">693</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Universal life and annuities no longer offered
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FFG and LTC disposed businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Short Duration Contracts:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group term life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group disability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical and dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">603</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warranties and extended service contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total policy liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,267</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For a description of our reserving methodology,
see Note&nbsp;14 of the Notes to Consolidated Financial
Statements included elsewhere in this prospectus.
</FONT>

<P align="left">
<B><FONT size="2">Reinsurance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth our reinsurance
recoverables as of the dates indicated:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reinsurance recoverables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,578</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance recoverables decreased by
$72&nbsp;million, or 2%, from December&nbsp;31, 2002 to
June&nbsp;30, 2003 and by $102&nbsp;million, or 2%, from
December&nbsp;31, 2001 to December&nbsp;31, 2002. We have used
reinsurance to exit certain businesses, such as the dispositions
of FFG and LTC. The reinsurance recoverables relating to these
dispositions amounted to $2,378&nbsp;million at
December&nbsp;31, 2002 and $2,294&nbsp;million at
December&nbsp;31, 2001.
</FONT>

<P align="center"><FONT size="2">71
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of business, we are
involved in both the assumption and cession of reinsurance with
non-affiliated companies. The following table provides details
of the reinsurance recoverables balance for the years ended
December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded future policyholder benefits and expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded unearned premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded claims and benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">757</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded paid losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We utilize ceded reinsurance for loss protection
and capital management, business dispositions and, in the
Assurant Solutions segment, for client risk and profit sharing.
</FONT>

<P align="left">
<I><FONT size="2">Loss Protection and Capital
Management</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of our overall risk and capacity
management strategy, we purchase reinsurance for certain risks
underwritten by our various business segments, including
significant individual or catastrophic claims, and to free up
capital to enable us to write additional business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For those product lines where there is exposure
to catastrophes, we closely monitor and manage the aggregate
risk exposure by geographic area, and we have entered into
reinsurance treaties to manage exposure to these types of events.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under indemnity reinsurance transactions in which
we are the ceding insurer, we remain liable for policy claims if
the assuming company fails to meet its obligations. To limit
this risk, we have control procedures to evaluate the financial
condition of reinsurers and to monitor the concentration of
credit risk to minimize this exposure. The selection of
reinsurance companies is based on criteria related to solvency
and reliability and, to a lesser degree, diversification as well
as developing strong relationships with our reinsurance partners
for the sharing of risks.
</FONT>

<P align="left">
<I><FONT size="2">Business Dispositions</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have used reinsurance to exit certain
businesses, such as the dispositions of FFG and LTC. Reinsurance
was used in these cases to facilitate the transactions because
the businesses shared legal entities with business segments that
we retained. Assets backing liabilities ceded relating to these
businesses are held in trusts, and the separate accounts
relating to FFG are still reflected in our balance sheet.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reinsurance recoverable from The Hartford was
$1,680&nbsp;million and $1,748&nbsp;million as of
December&nbsp;31, 2002 and 2001, respectively. The reinsurance
recoverable from John Hancock was $693&nbsp;million and
$546&nbsp;million as of December&nbsp;31, 2002 and 2001,
respectively. We would be responsible to administer this
business in the event of a default by reinsurers. In addition,
under the reinsurance agreement, The Hartford is obligated to
contribute funds to increase the value of the separate accounts
relating to the business sold if such value declines. If The
Hartford fails to fulfill these obligations, we will be
obligated to make these payments.
</FONT>

<P align="left">
<I><FONT size="2">Assurant Solutions Segment Client Risk and
Profit Sharing</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Assurant Solutions segment writes business
produced by its clients, such as mortgage lenders and servicers
and financial institutions, and reinsures all or a portion of
such business to insurance subsidiaries of the clients. Such
arrangements allow significant flexibility in structuring the
sharing of risks and profits on the underlying business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A substantial portion of Assurant Solutions&#146;
reinsurance activities are related to agreements to reinsure
premiums and risk related to business generated by certain
clients to the clients&#146; <B>captive insurance companies</B>
or to reinsurance subsidiaries in which the clients have an
ownership interest. Through these arrangements,
</FONT>

<P align="center"><FONT size="2">72
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">our insurance subsidiaries share some of the
premiums and risk related to client-generated business with
these clients. When the reinsurance companies are not authorized
to do business in our insurance subsidiary&#146;s domiciliary
state, our insurance subsidiary obtains collateral, such as a
trust or a letter of credit, from the reinsurance company or its
affiliate in an amount equal to the outstanding reserves to
obtain full financial credit in the domiciliary state for the
reinsurance. Our reinsurance agreements do not relieve us from
our direct obligation to our insured. Thus, a credit exposure
exists to the extent that any reinsurer is unable to meet the
obligations assumed in the reinsurance agreements. To minimize
our exposure to reinsurance insolvencies, we evaluate the
financial condition of our reinsurers and hold substantial
collateral (in the form of funds, trusts and letters of credit)
as security under the reinsurance agreements. See
&#147;&#151;Quantitative and Qualitative Disclosures about
Market Risk&#151;Credit Risk.&#148;
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Liquidity and Capital Resources</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant, Inc. is a holding company, and as such,
has limited direct operations of its own. Our holding company
assets consist primarily of the capital stock of our
subsidiaries. Accordingly, our future cash flows depend upon the
availability of dividends and other statutorily permissible
payments from our subsidiaries, such as payments under our tax
allocation agreement and under management agreements with our
subsidiaries. The ability to pay such dividends and to make such
other payments will be limited by applicable laws and
regulations of the states in which our subsidiaries are
domiciled, which subject our subsidiaries to significant
regulatory restrictions. The dividend requirements and
regulations vary from state to state and by type of insurance
provided by the applicable subsidiary. These laws and
regulations require, among other things, our insurance
subsidiaries to maintain minimum solvency requirements and limit
the amount of dividends these subsidiaries can pay to the
holding company. Solvency regulations, capital requirements and
rating agencies are some of the factors used in determining the
amount of capital used for dividends. For 2003, the maximum
amount of distributions our subsidiaries could pay under
applicable laws and regulations without prior regulatory
approval is $290&nbsp;million. As a result of statutory
accounting for our sales of businesses, we believe that our
maximum will be significantly lower for 2004. For a discussion
of the various restrictions on our ability and the ability of
our subsidiaries to pay dividends, please see
&#147;Regulation&#148; and &#147;Description of Share
Capital.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends and other interest income paid by our
subsidiaries totaled $18.5&nbsp;million for the six months ended
June&nbsp;30, 2003, $15&nbsp;million for the six months ended
June&nbsp;30, 2002, $186.5&nbsp;million for the year ended
December&nbsp;31, 2002 and $615.4&nbsp;million for the year
ended December&nbsp;31, 2001. Figures for 2001 were higher due
to a gain on the sale of FFG. We used these cash inflows
primarily to pay expenses, to make interest payments on
indebtedness and, historically, to make dividend payments to our
stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The primary sources of funds for our subsidiaries
consist of premiums and fees collected, the proceeds from the
sales and maturity of investments and investment income. Cash is
primarily used to pay insurance claims, agent commissions,
operating expenses and taxes. We generally invest our
subsidiaries&#146; excess funds in order to generate income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, Fortis has maintained a
$1&nbsp;billion commercial paper facility that we have been able
to access for up to $750&nbsp;million. We use commercial paper
to cover any cash shortfalls, which may occur from time to time.
We had no commercial paper borrowings during the first six
months of 2003 or during the year ended December&nbsp;31, 2002.
In 2001, $235&nbsp;million in commercial paper was issued and
redeemed. There was no outstanding commercial paper at year-end
2001. In connection with our separation from Fortis, we will no
longer have access to this facility. Our subsidiaries do not
maintain commercial paper or other borrowing facilities at the
subsidiary level.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our qualified pension plan was under-funded by
$95&nbsp;million at December&nbsp;31, 2002. In 2003, we made
contributions to the pension fund of $19&nbsp;million in April
and $39.6&nbsp;million in September. In accordance with ERISA,
there is no expected minimum funding requirement for 2004 or
2005. Our nonqualified plans, which are unfunded, had a
projected benefit obligation of $64&nbsp;million at
December&nbsp;31, 2002. The expected company payments to
retirees under these plans are approximately $4&nbsp;million per
year in 2004 and 2005. Also, our post-retirement plans (other
than pension), which are unfunded, had an accumulated
post-retirement benefit
</FONT>

<P align="center"><FONT size="2">73
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">obligation of $46&nbsp;million at
December&nbsp;31, 2002. In September 2003, we contributed
$5.9&nbsp;million towards pre-funding these benefits. In
addition, the expected company payments to retirees and
dependents under the postretirement plan are approximately
$1.5&nbsp;million per year in 2004 and 2005. See Note&nbsp;16 of
the Notes to Consolidated Financial Statements included
elsewhere in this prospectus.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We estimate that our capital expenditures in
connection with our name change and rebranding initiative will
be approximately $10&nbsp;million, which we will expense in
2004. We are not currently planning to make any other
significant capital expenditures in 2004 or 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We anticipate that we will pay to participants in
the Fortis Appreciation Incentive Rights Plan (to be renamed the
Assurant Appreciation Incentive Rights Plan) an aggregate of
approximately $22&nbsp;million in connection with the cash-out
of all outstanding Fortis, Inc. incentive rights. Approximately
$11&nbsp;million of this cash-out was accrued at June&nbsp;30,
2003. The balance, or approximately $11&nbsp;million, will be
accrued in the fourth quarter of 2003. See
&#147;Management&nbsp;&#151; Management Compensation and
Incentive Plans&nbsp;&#151; Assurant Appreciation Incentive
Rights Plan.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In management&#146;s opinion, our
subsidiaries&#146; cash flow from operations together with our
income and gains from our investment portfolio will provide
sufficient liquidity to meet our needs in the ordinary course of
business.
</FONT>

<P align="left">
<B><I><FONT size="2">Cash Flows</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We monitor cash flows at both the consolidated
and subsidiary levels. Cash flow forecasts at the consolidated
and subsidiary levels are provided on a monthly basis, and we
use trend and variance analyses to project future cash needs
making adjustments to the forecasts when needed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below shows our recent net cash flows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Net cash provided by (used in):</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(197</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">533</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(387</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(361</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(175</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(161</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(380</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(429</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(146</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(240</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cash Flows for the Six Months Ended
June&nbsp;30, 2003 and June&nbsp;30,
2002.</FONT></I><FONT size="2"> The key changes of the net cash
outflow of $146&nbsp;million for the six months ended
June&nbsp;30, 2003 were net purchases of fixed maturity
securities of $1,021&nbsp;million and dividends paid of
$160&nbsp;million, as compared to net purchases of fixed
maturity securities of $565&nbsp;million and dividends paid of
$20&nbsp;million for the six months ended June&nbsp;30, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Cash Flows for the Years Ended
December&nbsp;31, 2002, 2001 and 2000.</FONT></I><FONT size="2">
The key changes of the net cash outflow of $9&nbsp;million for
the year ended December&nbsp;31, 2002 were net purchases of
fixed maturity securities of $1,153&nbsp;million and maturities
of these securities of $861&nbsp;million. Key changes of the net
cash outflow of $19&nbsp;million for the year ended
December&nbsp;31, 2001 were the sale of FFG for
$396&nbsp;million in cash and changes in our revenues and
expenses from operating activities as described above. Key
changes of the net cash inflow of $76&nbsp;million for the year
ended December&nbsp;31, 2000 were $550&nbsp;million of proceeds
received from the issuance of the 2000 trust capital securities
and changes in our revenues and expenses from operating
activities as described above.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At June&nbsp;30, 2003, we had total debt
outstanding of $1,470&nbsp;million, as compared to
$1,471&nbsp;million at December&nbsp;31, 2002,
$1,471&nbsp;million at December&nbsp;31, 2001 and
$1,475&nbsp;million at December&nbsp;31, 2000. This debt
consists of trust capital securities, which we classify as
mandatorily redeemable preferred securities of
</FONT>

<P align="center"><FONT size="2">74
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">subsidiary trusts, and a small amount of
mandatorily redeemable preferred stock. See &#147;Description of
Share Capital&#148; and &#147;Description of Other
Securities&#148; for a description of the terms of these
securities.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below shows our cash outflows for
distributions and dividends for the periods indicated:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="5"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="5" align="center" nowrap><B><FONT size="1">For the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="5" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="5" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Security</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="9"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="9" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts and interest paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$117,114
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$133,667
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$112,816
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">516</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">1,052
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">1,053
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">947
    </FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A common stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">67,000
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">&#151;
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B&nbsp;&#38; C common stock dividends
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">41,876
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">42,298
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">21,111
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">219,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$160,042
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$244,018
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom">
    <FONT size="2">$134,874
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Capitalization.&#148;
</FONT>

<P align="left">
<B><I><FONT size="2">Commitments and Contingencies</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have obligations and commitments to third
parties as a result of our operations. These obligations and
commitments are detailed in the table below by maturity date as
of the dates indicated:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="20%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2004</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2005</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2006</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2007</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Thereafter</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <FONT size="2">Contractual obligations:
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating leases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="26"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <FONT size="2">Commitments:
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment purchases
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#151;unsettled trades
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#151;commercial mortgage loans on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">&#151;other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total obligations and commitments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Letters of Credit</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business, letters of
credit are issued primarily to support reinsurance arrangements.
These letters of credit are supported by commitments with
financial institutions. We had approximately $120&nbsp;million
and $109&nbsp;million of letters of credit outstanding as of
June&nbsp;30, 2003 and December&nbsp;31, 2002, respectively.
</FONT>

<P align="center"><FONT size="2">75
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Additionally, as of June&nbsp;30, 2003, we had an
unused $50&nbsp;million letter of credit facility.
</FONT>

<P align="left">
<B><FONT size="2">Quantitative and Qualitative Disclosures about
Market Risk</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a provider of insurance products, effective
risk management is fundamental to our ability to protect both
our customers&#146; and stockholders&#146; interests. We are
exposed to potential loss from various market risks, in
particular interest rate risk and credit risk. Additionally we
are exposed to inflation risk and to a small extent to foreign
currency risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest rate risk is the possibility the fair
value of liabilities will change more or less than the market
value of investments in response to changes in interest rates,
including changes in the slope or shape of the yield curve and
changes in spreads due to credit risks and other factors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Credit risk is the possibility that
counterparties may not be able to meet payment obligations when
they become due. We assume counterparty credit risk in many
forms. A counterparty is any person or entity from which cash or
other forms of consideration are expected to extinguish a
liability or obligation to us. Primarily, our credit risk
exposure is concentrated in our fixed income investment
portfolio and, to a lesser extent, in our reinsurance
recoverables.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inflation risk is the possibility that a change
in domestic price levels produces an adverse effect on earnings.
This typically happens when only one of invested assets or
liabilities is indexed to inflation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Foreign exchange risk is the possibility that
changes in exchange rates produce an adverse effect on earnings
and equity when measured in domestic currency. This risk is
largest when assets backing liabilities payable in one currency
are invested in financial instruments of another currency. Our
general principle is to invest in assets that match the currency
in which we expect the liabilities to be paid.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Interest Rate Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest rate risk arises as we invest
substantial funds in interest-sensitive fixed income assets,
such as fixed maturity investments, mortgage-backed and
asset-backed securities and commercial mortgage loans, primarily
in the United States and Canada. There are two forms of interest
rate risk&#151;price risk and reinvestment risk. Price risk
occurs when fluctuations in interest rates have a direct impact
on the market valuation of these investments. As interest rates
rise, the market value of these investments falls, and
conversely, as interest rates fall, the market value of these
investments rises. Reinvestment risk occurs when fluctuations in
interest rates have a direct impact on expected cash flows from
mortgage-backed and asset-backed securities. As interest rates
fall, an increase in prepayments on these assets results in
earlier than expected receipt of cash flows forcing us to
reinvest the proceeds in an unfavorable lower interest rate
environment, and conversely as interest rates rise, a decrease
in prepayments on these assets results in later than expected
receipt of cash flows forcing us to forgo reinvesting in a
favorable higher interest rate environment. As of June&nbsp;30,
2003, we held $9,771&nbsp;million at fair market value, or
89.6%, of our total invested assets, in fixed maturity
securities, including mortgage-backed and asset-backed
securities, and commercial mortgage loans as compared to
$9,005&nbsp;million at fair market value, or 88.3%, at
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect to manage interest rate risk by
selecting investments with characteristics such as duration,
yield, currency and liquidity tailored to the anticipated cash
outflow characteristics of our insurance and reinsurance
liabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our group long-term disability reserves are also
sensitive to interest rates. Group long-term disability reserves
are discounted to the valuation date at the valuation interest
rate. The valuation interest rate is determined by taking into
consideration actual and expected earned rates on our asset
portfolio, with adjustments for investment expenses and
provisions for adverse deviation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The interest rate sensitivity of our fixed income
assets is assessed using hypothetical test scenarios that assume
several positive and negative parallel shifts of the underlying
yield curves. We have assumed that both the United States and
Canadian yield curves have a 100% correlation and, therefore,
move together. The individual securities are repriced under each
scenario using a valuation model. For investments such as
</FONT>

<P align="center"><FONT size="2">76
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">mortgage-backed and asset-backed securities, a
prepayment model was used in conjunction with a valuation model.
The following table summarizes the results of this analysis for
fixed income assets such as fixed maturity, mortgage-backed and
asset-backed securities and commercial mortgage loans held in
our investment portfolio:
</FONT>
</DIV>

<P align="center">
<B><FONT size="2">Interest Rate Movement Analysis</FONT></B>

<DIV align="center">
<B><FONT size="2">of Market Value of Fixed Income Investment
Portfolio</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">As of December&nbsp;31, 2002</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="47%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="21"></TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap>&nbsp;</TD>
</TR>

<TR>
    <TD colspan="21" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">-100</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">-50</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">0</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">50</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">100</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total market value
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,433</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">% Change in market value from base case
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$ Change in market value from base case
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(246</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(486</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Credit Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have exposure to credit risk primarily as a
holder of fixed income securities and by entering into
reinsurance cessions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our risk management strategy and investment
policy is to invest in debt instruments of high credit quality
issuers and to limit the amount of credit exposure with respect
to any one issuer. We attempt to limit our credit exposure by
imposing fixed maturity portfolio limits on individual issuers
based upon credit quality. Currently our portfolio limits are
1.5% for issuers rated AA-and above, 1% for issuers rated A- to
A+, 0.75% for issuers rated BBB- to BBB+ and 0.375% for issuers
rated BB- to BB+. These portfolio limits are further reduced for
certain issuers with whom we have credit exposure on reinsurance
agreements. We use the lower of Moody&#146;s or Standard
&#38;&nbsp;Poor&#146;s ratings to determine an issuer&#146;s
rating. See &#147;Business&#151;Investments.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents our fixed maturity
investment portfolio by ratings of the nationally recognized
securities rating organizations as of December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Rating</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Aaa/Aa/ A
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Baa
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ba
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">B and lower
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are also exposed to the credit risk of our
reinsurers. When we reinsure, we are still liable to our
insureds regardless of whether we get reimbursed by our
reinsurer. As part of our overall risk and capacity management
strategy, we purchase reinsurance for certain risks underwritten
by our various business segments as described above under
&#147;&#151;&nbsp;Reinsurance.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the vast majority of our reinsurance
recoverables, we are protected from the credit risk by using
some type of risk mitigation mechanism such as a trust, letter
of credit, or by withholding the assets in a modified
coinsurance or co-funds-withheld arrangement. For example,
reserves of $1,679&nbsp;million and $693&nbsp;million as of
December&nbsp;31, 2002 relating to two large coinsurance
arrangements with The Hartford and John Hancock, respectively,
related to sales of businesses. If the value of the assets in
these trusts decreases, The Hartford and John Hancock, as the
case may be, will be required to put more assets in the trusts.
We may be dependent on the financial condition of The Hartford
and John Hancock, whose A.M. Best ratings are currently A+ and
A++, respectively. For recoverables totaling approximately
$860&nbsp;million on a statutory basis as of December&nbsp;31,
2002, these mechanisms are not present; thus, we are dependent
solely on the credit of the reinsurer.
</FONT>

<P align="center"><FONT size="2">77
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Occasionally, the credit worthiness of the
reinsurer becomes questionable. See &#147;Risk Factors&#151;
Risks Related to Our Company&#151; Reinsurance may not be
available or adequate to protect us against losses, and we are
subject to the credit risk of reinsurers.&#148; The exposure
group by A.M. Best rating of these reinsurers is as follows:
</FONT>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="40%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="16%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pre-Tax Exposure</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">A.M. Best Classifications</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">A.M. Best Ratings of Reinsurer</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Statutory Basis)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Superior
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A++ or A+</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Excellent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">A or A-</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Very Good
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">B++ or B+</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">B or B-</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weak and Poor
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">C and lower</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Not Rated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">86</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Inflation Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Inflation risk arises as we invest substantial
funds in nominal assets, which are not indexed to the level of
inflation, whereas the underlying liabilities are indexed to the
level of inflation. Approximately 15% of our pre-funded funeral
insurance policies with reserves of approximately
$409&nbsp;million as of June&nbsp;30, 2003 have death benefits
that are guaranteed to grow with the Consumer Price Index. In
times of rapidly rising inflation the credited death benefit
growth on these liabilities increases relative to the investment
income earned on the nominal assets resulting in an adverse
impact on earnings. We have partially mitigated this risk by
purchasing a contract with payments tied to the Consumer Price
Index. See &#147;&#151;&nbsp;Derivatives.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we have inflation risk in our
individual and small employer group health insurance businesses
to the extent that medical costs increase with inflation and we
have not been able to increase premiums to keep pace with
inflation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Exchange Risk</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are exposed to some foreign exchange risk
arising from our international operations mainly in Canada. We
also have limited foreign exchange risk exposure to currencies
other than the Canadian dollar, primarily British pounds and
Danish krone. Total invested assets denominated in these other
currencies were less than 1% of our total invested assets at
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Foreign exchange risk is mitigated by matching
our liabilities under insurance policies that are payable in
foreign currencies with investments that are denominated in such
currency. We have not established any hedge to our
foreign-currency exchange rate exposure.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We assess our foreign exchange risk by examining
the foreign exchange rate exposure of the excess of invested
assets over the statutory reserve liabilities denominated in
foreign currency. Two stress scenarios are examined.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The first scenario assumes a hypothetical 10%
immediate change in the foreign exchange rate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The second scenario assumes a more severe 2.33
standard deviation event (comparable to a one in 100 probability
under a normal distribution).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The modelling techniques we use to calculate our
exposure does not take into account correlation among foreign
currency exchange rates or correlation among various markets.
Our actual experience may differ from
</FONT>

<P align="center"><FONT size="2">78
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">the results noted below due to correlation
assumptions utilized or if events occur that were not included
in the methodology, such as significant illiquidity or other
market events.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the results of
this analysis:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Adverse impact on the excess of investment assets over the statutory reserve</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">liabilities denominated in foreign currency</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">As of December 31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Excess of invested</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">assets over</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adverse impact for</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total invested</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Statutory reserve</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">statutory reserve</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adverse impact for</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">a 2.33 standard</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">assets</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">liabilities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">liabilities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">a 10% change in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">deviation change in</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in&nbsp;foreign</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in&nbsp;foreign</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in&nbsp;foreign</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exchange rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">exchange rate</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Country</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">currency)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">currency)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">currency)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in&nbsp;$)*</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(in&nbsp;$)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Canada
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">CAD 495.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">CAD 339.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">CAD 155.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">10% depreciation of CAD would cause a
    $8.9&nbsp;million loss in the excess of investment assets over
    the statutory reserve liabilities.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Derivatives</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Derivatives are financial instruments whose
values are derived from interest rates, foreign exchange rates,
financial indices or the prices of securities or commodities.
Derivative financial instruments may be exchange-traded or
contracted in the over-the-counter market and include swaps,
futures, options and forward contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under insurance statutes, our insurance companies
may use derivative financial instruments to hedge actual or
anticipated changes in their assets or liabilities, to replicate
cash market instruments or for certain income-generating
activities. These statutes generally prohibit the use of
derivatives for speculative purposes. We generally do not use
derivative financial instruments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;1, 2003, we purchased a contract to
partially hedge the inflation risk exposure inherent in some of
our pre-funded funeral insurance policies.
</FONT>

<P align="center"><FONT size="2">79
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "BUSINESS" -->

<P align="center">
<B><FONT size="2">BUSINESS</FONT></B>

<P align="left">
<B><FONT size="2">Overview</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed homeowners insurance,
manufactured housing homeowners insurance, debt protection
administration, credit insurance, warranties and extended
service contracts, individual health and small employer group
health insurance, group dental insurance, group disability
insurance, group life insurance and pre-funded funeral
insurance. The markets we target are generally complex, have a
relatively limited number of competitors and, we believe, offer
attractive profit opportunities. In these markets, we leverage
the experience of our management team and apply our expertise in
risk management, underwriting and business-to-business
management, as well as our technological capabilities in complex
administration and systems. Through these activities, we seek to
generate above-average returns by building on specialized market
knowledge, well-established distribution relationships and
economies of scale.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of our strategy, we are a leader in
many of our chosen markets and products. In our Assurant
Solutions business, we have leadership positions or are
partnered with clients who are leaders in creditor-placed
homeowners insurance, manufactured housing homeowners insurance
and debt protection administration. In our Assurant Employee
Benefits business, we are a leading writer of group dental plans
measured by the number of master contracts in force. In our
Assurant PreNeed business, we are the largest writer of
pre-funded funeral insurance measured by face amount of new
policies sold. We believe that our leadership positions give us
a sustainable competitive advantage in our chosen markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have four decentralized operating
business segments to ensure focus on critical activities close
to our target markets and customers, while simultaneously
providing centralized support in key functions. Each operating
business segment has its own experienced management team with
the autonomy to make decisions on key operating matters. These
managers are eligible to receive incentive-based compensation
based in part on operating business segment performance and in
part on company-wide performance, thereby encouraging strong
business performance and cooperation across all our businesses.
At the operating business segment level, we stress disciplined
underwriting, careful analysis and constant improvement and
product redesign. At the corporate level, we provide support
services, including investment, asset/liability matching and
capital management, leadership development, information
technology support and other administrative and finance
functions, enabling the operating business segments to focus on
their target markets and distribution relationships while
enjoying the economies of scale realized by operating these
businesses together. Also, our overall strategy and financial
objectives are set and continuously monitored at the corporate
level to ensure that our capital resources are being properly
allocated.
</FONT>

<P align="center"><FONT size="2">80
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We organize and manage our specialized businesses
through four operating business segments:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Operating Business</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Principal Products and</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Principal Distribution</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">For the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Segment</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Services</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Channels</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <B><FONT size="2">Assurant Solutions</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <BR>
    <FONT size="2">&#149; &nbsp;&nbsp;<B>Total revenues:
    $2,401&nbsp;million</B>
    </FONT></TD>
</TR>

<TR>
    <TD colspan="8"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Specialty<BR>
    Property</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Creditor-placed homeowners
    insurance (including tracking services)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Mortgage lenders and servicers
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <B><FONT size="2">&#149; &nbsp;&nbsp;Segment income before
    income
    tax:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$197&nbsp;million</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Manufactured housing
    homeowners insurance
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Manufactured housing lenders,
    dealers and vertically integrated builders
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="8"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Consumer<BR>
    Protection</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Debt protection
    administration<BR>
    &#149; &nbsp;&nbsp;Credit insurance<BR>
    &#149; &nbsp;&nbsp;Warranties and extended service
    contracts<BR>&nbsp;&nbsp;&nbsp;-Appliances<BR>&nbsp;&nbsp;&nbsp;-Automobiles
    and<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;recreational
    vehicles<BR>&nbsp;&nbsp;&nbsp;-Consumer
    electronics<BR>&nbsp;&nbsp;&nbsp;-Wireless devices
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Financial institutions
    (including credit card issuers) and retailers<BR>
    &#149; &nbsp;&nbsp;Consumer electronics and appliance
    retailers<BR>
    &#149; &nbsp;&nbsp;Vehicle dealerships
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assurant Health</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <BR>
    <BR>
    <FONT size="2">&#149; &nbsp;&nbsp;<B>Total
    revenues:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$1,912&nbsp;million</B>
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Individual Health</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;PPO<BR>
    &#149; &nbsp;&nbsp;Short-term
    medical<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;insurance<BR>
    &#149; &nbsp;&nbsp;Student medical insurance
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Independent agents<BR>
    &#149; &nbsp;&nbsp;National accounts<BR>
    &#149; &nbsp;&nbsp;Internet
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;<B>Segment income before
    income
    tax:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$144&nbsp;million</B>
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <I><FONT size="2">Small Employer Group Health</FONT></I></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;PPO
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Independent agents
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <B><FONT size="2">Assurant Employee Benefits</FONT></B></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Group dental
    insurance<BR>&nbsp;&nbsp;&nbsp;-Employer-paid<BR>&nbsp;&nbsp;&nbsp;-Employee-paid<BR>
    <BR>
    &#149; &nbsp;&nbsp;Group
    disability<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;insurance<BR>
    <BR>
    &#149; &nbsp;&nbsp;Group term life insurance
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Employee benefit advisors<BR>
    <BR>
    &#149; &nbsp;&nbsp;Brokers<BR>
    <BR>
    &#149; &nbsp;&nbsp;DRMS(1)
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;<B>Total revenues:
    $1,455&nbsp;million<BR>
    <BR>
    &#149; &nbsp;&nbsp;Segment income before income
    tax:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$88&nbsp;million</B>
    </FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assurant PreNeed</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;Pre-funded
    funeral<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;insurance
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;SCI<BR>
    <BR>
    &#149; &nbsp;&nbsp;Independent funeral homes
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#149; &nbsp;&nbsp;<B>Total revenues:
    $727&nbsp;million<BR>
    <BR>
    &#149; &nbsp;&nbsp;Segment income before income
    tax:<BR>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;$77&nbsp;million</B>
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">DRMS refers to Disability Reinsurance Management
    Services, Inc., one of our wholly owned subsidiaries that
    provides a turnkey facility to other insurers to write
    principally group disability insurance.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">81
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also have a corporate and other segment, which
includes activities of the holding company, financing expenses,
realized gains (losses) on investments and interest income not
allocated to other segments. The Corporate and Other segment
also includes (i)&nbsp;the results of operations of FFG (a
business we sold on April&nbsp;2, 2001) and (ii)&nbsp;LTC (a
business we sold on March&nbsp;1, 2000), for the periods prior
to their disposition, and amortization of deferred gains
associated with the portions of the sales of FFG and LTC sold
through reinsurance agreements as described above. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&#151;Corporate and
Other.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the six months ended June&nbsp;30, 2003, we
generated total revenues of $3,455&nbsp;million and net income
of $164&nbsp;million. For the year ended December&nbsp;31, 2002,
we generated total revenues of $6,532&nbsp;million and net
income before cumulative effect of change in accounting
principle of $260&nbsp;million. As of June&nbsp;30, 2003, we had
total assets of approximately $22,738&nbsp;million, including
separate accounts. Our A.M. Best financial strength ratings, as
of September&nbsp;25, 2003, were either A
(&#147;Excellent&#148;) or A- (&#147;Excellent&#148;) for all of
our domestic operating subsidiaries. A rating of &#147;A&#148;
is the second highest of ten ratings categories and the highest
within the category based on modifiers (i.e., A and A- are
&#147;Excellent&#148;) and a rating of &#147;A-&#148; is the
second highest of ten ratings categories and the lowest within
the category based on modifiers. We view the A.M. Best ratings
as most relevant for the purpose of managing our businesses
because these ratings relate to capital management at our
insurance subsidiaries. These ratings reflect A.M. Best&#146;s
opinions of our ability to pay policyholder claims, are not
applicable to the securities offered in this prospectus and are
not a recommendation to buy, sell or hold any security,
including our common stock.
</FONT>

<P align="left">
<B><FONT size="2">Competitive Strengths</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe our competitive strengths include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Leadership Positions in Specialized Markets;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Strong Relationships with Key Clients and
    Distributors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">History of Product Innovation and Ability to
    Adapt to Changing Market Conditions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Disciplined Approach to Underwriting and Risk
    Management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Prudent Capital Management;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Diverse Business Mix and Superior Financial
    Strength; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Experienced Management Team with Proven Track
    Record and Entrepreneurial Culture.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Leadership Positions in Specialized Markets.
</FONT></I><FONT size="2">We are a market leader in many of our
chosen markets. We hold a leading position or are partnered with
clients who are leaders in creditor-placed homeowners insurance,
manufactured housing homeowners insurance, credit insurance and
debt protection administration. In addition, we are market
leaders in group dental plans and pre-funded funeral insurance.
We seek to participate in markets in which there are a limited
number of competitors and that allow us to achieve a market
leading position by capitalizing on our market expertise and
capabilities in complex administration and systems, as well as
on our established distribution relationships. We believe that
our leadership positions provide us with the opportunity to
generate high returns in these niche markets.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Strong Relationships with Key Clients and
Distributors. </FONT></I><FONT size="2">As a result of our
expertise in business-to-business management, we have created
strong relationships with our distributors and clients in each
of the niche markets we serve. In our Assurant Solutions
segment, we have strong long-term relationships in the United
States with six out of the ten largest mortgage lenders and
servicers, including JPMorgan Chase Bank, Washington Mutual and
Wells Fargo Bank, four out of the seven largest manufactured
housing builders, including Clayton Homes, four out of the six
largest general purpose credit card issuers, including Bank One,
Discover, JPMorgan Chase Bank and MBNA, and six out of the ten
largest consumer electronics and appliances retailers, including
CompUSA, RadioShack and Staples. In our Assurant Health segment,
we have exclusive distribution relationships with leading
insurance companies, as well as relationships with independent
brokers. Through exclusive distribution relationships with
companies such as Mutual of Omaha, IPSI, a
</FONT>

<P align="center"><FONT size="2">82
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">wholly owned subsidiary of State Farm, and USAA,
we gain access to a broad distribution network and a significant
number of potential customers. In our Assurant PreNeed segment,
we have an exclusive distribution relationship with SCI, the
largest funeral provider in North America, as well as
relationships with approximately 2,000 funeral homes. We believe
that the strength of our distribution relationships enables us
to market our products and services to our customers in an
effective and efficient manner that would be difficult for our
competitors to replicate.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">History of Product Innovation and Ability to
Adapt to Changing Market Conditions.
</FONT></I><FONT size="2">We are able to adapt quickly to
changing market conditions by tailoring our product and service
offerings to the specific needs of our clients. This flexibility
has developed, in part, as a result of our entrepreneurial focus
and the encouragement of management autonomy at each business
segment. By understanding the dynamics of our core markets, we
design innovative products and services to seek to sustain
profitable growth and market leading positions. For instance, we
were one of the first providers of credit insurance to migrate
towards fee-based debt protection solutions for our financial
institution clients. This has allowed us to meet the evolving
needs of our clients. It also has allowed us to continue
generating profitable business despite a significant regulatory
change that permitted financial institutions to offer debt
protection products similar to credit insurance as part of their
basic loan agreements with customers without being subject to
insurance regulations. Other examples of our innovative products
include: warranty products in our property business designed
specifically for vertically integrated manufacturers of
manufactured homes; specialty products, such as short-term
health insurance, to address specific developments in the health
insurance market and <B>Medical Savings Account&nbsp;(MSA)</B>
features in our individual health products, which we were one of
the first companies to offer. In addition, we developed our
creditor-placed homeowners insurance business when we perceived
a niche market opportunity.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Disciplined Approach to Underwriting and Risk
Management. </FONT></I><FONT size="2">Our businesses share best
practices of disciplined underwriting and risk management. We
focus on generating profitability through careful analysis of
risks and draw on our experience in core specialized markets.
Examples of tools we use to manage our risk include our
tele-underwriting program, which enables our trained
underwriters to interview individual health insurance applicants
over the telephone, as well as our electronic billing service in
Assurant Employee Benefits, which enables us to collect more
accurate data regarding eligibility of insureds. Also, at
Assurant Solutions, in order to align our clients&#146;
interests with ours and to help us to better manage risk
exposure, a significant portion of Assurant Solutions&#146;
consumer protection solutions contracts are written on a
retrospective commission basis, which permits Assurant Solutions
to adjust commissions based on claims experience. Under this
contingent commission arrangement, compensation to the financial
institutions and other agents distributing our products is
predicated upon the actual losses incurred compared to premiums
earned after a specific net allowance to Assurant Solutions. We
also continually seek to improve and redesign our product
offerings based on our underwriting experience. In addition, we
closely monitor regulatory and market developments and adapt our
approach as we deem necessary to achieve our underwriting and
risk management goals. In Assurant Health, for example, we have
exited states in which we were not achieving acceptable
profitability and have re-entered states where the insurance
environments have become more favorable. We are focused on loss
containment, and we purchase reinsurance as a risk management
tool to diversify risk and protect against unexpected events,
such as catastrophes. We believe that our disciplined
underwriting and risk management philosophy have enabled us to
realize above average financial returns while focusing on our
strategic objectives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Prudent Capital Management.
</FONT></I><FONT size="2">We focus on generating above-average
returns on a risk-adjusted basis from our operating activities.
We invest capital in our operating business segments when we
identify attractive profit opportunities in our target markets.
To the extent that we believe we can achieve, maintain or
improve on leadership positions in these markets by deploying
our capital and leveraging our expertise and other competitive
advantages, we have done so with the expectation of generating
high returns. When expected returns have justified continued
investment, we have reinvested cash from operations into
enhancing and growing our operating business segments through
the development of new products and services, additional
distribution relationships and other operational improvements.
In addition, when we have identified external opportunities that
are consistent with these objectives, we have acquired
businesses, portfolios, distribution
</FONT>

<P align="center"><FONT size="2">83
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">relationships, personnel or other resources. For
example, we acquired Protective Life Corporation&#146;s Dental
Benefits Division in December 2001. Finally, our management has
consistently taken a disciplined approach towards withdrawing
capital when businesses are no longer anticipated to meet our
expectations. For example, we have exited or divested a number
of operations including our LTC division, which was sold to John
Hancock in 2000 and our FFG division, which was sold to The
Hartford in 2001. We believe we have benefited from having the
discipline and flexibility to deploy capital opportunistically
and prudently to maximize returns to our stockholders.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Diverse Business Mix and Superior Financial
Strength. </FONT></I><FONT size="2">We have four operating
business segments across distinct areas of the insurance market.
These businesses are generally not affected in the same way by
economic and operating trends, which we believe allows us to
maintain a greater level of financial stability than many of our
competitors across business and economic cycles. In addition, as
of June&nbsp;30, 2003, we had $22,738&nbsp;million of total
assets, including separate accounts, and $2,779&nbsp;million of
stockholders&#146; equity. Our domestic operating subsidiaries
have financial strength ratings of A (&#147;Excellent&#148;) or
A- (&#147;Excellent&#148;) from A.M. Best, and two of our
domestic operating subsidiaries have financial strength ratings
of A2 (&#147;Good&#148;) and A3 (&#147;Good&#148;),
respectively, from Moody&#146;s. We employ a conservative
investment policy and our portfolio primarily consists of high
grade fixed income securities. As of June&nbsp;30, 2003, we had
$10,735&nbsp;million of investments, consisting primarily of
investment grade bonds with an average rating of &#147;A&#148;.
We believe our solid capital base and overall financial strength
allow us to distinguish ourselves from our competitors and
continue to enable us to attract clients that are seeking
long-term financial stability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Experienced Management Team with Proven Track
Record and Entrepreneurial Culture.</FONT></I><FONT size="2"> We
have a talented and experienced management team both at the
corporate level and at each of our business segments. Our
management team is led by our President and Chief Executive
Officer, J.&nbsp;Kerry Clayton, who has been with our Company or
its predecessors for 33&nbsp;years. Our senior officers have an
average tenure of approximately 16&nbsp;years with our Company
and close to 24&nbsp;years in the insurance and related risk
management business. Our management team has successfully
managed our business and executed on our specialized niche
strategy through numerous business cycles and political and
regulatory challenges. Our management team also shares a set of
corporate values and promotes a common corporate culture that we
believe enables us to leverage business ideas, risk management
expertise and focus on regulatory compliance across our
businesses. At the same time, we reward and encourage
entrepreneurship at each business segment, accomplished in part
by our long history of utilizing performance-based compensation
systems.
</FONT>

<P align="left">
<B><FONT size="2">Growth Strategy</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our objective is to achieve superior financial
performance by enhancing our leading positions in our
specialized niche insurance and related businesses. We intend to
achieve this objective by continuing to execute the following
strategies in pursuit of profitable growth:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Enhance Market Position in Our Business Lines;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Develop New Distribution Channels and Strategic
    Alliances;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Deploy Capital and Resources to Maintain
    Flexibility and Establish or Enhance Market Leading Positions;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Maintain Disciplined Pricing Approach; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">Continue to Manage Capital Prudently.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Enhance Market Position in Our Business Lines.
</FONT></I><FONT size="2">We have leading market positions in
several of our business lines. We have been selective in
developing our product and service offerings and will continue
to focus on providing products and services to those markets
that we believe offer attractive growth opportunities. We will
also seek to continue penetrating our target markets and expand
our market positions by developing and introducing new products
and services that are tailored to the specific needs of our
clients. For example, we are developing products that are
targeted to purchasers of recreational vehicles, cell phones and
other consumer products. In addition, we will continue to market
our products to our existing client base and seek to
</FONT>

<P align="center"><FONT size="2">84
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">identify clients in new target markets such as
Brazil, Mexico, Argentina and other countries with emerging
middle class populations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Develop New Distribution Channels and
Strategic Alliances.</FONT></I><FONT size="2"> We have a strong,
multi-channel distribution network already in place with leading
market participants. These relationships have been critical to
our market penetration and growth. We will continue to be
selective in developing new distribution channels as we seek to
expand our market share, enter new geographic markets and
develop new niche businesses. For example, we recently entered
into a strategic alliance with GE&nbsp;Consumer Products, which
will enable us to sell and administer extended service contracts
for consumer electronics, major appliances and other consumer
goods to General Electric&#146;s customers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Deploy Capital and Resources to Maintain
Flexibility and Establish or Enhance Market Leading
Positions.</FONT></I><FONT size="2"> We seek to deploy our
capital and resources in a manner that provides us with the
flexibility to grow internally through product development, new
distribution relationships and investments in technology, as
well as to pursue acquisitions. As we expand through internal
growth and acquisitions, we intend to leverage our expertise in
risk management, underwriting and business-to-business
management, as well as our technological capabilities in running
complex administration systems and support services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Maintain Disciplined Pricing
Approach.</FONT></I><FONT size="2"> We intend to maintain our
disciplined pricing approach by seeking to focus on profitable
products and markets and by pursuing a flexible approach to
product design. We continuously evaluate the profitability of
our products, and we will continue to pursue pricing strategies
and adjust our mix of businesses by geography and by product so
that we can maintain attractive pricing and margins. We seek to
price our products at levels in order to achieve our target
profit objectives.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Continue to Manage Capital
Prudently.</FONT></I><FONT size="2"> We intend to manage our
capital prudently relative to our risk exposure to maximize
profitability and long-term growth in stockholder value. Our
capital management strategy is to maintain financial strength
through conservative and disciplined risk management practices.
We do this through product design, strong underwriting and risk
selection and prudent claims management and pricing. In
addition, we will maintain our conservative investment portfolio
management philosophy and properly manage our invested assets in
order to match the duration of our insurance product
liabilities. We will continue to manage our business segments
with the appropriate level of capital required to obtain the
ratings necessary to operate in their markets and to satisfy
various regulatory requirements. We will also continue to
evaluate ways to reduce costs in each of our business lines,
including by streamlining the number of legal entities through
which we operate.
</FONT>

<P align="center"><FONT size="2">85
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Operating Business Segments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our business is comprised of four operating
business segments: Assurant Solutions; Assurant Health; Assurant
Employee Benefits; and Assurant PreNeed. We also have a
Corporate and Other segment. Our business segments and the
related net earned premiums and other considerations and fees
and other income and segment income before income tax generated
by those segments are as follows for the periods indicated:
</FONT>

<P align="center">
<B><U><FONT size="2">Net Earned Premiums and Other
Considerations and Fees and Other Income by Business
Segment</FONT></U></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="25%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ (in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ (in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Solutions:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Specialty Property
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consumer Protection
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,613</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Assurant Solutions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="20"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Health:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Individual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">504</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Small Employer Group
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Assurant Health
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="20"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Employee Benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="20"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant PreNeed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Business Segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<B><U><FONT size="2">Segment Income (Loss) Before Income Tax by
Business Segment</FONT></U></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="28%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ (in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">$ (in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Solutions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Health
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant Employee Benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assurant PreNeed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Corporate and Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total Business Segments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of our total revenues, segment income
before and after income tax and total assets by segment and the
amount of our revenues and long-lived assets by geographic
region is set forth in Note&nbsp;19 to our consolidated
financial statements.
</FONT>

<P align="center"><FONT size="2">86
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><I><FONT size="2">Assurant Solutions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Solutions has leadership positions or is
partnered with clients who are leaders in creditor-placed
homeowners insurance and related mortgage tracking services,
manufactured housing homeowners insurance and debt protection
administration. We develop, underwrite and market our specialty
insurance products and services through partnerships with our
clients (financial institutions, retailers, manufactured housing
and automobile dealers, utilities and other entities) to their
customers. We serve our client partners throughout North
America, the Caribbean and selected countries in South America
and Europe.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our principal business lines within our Assurant
Solutions segment have experienced growth in varying degrees.
Growth in premiums in the homeowners market has been driven by
increased home purchase activity due to the low interest rate
environment, appreciation in home values and an increasing
percentage of the population purchasing homes generally. The
manufactured housing market has been more challenging because of
a more restrictive lending environment with fewer lenders
extending credit and increasingly strict underwriting standards
being applied since the late 1990&#146;s. Finally, the domestic
consumer credit insurance market has been contracting due to an
adverse regulatory environment; however, this decline has been
offset somewhat by accelerating growth in the debt protection
market. At a recent industry conference, a study was presented
that projected growth in the U.S. debt protection market from
$500&nbsp;million in 2000 to $5&nbsp;billion in 2005. In
addition, as the global economy and consumer discretionary
spending grows, the international market for consumer insurance
is expected to grow. We believe that we are well positioned to
benefit from the growth in our key business lines with our broad
product and service offerings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant Solutions, we provide specialty
property and consumer protection products and services. In our
specialty property solutions division, our strategy is to
further develop our creditor-placed homeowners and manufactured
housing homeowners insurance products and related services in
order to maintain our leadership position or partnerships with
clients who are leaders and to gain market share in the mortgage
and manufactured housing industries, as well as to develop our
<B>renters&#146; insurance</B> product line. In our consumer
protection solutions division, we intend to continue to focus on
being a low-cost provider of debt protection administration
services, to leverage our administrative infrastructure with our
large customer base clients and to manage the switch from credit
insurance programs to debt protection programs in the United
States.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Solutions for the periods indicated:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Months Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Specialty Property
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">342</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">413</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consumer Protection
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,848</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<I><FONT size="2">Products and Services</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Specialty Property
Solutions.</FONT></I><FONT size="2"> We underwrite a variety of
creditor-placed and voluntary homeowners insurance as well as
property coverages on manufactured housing, specialty
automobiles, including antique automobiles, recreational
vehicles, including motorcycles and watercraft, and leased and
financed equipment. We also offer complementary programs such as
flood insurance, renters&#146; insurance and various other
property coverages. We are a leading provider of creditor-placed
and other collateral protection insurance programs, which
protect a lender&#146;s interest in homes, manufactured homes
and automobiles. We also offer administra-
</FONT>

<P align="center"><FONT size="2">87
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">tion services for some of the largest mortgage
lenders and servicers, manufactured housing lenders, dealers and
vertically integrated builders and equipment leasing
institutions in the United States. Many of our products and
services are sold in conjunction with the sale or lease of the
underlying property, vehicle or equipment by our clients. Our
market strategy is to partner with institutions who are leaders
in their chosen markets and therefore can effectively and
efficiently distribute our products and services to large
customer bases. By partnering with these leaders, we benefit not
only from their internally generated growth, but also from the
growth they experience as acquirers of other companies or books
of business in their respective markets.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The homeowners insurance product line is our
largest line in our specialty property solutions division. The
primary program within this line is our creditor-placed
homeowners insurance. Creditor-placed homeowners insurance
generally consists of <B>fire and dwelling insurance</B> that we
provide to ensure collateral protection to a mortgage lender in
the event that a homeowner fails to purchase or renew homeowners
insurance on a mortgaged dwelling. In our typical arrangements
with our mortgage lender and servicer clients, we agree that we
will monitor the client&#146;s mortgage loan portfolio over time
to verify the existence of homeowners insurance protecting the
lender&#146;s interest in the underlying properties. We have
developed a proprietary insurance tracking and administration
process to verify the existence of insurance on a mortgaged
property. In situations where such mortgaged property does not
have appropriate insurance and after notification to the
mortgageholder of the failure to have such insurance, we issue
creditor-placed insurance policies to ensure the mortgaged
property is protected. We believe our technology and insurance
processing expertise enable us to provide efficient and high
quality tracking and administration services.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also provide fee-based services to our
mortgage lender and servicer clients in the creditor-placed
homeowners insurance administration area, which services are
complementary to our insurance products. Our ability to offer
these services is a critical factor in establishing
relationships with our client partners. The vast majority of our
mortgage lender and servicer clients outsource their insurance
processing to us. These fee-based services include receipt of
the insurance-related mail, matching of insurance information to
specific loans, payment of insurance premiums on <B>escrowed
accounts,</B> insurance-related customer service, <B>loss draft
</B>administration and other related services. Our extensive use
of technology includes specialized optical character recognition
software, automated workflow processes and electronic data
interchange processes. We believe that we are a leader in
insurance and mortgage tracking services based on the number of
mortgage loans tracked.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The second largest specialty property line in our
specialty property solutions division is homeowners insurance
for owners of manufactured homes. We primarily distribute our
manufactured housing insurance programs utilizing three
marketing channels. Our primary channel is our partnerships with
the nation&#146;s leading manufactured housing retailers.
Through our proprietary premium rating technology, which is
integrated with our client partners&#146; sales process, we are
able to offer our property coverages at the time the home is
being sold, thus enhancing our ability to penetrate the new home
point-of-sale market place. We also offer our programs to
independent specialty agents who distribute our products to
individuals subsequent to new home purchases. Finally, we
perform the collateral tracking and administration services for
the nation&#146;s leading manufactured housing lending
organizations. Through these partnerships with lending
organizations, we place our homeowners coverage on the
manufactured home in the event that the homeowner fails to
obtain or renew homeowners coverage on the home. In a typical
arrangement with a manufactured housing lending organization, we
agree to monitor the organization&#146;s portfolio of loans over
time to verify the existence of homeowners insurance protecting
the organization&#146;s interest in the underlying manufactured
homes. We perform collateral tracking and homeowners insurance
placement for some of the largest manufactured housing lenders
in the country.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also provide voluntary homeowners insurance
and voluntary manufactured housing homeowners insurance, which
generally provide comprehensive coverage for the structure,
contents and liability, as well as coverage for floods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Consumer Protection
Solutions.</FONT></I><FONT size="2"> We offer a broad array of
credit insurance programs, debt protection services and product
warranties and extended service contracts, all of which are
consumer-related, both domestically and in selected
international markets. Credit insurance and debt protection
programs generally
</FONT>

<P align="center"><FONT size="2">88
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">offer a consumer a convenient option to protect a
credit card or installment loan in the event of a disability,
unemployment or death so that the amount of coverage purchased
equals the amount of outstanding debt. Under the credit
insurance program, the loan or credit card balance is paid off
in the case of death and, in the case of unemployment or
disability, payments are made on the loan until the covered
holder is employed again or medically able to return to work.
Under the terms and conditions of a debt protection agreement,
the monthly interest due from a customer may be waived or the
monthly payments may be paid for a covered life event, such as
disability, unemployment or family leave. Most often in the case
of the death of a covered account holder, the debt is
extinguished under the debt protection program. Coverage is
generally available to all consumers without the underwriting
restrictions that apply to <B>term life insurance,</B> such as
medical examinations and medical history reports. We are the
exclusive provider of debt protection administration services
and credit insurance for four of the six largest general purpose
credit card issuers in the United States.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Almost all of the largest credit card issuing
institutions in the United States have switched from offering
credit insurance to their credit card customers to offering
their own banking-approved debt protection programs. Assurant
Solutions has been able to maintain all of its major credit card
clients as they switched from our credit insurance programs to
their debt protection programs. We earn fee income rather than
net earned premiums from our debt protection administration
services. In addition, margins are lower in debt protection
administration than in traditional credit insurance programs.
However, because debt protection is not an insurance product,
certain costs, such as regulatory costs and costs of capital,
are expected to be eliminated as the transition from credit
insurance to debt protection administration services continues.
The fees from debt protection administration do not fully
compensate for the decrease in credit insurance premiums. In
addition, we continue to provide credit insurance programs for
many of the leading retailers, consumer finance companies and
other institutions who are involved in consumer lending
transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also underwrite, and provide administration
services on, extended service and warranty contracts on
appliances, consumer electronics, including personal computers,
cellular phones and other wireless devices, and vehicles,
including automobiles, recreational vehicles and boats. Our
strategy is to provide our clients with all aspects of the
extended service contract or warranty, including program design,
marketing strategy, technologically advanced administration,
claims handling and customer service. We believe that we
maintain a unique differentiated position in the market place as
a provider of both the required administrative infrastructure
and insurance underwriting capabilities.
</FONT>

<P align="left">
<I><FONT size="2">Marketing and Distribution</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Solutions markets its insurance programs
and administration services directly to large financial
institutions, mortgage lenders and servicers, credit card
issuers, finance companies, automobile retailers, consumer
electronics retailers, manufactured housing lenders, dealers and
vertically integrated builders and other institutions. Assurant
Solutions enters into exclusive and other distribution
agreements, typically with terms of one to five years, and
develops interdependent systems with its client partners.
Through our long-standing relationships, Assurant Solutions has
access to numerous potential policyholders and, in partnership
with its clients, can tailor its products to suit various market
segments. Assurant Solutions maintains a dedicated sales force
that establishes and maintains relationships with our clients.
We have a disciplined and proven multiple step business
development process that is employed by our direct sales force.
We maintain a specialized consumer acquisition marketing
services group that manages our direct marketing efforts on
behalf of our clients.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the United States, we have strong distribution
relationships with six out of the ten largest mortgage lenders
and servicers, four out of the seven largest manufactured
housing builders, four out of the six largest general purpose
credit card issuers and six out of the ten largest consumer
electronics and appliances retailers, with an average
relationship of at least 10&nbsp;years.
</FONT>

<P align="left">
<I><FONT size="2">Underwriting and Risk Management</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, along with Assurant Solutions&#146;
predecessors, have over 50&nbsp;years of experience in providing
specialty insurance programs and therefore maintain extensive
proprietary actuarial databases and catastrophe models.
</FONT>

<P align="center"><FONT size="2">89
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">This database enables us to better identify and
quantify the expected loss experience of particular products and
is employed in the design of our products and the establishment
of rates.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a disciplined approach to the management
of our property product lines. We vigilantly monitor pricing
adequacy on a product by region, state, risk and producer.
Subject to regulatory considerations, we seek to make timely
commission, premium and coverage modifications where we
determine them to be appropriate. In addition, we maintain a
segregated risk management area for property exposures whose
emphasis includes catastrophic exposure management, reinsurance
purchasing and analytical review of profitability based on
various catastrophe models. We do not underwrite in our
creditor-placed homeowners insurance line, as our contracts with
our client partners require that we automatically issue these
policies, after notice, when a policyholder&#146;s homeowners
policy lapses or is terminated.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A distinct characteristic of our credit insurance
programs is that the majority of these products have relatively
low exposures. This is because policy size is equal to the size
of the installment loan or credit card balance. Thus, loss
severity for most of this business is low relative to other
insurance companies writing more traditional lines of insurance.
For those product lines where there is exposure to catastrophes
(for example, our homeowners policies), we closely monitor and
manage our aggregate risk exposure by geographic area and have
entered into reinsurance treaties to manage our exposure to
these types of events.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Also, a significant portion of Assurant
Solutions&#146; consumer protection solutions contracts with our
client partners are written on a retrospective commission basis,
which permits Assurant Solutions to adjust commissions based on
claims experience. Under this contingent commission arrangement,
compensation to the financial institutions and other clients is
predicated upon the actual losses incurred compared to premiums
earned after a specific net allowance to Assurant Solutions,
which we believe aligns our clients&#146; interests with ours
and helps us to better manage risk exposure.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant Solutions, our claims processing is
highly automated and combines the efficiency of centralized
claims handling, customer service centers and the flexibility of
field representatives. This flexibility adds significant savings
and efficiencies to the claims-handling process. Our claims
department also provides automated feedback to help with risk
assessment and pricing. In our specialty property solutions
division, we complement our automated claims processing with
field representatives who manage the claims process on the
ground where and when needed.
</FONT>

<P align="left">
<B><I><FONT size="2">Assurant Health</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Health is a writer of individual and
short-term major medical health insurance. We also provide small
employer group health insurance to employer groups primarily of
two to 50 employees in size, and health insurance plans to
full-time college students. Our predecessor company first issued
medical insurance coverage to individuals in 1912. We serve
approximately 1.1&nbsp;million people throughout the United
States. We were one of the first companies to offer an MSA
feature as part of our individual health products and we
continue to be a provider of MSA-linked individual health
policies. MSAs are tax-sheltered savings accounts earmarked for
medical expenses and are established in conjunction with one of
our PPO or indemnity products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We expect growth in our Assurant Health segment
to be driven principally by inflation and increases in the cost
of providing medical care. We believe that the number of persons
covered by individually purchased health insurance in the United
States will remain stable at 14.2&nbsp;million people based upon
existing levels of unemployment and job turnover. Similarly, we
believe that the number of small employer groups in the United
States will continue to remain steady at 5.8&nbsp;million firms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We generally expect medical cost inflation to be
the principal driver of growth in this segment; however, reduced
funding of health insurance by employers and the increasing
attractiveness and flexibility of MSAs could create
opportunities for the individual medical insurance market to
expand.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant Health, we intend to continue to
concentrate on developing our product capabilities in the
individual health insurance market. From 2000 through June 2003,
we have increased the relative percentage of individual health
insurance products to our total health insurance products from
approximately 30% of premium dollars to approximately 50% of
premium dollars. We have pursued a variety of distribution
</FONT>

<P align="center"><FONT size="2">90
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">relationships focused on the individual health
insurance market. We seek to maintain the lowest combined
expense ratio of any of our major competitors serving the health
care financing needs of individuals, families and small employer
groups.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Health for the periods and as of the
dates indicated:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions, except membership data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Individual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Small employer group
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">475</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">954</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,348</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">914</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,852</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating statistics:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss ratio(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expense ratio(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Combined ratio(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">99.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="24"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Membership by product line (in thousands):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Individual
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">715</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Small employer group
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total membership
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,085</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The combined ratio is equal to total benefits,
    losses and expenses divided by net earned premiums and other
    considerations and fees and other income.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Products and Services</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Individual Health Insurance
Products.</FONT></I><FONT size="2"> Assurant Health&#146;s
individual health insurance products are sold to individuals,
primarily between the ages of 18 and 64&nbsp;years, and their
families who do not have employer-sponsored coverage. Due to
increasingly stringent federal and state restrictions relating
to insurance policies sold directly to individuals, we emphasize
the sale of individual products through associations and trusts
that act as the master policyholder for such products. Our
association and trust products offer greater flexibility in
pricing, underwriting and product design compared to products
sold directly to individuals on a true individual policy basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Substantially all of the individual health
insurance products we sell are PPO plans, which offer the member
the ability to select any health care provider, with benefits
reimbursed at a higher level when care is received from a
participating network provider. Coverage is typically subject to
<B>co-payments</B> or <B>deductibles </B>and coinsurance, with
member cost sharing for covered services limited by lifetime
policy maximums of $2&nbsp;million or $3&nbsp;million, with
options to purchase between $6&nbsp;million and $8&nbsp;million.
Product features often included in these plans are inpatient
pre-certification and benefits for preventative services. These
products are individually underwritten taking into account the
member&#146;s medical history and other factors, and consist
primarily of major medical insurance that renews on an annual
basis. The remaining products we sell are
</FONT>

<P align="center"><FONT size="2">91
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">indemnity, or fee-for-service, plans. Indemnity
plans offer the member the ability to select any health care
provider for covered services.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At June&nbsp;30, 2003 and December&nbsp;31, 2002,
we had total in force medical policies of 281,300 and 264,100,
respectively, covering approximately 560,000 and 520,000
individuals, respectively. Approximately 14% and 16% of the
individual health insurance products we sold in 2002 and the six
months ended June&nbsp;30, 2003, respectively, included an MSA.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Health markets additional products to
the individual market: short-term medical insurance and student
health coverage plans. The short-term medical insurance product
is ideal for individuals who are between jobs or seeking interim
coverage before their major medical coverage becomes effective.
Short-term medical insurance products are generally sold to
individuals with gaps in coverage for six months or less.
Student health coverage plans are medical insurance plans sold
to full-time college students who are not covered by their
parents&#146; health insurance, are no longer eligible for
dependant coverage or are seeking a more comprehensive
alternative to a college-sponsored plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Small Employer Health Insurance Products.
</FONT></I><FONT size="2">Our small employer market primarily
includes companies with two to 50&nbsp;employees, although
larger employer coverage is available. Our average group size,
as of June&nbsp;30, 2003, was approximately five employees. In
the case of our small employer group medical insurance, we
underwrite the entire group and examine the medical risk factors
of the individuals in the group for forecasting and reserving
purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Substantially all of the small employer health
insurance products that we sold in 2002 and the first six months
of 2003 were PPO products. At June&nbsp;30, 2003 and
December&nbsp;31, 2002, we had total in force medical policies
for small employer groups of 38,000 and 38,500, respectively,
covering approximately 360,000 and 355,000 individuals,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We recently introduced <B>Health Reimbursement
Accounts (HRAs)</B>, which are employer-funded accounts provided
to employees for reimbursement of qualifying medical expenses.
We also offer certain ancillary products to meet the demands of
small employers for life insurance, short-term disability
insurance and dental insurance.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Marketing and Distribution</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our health insurance products are principally
marketed to an extensive network of independent agents by
Assurant Health distributors. Approximately 150,000&nbsp;agents
had access to Assurant Health products during the 2002 calendar
year. We also market our products to individuals through a
variety of exclusive and non-exclusive national account
partnerships and direct distribution channels. In addition, we
market our products through NorthStar Marketing, a wholly owned
affiliate that proactively seeks business directly from
independent agents. Since 2000, Assurant Health has had an
exclusive national marketing agreement with IPSI, a wholly-owned
subsidiary of State Farm, pursuant to which IPSI <B>captive
agents </B>market Assurant Health&#146;s individual health
products. In addition, Assurant Health has exclusive
distribution relationships with USAA and Mutual of Omaha to
market Assurant Health&#146;s individual health products. All of
these arrangements have four-year terms from their commencement
dates and are generally terminable upon our bankruptcy or
similar proceeding or a breach of a material provision by us.
Additionally, some of these arrangements permit termination
after a specified notice period. We also have had a
long-standing relationship with Health Advocates Alliance, the
association through which we provide many of our individual
health insurance products. Assurant Health also has had a
long-term relationship with Rogers Benefit Group, a national
marketing organization with 70&nbsp;offices. Short-term medical
insurance and student health coverage plans are also sold
through the Internet by Assurant Health and numerous direct
writing agents.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Underwriting and Risk Management</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Health&#146;s underwriting and risk
management capabilities include pricing discipline, policy
underwriting, renewal optimization, development and retention of
provider networks and claims processing.
</FONT>

<P align="center"><FONT size="2">92
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In establishing premium rates for our health care
plans, we use underwriting criteria based upon our accumulated
actuarial data, with adjustments for factors such as claims
experience and member demographics to evaluate anticipated
health care costs. Our pricing considers the expected frequency
and severity of claims and the costs of providing the necessary
coverage, including the cost of administering policy benefits,
sales and other administrative costs. State rate regulation
significantly affects pricing. Our health insurance operations
are subject to a variety of legislative and regulatory
requirements and restrictions covering a range of trade and
claim settlement practices. State insurance regulatory
authorities have broad discretion in approving a health
insurer&#146;s proposed rates. In addition, HIPAA requires
certain guaranteed issuance and renewability of health insurance
coverage for individuals and small employer groups and limits
exclusions based on existing conditions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our individual health insurance business, we
medically underwrite our applicants and have implemented new
programs to improve our underwriting process. These include our
tele-underwriting program, which enables individual insurance
applicants to be interviewed over the telephone by trained
underwriters. Gathering information directly from prospective
clients over the telephone greatly reduces the need for costly
and time-consuming medical exams and physician reports. We
believe this approach leads to lower costs, improved
productivity, faster application processing times and improved
underwriting information. Our individual underwriting considers
not only an applicant&#146;s medical history, but also lifestyle
factors such as avocations and alcohol and drug and tobacco use.
Our individual health insurance products generally permit us to
rescind coverage if an insured has falsified his or her
application.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our small employer group health insurance
business, we underwrite the group on the basis of demographic
factors such as age, gender, occupation and geographic location
and concentration of the group. In addition, we examine
individual-level medical risk factors for forecasting and
reserving purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Health offers a broad choice of PPO
network options in each of its markets and enrolls members in
the network that Assurant Health believes reduces our price paid
for health care services while providing high quality care.
Assurant Health enrolls indemnity customers in selected PPO
networks to obtain discounts on provider services that would
otherwise not be available. In situations where a customer does
not obtain services from a contracted provider, Assurant Health
applies various usual and customary fees, which limit the amount
paid to providers within specific geographic areas.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Provider network contracts are a critical
dimension in controlling medical costs since there is often a
significant difference between a network negotiated rate and the
non-discounted rate. To this end, we retain provider networks
through a variety of relationships, which include leased
networks that contract directly with individual health care
providers, proprietary contracts and Private Health Care
Systems, Inc. (PHCS). PHCS is a national private company that
owned a provider network of approximately 3,600&nbsp;hospitals
and approximately 400,000 physicians as of September&nbsp;30,
2003. Assurant Health was a co-founder of PHCS, and we currently
own 29% of the company. PHCS has a staff solely dedicated to
provider relations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We seek to manage claim costs in our PPO plans by
selecting provider networks that have negotiated favorable
arrangements with physicians, hospitals and other health care
professionals and requiring participation in our various medical
management programs. In addition, we manage costs through
extensive underwriting, pricing and product design decisions
intended to influence the behavior of our insureds. We provide
<B>case management </B>programs and have doctors, nurses and
pharmacists on staff who endeavor to manage risks related to
medical claims and prescription costs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We utilize a broad range of focused traditional
cost containment and care management processes across our
various product lines to manage risk and to lower costs. These
include case management, <B>disease management </B>and pharmacy
benefits management programs. Our case management philosophy is
built on helping our insureds confront a complex care system to
find the appropriate care in a timely and cost effective manner.
We believe this approach builds positive relationships with our
providers and insureds and helps us achieve cost savings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective July&nbsp;1, 2003, Assurant Health
transitioned its pharmacy benefits management function to Medco
Health Solutions, formerly known as Merck-Medco. Medco Health
Solutions has established itself as
</FONT>

<P align="center"><FONT size="2">93
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">a leader in its industry with more than 57,000
participating pharmacies nationwide. Through Medco Health
Solutions&#146; advanced technology platforms, Assurant Health
is able to access information about customer utilization
patterns on a more timely basis to improve its risk management
capabilities. In addition to the technology-based advantages,
Medco Health Solutions allows us to purchase our pharmacy
benefits at competitive prices. Our agreement with Medco Health
Solutions expires June&nbsp;30, 2007. Assurant Health also
utilizes copays and deductibles to reduce prescription drug
costs.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We employ approximately 525&nbsp;claims employees
in locations throughout the United States dedicated to Assurant
Health. We have an appeals process pursuant to which
policyholders can appeal claims decisions made.
</FONT>

<P align="left">
<B><I><FONT size="2">Assurant Employee Benefits</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Employee Benefits is a market leader in
group dental benefit plans sponsored by employers and funded
through payroll deduction. We are also a leading provider of
employer-paid or <B>true group </B>dental, disability and term
life insurance products and related services to small and
medium-sized employers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our core benefits business, we focus on
employer-sponsored programs for employers with typically between
20 and 1,000 employees. We are willing to write programs for
employers with more than 1,000 covered employees when they meet
our risk profile. At June&nbsp;30, 2003, substantially all of
our coverages in force and 76% of our annualized premiums in
force were for employers with less than 1,000 employees. We have
a particularly strong emphasis on employers with under 250
employees, which represented approximately 97% and 59% of our in
force coverages and premiums, respectively, as of June&nbsp;30,
2003. Our average in force case size was 57 enrolled employees
as of June&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Growth in our Assurant Employee Benefits segment
will be principally driven by increases in the numbers of
employees enrolled in our plans, inflation and increases in the
cost of providing dental care and, for our group disability and
term life business, increases in salaries. We believe that
increased penetration of our target employer base could generate
growth for this segment. According to the 2003 National
Compensation Survey conducted by the Bureau of Labor Statistics,
U.S.&nbsp;Department of Labor, in March 2003, 41% of full-time
non-agricultural private industry employees lack employer
provided or sponsored life insurance coverage, 55% lack
short-term disability coverage, 64% lack long-term disability
coverage and 60% lack dental coverage. During 2002, according to
National Association of Dental Plans and Life Insurance
Marketing Research Association studies, approximately
$7.2&nbsp;billion in annualized premiums of group dental,
disability and life insurance was sold in the United States.
Exclusive of group dental, for which historical data from these
sources is not available, the average annual growth rate in
sales of the remaining group products for 2000 through 2002 was
5.4% per year. We believe that our broad product and
distribution coverage and our expertise in small case
underwriting will position us favorably as these markets
continue to grow.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant Employee Benefits, we intend to build
upon a leading position in the employee-paid dental lines in
order to expand and grow our portfolio of other employee-paid
product offerings and service capabilities, where we have seen
higher profits than in the employer-paid lines. We are also
focusing our efforts on achieving greater bottom line
profitability for our disability product offerings.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Trends in the U.S. employment market and, in
particular, in the cost of the medical benefits component of
total compensation, are leading an increasing number of
employers to offer new benefits on a voluntary basis. That is,
after originally vetting the insurer and typically selecting the
particular plan features to be offered, the employer offers the
new benefits to employees at their election and at their cost,
administered through payroll deduction. Because these products
can be economically distributed on this group basis and are
convenient to purchase and maintain, they are appealing to
employees who might have little opportunity or inclination to
purchase similar coverage on an individual basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We believe that voluntary products represent a
sizeable growth opportunity. In addition, the specialized skills
involved in soliciting employees to enroll and in administering
and managing these employer-sponsored group products, provide
prospects for differentiation to companies that focus on this
opportunity. We have reorganized our home office and sales
operations to reflect the strategic importance of this area. Our
group
</FONT>

<P align="center"><FONT size="2">94
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">sales representatives generally specialize in
either voluntary or true group sales. Voluntary and true group
representatives collaborate with each other in developing
relationships with and providing service to the intermediaries
selected by our targeted customers, many of whom are not
specialists in either voluntary or true group coverages. In
addition, we are investing substantial resources in enhanced
enrollment and specialized administrative capabilities for the
voluntary market.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Employee Benefits for the periods
and as of the dates indicated:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions, except master contract data)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">553</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group disability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">398</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">282</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">903</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,307</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="24"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Operating statistics:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Loss ratio(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expense ratio(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium persistency ratio(3)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="24"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Number of direct master contracts (rounded to the
    nearest 100):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group disability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The premium persistency ratio is equal to the
    year-to-date (not annualized) rate at which existing business
    for all issue years at the beginning of the period remains in
    force at the end of the period. Persistency is typically higher
    mid-year than at year-end. The calculations for the year ended
    December&nbsp;31, 2002 and the six months ended June&nbsp;30,
    2002 exclude DBD.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Information not readily available.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The results of DBD, which we acquired on
December&nbsp;31, 2001, and the results of CORE, which we
acquired on July&nbsp;12, 2001, are included in the financial
results of the Assurant Employee Benefits segment beginning in
2002 and July 2001, respectively. DBD at the time of acquisition
was a leading provider of voluntary (employee-paid) indemnity
dental and prepaid dental coverage for employee groups. CORE at
the time of acquisition was a leading national provider of
employee absence management services and a major provider of
disability reinsurance management services to middle-market
insurance carriers.
</FONT>

<P align="center"><FONT size="2">95
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Products and Services</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Group Dental. </FONT></I><FONT size="2">Dental
benefit plans provide for the funding of necessary or elective
dental care. We provide both employee-paid and employer-paid
plans. Plans may involve a traditional indemnity, or
fee-for-service, arrangement, a PPO, a managed care, or
&#147;prepaid,&#148; arrangement, or some combination of these
programs with employee choice. In a PPO plan, insureds may
select any dental provider, but benefits are reimbursed at a
higher level when they visit a provider who participates in the
PPO. Coverage is subject to deductibles, coinsurance and annual
or lifetime maximums. In a prepaid plan, members must go to
participating dentists in order to receive benefits. Depending
upon the procedure, dental benefits are provided by
participating dentists at either no cost or a nominal co-payment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Success in the group dental business requires
strong provider network development and management skills, a
focus on expense management and a claim system capable of
efficiently and accurately adjudicating high volumes of
transactions. We own and operate a PPO, Dental Health Alliance,
L.L.C., which as of October&nbsp;1, 2003 had approximately
26,700 <B>referable locations </B>and approximately 18,500
participating dentists nationwide. In addition, we have a
marketing arrangement with an independent PPO that adds another
approximately 1,700 referable locations and approximately 1,400
participating dentists nationwide. We have also developed local
managed care networks in 24 states, which collectively involve
approximately 13,400 referable locations and approximately 8,700
participating dentists. The number of referable locations in our
dental PPO and managed care networks have grown by approximately
35% and 10%, respectively, from January&nbsp;1, 2000 to
October&nbsp;1, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to fully insured dental benefits, we
also offer <B>administrative services only (ASO) </B>for
self-funded dental plans. Under this arrangement, the employer
or plan sponsor pays Assurant Employee Benefits a fee for
providing these services. The self-funded plan is responsible
for the claim liability. ASO dental is a viable product option
for employers with 100 or more employees. As of October&nbsp;1,
2003, our block of this business consisted of approximately 200
groups and approximately 96,000 covered employees and, for the
nine months ended September&nbsp;30, 2003, generated
$4.5&nbsp;million of fee revenue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003 and December&nbsp;31,
2002, we had approximately 29,800 and 30,300 group dental plans
insured or administered through this segment, respectively,
covering or involving in each case approximately
1.4&nbsp;million members.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Group Disability Insurance.
</FONT></I><FONT size="2">Group disability insurance provides
partial replacement of lost earnings for insured employees who
become disabled and otherwise qualify for benefits. Our group
disability products include both short-term and long-term
disability insurance. Group long-term disability insurance
provides employees with insurance coverage for loss of income in
the event of extended work absences due to sickness or injury.
Most policies begin providing benefits following 90 or
180&nbsp;day waiting periods, and benefits are limited to
specified maximums as a percentage of income. Group short-term
disability insurance provides coverage for temporary loss of
income due to injury or sickness, often effective immediately
for accidents and after one week of sickness, for up to
26&nbsp;weeks, also limited to specified maximums as a
percentage of income. As a reflection of both the breadth of our
disability product lines and our desire to diversify our risks,
we market our disability products across all major industry
segments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Disability Reinsurance Management Services, Inc.,
our wholly owned subsidiary, provides insurance carriers that
wish to supplement their core product offerings a <B>turnkey</B>
facility with which to write group disability insurance.
Services we provide to the insurers for a fee include product
development, state insurance regulatory filings, underwriting,
claims management or any of the other functions typically
performed by an insurer&#146;s back office. The risks written by
DRMS&#146; various clients are reinsured into a pool, with the
clients generally retaining shares ranging from 0% to 50% of the
risks they write. At times, the ceding insurer may also be a
reinsurer of one or more of the pools. DRMS administers various
aspects of the pools. As the largest reinsurer in the pools, our
licensed insurance subsidiary reinsures a substantial majority
of the insurance risk that is ceded by the client. Since DRMS
clients operate in niches not often reached through our
traditional distribution, our participation in the pools enables
us, through a form of alternate distribution, to reach customers
to whom we would not otherwise have access. In this reinsurance
arrangement, we manage through
</FONT>

<P align="center"><FONT size="2">96
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">DRMS both underwriting and the claims
adjudication process; therefore, we have more control of
critical risk management processes than is normally available in
reinsurance arrangements.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003 and December&nbsp;31,
2002, we had approximately 38,300 and 39,100 group disability
plans in force, reinsured or administered on an ASO basis,
covering approximately 2.8&nbsp;million and 3.0&nbsp;million
enrolled employees, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Group Term Life Insurance.
</FONT></I><FONT size="2">Group term life insurance is one of
the principal means by which working people in the United States
provide for their families against the risk of premature death
and often the means whereby they obtain lesser amounts of
coverage for their spouses, children or domestic partners. Group
term life insurance provides coverage to employees, with limited
coverage also available to their dependents, for a specified
period. Our policies are generally the standard or basic term
life insurance offered by employers. Group term life insurance
consists primarily of <B>renewable term life insurance </B>with
the amount of coverage frequently linked to employees&#146;
earnings, flat amounts or a combination of the two. Employers
generally provide a base or foundation level of coverage for
their employees and offer the opportunity for employees to
increase their coverage to meet specific needs. Also, basic term
life insurance is often supplemented with an accidental death or
dismemberment policy or rider, which provides additional
benefits in the indicated events. Because there are few ways to
differentiate an insurer in the area of traditional group term
life insurance, we often sell this product line as a complement
to our other core employee benefit insurance products.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003 and December&nbsp;31,
2002, we had approximately 25,200 and 25,600 group life plans in
force, covering approximately 1.9&nbsp;million and
2&nbsp;million enrolled employees, respectively.
</FONT>

<P align="left">
<I><FONT size="2">Marketing and Distribution</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We distribute the products of Assurant Employee
Benefits primarily through approximately 160 group sales
representatives, located in 40 offices in or near major U.S.
metropolitan areas. These representatives work through
independent employee benefits advisors, including brokers and
other intermediaries, to reach our customers, who are primarily
small to medium-sized employers. DRMS employs an independent
distribution arm tailored to its needs.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our marketing efforts concentrate on:
(i)&nbsp;the identification of the employee benefit needs of our
targeted customers; (ii)&nbsp;the development of tailored
products and services designed to meet those needs;
(iii)&nbsp;the alignment of our Company with select brokers and
other intermediaries who value our approach to the market; and
(iv)&nbsp;the promotion of our Company&#146;s brand.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To operate successfully in the small to
medium-sized employer marketplace requires a large and broadly
distributed sales force with relationships with the brokers and
other intermediaries who act as advisors to those employers in
connection with their benefits programs. In many cases, these
employers and their advisors rely on us for expertise in
matching their needs to the collection of solutions available
through group benefit programs. Success also requires systems
and work practices suited to a high transaction volume business
and the ability to provide a high level of customer service to a
large number of clients operating in almost all industries found
in the U.S. economy.
</FONT>

<P align="left">
<I><FONT size="2">Underwriting and Risk Management</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">True group products are normally offered to
employees on a <B>guaranteed issue </B>basis, meaning that if
the group is an acceptable risk, the insurer generally foregoes
individual medical underwriting and agrees in advance to accept
all applications for insurance from members of the eligible
class up to a formula-determined limit. Individual medical
underwriting is required on applications for amounts in excess
of this limit, or in connection with untimely applications. Our
sales representatives and underwriters evaluate the risk
characteristics of each prospective insured group and design
appropriate plans of insurance. They utilize various techniques
such as deductibles, co-payments, guarantee issue limits and
waiting periods to control the risk we assume. Voluntary
products introduce additional risks due to the fact that
employees have some awareness of the risk of loss they
personally face, and those employees who believe themselves to
be more at risk will be more likely to elect coverage. In order
to control these risks, we customize our plan designs to
mitigate adverse
</FONT>

<P align="center"><FONT size="2">97
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">selection problems. We also require that a
minimum percentage of eligible employees elect a voluntary
coverage.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We base the pricing of our products on the
expected pay-out of benefits that we calculate using assumptions
for mortality, morbidity, interest, expenses and persistency,
depending upon the specific product features. Group underwriting
takes into account demographic factors such as age, gender and
occupation of members of the group as well as the geographic
location and concentration of the group. Our disability policies
often limit the payment of benefits for certain kinds of
conditions, such as pre-existing conditions or disabilities
arising from specifically listed medical conditions, in each
case as defined in the policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Generally, we are not obligated to accept any
risk or group of risks from, or to issue a policy or group of
policies to, any employer or intermediary. Requests for coverage
are reviewed on their merits and generally a policy is not
issued unless the particular risk or group has been examined and
approved by our underwriters. Group products are typically
written with an initial rate guarantee of two years for
disability and life insurance and one year for other group
products. They are also written on a <B>guaranteed renewable
</B>basis with the right, upon expiration of the guarantee, to
re-price to reflect the aggregate experience of our block of
business and, where credible, the experience of the group.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reflecting both our ability to satisfy a broad
range of customers and our desire to prudently diversify our
risk, the business underwritten by our Assurant Employee
Benefits segment is widely dispersed across geographic areas as
well as the industries insured. At June&nbsp;30, 2003, our top
ten states measured by percentage of in force annual premiums
contributed approximately 54.4% of our total annualized premiums
in force, as detailed below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Annualized</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Premiums in</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">State</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Force</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">California
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Texas
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Minnesota
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New York
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michigan
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ohio
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Illinois
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Florida
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alabama
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Wisconsin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">98
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Similarly, at June&nbsp;30, 2003, our top ten
industry segments measured by percentage of in force annual
premiums, as aggregated by the first two digits of their
<B>standard industry code (SIC)</B>, contributed approximately
49.3% of our total annualized premiums in force, as detailed
below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="74%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="10%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Annualized</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Premiums in</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">SIC Code</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Force</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">80 (Health Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">82 (Educational Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">87 (Engineering, Accounting, Management, etc.)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">73 (Business Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">50 (Wholesale Trade-Durable)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">81 (Legal Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">91 (Government Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">86 (Membership Organizations)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">83 (Social Services)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">60 (Finance, Insurance, Real Estate)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Profitability in all of our product lines is
affected by deviations of actual claims experience from expected
claims experience, investment returns, persistency and our
ability to control our administrative expenses. Also important
is the general state of the economy; for example, during a
recession the incidence of disability claims tends to increase.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our efforts are focused on facilitating
claimants&#146; return to work through a variety of means,
including physical therapy, vocational rehabilitation and
retraining and workplace accommodation to support the insured.
We believe that we were the first U.S.&nbsp;insurance company to
develop and market disability insurance contracts aimed
explicitly at facilitating recovery of functionality and
vocational rehabilitation when disabilities occur. In support of
this effort, we also employ or contract with a staff of doctors,
nurses and vocational rehabilitation specialists. We also
utilize a broad range of outside medical and vocational experts
for independent evaluations and local vocational services.
Finally, we have an investigations unit focused on individuals
who have or may be capable of returning to work but continue to
claim benefits. Our dental business utilizes a highly automated
claims system focused on rapid handling of claims, with 66% of
claims adjudicated within seven calendar days for claims
received from January&nbsp;1, 2003 to and including
August&nbsp;30, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We employ approximately 800 claims employees in
locations throughout the United States dedicated to the Assurant
Employee Benefits segment. We have a comprehensive claims review
process, including an appeals process pursuant to which
policyholders can appeal claims decisions made.
</FONT>

<P align="left">
<B><I><FONT size="2">Assurant PreNeed</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant PreNeed is the market leader in the
United States in pre-funded funeral insurance, which provides
whole life insurance death benefits or annuity benefits used to
fund costs incurred in connection with pre-arranged funerals. We
distribute our pre-funded funeral insurance products through two
separate channels, our independent channel and our AMLIC
channel. Our pre-funded funeral insurance products provide
benefits to cover the costs incurred in connection with
<B>pre-arranged funeral contracts </B>and are distributed
primarily through funeral homes and sold mainly to consumers
over the age of 65, with an average issue age of 72. Our
pre-funded funeral insurance products are typically structured
as whole life insurance policies in the United States and as
annuity products in Canada. Our independent channel&#146;s
target market is comprised of the 23,000 funeral firms in the
United States and Canada, of which 2,000 are active customers.
</FONT>

<P align="center"><FONT size="2">99
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With our acquisition of AMLIC in 2000, we have
become the market leader in the area of pre-funded funeral
insurance based on face amount of policies sold. Through our
AMLIC channel, we provide the insurance products and support
services for the <B>pre-need</B> activities of SCI, the largest
operator of cemeteries and funeral homes in North America. As of
June&nbsp;30, 2003, SCI operated approximately 1,300 funeral
service locations in North America. This commission-based
arrangement is anchored by an exclusive ten-year marketing
agreement, which commenced on October&nbsp;1, 2000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">According to public filings, published statistics
and our own internal estimates, we believe the U.S. market for
insurance funded pre-need policies in 2002 was approximately
$2.0&nbsp;billion based on the face amount of policies sold.
According to Conning&#146;s Industry Insight, an industry
publication, the pre-funded funeral insurance industry grew by
approximately 2.9% annually from 1992 to 2000. We believe the
pre-need market will continue to grow at approximately this
level in the future. Growth in pre-need sales has been
traditionally driven by distribution with a high correlation
between new sales of pre-funded funeral insurance and the number
of pre-need counselors marketing the product. In addition, as
alternative distribution channels are identified, such as
targeting affinity groups and employers, we believe growth in
this market could accelerate above projected rates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant PreNeed, our strategy in our
independent channel is to increase sales potential by
strengthening our distribution relationships. We do this by
offering marketing support and programs to our funeral firm
clients to increase their local market share, providing training
for their sales counselors and assisting them in developing
direct-to-consumer marketing programs and lead generation and
management tools. Through our AMLIC channel our strategy is to
reduce SCI&#146;s cost to sell and manage its pre-need
operation. We do this by integrating our processes for managing
SCI&#146;s insurance production into its process for managing
its pre-need business. Additionally, in keeping with our goal of
aligning SCI&#146;s interest with ours, our arrangement with SCI
is commission-based; however, we compensate SCI with an
escalating production-based commission, with a defined maximum.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant PreNeed for the periods and as of
the dates indicated:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="46%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six</FONT></B></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the Year</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMLIC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="24"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">New face sales (life and annuity) net of
    reinsurance:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">AMLIC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Independent and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">364</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policies in force
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.67</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We acquired AMLIC on October&nbsp;1, 2000, and
therefore the results of AMLIC are included in our Assurant
PreNeed segment financial results beginning in October 2000.
</FONT>

<P align="center"><FONT size="2">100
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Products</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Pre-Funded Funeral Insurance
Policies.</FONT></I><FONT size="2"> Pre-funded funeral insurance
provides whole life insurance death benefits or annuity benefits
to fund the costs incurred in connection with pre-arranged
funeral contracts, or, in a minority of situations, pre-arranged
funerals without a pre-arranged funeral contract, which costs
typically include funeral firm merchandise and services. Our
pre-funded funeral insurance products are typically structured
as whole life insurance policies in the United States. In
Canada, for regulatory reasons, our pre-funded funeral insurance
products are typically structured as annuity contracts for newly
issued business. A pre-arranged funeral contract is an
arrangement between a funeral firm and an individual whereby the
funeral firm agrees to perform the selected funeral upon the
individual&#146;s death. The consumer then purchases an
insurance policy intended to cover the cost of the pre-arranged
funeral, and the funeral home generally becomes the irrevocable
assignee, or, in certain cases, the beneficiary, of the
insurance policy proceeds. However, the insured may name a
beneficiary other than the funeral home. The funeral home agrees
to provide the selected funeral at death in exchange for the
policy proceeds. Because the death benefit under many of our
policies is designed to grow over time, the funeral firm that is
the assignee of such a policy has managed some or all of its
funeral inflation risk. Consumers have the choice of making
their policy payments as a single lump-sum payment or through
multi-payment plans that spread payments out over a period of
one to ten years. We do not provide any funeral goods and
services in connection with our pre-funded funeral insurance
policies; these policies pay death benefits in cash only.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Marketing and Distribution</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We distribute our pre-funded funeral insurance
products through two distribution channels: the independent
channel, which distributes through approximately 2,000 funeral
homes and selected third-party general agencies, and our AMLIC
channel, which distributes through a partnership with
approximately 1,300 SCI-owned locations in North America. Our
policies are sold by licensed insurance agents or enrollers who
in some cases may also be a funeral director. As of
June&nbsp;30, 2003 and December&nbsp;31, 2002, the face amount
of our contracts sold through our AMLIC channel represented
approximately 50% and 55%, respectively, of our total new life
and annuity face sales in Assurant PreNeed.
</FONT>

<P align="left">
<I><FONT size="2">Risk Management</FONT></I>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant PreNeed generally writes whole life
insurance policies with increasing death benefits and obtains
the majority of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. To manage these spreads, we monitor
weekly the movement in new money yields and monthly evaluate our
actual net new achievable yields. This information is used by
our business segment crediting committee to evaluate rates to be
credited on applicable new and in force pre-funded funeral
insurance policies and annuities. In addition, our business
segment investment committee, including members of the crediting
committee, review asset benchmarks and perform asset/ liability
matching studies to develop the optimum portfolio to maximize
yield and reduce risk.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant PreNeed, we utilize prudent
underwriting to select and price insurance risks. We regularly
monitor mortality assumptions to determine if experience remains
consistent with these assumptions and to ensure that our product
pricing remains appropriate. We continually review our
underwriting, agent and policy contract provisions and pricing
guidelines so that our policies remain competitive and
supportive of our marketing strategies and profitability goals.
Our underwriting policies rely on review procedures with
actuarial personnel, in which actual loss experience is
examined. Decisions are based on established actuarial pricing
and risk selection principles to ensure that our underwriting
and pricing guidelines are appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many of our pre-funded whole-life funeral
insurance policies have increasing death benefits. As of
June&nbsp;30, 2003, approximately 70% of Assurant PreNeed&#146;s
in force insurance policy reserves related to policies that have
guaranteed crediting rates or require us to credit rates with
changes in the Consumer Price Index. Policies that have rates
guaranteed to change with the Consumer Price Index represented
approximately 15%
</FONT>

<P align="center"><FONT size="2">101
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">of Assurant PreNeed&#146;s reserves as of
June&nbsp;30, 2003. We have employed risk mitigation strategies
to seek to minimize our exposure to a rapid increase in
inflation.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Ceded Reinsurance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our operating business segments utilize ceded
reinsurance for three major business purposes:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Loss Protection and Capital
    Management.</FONT></I><FONT size="2"> As part of our overall
    risk and capacity management strategy, we purchase reinsurance
    for certain risks underwritten by our various operating business
    segments, including significant individual or catastrophic
    claims, and to free up capital to enable us to write additional
    business.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Business
    Dispositions.</FONT></I><FONT size="2"> We have used reinsurance
    to exit certain businesses, such as our FFG division in 2001 and
    our LTC business in 2000. Reinsurance was used in these cases to
    facilitate the transactions because the businesses shared legal
    entities with business units that we retained.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <I><FONT size="2">Assurant Solutions&#146; Client Risk and
    Profit Sharing.</FONT></I><FONT size="2"> Assurant Solutions
    writes business produced by its clients, such as mortgage
    lenders and servicers and financial institutions, and reinsures
    all or a portion of such business to insurance subsidiaries of
    the clients. Such arrangements allow significant flexibility in
    structuring the sharing of risks and profits on the underlying
    business.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loss Protection and Capital
    Management</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In a traditional indemnity reinsurance
transaction, a reinsurer agrees to indemnify another insurer for
part or all of its liability under a policy or policies it has
issued for an agreed upon premium. These agreements provide for
recovery of a portion of <B>losses and </B>associated <B>loss
expenses </B>from reinsurers. The terms of these agreements,
which are typical for agreements of this type, generally
provide, among other things, for the automatic acceptance by the
reinsurer of ceded risks in excess of our <B>retention
</B>limits (i.e. the amount of loss per individual risk that we
are willing to absorb). For excess of loss coverage, we pay
premiums to the reinsurers based on rates negotiated and stated
in the treaties. For <B>pro rata reinsurance,</B> we pay
premiums to the reinsurers based upon percentages of premiums
received by us on the business reinsured. These agreements are
generally terminable as to new risks by us or by the reinsurer
on appropriate notice; however, termination does not affect
risks ceded during the term of the agreement, which generally
remain with the reinsurer.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We work with our operating subsidiaries to
develop effective reinsurance arrangements that are consistent
with the pricing and operational goals of each operating
business segment. For example, Assurant Employee Benefits cedes
100% of monthly disability claims in excess of $10,000 per
individual insured. For our group term life business, the
maximum amount retained on any one life is $800,000 of life
insurance including accidental death, limited to $500,000 in
life insurance and $300,000 in accidental death and
dismemberment insurance. Amounts in excess of these figures are
reinsured with other life insurance companies on a yearly
renewable term basis. Assurant Solutions purchases property
reinsurance for flood risk, with per property limits of $925,000
in excess of $75,000 per individual loss. This treaty has a per
occurrence cap of $2,775,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For those product lines where there is exposure
to catastrophes (for example, homeowners&#146; policies written
by Assurant Solutions), we closely monitor and manage our
aggregate risk exposure by geographic area and have entered into
reinsurance treaties to manage our exposure to these types of
events. We purchase catastrophe reinsurance to manage our risk
exposure ranging from a one in 250-year to a one in 500-year
storm. We maintain $118&nbsp;million of catastrophic excess of
loss coverage for fire, flood and personal liability risks, with
a per occurrence retention of the first $20&nbsp;million. In
addition, 90% of Florida hurricane losses in excess of
$34&nbsp;million are covered by the Florida Hurricane
Catastrophe Fund (FHCF), with coverage capped at
$85&nbsp;million. This coverage has been in place as of
June&nbsp;1, 2003 and will continue through May&nbsp;31, 2004.
Future FHCF coverage will be determined by the FHCF in
accordance with Florida statutes and will depend upon Assurant
Solutions&#146; in force Florida risks and the FHCF claims
paying capacity. Also, in Assurant Employee Benefits, we have
purchased catastrophic reinsurance coverage in the group term
life product line of $30&nbsp;million in excess of our retention
of the first $20&nbsp;million.
</FONT>

<P align="center"><FONT size="2">102
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A significant portion of Assurant Health&#146;s
business has been reinsured under non-proportional reinsurance
agreements that provide for the reinsurers to indemnify us for
losses in a calendar year on combined ratios up to but not
exceeding 110%. Such losses, with interest, are offset against
any future profits. For calendar years where the combined ratio
does not exceed 98%, Assurant Health keeps all the profits on
the reinsured business net of the reinsurance fee. For years
where the reinsured business is profitable but the combined
ratio exceeds 98%, Assurant Health keeps 50% of the profits on
the business net of the fee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With the exception of a small block of older
policy forms, all of the LTC business of John Alden, one of our
subsidiaries, has been reinsured with ERC Life Reinsurance
Corporation (ERC). All risks and profits generated by the
reinsured business have been transferred to ERC. The reserves
and premium transferred are in excess of 95% of the direct
long-term care amounts generated by John Alden. The remaining
small block of long-term care policies in John Alden has been
reinsured with John Hancock as part of the sale of that
division. See &#147;&#151;&nbsp;Business Dispositions&#148;
below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under indemnity reinsurance transactions in which
we are the ceding insurer, we remain liable for policy claims if
the assuming company fails to meet its obligations. To limit
this risk, we have control procedures in place to evaluate the
financial condition of reinsurers and to monitor the
concentration of credit risk to minimize this exposure. The
selection of reinsurance companies is based on criteria related
to solvency and reliability and, to a lesser degree,
diversification as well as on developing strong relationships
with our reinsurance partners for the sharing of risks. At
December&nbsp;31, 2002, 68% of our primary reinsurers (excluding
The Hartford and John Hancock) were rated &#147;A&#148; or
better by A.M. Best, while 10% of our reinsurers did not have
A.M. Best ratings at such date.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we also purchase reinsurance when
capital requirements and the economic terms of the reinsurance
make it appropriate to do so.
</FONT>

<P align="left">
<B><I><FONT size="2">Business Dispositions</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have exited businesses through reinsurance
ceded to third parties, such as our 2001 sale of the insurance
operations of FFG to The Hartford. The assets backing the
liabilities on these businesses are held in a trust. All
separate account business and John Alden general account
business relating to FFG were transferred through modified
coinsurance, a form of proportional reinsurance in which the
underlying assets and liabilities are still reflected on the
ceding company&#146;s balance sheet. Under this arrangement, The
Hartford receives all premiums, pays all claims and funds all
reserve increases net of investment income on reserves held. All
other FFG business was reinsured by 100% coinsurance, which
transfers all affected assets and liabilities as well as all
premiums and claims to the assuming company. We would be
responsible for administering this business in the event of a
default by The Hartford. In addition, under the reinsurance
agreement, The Hartford is obligated to contribute funds to
increase the value of the separate accounts relating to the
business sold if such value declines. If The Hartford fails to
fulfill these obligations, we will be obligated to make these
payments.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1997, John Alden sold substantially all of its
annuity operations to SunAmerica Life Insurance Company
(SunAmerica), now a subsidiary of American International Group,
Inc. In connection with the sale, John Alden reinsured its
existing block of annuity policies to SunAmerica on a
coinsurance basis. This coinsurance was initially on an
indemnity basis and the parties agreed to transition the
business to an <B>assumption basis</B> as soon as practical. In
certain states, the transition to an assumption basis is subject
to policyholder approval. To the extent that such transition
does not take place with respect to any particular policy, the
policy will remain reinsured on an indemnity basis. As of
June&nbsp;30, 2003, more than 95% of the ceded annuity reserves
had either transitioned to an assumption basis or had lapsed.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 2000, we sold all of our LTC operations to
John Hancock. In connection with the sale, we reinsured our
existing block of long-term care policies to John Hancock on a
coinsurance basis. Under the coinsurance agreement, we
transferred 100% of the policy reserves and related assets on
this block of business to John Hancock, and John Hancock agreed
to be responsible for 100% of the policy benefits. The assets
backing the liabilities on this business are held in a trust and
John Hancock is obligated to fund the trust if the value of the
</FONT>

<P align="center"><FONT size="2">103
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">assets is deemed insufficient to fund the
liabilities. If John Hancock fails to fulfill these obligations,
we will be obligated to make these payments.
</FONT>
</DIV>

<P align="left">
<B><I><FONT size="2">Assurant Solutions&#146; Client Risk and
Profit Sharing</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, our insurance subsidiaries in
Assurant Solutions have ceded a portion of the premiums and risk
related to business generated by certain clients to the
client&#146;s captive insurance companies or to reinsurance
companies in which the clients have an ownership interest. In
some cases, our insurance subsidiaries have assumed a portion of
these ceded premiums and risk from the captive insurance
companies and reinsurance companies. Through these arrangements,
our insurance subsidiaries share some of the premiums and risk
related to client-generated business with these clients. When
the reinsurance companies are not authorized to do business in
our insurance subsidiary&#146;s domiciliary state, our insurance
subsidiary obtains collateral, such as a trust or a letter of
credit, from the reinsurance company or its affiliate in an
amount equal to the outstanding reserves to obtain full
financial credit in the domiciliary state for the third-party
reinsurance. See &#147;Management&#146;s Discussion and Analysis
of Financial Condition and Results of Operations&nbsp;&#151;
Quantitative and Qualitative Disclosures about Market
Risk&nbsp;&#151; Credit Risk.&#148;
</FONT>

<P align="left">
<B><I><FONT size="2">Gross Annualized Premium in Force, Ceded
Portion and Net Amount Retained</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table details our gross annualized
premium in force, the portion that was ceded to reinsurers and
the net amount that was retained as of December&nbsp;31, 2002.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="57%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">As of December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Ceded</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Net</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Life insurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,097</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accident and health
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and casualty
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total consolidated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,329</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Gross includes direct plus assumed premiums.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Claims Provisions/ Reserves</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In accordance with industry and accounting
practices and applicable insurance laws and regulatory
requirements, we establish reserves for payment of claims and
<B>claims expenses </B>for claims that arise from our insurance
policies. We maintain reserves for future policy benefits and
unpaid claims expenses. Policy reserves represent the
accumulation of the premiums received that are set aside to
provide for future benefits and expenses on claims not yet
incurred. Claim reserves are established for future payments and
associated expenses not yet due on claims that have already been
incurred, whether reported to us or not. Reserves, whether
calculated under GAAP or SAP, do not represent an exact
calculation of future policy benefits and expenses but are
instead estimates made by us using actuarial and statistical
procedures. There can be no assurance that any such reserves
would be sufficient to fund our future liabilities in all
circumstances. Future loss development could require reserves to
be increased, which would adversely affect earnings in current
and/or future periods. Adjustments to reserve amounts may be
required in the event of changes from the assumptions regarding
future morbidity, the incidence of disability claims and the
rate of recovery, including the effects thereon of inflation and
other societal and economic factors, persistency, mortality,
property claim frequency and severity and the interest rates
used in calculating the reserve amounts. The reserves reflected
in our consolidated financial statements are calculated in
accordance with GAAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of
Operations&nbsp;&#151; Critical Accounting Policies&nbsp;&#151;
Reserves.&#148;
</FONT>

<P align="center"><FONT size="2">104
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reserves are regularly reviewed and updated,
using the most current information. Any adjustments are
reflected in current results of operations. However, because the
establishment of reserves is an inherently uncertain process,
there can be no assurance that ultimate losses will not exceed
existing reserves.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reserves are reviewed at least quarterly by our
business segment management.
</FONT>

<P align="left">
<B><FONT size="2">Investments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The investment portfolio is a critical part of
our business activities and important to our overall
profitability. The fundamental investment philosophy is to
manage assets, within our stated risk parameters, to generate
consistent and high levels of investment income, before gains
and losses, while providing a total return that is competitive
over the long-term. Our investment team is charged with
maintaining safety of principal and sufficient liquidity,
managing credit, interest rate, prepayment and market risks,
maintaining adequate diversification among asset classes,
industry concentrations and individual issuers and adhering to
all applicable regulatory requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have individual business segments with
different needs and characteristics. Hence, our investment
approach for each business segment is tailored to that business
segment&#146;s needs in terms of asset allocation, liquidity
needs and duration of assets and liabilities.
</FONT>

<P align="left">
<B><I><FONT size="2">Organization</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The general account is managed by our asset
management department, Assurant Asset Management, or AAM. In
this capacity, AAM acts as both our investment advisor and our
asset manager. As investment advisor, the AAM organization
oversees the design and implementation of overall investment
policy. As asset manager, AAM is responsible for
(i)&nbsp;directly investing those general account assets for
which the department has in-house expertise and
(ii)&nbsp;selecting and monitoring outside managers for those
assets for which AAM has limited expertise. AAM fulfills these
roles through its involvement in the establishment of risk
management techniques, business segment investment policy and
asset benchmark construction and through leadership and
participation in our two investment oversight entities: the
Company&#146;s risk management committee and the individual
business segment investment committees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our risk management committee consists of the
Chief Executive Officer, Chief Financial Officer, Chief
Investment Officer, Corporate Actuary and Head of Strategic
Analysis. It meets quarterly and is responsible for setting
overall corporate risk tolerance for the general account. As
such, it approves all investment risk limits including those
affecting overall portfolio quality, liquidity, duration and
asset class concentration. Additionally, it approves the use of
new asset classes when appropriate and business segment asset
allocation and investment policy.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The business segment investment committees meet
quarterly and are co-chaired by the business segment Chief
Financial Officer and either the Head of Fixed Income
Investments or the Head of Mortgage and Real Estate Investments.
These committees are responsible for setting appropriate asset
allocation and investment policy for our specific business
segments. Additionally, they monitor investment strategy,
performance, pricing and liability cash flows and research and
recommend the use of new asset classes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These committees, together with AAM, manage the
overall risk parameters of our investment portfolios and seek to
employ investment policies and strategies that are appropriate
for and supportive of the needs of the individual businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The portfolio and investment performance results
are reviewed quarterly with our board of directors.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <I><FONT size="2">Investment Process</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our investment process is initiated by the
strategic analysis group within AAM. This group designs an
appropriate asset allocation benchmark for each portfolio that
is tailored to the associated liabilities and is designed to
generate the highest level of investment income available given
each business segment&#146;s overall risk tolerance. Although
income is the primary objective, total return is a significant
secondary objective.
</FONT>

<P align="center"><FONT size="2">105
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Multiple portfolios are maintained as a result of
the legal entity structure within our Company. The maturities of
the assets are selected so as to satisfy a <B>duration corridor
</B>for each portfolio that is appropriate to its underlying
liabilities. Duration is the sensitivity of the portfolio to
movements of interest rates. The actual duration is dynamic and
will change with time and interest rate movement, as will the
liability duration. The duration corridor is chosen by analyzing
various risk/reward measures from appropriate asset/liability
studies. The duration of our portfolio as of June&nbsp;30, 2003
and December&nbsp;31, 2002 was 5.71 and 5.46&nbsp;years,
respectively. This represents the amalgamated duration of our
four operating business segments that is directly tied to their
liabilities, much of which are short-tail. The average duration
of such liabilities is 5.8 years. It is our intent to manage the
portfolios such that their duration closely matches the
liabilities that they support.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the asset allocation benchmark will
reflect multiple constraints, such as all risk tolerances
established by our risk management committee, appropriate credit
structure, prepayment risk tolerance, liquidity requirements,
capital efficiency, tax considerations and regulatory and rating
agency requirements. The individual benchmarks are then
aggregated together to give a total asset profile. Asset
management is conducted at the portfolio level; however, risk
constraints are also in place for the aggregate portfolio. Each
benchmark is reviewed at least annually for appropriateness.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our investment portfolios are invested in the
following key asset classes: fixed income securities, including
mortgage-backed and other asset-backed securities, preferred
stocks, commercial mortgage loans and real estate. We intend to
begin investing in private placement loans in the fourth quarter
of 2003 and ultimately over the next several years to have
private placement loans represent 5% of our total invested
assets. We do not currently invest new money in equity
securities; however, we may do so in the future. As of
June&nbsp;30, 2003, less than 1% of the fair value of our total
invested assets was invested in common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each month the portfolio holdings are screened
for securities whose market price is equal to 85% or less of
their original purchase price. Management then makes their
assessment as to which of these securities are other than
temporarily impaired. Assessment factors include, but are not
limited to, the financial condition of the issuer, any
collateral held and the length of time the market value of the
security has been below cost. Each month the watchlist is
discussed at a meeting attended by members of our investment,
accounting and finance departments. Each quarter, any security
whose price decrease is deemed to have been other than
temporarily impaired is written down to its then current market
level, with the amount of the writedown reflected in our
statement of operations for that quarter. Previously impaired
issues are also monitored monthly, with additional writedowns
taken quarterly if necessary.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Fixed Income Portfolio Process</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">AAM controls the credit risk in the fixed income
portfolio through a combination of issuer level credit research
and portfolio level credit risk management. At the issuer level,
we maintain a credit database that contains both qualitative and
quantitative assessments of over 190 issuers and 35 industries.
This database is updated regularly by our credit research team
and is an integral part of the credit investment process. At the
portfolio level, we control credit risk primarily through
quality and industry diversification, individual issuer limits
based upon credit rating and a sell discipline designed to
reduce quickly exposure to deteriorating credits. In addition,
we monitor changes in individual security values on a
semi-monthly basis in order to identify potential problem
credits. This process is also incorporated into our impairment
watchlist process.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The risks in the fixed income portfolio are
carefully controlled and monitored. First, AAM customizes the
asset allocation benchmark to reflect the risk tolerance for
each of our operating business segments. Second, our risk
management committee imposes issuer portfolio limits on
individual issuers based upon credit quality, which limits are
currently 1.5% for issuers rated AA- and above, 1% for issuers
rated A- to A+, 0.75% for issuers rated BBB- to BBB+ and 0.375%
for issuers rated BB- to BB+. We use the lower of Moody&#146;s
or Standard&nbsp;&#38; Poor&#146;s ratings to determine an
issuer&#146;s rating. Third, our fixed income investment team
sub-divides the portfolio&#146;s BBB-rated holdings by rating
notch (i.e., BBB+, BBB, BBB-) and typically imposes lower limits
for the lower rated BBB issuers. Our policy is not to purchase
non-rated fixed income securities. However, as of June&nbsp;30,
2003, less than 2% of our fixed maturity securities portfolio
was invested in fixed maturity securities that were not rated by
Moody&#146;s or Standard&nbsp;&#38; Poor&#146;s. Finally, we
give our high yield
</FONT>

<P align="center"><FONT size="2">106
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">managers the option to accept investment grade
holdings if they are downgraded to below investment grade. If
our high yield managers reject such holdings, we will liquidate
any such holdings; if the high yield managers accept only a
portion of such holdings, we will liquidate the remaining
portion of such holdings. The effect of these and other risk
controls, some of which are described below, is a highly
diversified credit portfolio and a sell discipline designed to
reduce exposure to issuers whose credit profile is deteriorating.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to invest in a wide variety of asset
classes in our portfolio and to appropriately manage the
accompanying risks, we have outsourced the management of almost
15% of our portfolio&#146;s market value. We have engaged
Alliance Capital Management Corp. and Wellington Management Co.
for high yield investments, Spectrum Asset Management, Inc. and
Flaherty &#38; Crumrine Inc. for preferred stock investments and
Lancaster Investment Counsel and Phillips Hager&nbsp;&#38; North
Investment Management Ltd. for our Canadian investment
portfolios. We retain custody control over assets under
management by outside managers and have oversight procedures in
place for all managers. These procedures include formal
investment guidelines, daily transaction updates and periodic
portfolio reviews. The outside managers are required to provide
research updates for any issuer on the impairment watchlist for
which they are responsible. Our agreements with these investment
managers are generally terminable by us upon 30&nbsp;days&#146;
written notice. Additionally, we have recently entered into an
agreement to outsource our new private placement loan investment
program to Prudential Private Placement Investors, LP.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Commercial Mortgage Loans Investment
    Process</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We originate fixed rate, first commercial
mortgage loans through a nationwide group of exclusive, regional
mortgage correspondents. We have a mortgage loan committee
within AAM that is responsible for the approval of our mortgage
loan related investments. Generally the mortgage correspondents
service the loans they originate and we regularly meet with them
to help foster a strong working relationship. Every property
securing a loan application is inspected and underwritten by our
mortgage loan staff prior to approval by our mortgage loan
committee, which is comprised of the heads of our commercial
mortgage and real estate departments and the vice president of
our legal department. Most of the loans are non-recourse and
virtually all loans include a &#147;yield maintenance&#148;
provision, which compensates us in the event of loan prepayment.
We are a portfolio lender and generally hold our commercial
mortgage loans to maturity. We typically do not securitize or
otherwise sell our commercial mortgage loans.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our investment process requires an in-depth
review of the loan terms, security and the borrower prior to
commitment. We seek geographic and property-type diversification
and concentrate on the four following major property types for
collateral: office, retail, warehouse and multi-family
properties. Our policy is that mortgage loans may not exceed 75%
of the market value of the property securing the loan; however,
the loans we originate typically are below 70% of the market
value. Loan terms generally range from five to 20&nbsp;years,
with amortization of five to 25&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our commercial mortgage loan portfolio is
reviewed monthly for potential problems. All servicers provide
monthly delinquencies reports. Problem loans, including
delinquencies, foreclosures and loans on the &#147;watch
list,&#148; are reviewed monthly. Inspection reports relating to
financial, market and physical conditions, among other items,
are obtained and reviewed on all loans annually. A potential
<B>loss reserve </B>based on historical data adjusted for
current expectations is maintained and is typically between
1.25% and 2.25% of commercial mortgage loans on real estate. As
of June&nbsp;30, 2003, the reserve was approximately 2.1% of the
unpaid principal of our commercial mortgage loans, or
$19&nbsp;million.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Investment Real Estate Process</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We invest in income-producing commercial
properties to generate attractive risk-adjusted returns as well
as to generate operating investment income with the potential
for capital gains upon sale of the property. We invest with
regional operating partners who generally invest capital in the
property with us and provide management and leasing services.
Our portfolio is diversified by location, property type,
operating partner and lease term. Property types include office
buildings, warehouse/industrial buildings and multi-family
housing.
</FONT>

<P align="center"><FONT size="2">107
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our investment process relies upon thorough
market research and extensive due diligence. We maintain
regional market information to target potentially attractive
real estate markets. Physical, financial and market due
diligence is conducted on all potential acquisitions prior to
investing. Financial scenarios and resulting income and capital
gains for various holding periods are modeled. Modest levels of
non-recourse debt are employed to enable us to diversify the
portfolio while limiting our equity exposure to this asset
class. These investments are made through limited liability
companies or limited partnerships.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our portfolio is monitored through numerous
reports and regular property inspections. Monthly operating
statements and quarterly GAAP statements are produced on every
property and the results reported quarterly to the business
segment investment committee. Internal annual appraisals are
performed and every property is appraised by an independent
appraiser at least once every three years on a rolling basis.
Internal appraisals are updated quarterly to reflect major
changes in market conditions or property or leasing conditions.
Values are reported on our financial statements on the
&#147;equity method.&#148; Market values are reported at the
lesser of our internal valuation or the independent appraised
value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All portfolios are reviewed monthly to insure
that they are in compliance with guidelines established by our
risk management committee or the established asset allocation
for all asset classes. Exceptions are reviewed by our Chief
Investment Officer and are corrected by the appropriate asset
manager. State and regulatory compliance is reviewed by
portfolio and by legal entity at least annually to insure
compliance with regulations.
</FONT>

<P align="left">
<B><I><FONT size="2">Portfolio Composition</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our total invested assets were
$10,735&nbsp;million and $10,029&nbsp;million, or 47% and 45%,
of our total assets, as of June&nbsp;30, 2003 and
December&nbsp;31, 2002, respectively. Our net investment income
for the six months ended June&nbsp;30, 2003 and the year ended
December&nbsp;31, 2002 was 9% and 10%, respectively, of our
total revenue, excluding realized investment losses and gains.
We had a net realized gain on investments of $7&nbsp;million for
the six months ended June&nbsp;30, 2003 and a net realized loss
on investments of $118&nbsp;million for the year ended
December&nbsp;31, 2002. Our investment portfolio consists
primarily of fixed income securities, including mortgage-backed
and other asset-backed securities, preferred stocks, commercial
mortgage loans and commercial real estate. As of June&nbsp;30,
2003 and December&nbsp;31, 2002, fixed maturity securities
accounted for 82% and 80%, respectively, of our total invested
assets. The corporate bond portfolio is well diversified across
industry classes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the carrying value
of the securities held in our investment portfolio at the dates
indicated:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">At December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">At June&nbsp;30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,765,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,096,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204,406</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate at
    amortized cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">869,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">868,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,047,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">213,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">439,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments(1)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,810</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,734,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,028,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,600,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,172,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes primarily commercial real estate and
    limited partnerships.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">108
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Investment Results</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The overall income yield on our investments after
investment expenses, excluding realized investment gains
(losses), was 5.94% on an annualized basis for the six months
ended June&nbsp;30, 2003 and 6.27% for the year ended
December&nbsp;31, 2002. The overall income yield on our
investments after investment expenses, including realized gains
(losses), was 6.09% on an annualized basis for the six months
ended June&nbsp;30, 2003 and 5.09% for the year ended
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the income yield
and net investment income, excluding realized investment
gains/(losses), for each major investment category for the
periods indicated.
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended June&nbsp;30,&nbsp;2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,&nbsp;2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Yield(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Yield(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in thousands)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.76</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.93</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.31</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,559</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.11</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.33</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,856</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.42</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.30</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.64</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27.54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13.71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment income before investment expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.15</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.46</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">651,354</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,419</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,526</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.94</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">305,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The yield is calculated by dividing income by
    average assets. The yield calculation for the six months ended
    June&nbsp;30, 2003 is presented on an annualized basis and
    includes the average of asset positions as of December&nbsp;31,
    2002 and June&nbsp;30, 2003. The yield calculation for the year
    ended December&nbsp;31, 2002 includes the average of asset
    positions as of December&nbsp;31, 2001 and December&nbsp;31,
    2002.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes primarily commercial real estate and
    limited partnerships.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">109
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Fixed Maturity Securities</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and fair value of fixed
maturity securities at June&nbsp;30, 2003 and December&nbsp;31,
2002, by type of issuer, were as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">At June&nbsp;30, 2003</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. government and government agencies and
    authorities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">States, municipalities and political subdivisions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">193</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign governments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Public utilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other corporate bonds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,496</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">At December&nbsp;31, 2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">U.S. government and government agencies and
    authorities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">States, municipalities and political subdivisions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign governments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Public utilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">879</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other corporate bonds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,822</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(54</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For similar information regarding our equity
securities, see Note&nbsp;5 of the Notes to Consolidated
Financial Statements included elsewhere in this prospectus.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents our fixed maturity
securities portfolio by NAIC designation and the equivalent
ratings of the nationally recognized securities rating
organizations as of June&nbsp;30, 2003 and December&nbsp;31,
2002, as well as the percentage based on fair value, that each
designation comprises:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">At June&nbsp;30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">At December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">NAIC</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Rating Agency</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">of Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Rating</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Equivalent</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Aaa/Aa/A
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,821</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Baa
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Ba
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">328</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">B
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Caa and lower
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">In or near default
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    &nbsp;&nbsp;<FONT size="2">Total
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">110
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and fair value of fixed
maturity securities at June&nbsp;30, 2003 and December&nbsp;31,
2002, by contractual maturity are shown below:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="45%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">At June&nbsp;30, 2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">At December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">(in millions)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due in one year or less
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after one year through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,483</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,597</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,085</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after five years through ten years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,273</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after ten years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,313</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,483</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage and asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Virtually all of our fixed maturity securities
portfolio is publicly traded. We have recently initiated a
private placement program and plan to invest approximately
$500&nbsp;million in privately placed securities over the next
two years. As of June&nbsp;30, 2003, over 94% of the fair market
value of our fixed maturity securities were dollar denominated.
As of June&nbsp;30, 2003, we had approximately
C$500&nbsp;million invested in Canadian fixed maturity
securities; however, these assets directly support Canadian
liabilities.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Commercial Mortgage Loans</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have made commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the United States. At December&nbsp;31, 2002,
approximately 47% of the outstanding principal balance of
commercial mortgage loans was concentrated in the states of
California, New York, Connecticut, Pennsylvania and Florida.
Although we have a diversified loan portfolio, an economic
downturn could have an adverse impact on the ability of our
debtors to repay their loans. At December&nbsp;31, 2002, the
outstanding balances of commercial mortgage loans ranged in size
from $1 to $10&nbsp;million with an average outstanding balance
of $2&nbsp;million. Loan commitments outstanding at
June&nbsp;30, 2003 and December&nbsp;31, 2002 totaled
$29&nbsp;million and $61&nbsp;million, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, approximately
$449&nbsp;million of principal, or 50%, of our commercial
mortgage loans before valuation allowance had balloon
maturities. A balloon maturity is a loan with larger dollar
amounts of payments becoming due in the later years of the loan.
The default rate on commercial mortgage loans with balloon
payment maturities has historically been higher than the default
rate on commercial mortgage loans with standard repayment
schedules. Since most of the principal is being repaid at
maturity, the amount of loss on a default is generally greater
than on other commercial mortgage loans. An increase in defaults
on such loans as a result of the foregoing factors could
materially adversely affect our financial condition and reduce
our profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We may have liability under environmental
protection laws resulting from our commercial mortgage loan
portfolio and real estate investments. Under the laws of several
states, contamination of a property may give rise to a lien on
the property to secure recovery of the costs of cleanup. In some
states, this kind of lien has priority over the lien of an
existing mortgage against the property, which would impair our
ability to foreclose on that property should the related loan be
in default. In addition, under the laws of some states and under
the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, we may be liable for costs of
addressing releases or threatened releases of hazardous
substances that require remedy at a property securing a mortgage
loan held by us.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Investment Real Estate</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We also hold commercial equity real estate as
part of our investment portfolio. As of June&nbsp;30, 2003 and
December&nbsp;31, 2002, we had equity real estate investments
with a carrying amount in the range of $60&nbsp;million
</FONT>

<P align="center"><FONT size="2">111
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">to $70&nbsp;million. We own real estate through
real estate joint ventures and partnerships. The main property
types within our portfolio are office, industrial/warehouse and
multi-family housing.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Competition</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We face competition in each of our businesses;
however, we believe that no single competitor competes against
us in all of our business lines and the business lines in which
we operate are generally characterized by a limited number of
competitors. Competition in our operating business segments is
based on a number of factors, including quality of service,
product features, price, scope of distribution, financial
strength ratings and name recognition. The relative importance
of these factors depends on the particular product and market.
We compete for customers and distributors with insurance
companies and other financial services companies in our various
businesses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant Solutions has numerous competitors in
its product lines, but we believe no other company participates
in all of the same lines. Competitors include insurance
companies and financial institutions. In Assurant Health, our
main competitors include health insurance companies and the Blue
Cross/ Blue Shield plans in the states in which we write
business. In Assurant Employee Benefits, commercial competitors
include benefits and life insurance companies as well as
not-for-profit Delta Dental plans. In Assurant PreNeed, our main
competitors are two pre-need life insurance companies with
nationwide representation, Forethought Financial Services and
Homesteaders Life Company, and several small regional insurers.
While we are among the largest competitors in terms of market
share in many of our business lines, in some cases there are one
or more major market players in a particular line of business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Some of these companies may offer more
competitive pricing, greater diversity of distribution, better
brand recognition or higher financial strength ratings than we
have. Some may also have greater financial resources with which
to compete. In addition, many of our insurance products,
particularly our group benefits and health insurance policies,
are underwritten annually and, accordingly, there is a risk that
group purchasers may be able to obtain more favorable terms from
competitors rather than renewing coverage with us. The effect of
competition may, as a result, adversely affect the persistency
of these and other products, as well as our ability to sell
products in the future.
</FONT>

<P align="left">
<B><FONT size="2">Ratings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rating organizations continually review the
financial positions of insurers, including our insurance
subsidiaries. Insurance companies are assigned financial
strength ratings by independent rating agencies based upon
factors relevant to policyholders. Ratings provide both industry
participants and insurance consumers meaningful information on
specific insurance companies and are an important factor in
establishing the competitive position of insurance companies.
All of our active domestic insurance subsidiaries are rated by
A.M.&nbsp;Best. A.M.&nbsp;Best maintains a letter scale rating
system ranging from &#147;A++&#148; (Superior) to &#147;F&#148;
(in liquidation). Two of our insurance subsidiaries, Fortis
Benefits Insurance Company and John Alden, are also rated by
Moody&#146;s.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of September&nbsp;25, 2003, most of our
domestic insurance subsidiaries had A.M.&nbsp;Best financial
strength ratings of A (&#147;Excellent&#148;), which is the
second highest of ten ratings categories and the highest within
the category based on modifiers (i.e., A and A- are
&#147;Excellent&#148;). Our other domestic insurance
subsidiaries had A.M.&nbsp;Best financial strength ratings of A-
(&#147;Excellent&#148;), which is the second highest of ten
ratings categories and the lowest within the category based on
modifiers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our subsidiaries&#146; Moody&#146;s financial
strength ratings, as of September&nbsp;25, 2003, were A2
(&#147;Good&#148;), which is the third highest of nine ratings
categories and mid-range within the category based on modifiers
(i.e., A1, A2 and A3 are &#147;Good&#148;), for Fortis Benefits
Insurance Company and A3 (&#147;Good&#148;), which is the third
highest of nine ratings categories and the lowest within the
category based on modifiers, for John Alden.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The objective of A.M.&nbsp;Best&#146;s and
Moody&#146;s ratings systems is to assist policyholders and to
provide an opinion of an insurer&#146;s financial strength,
operating performance, strategic position and ability to meet
ongoing obligations to its policyholders. These ratings reflect
opinions of A.M.&nbsp;Best and Moody&#146;s of our ability to pay
</FONT>

<P align="center"><FONT size="2">112
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">policyholder claims, are not applicable to the
securities offered in this prospectus and are not a
recommendation to buy, sell or hold any security, including our
common stock. These ratings are subject to periodic review by
and may be revised upward, downward or revoked at the sole
discretion of A.M.&nbsp;Best and Moody&#146;s.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Properties</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We own seven properties, including our five
buildings that serve as headquarters locations for our operating
business segments in Miami, Florida, Atlanta, Georgia, Kansas
City, Missouri, Milwaukee, Wisconsin and Rapid City, South
Dakota. We lease office space for various offices and service
centers located throughout the United States and
internationally, including our New York corporate office and
Assurant PreNeed&#146;s Atlanta operations. Our leases have
terms ranging from month-to-month to ten years. We believe that
our owned and leased properties are adequate for our current
business operations.
</FONT>

<P align="left">
<B><FONT size="2">Employees</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of June&nbsp;30, 2003, we had approximately
12,200 employees. None of our employees are subject to
collective bargaining agreements governing employment with us or
represented by labor unions. We believe that we have an
excellent relationship with our employees.
</FONT>

<P align="left">
<B><FONT size="2">Legal Proceedings</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are regularly involved in litigation in the
ordinary course of business, both as a defendant and as a
plaintiff. We may from time to time be subject to a variety of
legal and regulatory actions relating to our current and past
business operations. While we cannot predict the outcome of any
pending or future litigation, examination or investigation, we
do not believe that any pending matter will have a material
adverse effect on our financial condition or results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In Assurant Solutions, we are subject to a number
of pending actions, primarily in the State of Mississippi, many
of which allege that our credit insurance products were packaged
and sold with lenders&#146; products without buyer consent. The
judicial climate in Mississippi is such that the outcome of
these cases is extremely unpredictable. We have been advised by
legal counsel that we have meritorious defenses to all claims
being asserted against us. We believe, based on information
currently available, that any liabilities that could result are
not expected to have a material adverse effect on our financial
condition or results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">American Bankers Insurance Group (ABIG), part of
Assurant Solutions, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company (ABIC) and American
Bankers Life Assurance Company (ABLAC), previously entered into
a Consent Order and a comprehensive Compliance Plan with 43
participating states relating to compliance with the often
disparate state insurance laws, regulations and administrative
interpretations which have been difficult to apply to the
marketing of ABIG&#146;s credit insurance products through
financial institutions, retailers and other entities offering
consumer financing as a regular part of their business. In
addition to an initial settlement of $12&nbsp;million, ABIG
agreed to a multi-state market conduct examination commencing
November&nbsp;23, 1999, for review of ABIG&#146;s implementation
of the Compliance Plan. A final report was issued on
December&nbsp;19, 2001, and ABIG paid a final settlement of
$3&nbsp;million to participating states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, in
connection with certain alleged regulatory violations.
Thereafter, ABIC and ABLAC filed suit in Minnesota state court
seeking to enjoin the enforcement action because the alleged
regulatory matters included within the enforcement action were
resolved as a part of the above-described Consent Order and
Compliance Plan to which Minnesota was a party. In February
2003, the State of Minnesota, ABIC and ABLAC reached a final
settlement of all matters included within the enforcement action
and the separate state court action filed by ABIC and ABLAC.
Pursuant to the settlement, ABIC and ABLAC each agreed to pay
$100,000 to the State of Minnesota and agreed to compensate the
state for its investigative costs, which totaled
$1.8&nbsp;million. In addition, ABIC and ABLAC agreed to stop
selling insurance in Minnesota for five years, though they could
apply for reinstatement in 20&nbsp;months. Other member
companies of Assurant Solutions with product lines that
</FONT>

<P align="center"><FONT size="2">113
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">overlap those offered by ABIC and ABLAC currently
remain authorized to do business in the State of Minnesota. We
do not believe that the effect of the settlement during the next
five years will have a material impact on our financial
condition or results of operations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of Assurant Solutions. The indictment alleges that ABIC
and its two named corporate officers each violated the Minnesota
Fair Campaign Practices Act in connection with two contributions
by ABIC to the Republican National State Election Committee
totaling $15,000. The maximum penalty for ABIC is a $40,000 fine
for each alleged violation and/or forfeiture of ABIC&#146;s
license to conduct business in Minnesota. Other member companies
of Assurant Solutions with product lines that overlap those
offered by ABIC remain authorized to conduct business in the
State of Minnesota. ABIC believes that it has meritorious
defenses to the claims being asserted against it, and we
believe, based on information currently available, that any
liabilities that could result are not expected to have a
material effect on our financial condition or results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, one of our subsidiaries, American
Reliable Insurance Company (ARIC), participated in certain
excess of loss reinsurance programs in the London market and, as
a result, reinsured certain personal accident, ransom and kidnap
insurance risks from 1995 to 1997. ARIC and a foreign affiliate
ceded a portion of these risks to other reinsurers
(<B>retrocessionaires</B>). ARIC ceased reinsuring such business
in 1997. However, certain risks continued beyond 1997 due to the
nature of the reinsurance contracts written. ARIC and some of
the other reinsurers involved in the programs are seeking to
avoid certain treaties on various grounds, including material
misrepresentation and non-disclosure by the ceding companies and
intermediaries involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of certain treaties with
ARIC and the other reinsurers. The disputes generally involve
multiple layers of reinsurance, and allegations that the
reinsurance programs involved interrelated claims
&#147;spirals&#148; devised to disproportionately pass claims
losses to higher-level reinsurance layers. Many of the companies
involved in these programs, including ARIC, are currently
involved in negotiations, arbitration and/or litigation between
multiple layers of retrocessionaires, reinsurers, ceding
companies and intermediaries, including brokers, in an effort to
resolve these disputes. Based on information currently available
to us, and after consideration of the reserves reflected in our
financial statements, we believe that it is not likely that any
liabilities we experience in connection with these programs
would have a material adverse effect on our financial condition
or results of operations. However, the inherent uncertainty of
arbitrations and lawsuits, including the uncertainty of
estimating whether any settlements we may enter into in the
future would be on favorable terms, makes it difficult to
predict the outcomes with certainty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of regulatory scrutiny of our
industry practices or our businesses, such as examinations of
race-based premiums charged in the past by two of our acquired
subsidiaries, it is possible that we may be subject to legal
proceedings in the future relating to those practices and
businesses. See &#147;Regulation.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Risk Factors&#151; Risks Related to Our
Industry&#151; Our business is subject to risks related to
litigation and regulatory actions.&#148;
</FONT>

<P align="center"><FONT size="2">114
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "REGULATION" -->

<P align="center">
<B><FONT size="2">REGULATION</FONT></B>

<P align="left">
<B><FONT size="2">United States</FONT></B>

<P align="left">
<B><I><FONT size="2">State Regulation</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our insurance subsidiaries are subject to
regulation in the various states and jurisdictions in which they
transact business. The extent of regulation varies, but
generally derives from statutes that delegate regulatory,
supervisory and administrative authority to a department of
insurance in each state. The regulation, supervision and
administration relate, among other things, to standards of
solvency that must be met and maintained, the payment of
dividends, changes of control of insurance companies, the
licensing of insurers and their agents, the types of insurance
that may be written, guaranty funds, privacy practices, the
ability to enter and exit certain insurance markets, the nature
of and limitations on investments, premium rates, restrictions
on the size of risks that may be insured under a single policy,
reserves and provisions for unearned premiums, losses and other
obligations, deposits of securities for the benefit of
policyholders, payment of sales compensation to third parties,
approval of policy forms and the regulation of market conduct,
including underwriting and claims practices. State insurance
departments also conduct periodic examinations of the affairs of
insurance companies and require the filing of annual and other
reports, prepared under SAP, relating to the financial condition
of companies and other matters. Financial examinations completed
during the past three years with respect to our operating
subsidiaries have not resulted in material negative adjustments
to statutory surplus and pending financial and market conduct
examinations with respect to these subsidiaries have not
identified any material findings to date. Two of our
subsidiaries have responded affirmatively to an NAIC survey
regarding race-based premiums, resulting in examinations by
two&nbsp;state insurance departments. This relates to actions of
the subsidiaries or predecessor companies before acquisition by
us. One examination has been concluded and one is still in
progress and, to date, no penalties have been imposed as a
result of these examinations. The amount of in force business as
to which these subsidiaries charged race-based premiums is very
small, representing less than 1% of the in force block of
business of the Company at June&nbsp;30, 2003. While we do not
expect that these examinations will have a material adverse
effect on us, there can be no assurance that further
examinations or litigation will not occur with respect to
race-based premiums.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2003, two of our subsidiaries, ABIC
and ABLAC, reached a final settlement with the State of
Minnesota in connection with certain alleged regulatory
violations. Pursuant to the settlement, ABIC and ABLAC have
agreed to stop selling insurance in Minnesota for five years,
though they could apply for reinstatement in 20&nbsp;months. In
addition, ABIC may lose its license to conduct business in the
State of Minnesota as a result of alleged violations of the
Minnesota Fair Campaign Practices Act. However, other member
companies of Assurant Solutions with product lines that overlap
those offered by ABIC and ABLAC currently remain authorized to
conduct business in the State of Minnesota. See
&#147;Business&#151;Legal Proceedings.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the present time, our insurance subsidiaries
are collectively licensed to transact business in all 50 states
and the District of Columbia, although several of our insurance
subsidiaries individually are licensed in only one or a few
states. We have insurance subsidiaries domiciled in the states
of Alabama, Arizona, Arkansas, Colorado, Delaware, Florida,
Georgia, Indiana, Kentucky, Michigan, Minnesota, Mississippi,
Missouri, Nebraska, New Mexico, New York, Ohio, Oklahoma,
Pennsylvania, South Carolina, South Dakota, Texas, Utah,
Wisconsin, and in Puerto Rico.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation of Credit Insurance
    Products</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Most states and other jurisdictions in which our
insurance subsidiaries do business have enacted laws and
regulations that apply specifically to consumer credit
insurance. The methods of regulation vary but generally relate
to, among other things, the amount and term of coverage, the
content of required disclosures to debtors, the filing and
approval of policy forms and rates, the ability to provide
creditor-placed insurance and limitations on the amount of
premiums that may be charged and on the amount of compensation
that may be
</FONT>

<P align="center"><FONT size="2">115
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">paid as a percentage of premiums. In addition,
some jurisdictions have enacted or are considering regulations
that may limit profitability arising from credit insurance based
on underwriting experience.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The regulation of credit insurance is also
affected by judicial activity. For example, recent federal court
decisions have enhanced the ability of national banks to engage
in activities that effectively compete with our consumer credit
insurance business without being subject to various aspects of
state insurance regulation.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation of Service Contracts and
    Warranties</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The extent of regulation over the sale of service
contracts and warranties varies considerably from state to
state. In the states that do regulate the sales of these
products, the regulations generally are less stringent than
those applicable to the sale of insurance. For example, most
states do not require the filing and approval of contract forms
and rates for service contracts and warranties. States that do
regulate such contract forms typically require specific wording
regarding cancellation rights and regarding the consumer&#146;s
rights in the event of a claim. Most states do not require that
individual salespersons of service contracts and warranties be
licensed as insurance agents. In the states that do require such
a license, salespersons may qualify for a limited license to
sell service contracts and warranties without meeting the
education and examination requirements applicable to insurance
agents. In addition, the compensation paid to salespersons of
service contracts and warranties is generally not regulated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation of Health Insurance
    Products</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State regulation of health insurance products
varies from state to state, although all states regulate premium
rates, policy forms and underwriting and claims practices to one
degree or another. Most states have special rules for health
insurance sold to individuals and small groups. For example, a
number of states have passed or are considering legislation that
would limit the differentials in rates that insurers could
charge for health care coverages between new business and
renewal business for small groups with similar demographics.
Every state has also adopted legislation that would make health
insurance available to all small employer groups by requiring
coverage of all employees and their dependents, by limiting the
applicability of pre-existing conditions exclusions, by
requiring insurers to offer a basic plan exempt from certain
benefits as well as a standard plan, or by establishing a
mechanism to spread the risk of high risk employees to all small
group insurers. The U.S.&nbsp;Congress and various state
legislators have from time to time proposed changes to the
health care system that could affect the relationship between
health insurers and their customers, including external review.
In addition, various states are considering the adoption of
&#147;play or pay&#148; laws requiring that employers either
offer health insurance or pay a tax to cover the costs of public
health care insurance. We cannot predict with certainty the
effect that any proposals, if adopted, or legislative
developments could have on our insurance businesses and
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A number of states have enacted new health
insurance legislation over the past several years. These laws,
among other things, mandate benefits with respect to certain
diseases or medical procedures, require health insurers to offer
an independent external review of certain coverage decisions and
establish health insurer liability. There has also been an
increase in legislation regarding, among other things, prompt
payment of claims, privacy of personal health information,
health insurer liability and relationships between health
insurers and providers. We expect that this trend of increased
legislation will continue. These laws may have the effect of
increasing our costs and expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In most states in which we operate, we provide
our individual health insurance products through an association.
The use of associations offers greater flexibility on pricing,
underwriting and product design compared to products sold
directly to individuals on a true individual policy basis due to
the greater regulatory scrutiny of true individual policies. The
marketing of health insurance through association groups has
recently come under increased scrutiny. An interruption in, or
changes to, our relationships with various third-party
distributors or our inability to respond to regulatory changes
could impair our ability to compete and market our insurance
products and services and materially adversely affect our
results of operations and financial condition.
</FONT>

<P align="center"><FONT size="2">116
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation of Employee Benefits
    Products</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State regulation of non-medical group products,
including group term life insurance, group disability and group
dental products, also varies from state to state. As with
individual insurance products, the regulation of these products
generally also includes oversight over premium rates and policy
forms, but often to a lesser degree. The regulatory environment
for group term life insurance is relatively established, with
few significant changes from year to year.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Group PPO dental insurance policies are generally
regulated in the same manner as non-PPO dental policies, except
to the extent that a small number of states have chosen to
restrict the difference in benefits allowable between in-network
and out-of-network services. Also, some states directly regulate
the operation of the PPO network by requiring separate licensing
or registration for the organization that contracts with the
providers of dental care. In those states, PPOs also must comply
with varying levels of regulatory oversight concerning the
content of PPO contracts and provider practice standards. Most
of the states in which prepaid dental plans are written
recognize prepaid dental plans as an activity separate from
traditional insurance, because providers are compensated through
capitation arrangements. In most of these states, prepaid dental
plans are written by a single-purpose, single-state affiliate
that holds a license distinct from the life and health insurance
license required for group dental insurance policies. Entities
providing prepaid plans are variously licensed as health
maintenance organizations (HMOs), prepaid dental plans, limited
service health plans, life and health insurers or risk-bearing
PPOs, where such licenses are required. Each state has different
rules regarding organization, capitalization and reporting for
the separate entities, with additional variations relating to
provider contracting, oversight, plan management and plan
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Providers of group disability and dental
insurance, like providers of group health insurance, are subject
to state privacy laws, claims processing rules and &#147;prompt
pay&#148; requirements in various states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As an extension of past legislative activities in
the medical insurance arena, legislative and regulatory
consideration, at both the federal at state levels, are being
directed toward an effort to mandate what its proponents call
&#147;mental health parity&#148; in the policy provisions of
group disability insurance plans. This would require providers
of group disability insurance to extend the same benefits for
disabilities related to mental illness as are provided for other
disabilities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Group benefit plans and the claims thereunder are
also largely subject to federal regulation under ERISA, a
complex set of laws and regulations subject to interpretation
and enforcement by the Internal Revenue Service and the
Department of Labor. ERISA regulates certain aspects of the
relationships between us and employers who maintain employee
benefit plans subject to ERISA. Some of our administrative
services and other activities may also be subject to regulation
under ERISA.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation of Pre-Funded Funeral Insurance
    Products</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State regulation of the pre-funded funeral
insurance products business varies considerably from state to
state. Our pre-funded funeral insurance products are typically
structured as small whole life insurance policies, usually under
$10,000 face amount, and are regulated as such by the states.
State laws also restrict who may sell a pre-funded funeral. For
example, in certain states a pre-funded funeral may only be
offered through licensed funeral directors. In New York, the
payment of commissions to a funeral director for the sale of
insurance is prohibited.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">State privacy laws, particularly those with
&#147;opt-in&#148; clauses, can also affect the pre-funded
funeral insurance business. These laws make it harder to share
information for marketing purposes, such as generating new sales
leads. Similarly, state &#147;do not call&#148; lists, as well
as the recently created national &#147;do not call&#148; list,
also make it more difficult for our pre-funded funeral insurance
agents to solicit new customers, particularly on a cold call
basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In certain states, insurance companies offering
pre-funded funeral insurance products must offer a
&#147;free-look period&#148; of typically 30&nbsp;days, during
which the purchaser of the product may cancel and receive a full
refund. Furthermore, in certain states, death benefits under
pre-funded funeral insurance products must grow with the
Consumer Price Index.
</FONT>

<P align="center"><FONT size="2">117
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Insurance Holding Company
    Statutes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Although as a holding company, Assurant, Inc. is
not regulated as an insurance company, we own capital stock in
insurance subsidiaries and therefore are subject to state
insurance holding company statutes, as well as certain other
laws, of each of the states of domicile of our insurance
subsidiaries. All holding company statutes, as well as other
laws, require disclosure and, in some instances, prior approval
of material transactions between an insurance company and an
affiliate. The holding company statutes as well as other laws
also require, among other things, prior approval of an
acquisition of control of a domestic insurer, some transactions
between affiliates and the payment of extraordinary dividends or
distributions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Insurance Regulation&nbsp;Concerning
    Dividends</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payment of dividends to us by any of our
insurance subsidiaries in excess of a certain amount (i.e.,
extraordinary dividends) must be approved by the
subsidiary&#146;s domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which our subsidiaries are domiciled is the lesser
of (i)&nbsp;10% of the statutory surplus as of the end of the
prior year or (ii)&nbsp;the prior year&#146;s statutory net
income. In some states, the formula is the greater amount of
clauses&nbsp;(i) and (ii).&nbsp;Some states, however, have an
additional stipulation that dividends may only be paid out of
earned surplus. If insurance regulators determine that payment
of an ordinary dividend or any other payments by our insurance
subsidiaries to us (such as payments under a tax sharing
agreement or payments for employee or other services) would be
adverse to policyholders or creditors, the regulators may block
such payments that would otherwise be permitted without prior
approval. In connection with the acquisition of ABIG in 1999, we
entered into an agreement with the Florida Insurance Department
pursuant to which ABIC and ABLAC have agreed to limit the amount
of ordinary dividends they would pay to us to an amount no
greater than 50% of the amount otherwise permitted under Florida
law. This agreement expires in August 2004. In addition, we
entered into an agreement with the New York Insurance Department
in connection with the merger of Bankers Atlantic Life Assurance
Company, one of our New York-domiciled insurance subsidiaries,
into First Fortis Life Insurance Company in 2001, pursuant to
which First Fortis Life Insurance Company agreed not to pay any
dividends to us until fiscal year 2004. No assurance can be
given that there will not be further regulatory actions
restricting the ability of our insurance subsidiaries to pay
dividends. Based on the dividend restrictions under applicable
laws and regulations, the maximum amount of dividends that our
subsidiaries could pay to us in 2003 without regulatory approval
is approximately $290&nbsp;million, of which approximately
$19&nbsp;million had been paid as of June&nbsp;30, 2003. We
expect that as a result of statutory accounting for our sold
businesses, the maximum amount of dividends our subsidiaries
will be able to pay to us will be significantly lower in 2004.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Statutory Accounting Practices
    (SAP)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">SAP is a basis of accounting developed to assist
insurance regulators in monitoring and regulating the solvency
of insurance companies. It is primarily concerned with measuring
an insurer&#146;s statutory surplus. Accordingly, statutory
accounting focuses on valuing assets and liabilities of insurers
at financial reporting dates in accordance with appropriate
insurance law and regulatory provisions applicable in each
insurer&#146;s domiciliary state.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">GAAP is concerned with a company&#146;s solvency,
but it is also concerned with other financial measurements, such
as income and cash flows. Accordingly, GAAP gives more
consideration to appropriate matching of revenue and expenses
and accounting for management&#146;s stewardship of assets than
does SAP. As a direct result, different assets and liabilities
and different amounts of assets and liabilities will be
reflected in financial statements prepared in accordance with
GAAP as opposed to SAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Statutory accounting practices established by the
NAIC and adopted, for the most part, by the various state
insurance regulators determine, among other things, the amount
of statutory surplus and statutory net income of our insurance
subsidiaries and thus determine, in part, the amount of funds
they have available to pay as dividends to us.
</FONT>

<P align="center"><FONT size="2">118
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Assessments for Guaranty
    Funds</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Virtually all states require insurers licensed to
do business in their state to bear a portion of the loss
suffered by some insureds as a result of the insolvency of other
insurers. Depending upon state law, insurers can be assessed an
amount that is generally equal to between 1% and 3% of premiums
written for the relevant lines of insurance in that state each
year to pay the claims of an insolvent insurer. A portion of
these payments is recoverable through premium rates, premium tax
credits or policy surcharges. Significant increases in
assessments could limit the ability of our insurance
subsidiaries to recover such assessments through tax credits or
other means. In addition, there have been some legislative
efforts to limit or repeal the tax offset provisions, which
efforts, to date, have been generally unsuccessful. These
assessments are expected to increase in the future as a result
of recent insolvencies.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Insurance Regulations Concerning Change of
    Control</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Many state insurance regulatory laws intended
primarily for the protection of policyholders contain provisions
that require advance approval by the state insurance
commissioner of any change in control of an insurance company
that is domiciled, or, in some cases, having such substantial
business that it is deemed to be commercially domiciled, in that
state. Prior to granting such approval, the state insurance
commissioner will consider such factors as the financial
strength of the applicant, the integrity of the applicant&#146;s
board of directors and executive officers, the applicant&#146;s
plans for the future operations of the domestic insurer and any
anti-competitive results that may arise from the consummation of
the acquisition of control. We own, directly or indirectly, all
of the shares of stock of insurance companies domiciled in the
states listed in the &#147;General&#148; section above.
&#147;Control&#148; is generally presumed to exist through the
ownership of 10% (5% in the case of Florida, in which certain of
our insurance subsidiaries are domiciled) or more of the voting
securities of a domestic insurance company or of any company
that controls a domestic insurance company. Any purchaser of
shares of common stock representing 10% (5% in the case of
Florida) or more of the voting power of our capital stock will
be presumed to have acquired control of our domestic insurance
subsidiaries unless, following application by that purchaser in
each insurance subsidiary&#146;s state of domicile, the relevant
insurance commissioner determines otherwise.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to these filings, the laws of many
states contain provisions requiring pre-notification to state
agencies prior to any change in control of a non-domestic
insurance company admitted to transact business in that state.
While these pre-notification statutes do not authorize the state
agency to disapprove the change of control, they do authorize
issuance of cease and desist orders with respect to the
non-domestic insurer if it is determined that some conditions,
such as undue market concentration, would result from the
acquisition.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any future transactions that would constitute a
change in control of any of our insurance subsidiaries would
generally require prior approval by the insurance departments of
the states in which our insurance subsidiaries are domiciled or
commercially domiciled and may require pre-acquisition
notification in those states that have adopted pre-acquisition
notification provisions and in which such insurance subsidiaries
are admitted to transact business. Regulatory approval for a
change of control may also be required in one or more of the
foreign jurisdictions in which we have insurance subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">These requirements may deter, delay or prevent
transactions affecting the control of our common stock,
including transactions that could be advantageous to our
stockholders.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Insurance Regulatory Information
    System</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The NAIC Insurance Regulatory Information System
(IRIS)&nbsp;was developed to help state regulators identify
companies that may require special attention. The IRIS system
consists of a statistical phase and an analytical phase whereby
financial examiners review annual statements and financial
ratios. The statistical phase consists of 12&nbsp;key financial
ratios based on year-end data that are generated from the NAIC
database annually; each ratio has an established &#147;usual
range&#148; of results. These ratios assist state insurance
departments in executing their statutory mandate to oversee the
financial condition of insurance companies.
</FONT>

<P align="center"><FONT size="2">119
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A ratio result falling outside the usual range of
IRIS ratios is not considered a failing result; rather, unusual
values are viewed as part of the regulatory early monitoring
system. Furthermore, in some years, it may not be unusual for
financially sound companies to have several ratios with results
outside the usual ranges. Generally, an insurance company will
become subject to regulatory scrutiny if it falls outside the
usual ranges of four or more of the ratios. In the past,
variances in certain ratios of our insurance subsidiaries have
resulted in inquiries from insurance departments, to which we
have responded. These inquiries have not led to any restrictions
affecting our operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Risk-Based Capital
    (RBC)&nbsp;Requirements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to enhance the regulation of insurer
solvency, the NAIC has adopted formulas and model laws to
implement <B>RBC requirements </B>for life and health insurers,
for property and casualty insurers, and, most recently, for
health organizations. These formulas and model laws are designed
to determine minimum capital requirements and to raise the level
of protection that statutory surplus provides for policyholder
obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under laws adopted by individual states, insurers
having less total adjusted capital (generally, as defined by the
NAIC), than that required by the relevant RBC formula will be
subject to varying degrees of regulatory action, depending on
the level of capital inadequacy. The RBC laws provide for four
levels of regulatory action. The extent of regulatory
intervention and action increases as the ratio of total adjusted
capital to RBC falls. The first level, the company action level,
requires an insurer to submit a plan of corrective actions to
the regulator if total adjusted capital falls below 200% of the
RBC amount (or below 250%, when the insurer has a &#147;negative
trend&#148; as defined under the RBC laws). The second level,
the regulatory action level, requires an insurer to submit a
plan containing corrective actions and requires the relevant
insurance commissioner to perform an examination or other
analysis and issue a corrective order if total adjusted capital
falls below 150% of the RBC amount. The third level, the
authorized control level, authorizes the relevant insurance
commissioner to take whatever regulatory actions considered
necessary to protect the best interests of the policyholders and
creditors of the insurer, which may include the actions
necessary to cause the insurer to be placed under regulatory
control, i.e., rehabilitation or liquidation, if total adjusted
capital falls below 100% of the RBC amount. The fourth action
level is the mandatory control level, which requires the
relevant insurance commissioner to place the insurer under
regulatory control if total adjusted capital falls below 70% of
the RBC amount.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The formulas have not been designed to
differentiate among adequately capitalized companies that
operate with higher levels of capital. Therefore, it is
inappropriate and ineffective to use the formulas to rate or to
rank these companies. At December&nbsp;31, 2002, all of our
insurance subsidiaries had total adjusted capital in excess of
amounts requiring company or regulatory action at any prescribed
RBC action level.
</FONT>

<P align="left">
<B><I><FONT size="2">Federal Regulation</FONT></I></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">General</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In 1945, the U.S.&nbsp;Congress enacted the
McCarran-Ferguson Act which declared the regulation of insurance
to be primarily the responsibility of the individual states.
Although repeal of McCarran-Ferguson is debated in the
U.S.&nbsp;Congress from time to time, the federal government
generally does not directly regulate the insurance business.
However, federal legislation and administrative policies in
several areas, including healthcare, pension regulation, age and
sex discrimination, financial services regulation, securities
regulation, privacy laws, terrorism and federal taxation, do
affect the insurance business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Federal Securities Regulation of Fortis
    Variable Insurance Product Business</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Two of our subsidiaries, Fortis Benefits
Insurance Company and First Fortis Life Insurance Company, are
subject to various federal securities regulations because they
have been involved in the issuance of variable insurance
products that are required to be registered as securities under
the Securities Act. These registered insurance contracts, which
are no longer being sold, have been 100% reinsured with The
Hartford through modified coinsurance agreements. The Hartford
now administers this closed block of business pursuant to a
third-party administration agreement. Nevertheless, because
these two subsidiaries are still considered the
</FONT>

<P align="center"><FONT size="2">120
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">issuers of the products, they are subject to
regulation by the SEC. As a result, they must file periodic
reports under the Securities Exchange Act of 1934, as amended
(Exchange Act) and are periodically examined for compliance with
applicable federal securities laws by the SEC. The SEC is
currently conducting a routine examination of this variable
product business. As of June&nbsp;30, 2003, there had been no
adverse findings reported by the SEC. See also
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations&nbsp;&#151; Acquisitions and
Dispositions of Businesses.&#148;
</FONT>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Health Insurance Portability and
    Accountability Act of 1996 (HIPAA)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As with other lines of insurance, the regulation
of health insurance historically has been within the domain of
the states. However, HIPAA and the implementing regulations
promulgated thereunder by the Department of Health and Human
Services impose new obligations for issuers of health and dental
insurance coverage and health and dental benefit plan sponsors.
HIPAA requires certain guaranteed issuance and renewability of
health insurance coverage for individuals and small employer
groups (generally 50 or fewer employees) and limits exclusions
based on pre-existing conditions. Most of the insurance reform
provisions of HIPAA became effective for plan years beginning on
or after July&nbsp;1, 1997.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HIPAA also establishes new requirements for
maintaining the confidentiality and security of individually
identifiable health information and new standards for electronic
health care transactions. The Department of Health and Human
Services promulgated final HIPAA regulations in 2002. The
privacy regulations required compliance by April 2003, the
electronic transactions regulations by October 2003 and the
security regulations by April 2005. As have other entities in
the health care industry, we have incurred substantial costs in
meeting the requirements of these HIPAA regulations and expect
to continue to incur costs to achieve and to maintain
compliance. We have been working diligently to comply with these
regulations in the time periods required. However, there can be
no assurances that we will achieve such compliance with all of
the required transactions or that other entities with which we
interact will take appropriate action to meet the compliance
deadlines. Moreover, as a consequence of these new standards for
electronic transactions, we may see an increase in the number of
health care transactions that are submitted to us in paper
format, which could increase our costs to process medical claims.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">HIPAA is far-reaching and complex and proper
interpretation and practice under the law continue to evolve.
Consequently, our efforts to measure, monitor and adjust our
business practices to comply with HIPAA are ongoing. Failure to
comply could result in regulatory fines and civil lawsuits.
Knowing and intentional violations of these rules may also
result in federal criminal penalties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">The Terrorism Risk Insurance
    Act</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;26, 2002, the Terrorism Risk
Insurance Act was enacted to ensure the availability of
insurance coverage for terrorist acts in the United States. This
law requires insurers writing certain lines of property and
<B>casualty insurance</B> to offer coverage against certain acts
of terrorism causing damage within the United States or to
U.S.&nbsp;flagged vessels or aircraft. In return, the law
requires the federal government to indemnify such insurers for
90% of insured losses resulting from covered acts of terrorism,
subject to a premium-based deductible. Any existing policy
exclusions for such coverage were immediately nullified by the
law, although such exclusions may be reinstated if either the
insured consents to reinstatement or fails to pay any applicable
increase in premium resulting from the additional coverage
within 30&nbsp;days of being notified of such an increase. It
should be noted that an &#147;act of terrorism&#148; as defined
by the law excludes purely domestic terrorism. For an act of
terrorism to have occurred, the U.S.&nbsp;Secretary of the
Treasury must make several findings, including that the act was
committed on behalf of a foreign person or foreign interest. The
law expires automatically at the end of 2005.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Terrorism Risk Insurance Act required the
U.S.&nbsp;Secretary of the Treasury to conduct an expedited
study as to whether or not group life insurance should be
covered under the law. Based on the study, the Secretary
concluded that inclusion of group life insurance was not
appropriate.
</FONT>

<P align="center"><FONT size="2">121
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have a geographically diverse block of group
life business and have secured limited reinsurance protection
against catastrophic losses in our group life product line.
Nevertheless, we are exposed to the risk of substantial group
life losses from a catastrophe, including a terrorist act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Given that our property and casualty insurance
products primarily cover personal residences and personal
property, we do not believe our property and casualty exposure
to terrorist acts to be significant.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">USA&nbsp;PATRIOT Act</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;26, 2001, the International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001
was enacted into law as part of the USA PATRIOT Act. Among its
many provisions the law requires that financial institutions
adopt anti-money laundering programs that include policies,
procedures and controls to detect and prevent money laundering,
designate a compliance officer to oversee the program and
provide for employee training, and periodic audits in accordance
with regulations proposed by the U.S.&nbsp;Treasury Department.
Proposed Treasury regulations governing portions of our life
insurance business would require us to develop and implement
procedures designed to detect and prevent money laundering and
terrorist financing. We remain subject to U.S.&nbsp;regulations
that prohibit business dealings with entities identified as
threats to national security. We have licensed software to
enable us to detect and prevent such activities in compliance
with existing regulations and we are developing policies and
procedures designed to comply with the proposed regulations
should they come into effect.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are significant criminal and civil
penalties that can be imposed for violation of Treasury
regulations. We believe that the steps we are taking to comply
with the current regulations and to prepare for compliance with
the proposed regulations should be sufficient to minimize the
risks of such penalties.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Gramm-Leach-Bliley Act</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On November&nbsp;12, 1999, the Gramm-Leach-Bliley
Act of 1999 became law, implementing fundamental changes in the
regulation of the financial services industry in the United
States. The act permits the transformation of the already
converging banking, insurance and securities industries by
permitting mergers that combine commercial banks, insurers and
securities firms under one holding company. Under the Act,
national banks retain their existing ability to sell insurance
products in some circumstances. In addition, bank holding
companies that qualify and elect to be treated as
&#147;financial holding companies&#148; may engage in
activities, and acquire companies engaged in activities, that
are &#147;financial&#148; in nature or &#147;incidental&#148; or
&#147;complementary&#148; to such financial activities,
including acting as principal, agent or broker in selling life,
property and casualty and other forms of insurance, including
annuities. A financial holding company can own any kind of
insurance company or insurance broker or agent, but its bank
subsidiary cannot own the insurance company. Under state law,
the financial holding company would need to apply to the
insurance commissioner in the insurer&#146;s state of domicile
for prior approval of the acquisition of the insurer, and the
act provides that the commissioner, in considering the
application, may not discriminate against the financial holding
company because it is affiliated with a bank. Under the Act, no
state may prevent or interfere with affiliations between banks
and insurers, insurance agents or brokers, or the licensing of a
bank or affiliate as an insurer or agent or broker. Privacy
provisions of the Act became fully effective in 2001. These
provisions established consumer protections regarding the
security and confidentiality of nonpublic personal information
and require us to make full disclosure of our privacy policies
to our customers.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Regulation by the Federal Reserve
    Board</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis Bank, which is a subsidiary of Fortis,
obtained approval in 2002 from state banking authorities and the
Federal Reserve Board to establish branch offices in Connecticut
and New York. By virtue of the opening of these offices, the
U.S.&nbsp;operations of Fortis, including our operations, became
subject to the nonbanking prohibitions of Section&nbsp;4 of the
BHCA. In order to continue to operate its U.S.&nbsp;nonbanking
operations, including the insurance activities conducted by our
subsidiaries, Fortis notified the Federal Reserve Board of its
election to be a financial holding company for purposes of the
BHCA and the Federal Reserve Board&#146;s implementing
regulations in Regulation&nbsp;Y. Pursuant to Fortis&#146;
status as a financial holding company, Fortis
</FONT>

<P align="center"><FONT size="2">122
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">and its subsidiaries, including our subsidiaries,
are permitted to engage in nonbanking activities in the United
States that are &#147;financial in nature&#148; or
&#147;incidental to a financial activity&#148; as defined in
Section&nbsp;4(k) of the BHCA and in Regulation&nbsp;Y. In
particular, Fortis&#146; status as a financial holding company
permits Fortis to engage in the United States in both banking
activities through the U.S.&nbsp;branches of Fortis Bank and
insurance activities through our subsidiaries. Activities that
are &#147;financial in nature&#148; include, among other things,
insuring, guaranteeing or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and issuing
annuities, and acting as principal, agent or broker for purposes
of the foregoing.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis will continue to qualify as a financial
holding company so long as Fortis Bank remains &#147;well
capitalized&#148; and &#147;well managed&#148; as those terms
are defined in Regulation&nbsp;Y. Generally, Fortis Bank will be
considered &#147;well capitalized&#148; if it maintains
tier&nbsp;1 and total risk-based capital ratios of at least 6%
and 10%, respectively, and will be considered &#147;well
managed&#148; if it has received at least a satisfactory
composite rating of its U.S. branch operations at its most
recent examination. As a general matter, as long as Fortis owns
more than 5% of any class of our voting shares, the BHCA does
not permit us to engage in nonfinancial activities such as
manufacturing, distribution of goods and real estate
development. If the Federal Reserve Board were to determine that
any of our existing activities were not insurance activities or
not otherwise financial in nature or not incidental to such
activities, or if Fortis lost and was unable to regain its
financial holding company status, we could be required to
restructure our operations or divest some of these operations,
which could result in increased costs and reduced profitability.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Federal Reserve Board oversees all of
Fortis&#146; direct and indirect U.S. subsidiaries for
compliance with the BHCA, including our Company. The requirement
that we comply with the nonbanking activities restrictions of
the BHCA and Regulation Y would cease if Fortis owned less than
5% of any class of our voting shares and did not otherwise
control us within the meaning of the BHCA, or if another BHCA
exemption, such as the merchant banking exemption, became
available.
</FONT>

<P align="left">
<B><I><FONT size="2">Legislative Developments</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Legislation has been introduced in the
U.S.&nbsp;Congress that would allow state-chartered and
regulated insurance companies, such as our insurance
subsidiaries, to choose instead to be regulated exclusively by a
federal insurance regulator. We do not believe that such
legislation will be enacted during the current Congressional
term.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Numerous proposals to reform the current health
care system have been introduced in the U.S.&nbsp;Congress and
in various state legislatures. Proposals have included, among
other things, modifications to the existing employer-based
insurance system, a quasi-regulated system of &#147;managed
competition&#148; among health insurers, and a single-payer,
public program. Changes in health care policy could
significantly affect our business. For example, federally
mandated, comprehensive major medical insurance, if proposed and
implemented, could partially or fully replace some of our
current products. Furthermore, legislation has been introduced
from time to time in the U.S.&nbsp;Congress that could result in
the federal government assuming a more direct role in regulating
insurance companies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the U.S.&nbsp;Congress is
considering the expansion of risk retention groups, which were
originally established in 1986 to address the lack of available
product liability insurance. Risk retention groups may be
chartered in a state with favorable regulations and then proceed
to do business in any state, even though insurance companies
competing in the other states may be subject to more stringent
regulations. This is a continuing risk to the extended service
contract business at Assurant Solutions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There is also legislation pending in the
U.S.&nbsp;Congress and in various states designed to provide
additional privacy protections to consumer customers of
financial institutions. These statutes, including the Fair
Credit Reporting Act, and similar legislation and regulations in
the United States or other jurisdictions could affect our
ability to market our products or otherwise limit the nature or
scope of our insurance operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The NAIC and individual states have been studying
small face amount life insurance for the past two years. Some
initiatives that have been raised at the NAIC include further
disclosure for small face amount policies and restrictions on
premium to benefit ratios. The NAIC is also studying other
issues such as
</FONT>

<P align="center"><FONT size="2">123
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">&#147;suitability&#148; of insurance products for
certain customers. This may have an effect on our pre-funded
funeral insurance business. Suitability requirements such as a
customer assets and needs worksheet could extend and complicate
the sale of pre-funded funeral insurance products.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Medical Savings Accounts were created by
U.S.&nbsp;Congress as a trial program in 1996. MSAs allow
self-employed individuals, as well as employees of small
employers (i.e., employers with 50 or fewer employees), to set
aside funds on a tax-free basis for the purpose of paying
eligible medical expenses, so long as such persons are covered
under a high-deductible health insurance policy. MSA health
insurance policies have become an important and growing product
line for Assurant Health. The trial program is scheduled to
expire at the end of 2003. If the program is not extended, the
present MSA policies issued by Assurant Health would continue in
force, but Assurant Health would not be able to issue new plans.
U.S.&nbsp;Congress is considering various proposals to extend
the MSA program. Under one such proposal, MSAs would become
Health Savings Accounts and would be available to greater
numbers of individuals, including those employed by large
employers.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are unable to evaluate new legislation that
may be proposed and when or whether any such legislation will be
enacted and implemented. However, many of the proposals, if
adopted, could have a material adverse effect on our financial
condition, cash flows or results of operations, while others, if
adopted, could potentially benefit our business.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Jurisdictions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A portion of our business is carried on in
foreign countries. We have insurance subsidiaries domiciled in
Argentina, Brazil, the Dominican Republic, the Turks and Caicos
Islands and the United Kingdom. Certain subsidiaries operate in
Canada under the branch system. The degree of regulation and
supervision in foreign jurisdictions varies from minimal in some
to stringent in others. Generally, our insurance subsidiaries
operating in such jurisdictions must satisfy local regulatory
requirements. Licenses issued by foreign authorities to our
insurance subsidiaries are subject to modification or revocation
by such authorities, and these subsidiaries could be prevented
from conducting business in certain of the jurisdictions where
they currently operate. In the past, we have been allowed to
modify our operations to conform with new licensing requirements
in most jurisdictions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to licensing requirements, our
foreign operations are also regulated in various jurisdictions
with respect to currency, policy language and terms, amount and
type of security deposits, amount and type of reserves, amount
and type of local investment and the share of profits to be
returned to policyholders on participating policies. Some
foreign countries regulate rates on various types of policies.
Certain countries have established reinsurance institutions,
wholly or partially owned by the state, to which admitted
insurers are obligated to cede a portion of their business on
terms which do not always allow foreign insurers full
compensation. In some countries, regulations governing
constitution of technical reserves and remittance balances may
hinder remittance of profits and repatriation of assets.
</FONT>

<P align="center"><FONT size="2">124
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "MANAGEMENT" -->

<P align="center">
<B><FONT size="2">MANAGEMENT</FONT></B>

<P align="left">
<B><FONT size="2">Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below sets forth the names, ages and
positions of our directors:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Positions</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Michael Palms
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Chairman of the Board
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anton van Rossum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director and Immediate Past Chairman of the Board
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director, President and Chief Executive Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michel Baise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert J. Blendon
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beth L. Bronner
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Howard L. Carver
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arie A. Fakkert
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allen R. Freedman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">63</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Carroll Mackin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">62</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gilbert Mittler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Georges Valckenaere
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Denotes Class&nbsp;I Director with term to expire
    in 2005.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Denotes Class&nbsp;II Director with term to
    expire in 2006.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Denotes Class&nbsp;III Director with term to
    expire in 2007.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">While our board of directors is not currently
classified, pursuant to our by-laws, our board of directors will
be classified effective upon the consummation of the offering.
These classifications will be denoted above.
</FONT>

<P align="left">
<B><FONT size="2">John Michael Palms, Ph.D., D.Sc., Chairman of
the Board.</FONT></B><FONT size="2"> Dr.&nbsp;Palms has been a
member of our board of directors since March 1990 and became
Chairman in October 2003 as a result of Mr.&nbsp;van
Rossum&#146;s decision to resign the position and allow it to be
filled by an outside director in line with emerging best
practices for public companies in the United States.
Dr.&nbsp;Palms is a Distinguished University Professor at the
University of South Carolina and was the President of the
University of South Carolina from 1991 until his retirement in
2002. Earlier in his career, Dr.&nbsp;Palms served as President
of Georgia State University and as a professor and administrator
at Emory University. Dr.&nbsp;Palms currently serves on the
boards of the Computer Task Group and Simcom International and
is the Chair of the Exelon Corporation&#146;s audit committee.
He is also Chairman of the Board of the Institute for Defense
Analyses. In the past, Dr.&nbsp;Palms has been a member of
various additional company committees and boards including the
University of South Carolina&#146;s Educational and Development
Foundation Boards, NationsBank of the Carolinas&#146; audit
committee, the audit committee of the Board of Directors of
Carolina First Bank, the Mynd Corporation&#146;s compensation
committee and Chair of PECO Energy&#146;s nuclear committee.
</FONT>

<P align="left">
<B><FONT size="2">Anton van Rossum, Director and Immediate Past
Chairman of the Board.</FONT></B><FONT size="2"> Mr.&nbsp;van
Rossum is the Chief Executive Officer of Fortis, has been a
member of our board of directors since September 2000 and was
Chairman of our board of directors from September 2000 until
October 2003. Mr.&nbsp;van Rossum stepped down as Chairman in
order to allow Dr.&nbsp;Palms to fill the Chairman&#146;s
position, in line with emerging best practices for public
companies in the United States. Prior to joining Fortis,
Mr.&nbsp;van Rossum spent 28&nbsp;years with McKinsey &#38;
Company in a variety of roles, including Principal and Director,
in The Netherlands, Scandinavia and Belgium. In addition to
serving as Chief Executive Officer of Fortis since 2000, he is a
member of the board of directors of Fortis SA/NV, Fortis N.V.,
Fortis Brussels, Fortis Utrecht and Caifor, a Fortis joint
venture based in Spain. He is also Chairman of the boards of
directors of Fortis Insurance N.V., Fortis Bank, Fortis AG, and
of Fortis ASR N.V.&#146;s &#147;Raad van Commissarissen&#148;
(Supervisory Board).
</FONT>

<P align="left">
<B><FONT size="2">J. Kerry Clayton, President, Chief Executive
Officer and Director.</FONT></B><FONT size="2"> Mr.&nbsp;Clayton
has been President and Chief Executive Officer of the Company
since May 2000 and has been a member of our board of directors
</FONT>

<P align="center"><FONT size="2">125
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">since March 1999. From 1993 to 1999,
Mr&nbsp;Clayton served as Executive Vice President of the
Company with a variety of responsibilities. From 1985 to 1993,
Mr.&nbsp;Clayton served as President of Fortis Benefits
Insurance Company, which acquired and combined the operations of
Western Life Insurance Company, St.&nbsp;Paul Life Insurance
Company and the Group Division of Mutual Benefit Life. He also
served as Senior Vice President, Finance of the Company from
1981 to 1985. From 1970 to 1980, Mr.&nbsp;Clayton held various
positions with American Security Group (now Assurant Solutions),
which was acquired by the Company in 1980.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Michel Baise, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Baise has been a member of
our board of directors since October 2003. Mr.&nbsp;Baise is
currently General Manager, Finance of Fortis and has held this
position since 1994. From 1989 to 1994, Mr.&nbsp;Baise worked
for Soci&#233;t&#233; G&#233;n&#233;rale de Belgique, as Advisor
in the Industrial Subsidiaries and Strategy Division. Between
1982 and 1989, Mr.&nbsp;Baise served in various management
positions and as a member of the Executive Committee of the
Belgian Bank in Hong Kong and Belgium. This was preceded by
assignments at the European Asian Bank as Credit Manager in
Hamburg, Germany from 1981 to mid-1982, and Operations Manager
in Singapore from 1977 to 1980. Mr.&nbsp;Baise began his career
in 1972 as a management trainee at Generale Bank, later named
Fortis Bank, and held various positions there including Deputy
Manager of the Bills Department until 1977. Mr.&nbsp;Baise is
Director and Chairman of Fortis Finance, a subsidiary of Fortis
Insurance N.V. He is also Director and Chairman of various
financing vehicles in Luxemburg: Fortfinlux SA, FGF Lux SA,
Fortinvestlux SA and in Jersey: Fortis Capital Company, Ltd. He
was recently appointed to be a member of the Supervisory Board
of a mortgage bank to be set up in The Netherlands as a
subsidiary of Fortis Bank Nederland before the end of 2003.
</FONT>

<P align="left">
<B><FONT size="2">Dr.&nbsp;Robert J. Blendon, Sc.D.,
Director.</FONT></B><FONT size="2"> Dr.&nbsp;Blendon has been a
member of our board of directors since March 1993.
Dr.&nbsp;Blendon has been a professor of Health Policy at
Harvard University&#146;s School of Public Health and a
professor of Political Analysis at Harvard University&#146;s
Kennedy School of Government since 1987. Previously, he served
as Vice President of The Robert Wood Johnson Foundation.
</FONT>

<P align="left">
<B><FONT size="2">Beth L. Bronner, Director.
</FONT></B><FONT size="2">Ms.&nbsp;Bronner has been a member of
our board of directors since January 1994. Ms.&nbsp;Bronner is
currently Senior Vice President and Chief Marketing Officer of
Jim Beam Brands, a division of Fortune Brands. Prior to joining
Jim Beam in 2003, Ms.&nbsp;Bronner was a Partner at LERA
Consulting in Chicago, Illinois. Prior to joining LERA
Consulting in 2002, Ms.&nbsp;Bronner was the President and Chief
Operating Officer of ADVO, Inc., the nation&#146;s largest
full-service targeted direct mail marketing company. Before
joining ADVO, Inc. in 2000, Ms.&nbsp;Bronner was President of
the Health Division at Sunbeam Corporation. She was also a
Senior Vice President and Director of Marketing of North
American Consumer Banking at Citibank, N.A. and Vice-President
of Emerging Markets for AT&#38;T Company. Since 1993, she has
been a member of the board of directors of The Hain-Celestial
Group Inc., and has chaired its compensation committee. She also
served as a member of Oak Industries, Inc.&#146;s audit
committee from 1996 until its 2000 merger with Corning
Incorporated. Ms.&nbsp;Bronner also serves on the boards of
several charitable organizations; she is currently serving as a
board member of the Cradle Foundation and is on the board of
trustees of the Goodman Theater in Chicago, Illinois. She is a
former trustee of the New School in New York City.
</FONT>

<P align="left">
<B><FONT size="2">Howard L. Carver, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Carver has been a member of
our board of directors since June 2002. Mr.&nbsp;Carver is
retired as an Office Managing Partner of Ernst&nbsp;&#38; Young.
Mr.&nbsp;Carver&#146;s career at Ernst&nbsp;&#38; Young spanned
five decades, beginning as an auditor and a financial
consultant. He later became the director of insurance operations
in several Ernst&nbsp;&#38; Young offices, and served as
Regional Director of insurance operations, Associate National
Director of insurance operations, Co-Chairman of
Ernst&nbsp;&#38; Young&#146;s International insurance committee
and was a member of the Ernst &#38; Young National Insurance
Steering Committee. He retired from Ernst&nbsp;&#38; Young in
June of 2002. He currently chairs the audit committees of the
Company and the Phoenix National Trust Company, a wholly owned
subsidiary of the Phoenix Group. Mr.&nbsp;Carver is a Certified
Public Accountant and is a member of both the American Institute
of Certified Public Accountants, and the Connecticut Society of
CPAs. Mr.&nbsp;Carver also serves on the boards and/or finance
committees of several civic/charitable organizations.
</FONT>

<P align="left">
<B><FONT size="2">Arie A. Fakkert, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Fakkert has been a member of
our board of directors since January 1987. From 1986 until his
retirement in October 2003, Mr.&nbsp;Fakkert was General Manager
of Fortis Insurance International N.V. and acted as General
Liaison between the Company in the United States and Fortis in
</FONT>

<P align="center"><FONT size="2">126
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Europe. Prior to assuming that position, he
served as the General Manager at AMEV Praktijkvoorziening N.V.
He began his career at Royal Dutch Shell Group, serving in both
the United States and the United Kingdom.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Allen R. Freedman, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Freedman has been a member of
our board of directors since its inception in 1979.
Mr.&nbsp;Freedman is currently the owner and principal of
A.R.&nbsp;Freedman&nbsp;&#38; Co., a corporate strategy
development firm and is the former Chairman and Chief Executive
Officer of the Company, where he served as Chief Executive
Officer until May 2000 and Chairman until his retirement in July
2000. In 1979, Mr.&nbsp;Freedman became the Company&#146;s
president and first employee, initiating the Company&#146;s
initial strategy and orchestrating its growth over the next
21&nbsp;years. He began his career in 1964 as a tax lawyer, and
a year later, he joined the Internal Revenue Service&#146;s
Office of the Chief Counsel. Mr.&nbsp;Freedman served as Vice
President of D.H.&nbsp;Magid&nbsp;&#38; Co. from 1967 to 1970.
From there, he served as Vice President of Irving Trust Company
(now Bank of New York). In 1975, Mr.&nbsp;Freedman became
Executive Vice President and Treasurer of Lewis R.
Eisner&nbsp;&#38; Co., where he managed the creation of what is
now Assurant in the United States, along with several other
investments made by predecessors of Assurant. Beginning in 1978,
he initiated and supervised most aspects of Assurant&#146;s
U.S.&nbsp;operations. Since his retirement as Chairman and Chief
Executive Officer of the Company, he has served as a Director of
Cornerstone Family Services, Chairman of its audit committee and
a member of its investment committee. Since 1984,
Mr.&nbsp;Freedman has also served as Chairman of the audit
committee of Systems&nbsp;&#38; Computer Technologies
Corporation (SCTC). In January 2002, he became the Chairman of
the Board of SCTC. Most recently, he has become a member of the
board of directors of the newly formed Association of Audit
Committee Members, Inc.
</FONT>

<P align="left">
<B><FONT size="2">H.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Carroll
Mackin, Director.</FONT></B><FONT size="2"> Mr.&nbsp;Mackin is
the former Executive Vice President and Treasurer of the
Company, where he served from 1980 until his retirement in 1997.
Mr.&nbsp;Mackin has been a member of our board of directors
since October 1996. Mr.&nbsp;Mackin served as a consultant to
the Company in 1979. He was the Company&#146;s fourth employee
and initiated many of the Company&#146;s early activities,
including consolidating its investment departments and its first
treasury function. Before joining the Company, he was Director
for Investments at Forstmann, Leff. He is currently principal
owner of Great Northern Manufacturing, LLC, a Louisville,
Kentucky-based manufacturer of specialty nails.
</FONT>

<P align="left">
<B><FONT size="2">Gilbert Mittler, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Mittler is the Chief
Financial Officer of Fortis, and has been a member of our board
of directors since March 2003. Mr.&nbsp;Mittler joined AG Group,
one of the founding companies of Fortis, in 1988 and became at
the inception of Fortis in 1990 Director of Fortis Group
Finance&nbsp;&#38; Development and Secretary of the Executive
and Supervisory Boards of Fortis. He began his career as an
accountant at Arthur Andersen in 1974, and subsequently worked
for Belgian holding company Sofina as Senior Officer from 1976
to 1988. In 1988, he was recruited to serve as Head of Corporate
Development of the AG Group (now Fortis AG), and in 1993 became
Managing Director of ASLK Bank (now Fortis Bank) and a member of
its Executive Committee, responsible for Finance&nbsp;&#38;
Control and foreign operations. In 1998, he became a member of
the executive committee of Fortis, and a year later, he was
named Managing Director of Fortis (B) and Fortis (NL),
maintaining various responsibilities at group level. Since
September 2000, he has served as Chief Financial Officer of
Fortis and since 2001 also as Managing Director and Chief
Financial Officer of Fortis Bank. Mr.&nbsp;Mittler is a member
of the board of directors of Caifor, Fortis AG, Fortis Bank and
Fortis Insurance N.V. He is also Vice-Chairman of the board of
directors of the Banque G&#233;n&#233;rale du Luxembourg and a
member of Fortis ASR N.V.&#146;s &#147;Raad van
Commissarissen&#148; (Supervisory Board).
</FONT>

<P align="left">
<B><FONT size="2">Georges A. Valckenaere, Director.
</FONT></B><FONT size="2">Mr.&nbsp;Valckenaere is the retired
Advisor to the Chief Executive Officer of Fortis and has been a
member of our board of directors since March 1995. Before
retiring from Fortis in January 2002, Mr.&nbsp;Valckenaere was
Chief Executive Officer of Fortis International N.V. Prior to
joining Fortis International N.V., Mr.&nbsp;Valckenaere was
Director and General Manager of Fortis AG. In addition to
serving on the Company&#146;s and Fortis International
N.V.&#146;s board of directors, Mr.&nbsp;Valckenaere also served
on the boards of Fortis Bank, Fortis Assurances, Fortis
Australia, Fortis Luxembourg Assurances, Fortis Insurance in the
United Kingdom, Keppel Insurance and Caifor.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the shareholders&#146; agreement that
we will enter into with Fortis Insurance N.V., Fortis will have
the right to nominate designees to our board of directors and
subject to limited exceptions, our board of
</FONT>

<P align="center"><FONT size="2">127
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">directors will nominate those designees as
follows: (i)&nbsp;so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii)&nbsp;so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Fortis has designated Messrs. van
Rossum, Baise, Fakkert, Mittler and Valckenaere as its
designees. Messrs.&nbsp;Fakkert, Valckenaere and van Rossum have
each expressed their intention to resign from our board of
directors when Fortis&#146; ownership interest in the Company
decreases to below 50%.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Composition of Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our by-laws provide that our board of directors
shall consist of such number as from time to time fixed
exclusively by resolution of the board of directors. The current
board of directors consists of 12&nbsp;persons and will be
divided into three classes. In addition, each director will
serve a three year term, with termination staggered according to
class. The classification and current term of office of each of
our directors will be noted in the table listing our board of
directors under &#147;&#151;Directors.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Committees of the Board of Directors</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Executive Committee.
</FONT></I><FONT size="2">The Executive Committee is composed of
Messrs. Clayton, Fakkert, Freedman and Palms and is chaired by
Mr.&nbsp;Clayton. This committee acts for the board of directors
when a meeting of the full board is not practical.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Compensation Committee.
</FONT></I><FONT size="2">The Compensation Committee is composed
of Ms.&nbsp;Bronner and Messrs.&nbsp;Freedman, Mittler and van
Rossum and is chaired by Mr.&nbsp;Freedman. This committee
approves, administers and interprets our compensation and
benefit policies, including our executive incentive programs. It
reviews and makes recommendations to our board of directors to
ensure that our compensation and benefit policies are consistent
with our compensation philosophy and corporate governance
guidelines. This committee is also responsible for establishing
our CEO&#146;s compensation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Audit Committee.</FONT></I><FONT size="2"> The
Audit Committee is composed of Messrs.&nbsp;Palms, Carver and
Mackin and is chaired by Mr.&nbsp;Carver. This committee has
general responsibility for the oversight and surveillance of our
accounting, reporting and financial control practices. Among
other functions, the committee retains our independent public
accountants. Each member of the Audit Committee is a
non-management director. Mr.&nbsp;Carver is a &#147;financial
expert&#148; within the definition of that term under the
regulations under the Securities Act.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Nominating and Corporate Governance
Committee.</FONT></I><FONT size="2"> The Nominating and
Corporate Governance Committee is composed of
Messrs.&nbsp;Blendon, Mittler, Palms and van Rossum and is
chaired by Dr.&nbsp;Palms. This committee oversees our
governance policies, nominates directors for election by
stockholders, nominates committee chairpersons and, in
consultation with the committee chairpersons, nominates
directors for membership on the committees of the board.
</FONT>

<P align="left">
<B><FONT size="2">Compensation Committee Interlocks and Insider
Participation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Compensation Committee is composed of
Ms.&nbsp;Bronner and Messrs.&nbsp;Freedman, Mittler and van
Rossum. There are no &#147;interlocks,&#148; as defined by the
SEC, with respect to any member of the Compensation Committee.
</FONT>

<P align="left">
<B><FONT size="2">Director Compensation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors adopted and our sole
stockholder approved the Assurant Directors Compensation Plan on
October&nbsp;15, 2003, to be effective as of the closing of the
offering contemplated by this prospectus. The purpose of the
plan is to attract, retain and compensate highly qualified
individuals for service as members of the board of directors by
providing them with competitive compensation and an ownership
interest in our common stock. Directors who are employees of the
Company or any of its subsidiaries or affiliates, or of Fortis
or any of its subsidiaries or affiliates, are not eligible to
participate in the plan or to receive payment for service as a
director.
</FONT>

<P align="center"><FONT size="2">128
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The plan provides for payment of an annual
retainer to our non-employee directors of $35,000, payable
quarterly. Additional annual retainers will be paid to the
Chairman of the Board and committee members and chairpersons as
follows: Chairman of the Board: $7,500; Audit Committee: member
$3,750, chairperson $7,500; Compensation Committee: member
$2,500, chairperson $5,000; Corporate Governance and Nominating
Committee: member $2,500, chairperson $5,000; Executive
Committee: none. Annual service for this purpose relates to the
approximate 12-month periods between annual meetings of our
stockholders. A prorated retainer will be paid to any person who
becomes a non-employee director other than by election at an
annual meeting. The plan also provides for the payment of
participation fees of $2,000 for each board or committee meeting
and $500 for each board or committee conference call (but not
more than one fee for meetings or conference calls held on the
same day). The Chairman of the Board or chairperson of a
committee may authorize the full meeting fee to be payable with
respect to any extended conference call or any other special
off-site meeting required as part of a director&#146;s service.
The plan provides for reasonable reimbursement of travel
expenses in connection with attending meetings of our board and
its committees, and other company functions where the
director&#146;s attendance is requested by our chief executive
officer. A participant may elect to have any cash amounts
payable under the Directors Compensation Plan transferred to the
Assurant Investment Plan, described under &#147;&#151;Management
Compensation and Incentive Plans.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition to cash compensation, the plan
provides that each non-employee director will receive, on the
later of the effective date of the plan or the first date he or
she becomes a non-employee director, an initial award of
(1)&nbsp;shares of our common stock having a grant date value
equal to the normal (non-prorated) annual cash retainer amount
for such year, excluding any retainer related to a committee
member or chairperson assignment, and (2)&nbsp;stock
appreciation rights with respect to an equal number of shares of
common stock. On the day following each annual meeting of our
stockholders, beginning in 2005, each non-employee director then
in office (other than a director who first became a non-employee
director at the stockholders meeting held on the previous day)
will receive (1)&nbsp;an award of stock having a grant date
value equal to the director&#146;s annual cash retainer for such
year, excluding any retainer earned by the director as a
committee member or chair, and (2)&nbsp;an award of stock
appreciation rights with respect to an equal number of shares of
common stock. In no event will a director receive both an
initial award and an annual award of shares and stock
appreciation rights for the same year of service. The stock
appreciation rights granted under the plan will have a base
value equal to the fair market value of our common stock on the
date of grant. Upon exercise of a stock appreciation right, a
director will receive a cash payment equal to the excess, if
any, of the fair market value of one share of our common stock
on the date of exercise over the base value of the right. Stock
appreciation rights granted under the plan will be fully vested
on the date of grant, but may not be exercised until the fifth
anniversary of the date of grant. To the extent not previously
exercised, such rights will be automatically exercised on the
earlier of the first anniversary of the grantee&#146;s
termination as a director of the Company for any reason or the
tenth anniversary of the date of grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Subject to adjustment for recapitalization
events, the maximum number of shares of our common stock that
may be issued under the Directors Compensation Plan is 500,000.
The plan will remain in effect until the day following the 2013
annual meeting of our stockholders, unless terminated earlier by
our board of directors. The board of directors may at any time
terminate or amend the plan, but any such amendment would be
subject to stockholder approval if, in the reasonable judgment
of the board, the amendment would constitute a material change
requiring stockholder approval under applicable laws or the
applicable requirements of a stock exchange on which our stock
is listed.
</FONT>

<P align="left">
<B><FONT size="2">Consulting Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective July&nbsp;31, 2000, Mr.&nbsp;Freedman
retired as the Chief Executive Officer of the Company. In
connection with his retirement, Mr.&nbsp;Freedman entered into a
Consulting, Non-Compete and Payments Agreement with us and
Fortis Insurance N.V. pursuant to which he agreed to
(1)&nbsp;perform consulting services for the Company for a
period of three years from and after July&nbsp;31, 2000, and
(2)&nbsp;refrain from certain activities that would be in
competition with the Company, which includes refraining from
encouraging, soliciting or inducing any officer or employee of
the Company or its subsidiaries to enter into an employment
relationship with any entity whose business activities are in
competition with those of the Company for a
</FONT>

<P align="center"><FONT size="2">129
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">period of five years ending July&nbsp;31, 2005.
Pursuant to the terms of this agreement, Mr.&nbsp;Freedman has
received total payments of $2,491,000 and is entitled to one
additional payment of $607,000 on August&nbsp;1, 2004, and
reimbursement of any reasonable out-of-pocket expenses incurred
in providing his consulting services.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Reimbursement of Fortis Liaison
Office</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, 2002, 2001 and 2000, we paid
$427,000, $749,000, $516,000 and $0, respectively, to Fortis for
costs representing salary, benefits and other expenses of
Mr.&nbsp;Fakkert, who was then an employee of one of
Fortis&#146; subsidiaries, and his support staff. We
discontinued these payments as of October&nbsp;3, 2003. See
&#147;Certain Relationships and Related Transactions&nbsp;&#151;
Reimbursement of Fortis Liaison Office.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Executive Officers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below sets forth certain information
concerning our executive officers:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="35%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Age</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Positions</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President, Chief Executive Officer and Director
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President and Chief Financial
    Officer
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">59</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michael J. Peninger
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President; President and Chief
    Executive Officer of Assurant Employee Benefits
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Alan W. Feagin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President; President and Chief
    Executive Officer of Assurant PreNeed
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Donald Hamm
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President; President and Chief
    Executive Officer of Assurant Health
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Vice President; President and Chief
    Executive Officer of Assurant Solutions
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Katherine Greenzang
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">39</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, General Counsel and
    Secretary
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Jeffrey Helman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and General Auditor
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lucinda Landreth
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President and Chief Investment Officer of
    Assurant Asset Management
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Larry M. Cains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Finance
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert Haertel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">48</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Compensation and Benefits
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Edwin L. Harper
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Public Affairs/ Government
    Relations
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Barbara R. Hege
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">60</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President, Finance (Taxation)
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lance R. Wilson
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Senior Vice President and Chief Information
    Officer
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<HR size="1" width="15%" align="left" noshade>

<P align="left">
<B><FONT size="2">J.&nbsp;Kerry Clayton, President, Chief
Executive Officer and Director.</FONT></B><FONT size="2">
Biography available under &#147;&#151;Directors.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Robert B. Pollock, Executive Vice President
and Chief Financial Officer.</FONT></B><FONT size="2">
Mr.&nbsp;Pollock has been our Executive Vice President and Chief
Financial Officer since January 1999. He is also the Chairman of
Assurant Solutions. From 1993 to 1999, he served as President
and Chief Executive Officer of Assurant Employee Benefits.
Mr.&nbsp;Pollock began his career as an actuary at CUNA Mutual
Insurance Group in 1974. He then joined the Company as a staff
actuary at Assurant Employee Benefits in 1981. In July 1992,
Mr.&nbsp;Pollock was appointed Senior Vice President, Group Life
and Disability at Assurant Employee Benefits. In July 1993, he
was appointed President and Chief Executive Officer of Assurant
Employee Benefits. He is a Fellow of the Society of Actuaries
and a member of the American Academy of Actuaries.
Mr.&nbsp;Pollock was the Chairman of the Disability Insurance
Committee for the Health Insurance Association of America (HIAA)
for three years.
</FONT>

<P align="center"><FONT size="2">130
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Lesley Silvester, Executive Vice President.
</FONT></B><FONT size="2">Ms.&nbsp;Silvester has been our
Executive Vice President since January 2001.
Ms.&nbsp;Silvester&#146;s professional career spans more than
two and a half decades, much of which has been in the insurance
industry in human resources management, organization development
and strategy. Ms.&nbsp;Silvester&#146;s experience includes
15&nbsp;years with different parts of the Company in the United
States and with Fortis in Europe, focusing recently on
world-wide senior management development, company learning,
human resources strategy and post-merger integration.
Ms.&nbsp;Silvester is a Graduate Member of the Institute of
Personnel Management in the United Kingdom and holds both her
F.L.M.I. and American Compensation Association Certification.
</FONT>

<P align="left">
<B><FONT size="2">Benjamin M. Cutler, Executive Vice President.
</FONT></B><FONT size="2">Mr.&nbsp;Cutler has been Executive
Vice President of the Company and Chairman, Assurant Health
since January 2003. Mr.&nbsp;Cutler has over 30&nbsp;years of
experience in the insurance industry. Prior to his current
position, Mr.&nbsp;Cutler served as President and Chief
Executive Officer of Assurant Health from 1998 to 2002. Before
joining the Company in 1985, Mr.&nbsp;Cutler held various
positions at Sun Life Group of America and USLIFE Corporation.
Mr.&nbsp;Cutler currently serves as Chairman of the board of
directors of HIAA. Mr.&nbsp;Cutler serves on the board of the
Wellness Councils of America.
</FONT>

<P align="left">
<B><FONT size="2">Michael J. Peninger, Executive Vice President;
President and Chief Executive Officer, Assurant Employee
Benefits. </FONT></B><FONT size="2">Mr.&nbsp;Peninger has been
President and Chief Executive Officer of Assurant Employee
Benefits since January 1999. Mr.&nbsp;Peninger began his career
at Northwestern National Life in 1977 as an actuary. He then
joined Assurant Employee Benefits in 1985 as a corporate actuary
and has held various positions within the Company. In 1991,
Mr.&nbsp;Peninger was appointed Senior Vice President and Chief
Financial Officer and in 1993 he became Senior Vice President of
Finance and Claims of Assurant Employee Benefits. In 1998,
Mr.&nbsp;Peninger was appointed Executive Vice President.
Mr.&nbsp;Peninger is a Fellow of the Society of Actuaries and a
member of the American Academy of Actuaries.
</FONT>

<P align="left">
<B><FONT size="2">Alan W. Feagin, Executive Vice President;
President and Chief Executive Officer, Assurant PreNeed.
</FONT></B><FONT size="2">Mr.&nbsp;Feagin is President and Chief
Executive Officer of Assurant PreNeed and Vice-Chairman and
Chief Executive Officer of AMLIC, positions he has held since
January 1995. Mr.&nbsp;Feagin joined United Family Life
Insurance Company (now part of Assurant PreNeed) in 1989 as
Senior Vice President, Marketing. He also served as Senior Vice
President of Sales of United Family Life before being named
President and Chief Executive Officer in 1995. Mr.&nbsp;Feagin
has more than 20&nbsp;years of experience in the marketing,
advertising and sales arenas, beginning his career in the soft
drink industry. He has served in various senior marketing
positions with the McCann-Erickson advertising agency,
RJ&nbsp;Reynolds Industries and Canada Dry/ Sunkist Corporation
prior to joining the Company.
</FONT>

<P align="left">
<B><FONT size="2">Donald Hamm, Executive Vice President;
President and Chief Executive Officer, Assurant Health.
</FONT></B><FONT size="2">Mr.&nbsp;Hamm has been President and
Chief Executive Officer of Assurant Health since January 2003.
Mr.&nbsp;Hamm first joined Assurant Health in 1982, holding
several executive positions until 1993. He then worked as a
principal with William M. Mercer, a consultant with
Tillinghast-Towers Perrin and as Vice President of the Southeast
Region for Blue Cross/ Blue Shield of Wisconsin prior to
rejoining Assurant Health in 1999 as Chief Financial Officer.
Mr.&nbsp;Hamm is a Fellow in the Society of Actuaries, a member
of the American Academy of Actuaries and a Fellow of the Life
Management Institute.
</FONT>

<P align="left">
<B><FONT size="2">Philip Bruce Camacho, Executive Vice
President; President and Chief Executive Officer, Assurant
Solutions. </FONT></B><FONT size="2">Mr.&nbsp;Camacho has been
President and Chief Executive Officer of Assurant Solutions
since January 2003. Prior to his appointment as President,
Mr.&nbsp;Camacho served as Assurant Group&#146;s Executive Vice
President for Sales and Marketing. Mr.&nbsp;Camacho joined
American Bankers in 1990 as Vice President of Information
Systems. At the time of the Company&#146;s acquisition of
American Bankers, he was Executive Vice President, Investor
Relations, with responsibility for legal and regulatory affairs,
marketing services, licensing, state filings and client
administration, as well as investor relations. A certified
public accountant, before joining American Bankers,
Mr.&nbsp;Camacho worked as an accountant with
PricewaterhouseCoopers LLP, specializing in insurance in the
United States, United Kingdom and the Caribbean.
</FONT>

<P align="left">
<B><FONT size="2">Katherine Greenzang, Senior Vice President,
General Counsel and Secretary.</FONT></B><FONT size="2">
Ms.&nbsp;Greenzang has been our Senior Vice President, General
Counsel and Secretary and has managed the Company&#146;s Legal
Department since June 2001. Ms.&nbsp;Greenzang joined the
Company in August 1994 as Corporate Counsel. She was named
</FONT>

<P align="center"><FONT size="2">131
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Assistant Vice President and Corporate Counsel in
1995 and Vice President, Corporate Counsel in 1996 before
assuming her current position. Prior to joining the Company,
Ms.&nbsp;Greenzang worked as an associate at Dewey Ballantine
LLP. She is a member of the American Bar Association, the New
York State Bar Association and the American Corporate Counsel
Association.
</FONT>
</DIV>

<P align="left">
<B><FONT size="2">Jeffrey Helman, Senior Vice President and
General Auditor. </FONT></B><FONT size="2">Mr.&nbsp;Helman has
been Senior Vice President and General Auditor since January
1997. As head of Audit Services, he is responsible for
fulfilling the internal auditing requirements of the Company and
its individual business segments. Mr.&nbsp;Helman has over two
decades of experience and expertise in finance and auditing.
Prior to joining the Company in 1993 as Vice President, he was a
Partner at Arthur Andersen&nbsp;&#38; Company, where he had
worked since graduating from college in 1975. Mr.&nbsp;Helman is
a Certified Public Accountant and is a member of the Institute
of Internal Auditors and the American Institute of Certified
Public Accountants.
</FONT>

<P align="left">
<B><FONT size="2">Lucinda Landreth, President and Chief
Investment Officer, Assurant Asset Management.
</FONT></B><FONT size="2">Ms.&nbsp;Landreth has been President
and Chief Investment Officer of Assurant Asset Management, a
division of the Company since June 2002. Ms.&nbsp;Landreth is
responsible for managing the Company&#146;s investment portfolio
and for overseeing the development and implementation of the
Company&#146;s investment policy. Ms.&nbsp;Landreth first worked
at the Company from 1997 until 2001 as Executive Vice President
and Chief Investment Officer of Fortis Mutual Funds, and was
responsible for investment performance and process, equity
strategy and compliance, as well as developing investment
professionals. When the sale of Fortis Financial Group was
finalized, Ms.&nbsp;Landreth left the Company. She returned in
July of 2002 as Senior Vice President before assuming her
current title. Prior to joining the Company, Ms.&nbsp;Landreth
was Chief Investment Officer of Alex. Brown Advisory and Trust
Co., a subsidiary of a major investment bank and securities
brokerage in Baltimore. Ms.&nbsp;Landreth started her career as
an equity analyst with Philadelphia&#146;s Provident National
Bank in 1970. After holding a succession of positions with what
later became PNC Financial Services Group, she was named
Managing Director of PNC&#146;s Equity Investment area in 1992.
Ms.&nbsp;Landreth is a Chartered Financial Analyst.
</FONT>

<P align="left">
<B><FONT size="2">Larry M. Cains, Senior Vice President,
Finance. </FONT></B><FONT size="2">Mr.&nbsp;Cains has been our
Senior Vice President, Finance, since January 1995 and is
responsible for managing the departments of the Controller,
Shared Services (Syracuse), corporate insurance and Information
Technology (New York). Prior to assuming his present position,
Mr.&nbsp;Cains served as the Company&#146;s Vice President and
Controller for seven years. Mr.&nbsp;Cains has three decades of
experience in accounting, finance and general management. Prior
to joining the Company in 1988, he was Marsh&nbsp;&#38;
McLennan&#146;s Vice President and Controller for ten years.
Earlier in his career, he was employed by Arthur
Andersen&nbsp;&#38; Company and Hertz Corporation in accounting
and auditing. Mr.&nbsp;Cains is a Certified Public Accountant
and is a member of the American Institute of Certified Public
Accountants, the New York Society of Certified Public
Accountants and Financial Executives International.
</FONT>

<P align="left">
<B><FONT size="2">Robert Haertel, Senior Vice President,
Compensation and Benefits.
</FONT></B><FONT size="2">Mr.&nbsp;Haertel has been Senior Vice
President of the Company since January 2001. Prior to his
current position he was Vice President, Compensation, a position
he held since June 1998. Mr.&nbsp;Haertel began his career in
Human Resources as an employee relations generalist for Shell
Oil Company in 1979. He then went on to hold various management
positions specializing in compensation and human resources at
Citicorp, Engelhard Corporation, Bankers Trust and CS&nbsp;First
Boston. Prior to joining the Company in June 1998,
Mr.&nbsp;Haertel was the director of compensation and benefits
at Nielsen Media Research. Mr.&nbsp;Haertel holds a Certified
Compensation Professional designation from World at Work
(formerly the American Compensation Association) and is a member
of the Society of Human Resources Management.
</FONT>

<P align="left">
<B><FONT size="2">Edwin L. Harper, Senior Vice President, Public
Affairs/ Government Relations.</FONT></B><FONT size="2">
Mr.&nbsp;Harper has been our Senior Vice President, Public
Affairs/ Government Relations since July 2001. Prior to his
current position, Mr.&nbsp;Harper held a number of senior
management positions including Chief Operating Officer and Chief
Financial Officer of American Security Group (now Assurant
Solutions) from 1998 to 2001. Prior to joining American Security
Group, Mr.&nbsp;Harper held various executive positions,
including President and Chief Executive Officer of the
Association of American Railroads, Executive Vice President and
Chief Financial Officer of the Campbell Soup Company and Senior
Vice President and Chief Administrative Officer of CertainTeed
Corporation. In 1980, Mr.&nbsp;Harper joined then
President-elect Reagan&#146;s Transition Team. He
</FONT>

<P align="center"><FONT size="2">132
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">stayed on to become an Assistant to the
President, Deputy Director of the Office on Management and
Budget and, later, Chief of Policy Development. Earlier, from
1970 and 1973, he served under President Nixon as a Special
Assistant to the President with policy planning and budgeting
responsibilities. Mr.&nbsp;Harper has served on the boards of
several public companies, academic institutions, civic
organizations and professional associations. Currently he is a
member of the board of directors of CompuCon Inc., the Council
on Excellence in Government and The American Quality and
Productivity Center.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Barbara R. Hege, Senior Vice President,
Finance. </FONT></B><FONT size="2">Ms.&nbsp;Hege has been Senior
Vice President, Finance since December 2000. Ms.&nbsp;Hege
joined the Company as Vice President, Taxation, in 1991. Prior
to joining the Company, she was Vice President, Finance and
Taxation at Mutual Benefit Life Insurance Company. Earlier in
her career she was a Senior Manager with KPMG LLP in Chicago.
She is a Certified Public Accountant and a Chartered Life
Underwriter. She is a member of the American Institute of
Certified Public Accountants, the New Jersey Society of
Certified Public Accountants, the American Woman&#146;s Society
of Certified Public Accountants, The Society of Financial
Service Professionals and a past president of the Chicago
Society of Women Certified Public Accountants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><FONT size="2">Lance R. Wilson, Senior Vice President and
Chief Information Officer.
</FONT></B><FONT size="2">Mr.&nbsp;Wilson has been our Senior
Vice President, Shared Services, and Chief Information Officer
since April 2000. Prior to joining the Company, Mr.&nbsp;Wilson
was Chief Information Officer at Sunbeam Corporation from 1999
to 2001, and also worked for Honeywell Corporation from 1997 to
1999 as Vice President and Chief Information Officer. From 1989
to 1997, Mr.&nbsp;Wilson provided leadership for the information
systems activities of the Pillsbury Company, where he was Vice
President, Management Information Systems. From 1979 to 1989,
Mr.&nbsp;Wilson held various positions with Land O&#146;Lakes,
Inc., where he was responsible for the creation and
implementation of a marketing and sales decision support system.
Mr.&nbsp;Wilson started his career in 1974 at the
U.S.&nbsp;Department of Defense, U.S.&nbsp;Navy, where he was
responsible for Management Systems Analysis.
</FONT>

<P align="left">
<B><FONT size="2">Executive Management Committee and Management
Board</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A group of executive officers that we refer to as
the Executive Management Committee, consisting of the Chief
Executive Officer and all Executive Vice Presidents of the
Company and the Chief Executive Officers of each of our
operating business segments, is ultimately responsible for
setting the policies, strategy and direction of the Company,
subject to the overall direction and supervision of the board of
directors. The current members of the Executive Management
Committee are J. Kerry Clayton, Robert B. Pollock, Lesley
Silvester, Benjamin M. Cutler, Michael J. Peninger, Alan W.
Feagin, Donald Hamm and Philip Bruce Camacho. All of the
Company&#146;s executive officers constitute a group that we
refer to as the Management Board. This group is responsible for
setting the operational policies of the Company, including those
dealing with shared services, issues that pertain to multiple
business segments and corporate functions.
</FONT>

<P align="center"><FONT size="2">133
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Stock Ownership of Directors and Executive
Officers</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table shows the number of Fortis
Shares, comprised of one ordinary share of Fortis N.V. together
with one ordinary share of Fortis SA/NV, beneficially owned as
of October&nbsp;1, 2003 by each director and each executive
officer named in the Summary Compensation Table in the
&#147;&#151;Management Compensation and Incentive Plans&#148;
section below, and by all of our directors and executive
officers as a group. Unless otherwise noted, each of the named
individuals had sole voting and investment power with respect to
the shares shown. Shares underlying stock options that are
exercisable within 60&nbsp;days are deemed to be outstanding for
the purpose of computing the outstanding shares owned by the
particular person and by the group, but are not deemed
outstanding for any other purpose. The beneficial ownership of
each director, each executive officer and of the group is less
than 1% of the outstanding Fortis Shares. See &#147;Principal
and Selling Stockholders&#148; for a description of the
beneficial ownership of our common stock.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="13%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount and Nature of</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Beneficial Ownership of</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fortis Shares(1)(2)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Michael Palms
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anton van Rossum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,450</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(1)*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michel Baise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,142</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(2)*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert J. Blendon
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beth L. Bronner
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Howard L. Carver
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arie A. Fakkert
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,715</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(3)*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allen R. Freedman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Carroll Mackin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gilbert Mittler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,850</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(4)*</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Georges Valckenaere
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,450</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">(5)*</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All directors and executive officers as a group
    (27&nbsp;persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*</FONT></TD>
    <TD align="left">
    <FONT size="2">Less than 1%
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 25,450 shares that are subject to stock
    options exercisable within 60&nbsp;days.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 16,050 shares that are subject to stock
    options exercisable within 60 days.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 3,500 shares that are subject to stock
    options exercisable within 60 days.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 38,850 shares that are subject to stock
    options exercisable within 60 days.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(5)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 42,450 shares that are subject to stock
    options exercisable within 60 days.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">134
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Management Compensation and Incentive
Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth certain summary
information concerning compensation paid or accrued by the
Company for services rendered in all capacities during the
fiscal years ended December&nbsp;31, 2000, December&nbsp;31,
2001 and December&nbsp;31, 2002 for our Chief Executive Officer
and each of the next four most highly compensated executive
officers during the fiscal year ended December&nbsp;31, 2002.
These individuals are referred to as the &#147;named executive
officers.&#148;
</FONT>

<P align="center">
<B><FONT size="2">Summary Compensation Table</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="21%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Long-Term</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Annual Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Awards</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payouts</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Annual</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">All Other</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Principal Position</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Salary</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Bonus</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options(2)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">LTIP(3)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Compensation(4)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">780,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,560,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">President and Chief
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">450,389</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Executive Officer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">633,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,036,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">133,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">624,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,067,368</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Executive Vice
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">609,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">87,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">President and Chief
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">508,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">806,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Financial Officer
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">442,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">530,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Executive Vice
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">425,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">President
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">355,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">453,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">416,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">540,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Executive Vice
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">President
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">295,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">478,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278,907</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">220,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Executive Vice
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">464,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">President; President
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">407,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">and Chief Executive Officer, Assurant Solutions
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Perquisites and other personal benefits to the
    named executive officers were less than both $50,000 and 10% of
    the total annual salary and bonus reported for the named
    executive officers, and therefore, information regarding
    perquisites and other personal benefits has not been included.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The option grants shown in this table represent
    options granted pursuant to the Fortis, Inc. Stock Option Plan
    to acquire shares of our Series&nbsp;D Preferred Stock, the
    value of which is related to the market value of shares of
    Fortis N.V. and Fortis SA/NV, and the Euro to U.S. dollar
    conversion rate. On October&nbsp;15, 2003, our board of
    directors authorized the discontinuance of this plan and all
    stock options outstanding thereunder were cancelled in exchange
    for a payment of the fair value of such options, as determined
    by an independent third party.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Amounts shown in this column represent amounts
    that were paid or payable in the given year under the Assurant
    Appreciation Incentive Rights Plan, or the now terminated
    Fortis, Inc. Long-Term Incentive Plan, including amounts payable
    under these plans that were invested in options to acquire
    third-party mutual funds under the Assurant Investment Plan, as
    described under &#147;&#151;Assurant Investment Plan.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(4)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Amounts shown in this column for fiscal year
    ended December&nbsp;31, 2002 include the following amounts:
    (i)&nbsp;for Mr.&nbsp;Clayton, $14,000 for Company contributions
    under the Assurant 401(k) Plan and $40,600 for Company
    contributions under the 401(k) portion of the Assurant Executive
    Pension and 401(k) Plan; (ii)&nbsp;for Mr.&nbsp;Pollock, $14,000
    for Company contributions under the Assurant 401(k) Plan and
    $29,680 for Company contributions under the 401(k) portion of
    the Assurant Executive Pension and 401(k) Plan;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">135
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD align="left">
    <FONT size="2">(iii)&nbsp;for Mr.&nbsp;Cutler, $14,000 for
    Company contributions under the Assurant 401(k) Plan and $52,640
    for Company contributions under the 401(k) portion of the
    Assurant Executive Pension and 401(k) Plan; (iv)&nbsp;for
    Ms.&nbsp;Silvester, $14,000 for Company contributions under the
    Assurant 401(k) Plan and $15,120 for Company contributions under
    the 401(k) portion of the Assurant Executive Pension and 401(k)
    Plan; and (v)&nbsp;for Mr.&nbsp;Camacho, $14,000 for Company
    contributions under the Assurant 401(k) Plan and $19,488 for
    Company contributions under the 401(k) portion of the Assurant
    Executive Pension and 401(k) Plan.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">Option Grants in 2002</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables present information
concerning stock options granted pursuant to our Stock Option
Plan to acquire shares of our Series&nbsp;D Preferred Stock to
the named executive officers during the fiscal year ended
December&nbsp;31, 2002. The Stock Option Plan was terminated
effective as of September&nbsp;22, 2003, and all stock options
outstanding thereunder were cancelled in exchange for a payment
of the fair value of such options, as determined by an
independent third party. Such payment totaled approximately
$2.1&nbsp;million.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percent of</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Grant Date</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted to</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Present</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Granted(1)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employees in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Base Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expiration</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value(2)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fiscal Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($/Sh)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Date</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3/22/12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3/22/12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3/22/12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.4</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3/22/12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39.91</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3/22/12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">The options were granted pursuant to the Fortis,
    Inc. Stock Option Plan to acquire shares of our Series&nbsp;D
    Preferred Stock, the value of which is related to the market
    value of shares of Fortis N.V. and Fortis SA/NV and the Euro to
    U.S. dollar conversion rate. The options had a term of ten years
    and were scheduled to vest as to one-third of the shares on the
    first three anniversaries of the date of grant.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">There was no public market for shares of our
    Series&nbsp;D Preferred Stock as of December&nbsp;31, 2002. The
    estimated present values for the options listed above are based
    on the binomial values of the options calculated as of
    September&nbsp;22, 2003 by an independent third party, using the
    following assumptions: (i)&nbsp;the value of one share of
    Series&nbsp;D Preferred Stock is the sum of the value of 0.9 of
    one share of Fortis SA/NV and 0.9 of one share of common stock
    of Fortis N.V., (ii)&nbsp;the exercise price of the option was
    equal to the fair market value as of the date of grant,
    (iii)&nbsp;the stock price equals the average of the combined
    Fortis N.V./Fortis SA/NV share price for the three months prior
    to the calculation; (iv)&nbsp;volatility was calculated as the
    average of the 60-month historical volatility of the Fortis
    SA/NV and Fortis N.V. shares at the date of calculation;
    (v)&nbsp;the annual dividend was calculated as the average of
    the Fortis SA/NV and Fortis N.V. stock dividend, and
    (vi)&nbsp;the discount rate was based on the Euro benchmark
    yield curve for the outstanding term of each option. Although
    this calculation is not necessarily the value of the options as
    of their date of grant, it is the value for which they were
    cashed out, as discussed above.
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">2002 Year-End Option Values</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the total number
of shares of our Series&nbsp;D Preferred Stock underlying
options granted pursuant to the Company&#146;s Stock Option Plan
and held by our named executive officers as of December&nbsp;31,
2002. None of these options were in-the-money as of
December&nbsp;31, 2002, and none of our named executive officers
exercised any options during the fiscal year ended
December&nbsp;31, 2002. The Stock
</FONT>

<P align="center"><FONT size="2">136
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Option Plan was terminated effective as of
September&nbsp;22, 2003, and all stock options outstanding
thereunder were cancelled in exchange for a payment of the fair
value of such options, as determined by an independent
third-party.
</FONT>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Preferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Total Shares of Preferred</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Value of Unexercised</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Stock Underlying</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">In-The-Money</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Acquired</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Unexercised Options at</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Options Held at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002($)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Realized</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">($)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unexercisable</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,733</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,834</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">Long-Term Incentive Plan Awards</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table presents information
concerning long-term incentive plan awards to the named
executive officers under the Assurant Appreciation Incentive
Rights Plan during the fiscal year ended December&nbsp;31, 2002:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Estimated Future</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payouts Under</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Performance Or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Non-Stock Price-</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number Of Shares,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other Period Until</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Based Plans</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Units or Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturation Or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Rights(#)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payout</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Target(1)($)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,154(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3 Years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">780,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,951(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3 Years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">561,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,306(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3 Years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,861(2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3 Years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">312,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,508(3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3 Years</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">311,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">As described more fully under
    &#147;&#151;Assurant Appreciation Incentive Rights Plan,&#148;
    an eligible employee of Assurant, Inc. receives 75% of his or
    her award in Assurant, Inc. incentive rights and 25% of his or
    her award in operating business segment incentive rights.
    Conversely, an eligible employee of an operating business
    segment of Assurant receives 25% of his or her award in
    Assurant, Inc. incentive rights and 75% of his or her award in
    operating business segment incentive rights. Each incentive
    right represents the right to the appreciation in value of an
    incentive right over the vesting period of the award, based on a
    valuation provided by an independent, qualified appraiser.
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the total number of incentive rights
    awarded. Rights are distributed between Assurant, Inc. (75%) and
    each of the four operating business segments (25%). The
    Assurant, Inc. incentive rights will be replaced with stock
    appreciation rights on Assurant common stock from and after the
    closing of the offering contemplated by this prospectus, as more
    fully described under &#147;&#151;Assurant Appreciation
    Incentive Rights Plan.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(3)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents the total number of incentive rights
    awarded. Rights are distributed between Assurant, Inc. (25%) and
    Assurant Solutions (75%). The Assurant, Inc. incentive rights
    will be replaced with stock appreciation rights on Assurant
    common stock from and after the closing of the offering
    contemplated by this prospectus, as more fully described under
    &#147;&#151;Assurant Appreciation Incentive Rights Plan.&#148;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Pension Plans</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We maintain two executive defined benefit pension
plans, each of which is inter-related with our broad-based,
tax-qualified, defined benefit pension plan.
</FONT>

<P align="center"><FONT size="2">137
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Supplemental Executive Retirement Plan.
</FONT></I><FONT size="2">Effective January&nbsp;1, 1990, our
board of directors adopted the Supplemental Executive Retirement
Plan (SERP), which is a non-qualified, unfunded supplemental
pension plan for certain key executives of the Company and its
subsidiaries. Under the SERP, participants who meet certain
conditions are entitled to receive a benefit, called a
&#147;target benefit,&#148; that is then offset
(reduced)&nbsp;by certain other benefits, such as the pension
payable under our tax-qualified defined benefit pension plan
(the Assurant Pension Plan, described below), the benefit
payable under the pension portion of the Executive Pension and
401(k) Plan, described below, certain other nonqualified benefit
plans and Social Security benefits. If the SERP benefit
commences at age 60 or later, the target benefit, expressed as a
single life annuity, is 50% of the employee&#146;s base pay plus
target short-term incentive bonus, each as most recently
approved by our board of directors, multiplied by a fraction,
the numerator of which is the employee&#146;s number of months
of employment with the Company or its subsidiaries, and the
denominator of which is 240. If the SERP benefit commences prior
to age 60, then the target benefit will be reduced on an
actuarially equivalent basis from age 60 to the date the benefit
actually commences.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant is not vested in any of his or her
benefit under the SERP until the second anniversary of the date
he or she commences participation in the plan. On the second
anniversary of participation, the participant vests in the SERP
benefit at the rate of 3% for each month of employment
thereafter with the Company or its subsidiaries. A participant
will become 100% vested in his or her SERP benefit in the event
of death or disability. If a participant is terminated for
cause, as defined in the SERP, or commits a material breach of
certain covenants regarding non-competition, confidentiality,
non-solicitation of employees or non-solicitation of customers,
then the participant will forfeit any remaining SERP benefits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The default form of payment under the SERP is a
single lump payment that is the actuarial equivalent of the SERP
benefit. The participant may also elect optional forms of
payment under the SERP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">If there is a change in control with respect to
the Company or a division, and within two years after the change
in control a participant&#146;s employment is terminated without
cause or the participant terminates employment for good reason,
then (1)&nbsp;the participant will become 100% vested in his or
her SERP benefit; (2)&nbsp;the participant will be credited with
36 additional months of service for purposes of computing his or
her target benefit; and (3)&nbsp;the actuarial reduction for
commencement of the SERP benefit prior to age 60 will be
calculated as though the participant was 36&nbsp;months older
than his or her actual age.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The SERP provides that if the payments to a
participant or beneficiary will be made over a period of more
than one year and if at the time payments commence the Company
is not subject to pending proceedings as a debtor under the
U.S.&nbsp;Bankruptcy Code, then Fortis Insurance N.V. will
guarantee the payment of SERP benefits to such participant or
beneficiary. The SERP further provides that if Fortis Insurance
N.V. ceases to be the beneficial owner of the Company, then such
guarantee will be limited to the actuarially equivalent value of
the participant&#146;s SERP benefit immediately following such
cessation of beneficial ownership.
</FONT>

<P align="center"><FONT size="2">138
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The table below shows the target benefit payable
under the SERP. The benefit shown is a single life annuity
commencing at age 60.
</FONT>

<P align="center">
<B><FONT size="2">Target Benefits Payable Under the Assurant,
Inc. SERP</FONT></B>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="36%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><B><FONT size="1">Years of Service(1)</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="19" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Final Compensation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">10</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">15</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">20</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">25</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">30</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$&nbsp;500,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">187,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">750,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">187,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1,000,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1,250,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">312,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">468,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">625,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">625,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">625,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1,500,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">375,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">562,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1,750,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">437,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">656,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2,000,000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">500,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,000,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">At December&nbsp;31, 2002, J. Kerry Clayton had
    32.2&nbsp;years of service and SERP compensation of $1,560,000;
    Robert B. Pollock had 21.6&nbsp;years of service and SERP
    compensation of $1,154,400; Lesley Silvester had 18.3&nbsp;years
    of service and SERP compensation of $686,400; and Benjamin M.
    Cutler had 17.1&nbsp;years of service and SERP compensation of
    $707,200. Philip Bruce Camacho became a SERP participant on
    January&nbsp;1, 2003.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Executive Pension and 401(k) Plan.
</FONT></I><FONT size="2">Effective January&nbsp;1, 1994, our
board of directors adopted the Executive Pension and 401(k)
Plan, which is a non-qualified, unfunded deferred compensation
plan for certain key executives of the Company and its
subsidiaries. The pension portion of this plan (referred to
herein as the Executive Pension Plan) is intended to restore to
participants amounts that they are restricted from receiving
under the Assurant Pension Plan, described below, due to section
401(a)(17) of the U.S.&nbsp;tax code, which generally limits the
compensation that may be taken into account under a
tax-qualified pension plan to no more than $200,000 annually
(subject to cost of living adjustments).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant becomes vested in the benefits
under the Executive Pension Plan after three years of vesting
service, if the participant has elected to participate in the
pension equity portion of the Assurant Pension Plan and after
five years of vesting service if the participant has elected to
participate in the pension formula that predated the pension
equity formula under the Assurant Pension Plan. The benefits
under the Executive Pension Plan are payable in a single lump
sum in cash as soon as practicable after the participant
terminates employment, unless exchanged for options under the
Assurant Investment Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Assurant Pension Plan.
</FONT></I><FONT size="2">Since 1984, the Company has maintained
the Assurant Pension Plan, which is a tax-qualified, defined
benefit pension plan subject to regulation under ERISA. Eligible
employees generally may participate in the Plan after completing
one year of service with the Company. The Assurant Pension Plan
provides for three different benefit formulas for different
groups of participants. Benefits under the plan are payable at
termination of employment. A participant&#146;s benefit may be
paid in a lump sum or in various annuity forms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the fiscal year ended December&nbsp;31, 2002,
we had $9,311,532 in expense under the SERP, $1,461,243 of
expense under the Executive Pension Plan and $14,310,651 of
expense under the Assurant Pension Plan.
</FONT>

<P align="left">
<B><FONT size="2">401(k) Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Assurant 401(k) Plan.
</FONT></I><FONT size="2">Since 1983, we have maintained the
Assurant 401(k) Plan, which is a tax-qualified, defined
contribution plan subject to regulation under ERISA. Employees
generally are eligible to make pre-tax contributions to the plan
immediately upon beginning work with Assurant. Participants may
elect to contribute up to 50% of their earnings to the plan on a
pre-tax or after-tax basis. Earnings include base salary,
short-term incentive bonus, overtime and commissions.
</FONT>

<P align="center"><FONT size="2">139
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">After one year of service, a participant is
eligible to begin receiving employer matching contributions.
Each year, we may determine whether to declare an employer
matching contribution. The Assurant 401(k) plan provides for
three different matching allocation formulas for different
groups of participants. A participant generally vests in his
employer matching contributions and investment earnings thereon
after three years of vesting service.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before a participant terminates employment, a
participant&#146;s vested pre-tax account generally is payable
after age 59&nbsp;1/2, in the event of a hardship, or as a loan.
A participant&#146;s vested account is also payable at
termination of employment in the form of a lump sum.
Participants may invest their own contributions and Company
matching contributions in various investment options offered
under the plan, including common stock of the Company. The
investment fund within the plan that consists of common stock of
the Company will be designed as an employee stock ownership plan
under ERISA and the U.S.&nbsp;tax code.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Executive Pension and 401(k) Plan
discussed above, the 401(k) portion of this plan (referred to
herein as the Executive 401(k) Plan) is intended to restore to
participants amounts that they are restricted from receiving
under the Assurant 401(k) Plan due to section 401(a)(17) of the
U.S.&nbsp;tax code, which generally limits the compensation that
may be taken into account under a tax-qualified pension plan to
no more than $200,000 annually (subject to cost of living
adjustments).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Executive 401(k) Plan, a participant
who is actively employed on the last regularly scheduled work
day of a fiscal year is entitled to receive a credit equal to 7%
of compensation as determined under the Assurant 401(k) Plan,
but determined as though the compensation limitation of section
401(a)(17) of the U.S. tax code did not exist and as though any
compensation exchanged for options under the Assurant Investment
Plan was received as compensation in the year the options are
granted. Such credit is then offset by the amount of the
employer matching contribution received in the Assurant 401(k)
Plan. The amounts credited to a participant&#146;s account under
the 401(k) portion of this plan are deemed to be invested at the
participant&#146;s direction in investment vehicles that are
also available under the Assurant 401(k) Plan (including common
stock of the Company).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A participant becomes vested in the 401(k)
credits and deemed investment earnings thereon in the Executive
401(k) Plan after three years of vesting service. The benefits
under the Executive 401(k) Plan are payable in a single lump sum
in cash as soon as practicable after the participant terminates
employment, unless exchanged for options under the Assurant
Investment Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the fiscal year ended December&nbsp;31, 2002,
we made combined employer allocations of $24&nbsp;million under
the Executive 401(k) Plan and employer matching contributions
under the Assurant 401(k) Plan.
</FONT>

<P align="left">
<B><FONT size="2">Employment and Change in Control
Agreements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have entered into change in control severance
agreements with Mr. Clayton, our other named executive officers
and other officers and key employees. The severance agreements
generally provide that if a change in control (as defined)
occurs with respect to the business segment for which an
employee works, then a two-year trigger period begins. If the
employee&#146;s employment is terminated by us without cause or
if the employee resigns for good reason (each as defined) during
such two-year period, the employee is entitled to certain cash
severance payments and continuation of medical and other welfare
benefits for a period of 18&nbsp;months following the
termination of employment at the rate charged active employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of cash severance benefits payable to
an employee is equal to a multiple (ranging from 1 to 3
depending on the agreement, and equal to 3 for Mr.&nbsp;Clayton
and our other named executive officers) times the sum of the
employee&#146;s annual base salary and target annual bonus.
One-half of the cash severance is payable within thirty days of
the date of the employee&#146;s termination, and one-half of the
cash severance is payable in equal monthly installments over a
period ranging from six months (for those with a severance
multiple of 1) to 18&nbsp;months (for those with a severance
multiple of 3), offset by the amount of pre-tax compensation
earned by the executive during such period. In addition, if a
change in control has occurred and the employee&#146;s
employment has been terminated by us without cause or if the
employee has resigned for good reason within one year prior to
the change in control, then the employee is entitled to the cash
severance benefits described
</FONT>

<P align="center"><FONT size="2">140
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">above, to be paid in a lump sum in cash within
30&nbsp;days after the change in control has occurred, and
continuation of medical and other welfare benefits for a period
of 18&nbsp;months at the rate charged active employees, except
that we shall reimburse the employee for the cost of obtaining
such welfare benefits between the date his or her termination
and the date of the change in control. These agreements may also
provide additional rights including, but not limited to,
outplacement services, legal fee reimbursement and reimbursement
for any excise tax imposed on the officer by section 4999 of the
U.S.&nbsp;tax code.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The offering contemplated by this prospectus does
not constitute a change in control as defined in these
agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">American Bankers Insurance Group has a severance
agreement with Mr.&nbsp;Camacho. If Mr.&nbsp;Camacho terminates
his employment because of retirement (as determined in
accordance with normal company policies) or death, then
Mr.&nbsp;Camacho will receive a severance payment equal to 150%
of his current salary, defined as his salary for the
12&nbsp;months preceding the severance, excluding any bonus or
deferred compensation. If Mr.&nbsp;Camacho&#146;s employment is
terminated because of disability, then Mr.&nbsp;Camacho will
receive a severance payment equal to 50% of his current annual
salary, as defined above. If either Mr.&nbsp;Camacho&#146;s
employment is terminated without cause (as defined in the
agreement), or Mr.&nbsp;Camacho terminates employment after a
decrease in his base salary to a level less than 80% of the
level for any prior year, then Mr.&nbsp;Camacho will receive a
severance payment equal to 100% of his current salary, as
defined. In each case the severance benefit will be paid in a
lump sum on the fifth business day following termination of
employment.
</FONT>

<P align="left">
<B><FONT size="2">2004 Long-Term Incentive Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors has adopted and our sole
stockholder has approved the 2004 Long-Term Incentive Plan, to
be effective as of the closing of the offering contemplated by
this prospectus. This equity-based incentive plan is intended to
promote our success and enhance our value by linking the
personal interests of our employees, directors and consultants
to those of our stockholders, and by providing such persons with
an incentive for outstanding performance.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, directors and
consultants in the following forms:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">options to purchase shares of our common stock,
    which may be nonstatutory stock options or incentive stock
    options under the U.S.&nbsp;tax code;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">stock appreciation rights, which give the holder
    the right to receive the difference between the fair market
    value per share on the date of exercise over the grant price;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">performance awards, which are payable in cash or
    stock upon the attainment of specified performance goals;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">restricted stock, which is subject to
    restrictions on transferability and subject to forfeiture on
    terms set by the Compensation Committee of our board of
    directors;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">dividend equivalents, which entitle the
    participant to payments equal to any dividends paid on the
    shares of stock underlying an award; and
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">other stock-based awards in the discretion of the
    Compensation Committee, including unrestricted stock grants.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The number of shares reserved and available for
issuance under the plan is 10,000,000&nbsp;shares. In the event
that any outstanding award expires for any reason or is settled
in cash, any unissued shares subject to the award will again be
available for issuance under the plan. If a participant pays the
exercise price of an option by delivering to us previously owned
shares, only the number of shares we issue in excess of the
surrendered shares will count against the plan&#146;s share
limit. Also, if the full number of shares subject to an option
is not issued upon exercise for any reason (other than to
satisfy a tax withholding obligation), only the net number of
shares actually issued upon exercise will count against the
plan&#146;s share limit.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a corporate transaction involving
the Company (including any stock dividend, stock split, merger,
spin-off or related transaction), the share authorization limits
of the 2004 Long-Term Incentive Plan
</FONT>

<P align="center"><FONT size="2">141
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">will be adjusted proportionately, and the
Compensation Committee may adjust outstanding awards to preserve
their benefits or potential benefits.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan will be
administered by the Compensation Committee of our board of
directors. The committee has the authority to designate
participants, determine the type or types of awards to be
granted to each participant and the number, terms and conditions
of awards, establish, adopt or revise any rules and regulations
to administer the plan, and make all other decisions and
determinations that may be required under the plan. Our board of
directors may at any time administer this plan. If so, it will
have all the powers of the committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All awards must be evidenced by a written
agreement with the participant, which will include the
provisions specified by the Compensation Committee.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under section 162(m) of the U.S.&nbsp;tax code, a
public company generally may not deduct compensation in excess
of $1&nbsp;million paid to its chief executive officer and the
four next most highly compensated executive officers. Until the
annual meeting of our stockholders in 2007, or until the 2004
Long-Term Incentive Plan is materially amended, if earlier,
awards granted under the plan will be exempt from the deduction
limits of section 162(m). In order for awards granted after the
expiration of such grace period to be exempt, the plan must be
amended to comply with the exemption conditions and be
re-submitted for approval of our stockholders.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unless otherwise provided in an award certificate
or plan document, upon the death or disability of a participant,
all of his or her outstanding awards under the 2004 Long-Term
Incentive Plan will become fully vested. Unless otherwise
provided in an award certificate or plan document, if a
participant&#146;s employment is terminated without cause or the
participant resigns for good reason (as such terms are defined
in the plan) within two years after a change in control of the
Company, all of such participant&#146;s outstanding awards under
the plan will become fully vested. The Compensation Committee
may in its discretion accelerate the vesting of an award at any
other time, and may discriminate among participants or among
awards in exercising its discretion.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors or the Compensation
Committee may at any time terminate or amend the 2004 Long-Term
Incentive Plan, but any such amendment would be subject to
stockholder approval if, in the reasonable judgment of the board
or committee, the amendment would materially increase the number
of shares available under the plan, expand the types of awards
available under the plan, materially extend the term of the plan
or otherwise constitute a material change requiring stockholder
approval under applicable laws or the applicable requirements of
a stock exchange on which our stock is listed. No termination or
amendment of the plan may, without the written consent of the
participant, reduce or diminish the value of an outstanding
award determined as if the award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or
termination. The Compensation Committee may amend or terminate
outstanding awards, but such amendments may require the consent
of the participant and, unless approved by our stockholders or
otherwise permitted by the antidilution provisions of the plan,
the exercise price of an outstanding option may not be reduced,
directly or indirectly, and the original term of an option may
not be extended.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan will become
effective as of the closing of the offering contemplated by this
prospectus. We estimate that, as of its effective date,
approximately 12,000 employees, officers and directors will be
eligible to participate in the plan. No awards will be granted
under the plan prior to its effective date. Any awards will be
made at the discretion of the Compensation Committee. Therefore,
it is not presently possible to determine the benefits or
amounts that will be received by any individuals or groups
pursuant to the 2004 Long-Term Incentive Plan in the future.
</FONT>

<P align="left">
<B><FONT size="2">2004 Employee Stock Purchase Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Employee Stock Purchase Plan was adopted
by our board of directors and was approved by our sole
stockholder on October&nbsp;15, 2003. It will go into effect as
of the first July&nbsp;1 or January&nbsp;1 following the closing
of the offering contemplated by this prospectus.
</FONT>

<P align="center"><FONT size="2">142
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company and our participating subsidiaries through ownership of
our common stock. The stock purchase plan is designed to allow
eligible employees to purchase shares of our common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are customarily
employed by us, or one of our subsidiaries designated by our
Compensation Committee, for at least 20&nbsp;hours per week and
five months per calendar year, and provided they have served as
an employee for at least six months. We have reserved
5,000,000&nbsp;shares of our common stock for issuance under the
stock purchase plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The plan is intended to be a qualified employee
stock purchase plan within the meaning of section 423 of the
U.S. tax code. Under the stock purchase plan, our Compensation
Committee may from time to time grant to eligible employees
rights to purchase our common stock during designated purchase
periods. Provided the offering contemplated by this prospectus
closes on or before July&nbsp;1, 2004, the initial purchase
period will begin on July&nbsp;1, 2004 and will end on
December&nbsp;31, 2004. Unless otherwise determined by the
Compensation Committee, new purchase periods of six months
duration will begin each following January&nbsp;1 and
July&nbsp;1.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employees who elect to participate in a purchase
period may have up to 15% of their compensation withheld
pursuant to the stock purchase plan, subject to any limit
imposed from time to time by the committee (currently $6,000 per
six-month purchase period). The amount withheld is then used to
purchase shares of our common stock on the designated purchase
dates at the end of each purchase period. Until the Compensation
Committee determines otherwise, the price of common stock
purchased under the plan is equal to the lower of 90% of the
market value (closing price) of our common stock at the
beginning date of each purchase period or 90% of the market
value (closing price) of our common stock at the end of the
purchase period. The Compensation Committee may designate a
different discount formula, but not less than 85% of the market
value at the beginning or end of any purchase period. Since the
shares are purchased at less than market value, employees will
receive a benefit from participating in the stock purchase plan.
The maximum number of shares of our common stock that may be
purchased by any participant in the stock purchase plan on any
one purchase date is 5,000&nbsp;shares.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain limits are imposed by law. For example,
an employee may not be granted a purchase right for a purchase
period if immediately after the grant, he or she would own 5% or
more of the total combined voting power or value of all classes
of our stock or the stock of our subsidiaries. Also, a
participant cannot receive purchase rights that, in combination
with purchase rights under other section 423 plans, would result
during any calendar year in the purchase of shares having an
aggregate fair market value of more than $25,000.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in our
capitalization, or other distribution with respect to our
stockholders other than normal cash dividends, an automatic
adjustment will be made in the number and kind of shares as to
which outstanding purchase rights will be exercisable and in the
available shares and limits described above, so that the
proportionate interest of the participants is maintained as
before the occurrence of such event.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The stock purchase plan will terminate on the
tenth anniversary of its effective date, unless terminated
earlier by the Compensation Committee. The Compensation
Committee has the authority to amend the stock purchase plan at
any time, but, with limited exceptions, no amendment may
adversely affect any outstanding rights to purchase stock.
Certain amendments to the stock purchase plan would require
approval of our stockholders, such as a change in eligibility
requirements or an increase in the number of shares reserved for
purchase under the plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Executive Management Incentive Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our Executive Management Incentive Plan was
adopted by the board of directors and approved by our sole
stockholder on October&nbsp;15, 2003, to be effective as of
January&nbsp;1, 2004. Participation in the Executive Management
Incentive Plan is limited to senior officers of the Company and
its subsidiaries who are selected to participate in the plan for
a given year by the Compensation Committee of our board of
directors. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant&#146;s base salary based upon the achievement of
certain designated performance goals.
</FONT>

<P align="center"><FONT size="2">143
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each participant in the plan will be eligible to
receive a cash bonus in connection with a particular calendar
year during the term of the plan if performance goals set for
that year by the Compensation Committee are met or exceeded. Not
later than ninety days after the commencement of any year during
the term of the plan, the Compensation Committee will set in
writing performance goals based on one or more performance
criteria, which may be expressed in terms of Company-wide
objectives or in terms of objectives that relate to the
performance of an affiliate or a division, department, region or
function within the Company or an affiliate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At the time the Compensation Committee sets the
performance goals for a particular year, it will also set in
writing the percentages of each participant&#146;s salary that
will be awarded to the participant if the Company (or one or
more of our subsidiaries or divisions, as applicable) achieves
the designated performance goals. Payments under the plan will
be made promptly after the Compensation Committee certifies in
writing that the relevant performance goals and other terms of
the plan were satisfied in connection with such payments. Our
board of directors or the Compensation Committee may terminate,
suspend or amend the plan at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Only our senior officers and senior officers of
our subsidiaries are eligible to participate in the Executive
Management Incentive Plan. The amount of awards under the plan
will be determined at the discretion of the Compensation
Committee. Therefore, it is not presently possible to determine
the benefits or amounts that will be received by any individuals
or groups pursuant to this plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="1%"></TD>
    <TD width="99%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><FONT size="2">Assurant Appreciation Incentive Rights
    Plan</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since January&nbsp;1, 1999, the Company has
maintained the Fortis Appreciation Incentive Rights Plan (to be
renamed the Assurant Appreciation Incentive Rights Plan), which
provides key employees with the right to receive long-term
incentive cash compensation based on the appreciation in value
of incentive units of Assurant and incentive units of each of
its operating business segments. This plan is administered by a
committee appointed by our board of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under this plan as currently in effect, an
eligible employee of Assurant receives 75% of his or her award
in Assurant incentive rights and 25% of his or her award in
operating business segment incentive rights. Conversely, an
eligible employee of an operating business segment of Assurant
receives 25% of his or her award in Assurant incentive rights
and 75% of his or her award in operating business segment
incentive rights. Each incentive right represents the right to
the appreciation in value of an incentive unit. Each Assurant
incentive unit originally represented one ten millionth
(.0000001) of the entity value of Assurant, and each operating
business segment incentive unit represented one ten millionth of
the entity value of each operating business segment that
participates in the plan. However, the number of incentive units
has been adjusted over time for cash flows into and out of each
entity. The entity value of Assurant and the entity value of the
respective operating business segments are determined by the
committee as of each December&nbsp;31st based on a valuation
provided by an independent, qualified appraiser. The committee
also determines the adjustment to the number of incentive units
outstanding in each entity and the value of each unit as of the
valuation date. Each incentive right entitles the holder to a
cash payment equal to the difference between the value of the
incentive unit on the December&nbsp;31st immediately preceding
the date of exercise and the value of the incentive unit on the
December&nbsp;31st immediately preceding the date of grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Each right becomes vested on December&nbsp;31st
of the second year following the year of grant, except that
(1)&nbsp;each Assurant right becomes fully vested if Assurant
undergoes a change in control (as defined in the plan);
(2)&nbsp;each business unit segment becomes fully vested if that
operating business segment undergoes a change in control; and
(3)&nbsp;if a participant retires, becomes disabled, or dies,
then the participant vests in 1/36th of each right for each
month elapsed from January 1st of the year of grant to the date
the participant terminates employment. Rights that have become
vested may be exercised during a 45-day exercise period
following the announcement by the plan committee of the value of
Assurant incentive units and of the incentive units of each
operating business segment. To the extent not previously
exercised, all rights will automatically be exercised on the
tenth anniversary of the date of grant. Rights that are
exercised are payable solely in cash. A participant may elect to
have any amounts payable under the Assurant Appreciation
Incentive Rights Plan exchanged for options in the Assurant
Investment Plan, described below.
</FONT>

<P align="center"><FONT size="2">144
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors amended the Fortis
Appreciation Incentive Rights Plan to provide for the cash-out
and replacement of Fortis, Inc. incentive rights with stock
appreciation rights related to Assurant common stock from and
after the closing of the offering contemplated by this
prospectus. The business segment rights outstanding under the
plan will not be changed or affected. The conversion of
outstanding Fortis, Inc. incentive rights will take place as
described in this paragraph. The Fortis, Inc. incentive rights
will be valued as of December&nbsp;31, 2003 using a special
valuation method, as follows. The measurement value of each
Fortis, Inc. incentive right as of December&nbsp;31, 2002 will
be adjusted to reflect dividends paid by the Company, consistent
with past practice; such adjusted value shall then be multiplied
by the arithmetic average of the change during calendar year
2003 in the Dow&nbsp;Jones Life Insurance Index, the Dow Jones
Property Casualty Index, and the Dow&nbsp;Jones Healthcare
Providers Index; and the result will be the measurement value of
a Fortis, Inc. incentive right as of December&nbsp;31, 2003. As
soon as practical after this special valuation is completed, and
before the closing of the offering contemplated by this
prospectus, the Company will cash out each Fortis, Inc.
incentive right then outstanding under the plan for a cash
payment equal to the difference, if any, between the measurement
value of the Fortis, Inc. incentive right as of the
December&nbsp;31st immediately preceding the date of grant, and
the measurement value of that right determined as of
December&nbsp;31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, the Company will grant to each participant
whose rights were cashed out a number of stock appreciation
rights on our common stock (referred to as &#147;replacement
rights&#148;). The number of replacement rights to be granted to
a participant will equal (1)&nbsp;the measurement value of the
participant&#146;s cashed-out Fortis, Inc. incentive rights,
divided by (2)&nbsp;the public offering price set forth on the
cover of this prospectus. Each replacement right that replaces a
vested cashed-out right will be vested immediately, and each
replacement right that replaces a non-vested cashed-out right
will become vested on the vesting date for the corresponding
cashed-out right, but no replacement right, whether or not
vested, may be exercised sooner than one year from the closing
date of the offering contemplated by this prospectus. After that
waiting period, each replacement right will be exercisable for
the remaining term of the corresponding cancelled right.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All future grants of Assurant rights under the
amended and restated plan, now called the Assurant Appreciation
Incentive Rights Plan, will consist of Assurant stock
appreciation rights that will give the holder the right to
receive, upon exercise of the right, a cash payment equal to the
difference between the market price of Assurant common stock on
the date of exercise over the market price of Assurant common
stock on the date of grant. Except as provided above with
respect to the replacement Assurant stock appreciation rights,
all such rights will vest over a three-year period from the date
of grant, will have a ten-year term and will be exercisable at
any time after they are vested and before the expiration of the
term.
</FONT>

<P align="left">
<B><FONT size="2">Assurant Investment Plan</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors adopted the Assurant
Investment Plan, which provides key employees the ability to
exchange a portion of their compensation for options to purchase
certain third-party mutual funds. The plan became effective as
of January&nbsp;1, 1999 and is administered by our Senior Vice
President&#151;Compensation and Benefits, who is referred to as
the administrator. Under the Assurant Investment Plan, a
participant may exchange all or a portion of his or her eligible
compensation for a specific number of options under the plan.
Each option represents the right to purchase shares of a
third-party mutual fund, as selected by the participant. Each
option is exercisable for a dollar amount equal to the greater
of 25% of the trading price of the applicable mutual fund units
at the date the option is granted and 50% of the trading price
of the applicable mutual fund units on the date the option is
exercised. Each option is fully vested and exercisable on the
grant date. Options may not be exercised more than twice in any
calendar year, except with the consent of the administrator. For
most options, the exercise period generally will expire on the
earlier of 120&nbsp;months after the participant&#146;s death,
disability or retirement and 60&nbsp;months after the
participant&#146;s termination of employment for any other
reason. Until the options are exercised, a participant may
instruct the administrator to exchange some or all of the
options for options to purchase different underlying mutual fund
units.
</FONT>

<P align="center"><FONT size="2">145
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "PRINCIPAL AND SELLING STOCKHOLDERS" -->

<P align="center">
<B><FONT size="2">PRINCIPAL AND SELLING STOCKHOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Before this offering, 100% of the outstanding
shares of our common stock have been beneficially owned by
Fortis N.V. and Fortis SA/ NV, the parent companies of the
selling stockholder, Fortis Insurance N.V. After the completion
of this offering, Fortis N.V. and Fortis SA/ NV will
beneficially own
approximately &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
of our common stock,
or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
if the underwriters exercise their over-allotment option in
full. Although it has no contractual obligation to do so, Fortis
has advised us that its current intent is to divest its
remaining shares of our common stock over a period of time
following the expiration of the lock-up agreement described
under &#147;Underwriting.&#148; Pursuant to the lock-up
agreements, we, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV, Fortis Insurance N.V., and
purchasers of shares under the directed share program have
agreed not to sell or cause to be sold or otherwise dispose of
any shares of our common stock for a period of 180&nbsp;days
after the date of this prospectus without the prior written
consent of Morgan Stanley &#38; Co. Incorporated on behalf of
the underwriters.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth information as of
October&nbsp;1, 2003 regarding the beneficial ownership of our
common stock by:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all persons known by us to own beneficially more
    than 5% of our common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">our chief executive officer and each of the named
    executive officers;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">each director;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">all directors and executive officers as a group;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the selling stockholder.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Beneficial ownership is determined in accordance
with the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of
that person, shares of common stock subject to options held by
that person that are currently exercisable or exercisable within
60&nbsp;days of October&nbsp;1, 2003 are deemed issued and
outstanding. These shares, however, are not deemed outstanding
for purposes of computing percentage ownership of each other
stockholder.
</FONT>

<P align="center"><FONT size="2">146
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="38%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Beneficial Ownership</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Beneficial Ownership</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">of Principal</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">of Principal</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Stockholders Prior</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Stockholders After</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">to the Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares To Be</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">the Offering(1)</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Name and Address</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Sold in the</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">of Beneficial Owner</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Offering</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Percentage</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fortis Insurance N.V.(2)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">J. Kerry Clayton
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert B. Pollock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benjamin M. Cutler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Lesley Silvester
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Philip Bruce Camacho
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">John Michael Palms
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Anton van Rossum
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Michel Baise
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Robert J. Blendon
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beth L. Bronner
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Howard L. Carver
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Arie A. Fakkert
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allen R. Freedman
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">H. Carroll Mackin
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gilbert Mittler
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Georges Valckenaere
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All directors and executive officers as a group
    (27 persons)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(1)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Beneficial ownership of principal and selling
    stockholders after the offering does not take into account
    shares that may be sold by the selling stockholder in the event
    the underwriters&#146; over-allotment option is exercised. If
    the underwriters&#146; over-allotment option is exercised in
    full, Fortis Insurance N.V. will beneficially
    own &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
    of our common stock,
    or &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
    immediately after the offering. In addition, beneficial
    ownership of principal and selling stockholders after the
    offering does not include shares that may be purchased in the
    offering, including in the directed share program. See
    &#147;Underwriting&#151;Directed Share Program.&#148;
    </FONT></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(2)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Includes 7,596,679&nbsp;shares of Class&nbsp;A
    Common Stock held by Fortis Insurance N.V. directly,
    41,832&nbsp;shares of Class&nbsp;A Common Stock and
    150,001&nbsp;shares of Class&nbsp;B Common Stock held by Fortis
    (US) Funding Partners&nbsp;I LP and 111,489&nbsp;shares of
    Class&nbsp;A Common Stock and 400,001 shares of Class&nbsp;C
    Common Stock held by Fortis (US) Funding Partners&nbsp;II LP.
    Fortis Insurance&nbsp;N.V. is an indirect, wholly owned
    subsidiary of Fortis&nbsp;N.V. and Fortis&nbsp;SA/NV.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">147
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" -->

<P align="center">
<B><FONT size="2">CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We describe below some of the transactions we
have entered into with parties that are related to our Company,
including Fortis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain relationships and related transactions
with respect to the underwriters are set forth in
&#147;Underwriting.&#148;
</FONT>

<P align="left">
<B><FONT size="2">General</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are currently an indirect subsidiary of
Fortis. Prior to and following the offering, some of our
directors also were and will continue to be directors, officers
and employees of Fortis and/or its subsidiaries. We will enter
into a shareholders&#146; agreement with Fortis Insurance N.V.
that will give Fortis the right to nominate designees to our
board of directors and the right to approve certain significant
corporate actions as described under
&#147;&#151;Shareholders&#146; Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of business, we have
entered into a number of agreements with Fortis and its
subsidiaries relating to our historical business and our
relationship with the Fortis group of companies, the material
terms of which are described below. In addition, in connection
with the offering, we will enter into agreements with Fortis
relating to our separation from Fortis and the ongoing
relationship of the two companies after the offering date, as
described below. We will enter into these agreements while we
are still a wholly owned subsidiary of Fortis and the agreements
will become effective concurrently with the completion of the
offering. Forms of the agreements summarized below will be filed
as exhibits to the registration statement of which this
prospectus forms a part.
</FONT>

<P align="left">
<B><FONT size="2">Registration Rights Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrently with the offering contemplated by
this prospectus, we will enter into a registration rights
agreement with Fortis Insurance N.V. pursuant to which we will
grant to Fortis Insurance N.V. and its affiliates that become
our stockholders (collectively, Fortis Insurance) rights to
request registration under the Securities Act to effect a public
offering with respect to all of the shares of our common stock
owned by them from time to time during the term of the
agreement. The maximum number of shares to be included in any
such public offering will not exceed the maximum number that the
managing underwriter of such public offering considers to be
appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, subject to limited exceptions, if we
propose to register any shares of our common stock, other equity
securities or securities convertible into or exchangeable for
equity securities, whether or not for sale for our own account,
we are required to provide notice to Fortis Insurance, and if
requested by Fortis Insurance, we will include its shares in the
registration statement. The maximum number of shares to be
included in any such public offering will not exceed the maximum
number that the managing underwriter of such public offering
considers to be appropriate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the term of the agreement, Fortis
Insurance will agree not to sell, transfer or hedge any shares
of our common stock or any securities convertible into or
exchangeable for our common stock during the period
ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;days after the
effective date of a registration statement for an underwritten
public offering of any of our equity securities (unless the
underwriters of such offering permit a shorter period).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are obligated to pay all expenses of the
registration and offering of shares in connection with any such
registration, other than underwriting discounts and commissions.
In addition, we will agree to indemnify Fortis Insurance for
damages relating to a material misstatement or omission in any
registration statement or prospectus relating to shares of our
common stock to be sold by Fortis Insurance. Fortis Insurance
will agree to indemnify us, our officers and our directors on
the same basis with respect to material misstatements or
omissions relating to information about Fortis Insurance.
</FONT>

<P align="center"><FONT size="2">148
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Shareholders&#146; Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrently with the offering contemplated by
this prospectus, we will enter into a shareholders&#146;
agreement with Fortis Insurance N.V. The shareholders&#146;
agreement will set forth the following agreements as to
corporate governance matters:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Composition of Board of Directors.
</FONT></I><FONT size="2">Fortis will have the right to nominate
designees to our board of directors and subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i)&nbsp;so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii)&nbsp;so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Upon consummation of the offering
contemplated by this prospectus, three Fortis designees will be
designated as Class&nbsp;II directors and two Fortis designees
will be designated as Class&nbsp;III directors. See
&#147;Description of Share Capital&#151; Shareholders&#146;
Agreement&#151; Composition of Board of Directors&#148; for more
detail on these provisions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Supermajority Voting
Requirement.</FONT></I><FONT size="2"> As long as Fortis owns at
least 50% of our outstanding common stock, we will be required
to have a by-law provision requiring a supermajority of our
directors to approve certain actions, which would require the
approval of two or more Fortis directors. See &#147;Description
of Share Capital&#151; Shareholders&#146; Agreement&#151;
Supermajority Voting Requirement.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Cooperation Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrently with the offering contemplated by
this prospectus, we will enter into a cooperation agreement with
Fortis Insurance N.V., Fortis N.V. and Fortis SA/NV relating to
our separation from Fortis and the ongoing relationship between
the companies, pursuant to which Fortis will grant us rights to
use the Fortis name for various transition periods following the
offering contemplated by this prospectus.
</FONT>

<P align="left">
<B><FONT size="2">SERP Guarantee</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our SERP program provides that if the payments to
a participant or beneficiary will be made over a period of more
than one year and if at the time payments commence we are not
subject to pending proceedings as a debtor under the
U.S.&nbsp;Bankruptcy Code, then Fortis Insurance will guarantee
the payment of SERP benefits to such participant or beneficiary.
The SERP further provides that if Fortis Insurance ceases to be
the beneficial owner of the Company, then such guarantee will be
limited to the actuarially equivalent value of the
participant&#146;s SERP benefit immediately following such
cessation of beneficial ownership.
</FONT>

<P align="left">
<B><FONT size="2">The 1999 Trust Capital Securities and the
Company&#146;s Subordinated Debentures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1999 Trust Capital Securities and the 1999
Subordinated Debentures were issued at the time of the issuance
by (i)&nbsp;Fortis Floating Rate Capital Funding Trust of Euro
400&nbsp;million floating rate noncumulative guaranteed trust
capital securities, (ii)&nbsp;Fortis Fixed Rate Quarterly
Capital Funding Trust of Euro 200&nbsp;million fixed rate
quarterly noncumulative guaranteed trust capital securities and
(iii)&nbsp;Fortis Fixed Rate Annual Capital Funding Trust of
Euro 50&nbsp;million fixed rate annual noncumulative guaranteed
trust capital securities (collectively, the Fortis Trusts and
the Fortis Trust Securities), the common equity of each such
Fortis Trust being owned indirectly by Fortis. The payments we
make on the 1999 Subordinated Debentures and accordingly the
payments made on the 1999 Trust Capital Securities are
ultimately used by Fortis Insurance N.V. and Fortis Capital
Funding LP to make payments on the Fortis Trust Securities. The
payments we make on the 1999 Subordinated Debentures and
therefore on the 1999 Trust Capital Securities exceed the total
payments due by the Fortis Trusts on the Fortis Trust
Securities. In addition, in connection with the Fortis Trust
Securities, we entered into a services agreement pursuant to
which we are obligated to provide legal, accounting, tax and
other general support services, including providing necessary
administrative and record-keeping services for Fortis Capital
Funding LP and the Fortis Trusts for an annual fee of $100,000.
</FONT>

<P align="left">
<B><FONT size="2">Guarantee of Capital Securities</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis has guaranteed certain payments in
connection with our junior subordinated debentures and the
Capital Securities of Fortis Capital Trust and Fortis Capital
Trust&nbsp;II. See &#147;Description of Other Securities.&#148;
</FONT>

<P align="center"><FONT size="2">149
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Commercial Paper Program and Other
Indebtedness</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, Fortis has maintained a
$1&nbsp;billion commercial paper facility that we have been able
to access (via intercompany loans) for up to $750&nbsp;million.
We have used the commercial paper facility to cover any cash
shortfalls, which may occur from time to time. We had no
intercompany loans with Fortis associated with this commercial
paper facility during the year ended December&nbsp;31, 2002. In
2001, $235&nbsp;million in commercial paper was issued and
redeemed by Fortis on our behalf. We had no outstanding
intercompany loans with Fortis related to this commercial paper
facility at year end December&nbsp;31, 2002 and 2001. In
connection with our separation from Fortis, we will no longer
have access to this facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we previously had indebtedness
outstanding in the amount of $225&nbsp;million to Fortis Finance
N.V., which was repaid in April 2001. See
&#147;Management&#146;s Discussion and Analysis of Financial
Condition and Results of Operations.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See &#147;Description of Other Securities&#148;
for a description of our 2000 Trust Capital Securities, which
are owned by Fortis Insurance N.V.
</FONT>

<P align="left">
<B><FONT size="2">Reimbursement of Fortis Liaison
Office</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2003, 2002, 2001 and 2000, we paid
$427,000, $749,000, $516,000 and $0, respectively, to Fortis for
costs representing salary, benefits and other expenses of Arie
Fakkert, a director of the Company, who was then an employee of
one of Fortis&#146; subsidiaries, and his support staff. We
discontinued these payments as of October&nbsp;3, 2003.
</FONT>

<P align="center"><FONT size="2">150
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-U.S. HOLDERS" -->

<P align="center">
<B><FONT size="2">CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following summary describes the material
United States federal income and estate tax consequences of the
ownership of common stock by a Non-U.S.&nbsp;Holder (as defined
below) as of the date hereof. This discussion does not address
all aspects of United States federal income and estate taxes and
does not deal with foreign, state and local consequences that
may be relevant to such Non-U.S.&nbsp;Holders in light of their
personal circumstances. Special rules may apply to certain
Non-U.S.&nbsp;Holders, such as United States expatriates,
&#147;controlled foreign corporations,&#148; &#147;passive
foreign investment companies,&#148; &#147;foreign personal
holding companies,&#148; corporations that accumulate earnings
to avoid United States federal income tax, and investors in
pass-through entities that are subject to special treatment
under the Internal Revenue Code of 1986, as amended (the
&#147;Code&#148;). Such Non-U.S.&nbsp;Holders should consult
their own tax advisors to determine the United States federal,
state and local income and other tax consequences that may be
relevant to them. Furthermore, the discussion below is based
upon the provisions of the Code, and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified, perhaps
retroactively, so as to result in United States federal income
tax consequences different from those discussed below.
<B>Persons considering the purchase, ownership or disposition of
common stock should consult their own tax advisors concerning
the United States federal income tax consequences in light of
their particular situations as well as any consequences arising
under the laws of any other taxing jurisdiction.</B>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As used herein, a &#147;U.S. Holder&#148; of
common stock means a holder that is for United States federal
income tax purposes (i)&nbsp;a citizen or resident of the United
States, (ii)&nbsp;a corporation or partnership created or
organized in or under the laws of the United States or any
political subdivision thereof, (iii)&nbsp;an estate the income
of which is subject to United States federal income taxation
regardless of its source or (iv)&nbsp;a trust if it (X)&nbsp;is
subject to the primary supervision of a court within the United
States and one or more United States persons have the authority
to control all substantial decisions of the trust or
(Y)&nbsp;has a valid election in effect under applicable United
States Treasury regulations to be treated as a United States
person. A &#147;Non-U.S.&nbsp;Holder&#148; is a holder that is
not a U.S.&nbsp;Holder. If a partnership holds the common stock,
the tax treatment of a partner will generally depend upon the
status of the partner and the activities of the partnership.
Persons who are partners of partnerships holding the common
stock should consult their tax advisors.
</FONT>

<P align="left">
<B><FONT size="2">Dividends</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dividends paid to a Non-U.S.&nbsp;Holder of
common stock generally will be subject to withholding of United
States federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a
trade or business by the Non-U.S.&nbsp;Holder within the United
States and, where a tax treaty applies, are attributable to a
United States permanent establishment of the
Non-U.S.&nbsp;Holder, are not subject to the withholding tax,
but instead are subject to United States federal income tax on a
net income basis at applicable graduated individual or corporate
rates. Certain certification and disclosure requirements must be
satisfied for effectively connected income to be exempt from
withholding. Any such effectively connected dividends received
by a foreign corporation may be subject to an additional
&#147;branch profits tax&#148; at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A Non-U.S. Holder of common stock who wishes to
claim the benefit of an applicable income tax treaty rate (and
avoid backup withholding as discussed below) for dividends, will
be required to (a)&nbsp;complete Internal Revenue Service (IRS)
Form&nbsp;W-8BEN (or other applicable form) and certify under
penalties of perjury that such holder is not a United States
person or (b)&nbsp;if the common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
Non-U.S. Holders that are entities rather than individuals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A Non-U.S.&nbsp;Holder of common stock eligible
for a reduced rate of United States withholding tax pursuant to
an income tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the IRS.
</FONT>

<P align="center"><FONT size="2">151
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Gain on Disposition of Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A Non-U.S.&nbsp;Holder generally will not be
subject to United States federal income tax with respect to gain
recognized on a sale or other disposition of common stock unless
(i)&nbsp;the gain is effectively connected with a trade or
business of the Non-U.S.&nbsp;Holder in the United States, and,
where an income tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S.&nbsp;Holder,
(ii)&nbsp;in the case of a Non-U.S.&nbsp;Holder who is an
individual and holds the common stock as a capital asset, such
holder is present in the United States for 183 or more days in
the taxable year of the sale or other disposition and certain
other conditions are met, or (iii)&nbsp;the Company is or has
been a &#147;United States real property holding
corporation&#148; for United States federal income tax purposes.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">An individual Non-U.S. Holder described in clause
(i)&nbsp;above will be subject to tax on the net gain derived
from the sale under regular graduated United States federal
income tax rates. An individual Non-U.S. Holder described in
clause (ii)&nbsp;above will be subject to a flat 30% tax on the
gain derived from the sale, which may be offset by United States
source capital losses (even though the individual is not
considered a resident of the United States). If a
Non-U.S.&nbsp;Holder that is a foreign corporation falls under
clause&nbsp;(i) above, it will be subject to tax on its gain
under regular graduated United States federal income tax rates
and, in addition, may be subject to the branch profits tax equal
to 30% of its effectively connected earnings and profits or at
such lower rate as may be specified by an applicable income tax
treaty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company believes it is not and does not
anticipate becoming a &#147;United States real property holding
corporation&#148; for United States federal income tax purposes.
</FONT>

<P align="left">
<B><FONT size="2">Federal Estate Tax</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Common stock held by an individual Non-U.S.
Holder at the time of death will be included in such
holder&#146;s gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
</FONT>

<P align="left">
<B><FONT size="2">Information Reporting and Backup
Withholding</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company must report annually to the IRS and
to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends,
regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in
which the Non-U.S.&nbsp;Holder resides under the provisions of
an applicable income tax treaty. A Non-U.S.&nbsp;Holder will be
subject to backup withholding on dividends paid to such holder
unless applicable certification requirements are met.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information reporting and, depending on the
circumstances, backup withholding, will apply to the proceeds of
a sale of common stock within the United States or conducted
through United States-related financial intermediaries unless
the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder (and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person) or the holder otherwise establishes an
exemption.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against such
holder&#146;s United States federal income tax liability
provided the required information is furnished to the IRS.
</FONT>

<P align="center"><FONT size="2">152
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "DESCRIPTION OF SHARE CAPITAL" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF SHARE CAPITAL</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation authorizes
capital stock consisting of 80,000,000 shares of common stock,
par value $.01 per share, and 20,000,000 shares of preferred
stock, par value $1.00 per share. Our board of directors has
designated a portion of our common stock as Class&nbsp;B Common
Stock and a portion as Class&nbsp;C Common Stock. The following
summary of the terms and provisions of our capital stock does
not purport to be complete and is qualified in its entirety by
reference to our certificate of incorporation and by-laws,
copies of which will be filed as exhibits to the Registration
Statement on Form&nbsp;S-1 of which this prospectus is a part,
and applicable law. As of October&nbsp;1, 2003, the following
shares were outstanding: 7,750,000 shares of Common Stock;
150,001 shares of Class&nbsp;B Common Stock; 400,001 shares of
Class&nbsp;C Common Stock; 19,160 shares of Series&nbsp;B
Preferred Stock; and 5,000 shares of Series&nbsp;C Preferred
Stock. As of October&nbsp;1, 2003, we had three common
stockholders of record.
</FONT>

<P align="left">
<B><FONT size="2">Common Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">General.</FONT></I></B><FONT size="2"> All
outstanding shares of common stock are, and all shares of common
stock to be outstanding upon completion of the offering will be,
fully-paid and nonassessable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Dividends.</FONT></I></B><FONT size="2">
Subject to any preferential rights of any outstanding series of
preferred stock that our board of directors may create from time
to time or of our Class&nbsp;B or Class&nbsp;C Common Stock, the
holders of our Common Stock will be entitled to dividends as may
be declared from time to time by the board of directors from
funds available therefor. Our board of directors does not
currently intend to pay dividends to holders of our Common
Stock. See &#147;Dividend Policy&#148; and
&#147;Regulation.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Voting
Rights.</FONT></I></B><FONT size="2"> Each share of Common Stock
entitles the holder thereof to one vote on all matters,
including the election of directors, and, except as otherwise
required by law or provided in any resolution adopted by our
board of directors with respect to any series of preferred stock
and our Class&nbsp;B or Class&nbsp;C Common Stock, the holders
of the shares of our Common Stock will possess all voting power.
The holders of our Series&nbsp;B and Series&nbsp;C Preferred
Stock are entitled to vote on all matters as a single class with
the holders of our Common Stock. Our certificate of
incorporation does not provide for cumulative voting in the
election of directors. Generally, all matters to be voted on by
the stockholders must be approved by a majority, or, in the case
of the election of directors, by a plurality, of the votes cast,
subject to state law and any voting rights granted to any of the
holders of preferred stock and our Class&nbsp;B or Class&nbsp;C
Common Stock. Notwithstanding the foregoing, approval of the
following matters requires the vote of holders of at least
two-thirds of our outstanding capital stock entitled to vote in
the election of directors:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">altering, amending, repealing or adopting of
    certain provisions of our certificate of incorporation or
    by-laws by the stockholders, including amendments to the
    provisions governing the classified board, the approval of
    mergers and the liability of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">removing directors (which is permitted for cause
    only);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">effecting any merger or consolidation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">selling all or substantially all of our assets;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">amending of any of the super-majority voting
    provisions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">See &#147;&#151;Shareholders&#146;
Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Preemptive
Rights.</FONT></I></B><FONT size="2"> The holders of Common
Stock do not have any preemptive rights. There are no
subscription, redemption, conversion or sinking fund provisions
with respect to the Common Stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Liquidation
Rights.</FONT></I></B><FONT size="2"> Upon dissolution,
liquidation or winding-up of Assurant, Inc., subject to the
rights of holders of any preferred stock and our Class&nbsp;B or
Class&nbsp;C Common Stock outstanding or any other class or
series of stock having preferential rights, the holders of
Common Stock will be entitled to receive our assets available
for distribution proportionate to their pro rata ownership of
the outstanding shares of Common Stock.
</FONT>

<P align="center"><FONT size="2">153
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">
<B><FONT size="2">Class&nbsp;B and Class&nbsp;C Common
Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">General.
</FONT></I></B><FONT size="2">Shares of our Class&nbsp;B and
Class&nbsp;C Common Stock rank senior to our common stock with
respect to the payment of dividends at the indicative rates for
those shares (described below for those shares) and with respect
to the payment of liquidation amounts upon the liquidation,
dissolution or winding up of Assurant, Inc. In all other
respects, shares of our Class&nbsp;B and Class&nbsp;C Common
Stock rank <I>pari passu </I>with our common stock and
participate equally with our common stock with respect to
dividends and other distributions paid by us and with respect to
any amounts payable upon our liquidation, dissolution or winding
up. The Class&nbsp;B and Class&nbsp;C Common Stock rank junior
in all respects to our Series&nbsp;B and Series&nbsp;C Preferred
Stock. We may not issue any further class or series of equity
securities ranking senior to or <I>pari passu </I>with our
Class&nbsp;B and Class&nbsp;C Common Stock with respect to
dividends and other distributions paid by us or with respect to
any amounts payable upon our liquidation, dissolution or winding
up, without the prior consent of the holders of not less than a
majority of the outstanding Class&nbsp;B and Class&nbsp;C Common
Stock, except that we may issue additional Class&nbsp;B or
Class&nbsp;C Common Stock and other equity securities that rank
<I>pari passu </I>with the Class&nbsp;B and Class&nbsp;C Common
Stock without such consent if we have paid in full each of the
last four dividends at the indicated rate on their respective
dividend payment dates.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The holders of the Class&nbsp;B and Class&nbsp;C
Common Stock have no preemptive rights with respect to any other
securities of Assurant, Inc. and the Class&nbsp;B and
Class&nbsp;C Common Stock are not convertible into any other
securities of Assurant, Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Dividends.</FONT></I></B><FONT size="2"><I>
</I>Cash dividends on the Class&nbsp;B and Class&nbsp;C Common
Stock are payable in arrears on a non-cumulative basis out of
available cash when, as and if declared by our board of
directors, on each dividend date, in such amounts as may be
declared by our board of directors. Our board of directors has
authorized the payment of (1)&nbsp;dividends semi-annually on
our Class&nbsp;B Common Stock in the amount of $37.502 per share
and (2)&nbsp;dividends semi-annually on our Class&nbsp;C Common
Stock in the amount of $38.505 per share. The indicative rate
for the Class&nbsp;B Common Stock is currently 7.48% and after
March&nbsp;1, 2005, will be a variable rate of six-month LIBOR
plus 1.10%, reset semi-annually. The indicative rate for the
Class&nbsp;C Common Stock is currently 7.684% per annum and
after March&nbsp;1, 2010, will be a variable rate of six-month
LIBOR plus 1.25%, reset semi-annually. When dividends are paid
on the Class&nbsp;B or C Common Stock at less than the
applicable indicative rate, all dividends declared on the
Class&nbsp;B and Class&nbsp;C Common Stock will be paid <I>pro
rata.</I>
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No cash dividend or other distribution may be
declared or paid or set apart for payment on any shares of our
common stock or any other junior shares, and neither we nor any
of our affiliates may purchase or redeem for cash any
outstanding shares of common stock or any other junior shares,
unless (i)&nbsp;full dividends have been declared and paid or
set apart for payment on the shares of the Class&nbsp;B and
Class&nbsp;C Common Stock in an amount at least equal to the
greater of (A)&nbsp;the dividends payable during such dividend
period at the indicative rate for such Class&nbsp;B or
Class&nbsp;C Common Stock or (B)&nbsp;the dividends paid by us
on the corresponding number of shares of common stock and other
junior shares during such dividend period (treating any cash
payment in connection with a purchase or redemption of common
stock or junior shares by us as a cash dividend), (ii)&nbsp;the
Fortis (US)&nbsp;Funding Partners LPs have paid the full amount
of payments on the securities issued by them (the Preference
Securities) for the current Preference Securities payment period
and (iii)&nbsp;such repurchase or redemption does not cause our
net worth to be less than $1.6&nbsp;billion. If a dividend is
paid on the shares of Class&nbsp;B or C Common Stock during any
dividend period at a rate less than the indicative rate for such
Class&nbsp;B or Class&nbsp;C Common Stock, we may not make any
dividend payments on any shares of common stock or other junior
shares and may only make dividend payments on our other
securities that rank <I>pari passu </I>with the Class&nbsp;B and
Class&nbsp;C Common Stock, if any, in the same proportion as the
partial dividend paid on the Class B and Class&nbsp;C Common
Stock for the current dividend period bears to the full dividend
payment determined for such dividend period at the indicative
rate for such Class&nbsp;B and Class&nbsp;C Common Stock. The
corresponding number of junior shares is currently
2.2996&nbsp;shares of common stock. For so long as the
Preference Securities are outstanding, if a partial Preference
Securities payment is made for any Preference Securities payment
period, we may not make any dividend payments on our common
stock or other junior shares and may only make dividend payments
on our other securities ranking <I>pari passu </I>with the
corresponding Class&nbsp;B and Class&nbsp;C Common Stock in the
same proportion as the lesser of (i)&nbsp;the proportion the
partial Preference
</FONT>

<P align="center"><FONT size="2">154
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Securities payment made for the current
Preference Securities payment period bears to the full
Preference Securities payment determined for such Preference
Securities payment period and (ii)&nbsp;the proportion the
partial dividend paid on the Class&nbsp;B and Class&nbsp;C
Common Stock for the corresponding dividend period bears to the
full dividend payment determined for such dividend period at the
applicable indicative rate.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we will not purchase or redeem any
common stock or other junior shares if such purchase or
redemption would cause our net worth, as of the last day of the
most recently ended fiscal quarter and after giving effect to
such purchase or redemption, to be less than $1.6&nbsp;billion,
subject to adjustment for issuances and redemptions of
Class&nbsp;B or Class&nbsp;C Common Stock or other <I>pari passu
</I>securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">To the extent that dividends paid with respect to
the Class&nbsp;B and Class&nbsp;C Common Stock exceed our
earnings and profits as calculated for U.S. federal income tax
purposes, they will not constitute dividends for U.S. federal
income tax purposes and will not qualify for the
dividends-received deduction. In such event, we must make
additional distributions to place each holder of the
Class&nbsp;B and Class&nbsp;C Common Stock in the same position
it would have been in if all dividends from us were paid from
such earnings and profits, assuming for these purposes that such
holder was eligible for the dividends-received deduction.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Voting Rights.
</FONT></I></B><FONT size="2">As long as any Class&nbsp;B and
Class&nbsp;C Common Stock is owned by the applicable Fortis
(US)&nbsp;Funding Partners LP, the holders of such Class&nbsp;B
or Class&nbsp;C Common Stock will be entitled to one vote per
share and will be entitled to vote with our common stock as a
single class on all matters submitted to a vote of our common
stock (other than those matters affecting only our common
stock). The holders of the Class&nbsp;B and Class&nbsp;C Common
Stock will be entitled to vote separately as a single class on
certain matters affecting the Class&nbsp;B and Class&nbsp;C
Common Stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Whenever dividends on the Class&nbsp;B or
Class&nbsp;C Common Stock are in arrears for five or more
consecutive dividend periods, the holders of those shares,
voting as a single class, will be entitled, subject to any
necessary regulatory actions, to elect two special independent
directors to our board of directors at a special meeting called
by the holders of record of at least 25% of the Class&nbsp;B or
Class&nbsp;C Common Stock, as applicable. The special
independent directors will vacate office if dividends are
resumed and are paid regularly for at least two consecutive
dividend periods.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Redemption.
</FONT></I></B><FONT size="2">Shares of the Class&nbsp;B and
Class&nbsp;C Common Stock are not subject to mandatory
redemption at any time and, prior to March&nbsp;1, 2030, are not
subject to optional redemption. On or after March&nbsp;1, 2030,
shares of Class&nbsp;B and Class&nbsp;C Common Stock may be
redeemed at our option at any time, in whole but not in part, at
their fair market value as determined by a nationally recognized
investment bank.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Liquidation Rights.
</FONT></I></B><FONT size="2">Upon any voluntary or involuntary
dissolution, liquidation or winding up of Assurant, Inc., after
payment or provision for our liabilities and the expenses of
such dissolution, liquidation or winding up, the holders of the
outstanding Class&nbsp;B and Class&nbsp;C Common Stock will be
entitled to receive out of our assets or proceeds thereof
available for distribution to holders of Class&nbsp;B and
Class&nbsp;C Common Stock, before any payment or distribution of
assets is made to holders of common stock or any other junior
shares, the applicable liquidation amount, which is generally
$1,000 per share or the amount that would be payable on the
corresponding number of junior shares, whichever is greater.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<B><I><FONT size="2">Merger, Consolidation or Amalgamation of
Assurant, Inc. </FONT></I></B><FONT size="2">So long as the
Class&nbsp;B and Class&nbsp;C Common Stock remain outstanding,
we may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease our properties and
assets substantially as an entirety to, any corporation or other
entity, except that we may, with the consent of at least one of
the special independent directors, if any, on our board of
directors at the time the issue is considered and without the
consent of the holders of the Class&nbsp;B and Class&nbsp;C
Common Stock, consolidate, amalgamate, merge with or into, or be
replaced by a corporation organized as such under the laws of
any state of the United States provided that specified
conditions are met.
</FONT>

<P align="left">
<B><FONT size="2">Preferred Stock</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our board of directors has the authority, without
further action of our stockholders, to issue up to 20,000,000
shares of preferred stock, par value $1.00 per share, in one or
more series and to fix the powers, preferences, rights and
qualifications, limitations or restrictions thereof, which may
include dividend rights,
</FONT>

<P align="center"><FONT size="2">155
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares
constituting any series or the designations of the series. The
issuance of preferred stock could adversely affect the holders
of common stock. The potential issuance of preferred stock may
discourage bids for our common stock at a premium over the
market price of our common stock, may adversely affect the
market price of our common stock and may discourage, delay or
prevent a change of control of Assurant, Inc.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We currently have Series&nbsp;B Preferred Stock
consisting of 30,000 designated shares, 19,160 of which are
outstanding, and Series&nbsp;C Preferred Stock consisting of
5,000 designated shares, all of which are outstanding. All of
such shares have a liquidation price of $1,000 per share and
rank senior to our common stock and the Class&nbsp;B and
Class&nbsp;C Common Stock with respect to right to receive
dividends and to receive distributions upon the liquidation,
dissolution or winding up of Assurant, Inc. Holders of the
Series&nbsp;B Preferred Stock are entitled to receive cumulative
dividends at the rate of 4.0% per share per annum, multiplied by
the $1,000 liquidation price, and holders of the Series&nbsp;C
Preferred Stock are entitled to receive dividends at the rate of
4.5% per share per annum multiplied by the $1,000 liquidation
price. All dividends are payable in arrears on a quarterly
basis. Any dividend that is not paid on a specified dividend
payment date with respect to a share of such Preferred Stock
shall be deemed added to the liquidation price of such share for
purposes of computing the future dividends on such share, until
such delinquent dividend has been paid.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of the Series&nbsp;B Preferred Stock may
elect to have any or all of their shares redeemed by us at any
time after April&nbsp;1, 2002, and we must redeem all shares of
the Series&nbsp;B Preferred Stock no later than July&nbsp;1,
2017. Holders of the Series&nbsp;C Preferred Stock may elect to
have any or all of their shares redeemed by us any time after
April&nbsp;1, 2022, and we must redeem all shares of the
Series&nbsp;C Preferred Stock no later than July&nbsp;1, 2027.
We also have the right and the obligation to redeem the
Series&nbsp;B Preferred Stock and Series&nbsp;C Preferred Stock
upon the occurrence of certain specified events. The redemption
price in all cases shall equal the $1,000 per share liquidation
price plus all accumulated and unpaid dividends. We are not
required to establish any sinking fund or similar funds with
respect to such redemptions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">None of the shares of Series&nbsp;B Preferred
Stock or Series&nbsp;C Preferred Stock is convertible into
common stock or any other equity security of Assurant, Inc.
However, holders of the Series&nbsp;B Preferred Stock and
Series&nbsp;C Preferred Stock are entitled to one vote per share
owned of record on all matters voted upon by Assurant, Inc.
stockholders, voting with the holders of common stock as a
single class, and not as a separate class or classes. The shares
of Series&nbsp;B Preferred Stock and Series&nbsp;C Preferred
Stock are subject to certain restrictions on transferability,
and we have a right of first refusal to acquire the shares if
any holder thereof desires to make a transfer not otherwise
permitted by the terms thereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have no current plans to issue any additional
shares of preferred stock.
</FONT>

<P align="left">
<B><FONT size="2">Anti-takeover Effects of Certain Provisions of
the Certificate of Incorporation, By-Laws and Delaware General
Corporation Law</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provisions of the Delaware General
Corporation Law and our certificate of incorporation and by-laws
summarized below may have the effect of discouraging, delaying
or preventing hostile takeovers, including those that might
result in a premium being paid over the market price of our
common stock, and discouraging, delaying or preventing changes
in control or management of our Company.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Certificate of Incorporation and
    By-Laws</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation, which provides
for the issuance of preferred stock, may have the effect of
delaying, deferring or preventing a change in control of our
Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of
common stock. Our certificate of incorporation provides that the
approval of certain matters requires the vote of the holders of
at least two-thirds of our outstanding capital stock entitled to
vote in the election of directors. Further, our certificate of
incorporation requires that any action required or permitted to
be taken by our stockholders must be effected at a duly called
annual or special meeting of our stockholders and may not be
effected by a consent in writing. Special meetings of our
stockholders may be called only by our Chief Executive Officer
or by our board of directors pursuant to a resolution approved
by the board of directors. In addition, our by-laws
</FONT>

<P align="center"><FONT size="2">156
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for
election as directors. These provisions may have the effect of
delaying, deferring or preventing a change in control.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Super-Majority Voting
Provision.</FONT></I><FONT size="2"> Our certificate of
incorporation requires the affirmative vote of the holders of at
least two-thirds of the voting power of the common stock for
approval of the following actions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">altering, amending, repealing or adopting certain
    provisions of our certificate of incorporation or our by-laws,
    including amendments to the provisions governing the classified
    board, the approval of mergers and the liability of directors;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">removing directors (which is permitted for cause
    only);
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">effecting any merger or consolidation;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">selling all or substantially all of our assets;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any amendment of the super-majority voting
    provision.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the shareholders&#146; agreement we
will enter into with Fortis will give Fortis the right to
nominate designees to our board of directors and, subject to
limited exceptions, our board of directors will nominate those
designees as follows: (i)&nbsp;so long as Fortis owns at least
50% of our outstanding common stock, five designees and,
(ii)&nbsp;so long as Fortis owns less than 50% but at least 10%
of our outstanding common stock, two designees. In addition, as
long as Fortis holds 50% or more of our outstanding common
stock, certain significant corporate actions cannot be taken
without the approval of a supermajority of our board of
directors, which will require approval of two or more Fortis
board designees. These actions include those listed under
&#147;&#151; Shareholders&#146; Agreement&#151; Supermajority
Voting Requirement.&#148; These voting requirements could have
the effect of delaying, deferring or preventing such
transactions.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Classified Board of
Directors.</FONT></I><FONT size="2"> Our board of directors will
be divided into three classes, with the members of each class
serving for staggered three-year terms. As a result, only one
class of directors will be elected at each annual meeting of
stockholders, with the other classes continuing for the
remainder of their respective three-year terms. Stockholders
have no cumulative voting rights, and a plurality of the
stockholders are able to elect all of the directors. The
classification of the directors and lack of cumulative voting
will have the effect of making it more difficult not only for
another party to obtain control of our Company by replacing our
board of directors, but also for our existing stockholders to
force an immediate change in the composition of our board of
directors. Since our board of directors has the power to retain
and discharge our officers, these provisions could also make it
more difficult for existing stockholders or another party to
effect a change in management. In addition, pursuant to the
shareholders&#146; agreement we will enter into with Fortis
Insurance N.V., three of the Fortis director designees will be
designated as Class&nbsp;II directors, and two of the Fortis
director designees will be designated as Class&nbsp;III
directors. See &#147;&#151;Shareholders&#146; Agreement.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The anti-takeover and other provisions of our
certificate of incorporation and by-laws could discourage
potential acquisition proposals and could delay or prevent a
change in control. These provisions are intended to enhance the
likelihood or continuity and stability in the composition of the
board of directors and in the policies formulated by the board
of directors and to discourage certain types of transactions
that may involve an actual or threatened change of control.
These provisions are designed to reduce our vulnerability to an
unsolicited acquisition proposal. The provisions also are
intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of
discouraging others from making tender offers for our shares
and, as a consequence, they also may inhibit fluctuations in the
market price of our shares that could result from actual or
rumored takeover attempts. Such provisions also may have the
effect of preventing changes in our management.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Delaware General Corporation
    Law</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We are subject to Section&nbsp;203 of the
Delaware General Corporation Law, which we refer to as
&#147;Section&nbsp;203.&#148; In general, Section&nbsp;203
prevents a person who owns 15% or more of our outstanding voting
stock, an &#147;interested stockholder,&#148; from engaging in
some business combinations, as described below, with us
</FONT>

<P align="center"><FONT size="2">157
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">for three years following the time that that
person becomes an interested stockholder unless one of the
following occurs:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the board of directors either approves the
    business combination or the transaction in which the person
    became an interested stockholder before that person became an
    interested stockholder;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">upon consummation of the transaction which
    resulted in the person becoming an interested stockholder, the
    interested stockholder owned at least 85% of our voting stock
    outstanding at the time the transaction commenced, excluding
    stock held by:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">-</FONT></TD>
    <TD align="left">
    <FONT size="2">directors who are also officers of our Company;
    and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">-</FONT></TD>
    <TD align="left">
    <FONT size="2">employee stock plans that do not provide
    employees with the right to determine confidentiality whether
    shares held subject to the plan will be tendered in a tender or
    exchange offer; or
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">at or subsequent to the time that the transaction
    in which the person became an interested stockholder, the
    business combination is:
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="4%"></TD>
    <TD width="91%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">-</FONT></TD>
    <TD align="left">
    <FONT size="2">approved by the board of directors; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">-</FONT></TD>
    <TD align="left">
    <FONT size="2">authorized at a meeting of stockholders by the
    affirmative vote of the holders of at least two-thirds of our
    outstanding voting stock which is not owned by the interest
    stockholder.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For purposes of Section&nbsp;203, the term
&#147;business combinations&#148; includes mergers,
consolidations, asset sales or other transactions that result in
a financial benefit to the interested stockholder and
transactions that would increase the interested
stockholder&#146;s proportionate share ownership of our Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under some circumstances, Section&nbsp;203 makes
it more difficult for an interested stockholder to effect
various business combinations with us for a period of three
years after the stockholder becomes an interested stockholder.
Although our stockholders have the right to exclude us from the
restrictions imposed by Section&nbsp;203, they have not done so.
Section&nbsp;203 may encourage companies interested in acquiring
us to negotiate in advance with the board of directors, because
the requirement stated above regarding stockholder approval
would be avoided if a majority of the directors approves, prior
to the time the party became an interested stockholder, either
the business combination or the transaction which results in the
stockholder becoming an interested stockholder.
</FONT>

<P align="left">
<B><FONT size="2">Shareholders&#146; Agreement</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrently with the offering contemplated by
this prospectus, we will enter into a shareholders&#146;
agreement with Fortis Insurance N.V. The shareholders&#146;
agreement will set forth the following agreements as to
corporate governance matters:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Composition of Board of Directors.
</FONT></I><FONT size="2">Fortis has the right to nominate
designees to our board of directors and, subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i)&nbsp;so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii)&nbsp;so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Upon consummation of the offering
contemplated by this prospectus, three Fortis designees will be
designated as Class&nbsp;II directors and two Fortis designees
will be designated as Class&nbsp;III directors. If a vacancy in
a Fortis director slot occurs, subject to limited exceptions,
those vacancies will be filled with a person nominated by
Fortis. We will agree to use our best efforts to cause each
person designated by Fortis pursuant to the shareholders&#146;
agreement to be nominated to our board of directors.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<I><FONT size="2">Supermajority Voting
Requirement.</FONT></I><FONT size="2"> As long as Fortis owns at
least 50% of our outstanding common stock, we will be required
to have a by-law provision requiring a supermajority of our
directors to approve certain actions, which would require the
approval of two or more Fortis directors. These actions include:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any reorganization, recapitalization,
    reclassification or combination of any our securities or any of
    those of our principal subsidiaries;
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">158
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any liquidation, dissolution, winding up or
    commencement of voluntary bankruptcy or insolvency proceedings
    with respect to us or our principal subsidiaries;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any acquisition or disposition with a value in
    excess of $500 million;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the incurrence or assumption of indebtedness
    resulting in total indebtedness in excess of $1.5&nbsp;billion
    on a consolidated basis; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">any offer or sale of shares of our common stock,
    other equity securities or securities convertible into or
    exchangeable into our equity securities in excess of 10% of the
    common stock outstanding or such amounts as would reduce
    Fortis&#146; ownership to below 50% of our outstanding common
    stock.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<B><FONT size="2">Registration Rights</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Concurrently with the offering contemplated by
this prospectus, we will grant Fortis Insurance N.V. and its
affiliates certain demand and piggyback registration rights with
respect to all of the shares of our common stock owned by them.
Pursuant to this registration rights agreement, after completion
of this offering, Fortis will have the right to require us to
register its shares of our common stock under the Securities Act
for sale into the public markets, subject to the 180-day lock-up
agreements. See &#147;Underwriting&#148; and &#147;Certain
Relationships and Related Transactions&#151; Registration Rights
Agreement.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Listing</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to have our common stock
listed on the New York Stock Exchange under the trading symbol
&#147;AIZ.&#148;
</FONT>

<P align="left">
<B><FONT size="2">Transfer Agent and Registrar</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The transfer agent and registrar for our common
stock will be Mellon Investor Services LLC, 85&nbsp;Challenger
Road, Overpeck Centre, Ridgefield Park, New Jersey 07660.
</FONT>

<P align="center"><FONT size="2">159
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "DESCRIPTION OF OTHER SECURITIES" -->

<P align="center">
<B><FONT size="2">DESCRIPTION OF OTHER SECURITIES</FONT></B>

<P align="left">
<B><FONT size="2">2000 Trust Capital Securities and Subordinated
Debentures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, two of our subsidiary trusts,
Fortis Capital Proceeds Trust&nbsp;2000-1 and Fortis Capital
Proceeds Trust&nbsp;2000-2, issued 150,000 8.48% and 400,000
8.40% trust capital securities (collectively, the 2000 Trust
Capital Securities), respectively, to Fortis Insurance&nbsp;N.V.
(formerly, Fortis Insurance Holding&nbsp;N.V.), in each case
with a liquidation amount of $1,000 per security.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis Capital Proceeds Trust&nbsp;2000-1 and
Fortis Capital Proceeds Trust&nbsp;2000-2 used the proceeds from
the sale of the applicable 2000 Trust Capital Securities and
trust common securities to purchase $150,001,000 and
$400,001,000, respectively, of our 8.48% and 8.40% subordinated
debentures due 2030 (collectively, the 2000 Subordinated
Debentures), respectively. These debentures are the sole assets
of the trusts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments we make on the applicable 2000
Subordinated Debentures are the sole source of funds available
for the applicable trust to make the distributions on the
applicable 2000 Trust Capital Securities. Interest on the 2000
Subordinated Debentures is payable semi-annually, except we have
the right to extend the interest payment period under the
applicable 2000 Subordinated Debentures for up to ten
consecutive semi-annual periods, during which periods interest
will compound semi-annually. Distributions on the 2000 Trust
Capital Securities are cumulative and payable semi-annually,
except distributions are deferrable to the extent we exercise
our right described in the preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2000 Subordinated Debentures restrict our
ability to (i)&nbsp;declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of our capital stock, (ii)&nbsp;make
any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any of our debt securities that
rank pari passu with or junior in right of payment to the
applicable 2000 Subordinated Debentures or (iii)&nbsp;make any
guarantee payments with respect to any guarantee by us of any
securities of any subsidiary of ours if such guarantee ranks
pari passu or junior in right of payment to the applicable 2000
Subordinated Debentures, if at any time (1)&nbsp;any 2000
Subordinated Debentures are held by Fortis Capital Proceeds
Trust&nbsp;2000-1 or 2, as applicable, and there shall have
occurred and be continuing an event of default under the
declaration of trust of Fortis Capital Proceeds
Trust&nbsp;2000-1 or 2, as applicable, (2)&nbsp;there shall have
occurred and be continuing an event of default under the
applicable indenture pursuant to which the applicable 2000
Subordinated Debentures were issued or (3)&nbsp;we shall have
given notice of our election to extend the interest payment
period under the applicable 2000 Subordinated Debentures as
described above and we shall not have rescinded such notice, and
such extension period has commenced and is continuing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On or after April&nbsp;2005 and April&nbsp;2010,
respectively, we have the right to redeem the applicable 2000
Subordinated Debentures, in each case at a redemption price
equal to 100% of the principal amount, plus accrued and unpaid
interest. The 2000 Trust Capital Securities are mandatorily
redeemable upon the maturity of the applicable 2000 Subordinated
Debentures in March&nbsp;2030 or such earlier date as the
applicable 2000 Subordinated Debentures may be redeemed. On
April&nbsp;1, 2005 and April&nbsp;1, 2010, Fortis Insurance
N.V., as holder of the 2000 Trust Capital Securities, has the
right to require Fortis Capital Proceeds Trust&nbsp;2000-1
and&nbsp;2, respectively, to repurchase all (but not less than
all) of Fortis Insurance N.V.&#146;s applicable 2000 Trust
Capital Securities at a purchase price equal to 100% of the
liquidation amount of the applicable 2000 Trust Capital
Securities plus an amount equal to accumulated and unpaid
distributions, in which case we would be required to repurchase
all the applicable 2000 Subordinated Debentures at a repurchase
price equal to the principal amount, plus accrued and unpaid
interest.
</FONT>

<P align="left">
<B><FONT size="2">1999 Trust Capital Securities and Subordinated
Debentures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 1999, two of our subsidiary trusts, 1999
Fortis Capital Trust&nbsp;I and 1999 Fortis Capital
Trust&nbsp;II, issued 200,000 7.60% and 499,850 7.876% trust
capital securities (collectively, the 1999 Trust Capital
Securities), respectively, to Fortis Capital Funding&nbsp;LP and
Fortis Insurance N.V. (formerly, Fortis Insurance Holding N.V.),
respectively in each case with a liquidation amount of $1,000
per security.
</FONT>

<P align="center"><FONT size="2">160
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1999 Fortis Capital Trust&nbsp;I and 1999 Fortis
Capital Trust&nbsp;II used the proceeds from the sale of the
applicable 1999 Trust Capital Securities and trust common
securities to purchase $200,001,000 and $499,851,000,
respectively, of our 7.60% and 7.876% subordinated debentures
due 2029 (collectively, the 1999 Subordinated Debentures),
respectively. These debentures are the sole assets of the trusts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments we make on the applicable 1999
Subordinated Debentures are the sole source of funds available
for the applicable trust to make the distributions on the
applicable 1999 Trust Capital Securities. Interest on the 1999
Subordinated Debentures is payable quarterly, except we have the
right to extend the interest payment period under the applicable
1999 Subordinated Debentures for up to twenty consecutive
quarterly periods, during which periods interest will compound
quarterly. Distributions on the 1999 Trust Capital Securities
are cumulative and payable quarterly, except distributions are
deferrable to the extent we exercise our right described in the
preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1999 Subordinated Debentures restrict our
ability to (i)&nbsp;declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of our capital stock, (ii)&nbsp;make
any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any of our debt securities that
rank pari passu with or junior in right of payment to the
applicable 1999 Subordinated Debentures or (iii)&nbsp;make any
guarantee payments with respect to any guarantee by us of any
securities of any subsidiary of ours if such guarantee ranks
pari passu or junior in right of payment to the applicable 1999
Subordinated Debentures, if at any time (1)&nbsp;any 1999
Subordinated Debentures are held by 1999 Fortis Capital Trust I
or II, as applicable, and there shall have occurred and be
continuing an event of default under the declaration of trust of
1999 Fortis Capital Trust I or II, as applicable, (2)&nbsp;there
shall have occurred and be continuing an event of default under
the applicable indenture pursuant to which the applicable 1999
Subordinated Debentures were issued or (3)&nbsp;we shall have
given notice of our election to extend the interest payment
period under the 1999 Subordinated Debentures as described above
and we shall not have rescinded such notice, and such extension
period has commenced and is continuing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;30, 2009 or any interest payment
date thereafter, we have the right to redeem the 1999
Subordinated Debentures at a redemption price equal to 100% of
the principal amount or the principal amount multiplied by a
percentage that ranges from 103.8% to 100.0%, depending on the
year of redemption and depending on the series, plus accrued and
unpaid interest. The 1999 Trust Capital Securities are
mandatorily redeemable upon the maturity of the applicable 1999
Subordinated Debentures in April&nbsp;2029 or such earlier date
as the applicable 1999 Subordinated Debentures may be redeemed.
</FONT>

<P align="left">
<B><FONT size="2">1997 Capital Securities and Junior
Subordinated Debentures</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 1997, Fortis Capital Trust, a subsidiary
trust of ours, issued 150,000 8.40% capital securities (the 1997
Capital Securities&nbsp;I) to purchasers and 4,640 8.40% common
securities (the 1997 Common Securities&nbsp;I) to us, in each
case with a liquidation amount of $1,000 per security. Fortis
Capital Trust used the proceeds from the sale of the 1997
Capital Securities&nbsp;I and the 1997 Common Securities&nbsp;I
to purchase $154,640,000 of our 8.40% junior subordinated
debentures due 2027 (the 1997 Junior Subordinated
Debentures&nbsp;I). These debentures are the sole assets of
Fortis Capital Trust.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July 1997, Fortis Capital Trust&nbsp;II, a
subsidiary trust of ours, issued 50,000 7.94% capital securities
(the 1997 Capital Securities&nbsp;II and, together with the 1997
Capital Securities&nbsp;I, the 1997 Capital Securities) to
purchasers and 1,547 7.94% common securities (the 1997 Common
Securities&nbsp;II and, together with the 1997&nbsp;Common
Securities I, the&nbsp;1997 Common Securities) to us, in each
case with a liquidation amount of $1,000 per security. Fortis
Capital Trust&nbsp;II used the proceeds from the sale of the
1997 Capital Securities&nbsp;II and the 1997 Common
Securities&nbsp;II to purchase $51,547,000 of our 7.94% junior
subordinated debentures due 2027 (the 1997 Junior Subordinated
Debentures&nbsp;II and, together with the 1997 Junior
Subordinated Debentures&nbsp;I, the 1997 Junior Subordinated
Debentures). These debentures are the sole assets of Fortis
Capital Trust&nbsp;II.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to each of Fortis Capital Trust and
Fortis Capital Trust&nbsp;II, we, Fortis SA/ NV and
Fortis&nbsp;N.V. entered into a junior subordinated guarantee of
the distributions and payments on the liquidation and redemption
of the 1997 Capital Securities&nbsp;I and the 1997 Capital
Securities&nbsp;II, respectively, but only to
</FONT>

<P align="center"><FONT size="2">161
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">the extent the funds are held by Fortis Capital
Trust and Fortis Capital Trust&nbsp;II, respectively. Fortis SA/
NV and Fortis&nbsp;N.V. also entered into a junior subordinated
guarantee of the payment of the principal, premium, if any, and
interest on the 1997 Junior Subordinated Debentures. The 1997
Junior Subordinated Debentures and the guarantees are unsecured,
junior subordinated obligations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments we or the guarantors make on the
applicable 1997 Junior Subordinated Debentures are the sole
source of funds available for the applicable trust to make the
distributions on the applicable 1997 Capital Securities.
Interest on the 1997 Junior Subordinated Debentures is payable
semi-annually, except we, so long as no event of default has
occurred or is continuing and with the consent of the
guarantors, may exercise our right to defer payment on the 1997
Junior Subordinated Debentures for up to ten consecutive
semi-annual periods, during which periods interest will compound
semi-annually. Distributions on the 1997 Capital Securities are
cumulative and payable semi-annually, except distributions are
deferrable to the extent we exercise our right described in the
preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Junior Subordinated Debentures&nbsp;I
and the 1997 Junior Subordinated Debentures&nbsp;II each
restrict our and the guarantors&#146; ability to:
(i)&nbsp;declare or pay any dividends on or distributions on or
redeem, purchase, acquire or make a liquidation payment on any
of the capital stock of ours or such guarantor, (ii)&nbsp;make
any payment of principal, premium, if any, or interest on or
repay, redeem or repurchase any debt securities that rank pari
passu with or junior to the applicable 1997 Junior Subordinated
Debentures or the guarantees or (iii)&nbsp;make any guarantee
payment with respect to any guarantee of the debt securities of
any subsidiary if such guarantee ranks pari passu with or junior
to the applicable 1997 Junior Subordinated Debentures or the
guarantees, if at any time (1)&nbsp;we elect to defer payment on
the applicable 1997 Junior Subordinated Debentures, (2)&nbsp;at
any time there has occurred any event of which we or a guarantor
has knowledge that would constitute an event of default under
the applicable 1997 Junior Subordinated Debentures and that we
and the guarantors have not taken reasonable steps to cure or
(3)&nbsp;we or the guarantors are in default with respect to our
payment of obligations under the guarantees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Capital Securities rank pari passu with
the 1997 Common Securities with respect to cash distributions
and amounts payable on liquidation, except that the 1997 Common
Securities will be subordinated to the 1997 Capital Securities
if an event of default has occurred and is continuing as a
result of any failure by us to pay amounts when due in respect
of the applicable 1997 Junior Subordinated Debentures.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Junior Subordinated Debentures&nbsp;I
and the 1997 Junior Subordinated Debentures&nbsp;II mature in
May and July 2027, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Capital Securities are subject to
mandatory redemption, in whole or in part, upon repayment of the
applicable 1997 Junior Subordinated Debentures at their stated
maturity or earlier redemption. The 1997 Junior Subordinated
Debentures are redeemable prior to maturity at our option in
whole at any time or in part from time to time at redemption
prices calculated according to a specified formula.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Events of default under the 1997 Junior
Subordinated Debentures include: (i)&nbsp;failure for
30&nbsp;days to pay interest when due (subject to any deferral
as described above), (ii)&nbsp;failure to pay principal or
premium, if any, when due, (iii)&nbsp;failure to perform the
covenants in the indenture for 90&nbsp;days after notice and
(iv)&nbsp;certain events of bankruptcy, insolvency or
reorganization of us or the guarantors. Events of default under
the guarantees of the 1997 Capital Securities include the
failure of us or the guarantors to perform any payment
obligations thereunder or to perform any non-payment obligation
for 30&nbsp;days.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We and the guarantors have also agreed to
guarantee to each person to whom the applicable trust becomes
indebted or liable, the full payment of any costs, expenses or
liabilities of the trust (other than the obligations to pay
amounts due to the holders of the 1997 Capital Securities and
the 1997 Common Securities pursuant to their terms).
</FONT>

<P align="center"><FONT size="2">162
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "SHARES ELIGIBLE FOR FUTURE SALE" -->

<P align="center">
<B><FONT size="2">SHARES ELIGIBLE FOR FUTURE SALE</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of the offering we will have a
total
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding. All of
the &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
sold in the offering will be freely tradable without restriction
or further registration under the Securities Act by persons
other than our &#147;affiliates.&#148; Under the Securities Act,
an &#147;affiliate&#148; of a company is a person that directly
or indirectly controls, is controlled by or is under common
control with that company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The
remaining &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
of our common stock outstanding will be &#147;restricted
securities&#148; within the meaning of Rule&nbsp;144 under the
Securities Act, as they will be held by Fortis, and may not be
sold in the absence of registration under the Securities Act
unless an exemption from registration is available, including
the exemptions contained in Rule&nbsp;144.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In general, under Rule&nbsp;144, a person (or
persons whose shares are aggregated), including any person who
may be deemed our affiliate, is entitled to sell within any
three-month period, a number of restricted securities that does
not exceed the greater of 1% of the then outstanding common
stock and the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding
each such sale, provided that at least one year has elapsed
since such shares were acquired from us or any affiliate of ours
and certain manner of sale, notice requirements and requirements
as to availability of current public information about us are
satisfied. Any person who is deemed to be our affiliate must
comply with the provisions of Rule&nbsp;144 (other than the
one-year holding period requirement) in order to sell shares of
common stock which are not restricted securities (such as shares
acquired by affiliates either in the offering or through
purchases in the open market following the offering). In
addition, under Rule&nbsp;144(k), a person who is not our
affiliate, and who has not been our affiliate at any time during
the 90&nbsp;days preceding any sale, is entitled to sell such
shares without regard to the foregoing limitations, provided
that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, our directors and executive officers, Fortis
N.V., Fortis SA/NV and Fortis Insurance N.V. have agreed with
the underwriters not to, directly or indirectly, dispose of or
hedge any shares of our common stock or securities convertible
into or exchangeable for common stock for a period of
180&nbsp;days from the date of this prospectus, without the
prior written consent of Morgan Stanley &#38; Co. Incorporated,
on behalf of the underwriters, subject to certain exceptions. We
may, however, grant options to purchase common stock under our
existing plans and issue common stock upon the exercise of those
options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis has advised us that it intends to divest
its remaining shares of our common stock over a period of time
following the expiration of the lock-up period. Concurrently
with the offering contemplated by this prospectus, we will enter
into a registration rights agreement with Fortis Insurance N.V.
pursuant to which we will grant Fortis Insurance N.V. and its
affiliates certain demand and piggyback registration rights with
respect to all of the shares of our common stock owned by them.
Pursuant to this agreement, after completion of this offering,
Fortis will have the right to require us to register its shares
of our common stock under the Securities Act for sale into the
public markets, subject to the lock-up agreement. Shares
registered under any such registration statement will be
available for sale in the open market unless restrictions apply.
See &#147;Certain Relationships and Related
Transactions&#151;Registration Rights Agreement&#148; and
&#147;Description of Share Capital&#151;Registration
Rights.&#148;
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Following the consummation of this offering, we
intend to file one or more registration statements on
Form&nbsp;S-8 under the Securities Act to register common stock
issued or reserved for issuance under our Directors Compensation
Plan, our 2004 Long-Term Incentive Plan and our Employee Stock
Purchase Plan. Any such Form&nbsp;S-8 registration statement
will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will be
available for sale in the open market, unless such shares are
subject to vesting restrictions with us or the lock-up
restrictions described above. We expect that the registration
statement on Form&nbsp;S-8 will
cover &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
and options.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No prediction can be made as to the effect, if
any, future sales of shares, or the availability of shares for
future sales, will have on the market price of our common stock
prevailing from time to time. The sale of substantial amounts of
our common stock in the public market, or the perception that
such sales could occur, could harm the prevailing market price
of our common stock.
</FONT>

<P align="center"><FONT size="2">163
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "UNDERWRITING" -->

<P align="center">
<B><FONT size="2">UNDERWRITING</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Morgan
Stanley&nbsp;&#38; Co. Incorporated is acting as representative,
have severally agreed to purchase, and the selling stockholder
has agreed to sell to them, the number of shares indicated below:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Name</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number of Shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Morgan Stanley&nbsp;&#38; Co. Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit Suisse First Boston LLC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Merrill Lynch, Pierce, Fenner&nbsp;&#38; Smith<BR>
    Incorporated
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters are offering the shares of
common stock subject to their acceptance of the shares from the
selling stockholder and subject to prior sale. The underwriting
agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of
common stock offered by this prospectus are subject to the
approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered by this
prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters&#146; over-allotment option
described below.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a
share under the public offering price. After the initial
offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the
representative.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The selling stockholder has granted to the
underwriters an option, exercisable for 30&nbsp;days from the
date of this prospectus, to purchase up to an aggregate
of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;additional
shares of common stock at the public offering price set forth on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase approximately the same
percentage of the additional shares of common stock as the
number listed next to the underwriter&#146;s name in the
preceding table bears to the total number of shares of common
stock listed next to the names of all underwriters in the
preceding table. If the underwriters&#146; option is exercised
in full, the total price to the public would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
the total underwriters&#146; discounts and commissions would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million
and total proceeds to the selling stockholder, excluding
estimated offering expenses, would be
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The estimated offering expenses, in addition to
the underwriting discounts and commissions, are approximately
$&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;million,
which includes legal, accounting and printing costs and various
other fees associated with the registration and listing of the
shares of common stock.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed 5% of the
total number of shares of common stock offered by them.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We intend to apply to list our common stock on
the New York Stock Exchange under the symbol &#147;AIZ.&#148; In
connection with the listing of the common stock on the New York
Stock Exchange, the underwriters will undertake to sell round
lots of 100 shares or more to a minimum of 2,000 beneficial
owners.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV, Fortis Insurance N.V. and purchasers
of shares under the directed share program, have agreed that,
without the prior written consent of
</FONT>

<P align="center"><FONT size="2">164
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">Morgan Stanley &#38; Co. Incorporated on behalf
of the underwriters, we and they will not, during the period
ending 180&nbsp;days after the date of this prospectus:
</FONT>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend,
    or otherwise transfer or dispose of, directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">file any registration statement with the SEC
    relating to the offering of any shares of common stock or any
    securities convertible into or exercisable or exchangeable for
    common stock; or
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">enter in any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of common stock;
    </FONT></TD>
</TR>

</TABLE>

<P align="left">
<FONT size="2">whether any such transaction described above is
to be settled by delivery of common stock or such other
securities, in cash or otherwise. The restrictions described in
this paragraph do not apply to:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="4%"></TD>
    <TD width="93%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the sale of shares to the underwriters;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">grants by us of options to purchase shares of our
    common stock or grants by us of restricted stock pursuant to our
    benefit plans;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares of common stock; and
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2"> &#149;</FONT></TD>
    <TD align="left">
    <FONT size="2">transfers by any person other than us to an
    affiliate of such person, a family member of such person or a
    trust created for the benefit of such person or family member,
    provided that any transferee agrees to be bound by the transfer
    restrictions described in this paragraph and subject to certain
    other conditions.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. As an additional means of facilitating the
offering or to cover any over-allotments, the underwriters may
bid for, and purchase, common stock in the open market to
stabilize the price of the common stock. The underwriting
syndicate may also reclaim selling concessions allowed to an
underwriter or a dealer for distributing the common stock in the
offering, if the syndicate repurchases previously distributed
common stock to cover syndicate short positions or to stabilize
the price of the common stock. These activities may raise or
maintain the market price of the common stock. The underwriters
are not required to engage in these activities, and may end any
of these activities at any time.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A prospectus in electronic format may be made
available on the web sites maintained by one or more
underwriters. The underwriters may agree to allocate a number of
shares to underwriters for sale to their
</FONT>

<P align="center"><FONT size="2">165
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="left">
<FONT size="2">online brokerage account holders. Internet
distributions will be allocated by the representative to
underwriters that may make Internet distributions on the same
basis as other allocations.
</FONT>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We, the selling stockholder and the underwriters
have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
</FONT>

<P align="left">
<B><FONT size="2">Relationships with Underwriters</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The underwriters and their affiliates have from
time to time provided, and expect to provide in the future,
investment banking, commercial banking and other financial
services to us and our affiliates, including Fortis and the
selling stockholder, for which they have received and may
continue to receive customary fees and commissions.
</FONT>

<P align="left">
<B><FONT size="2">Directed Share Program</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At our request, the underwriters have reserved
for sale as part of the underwritten offering, at the initial
offering price, up
to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;shares
offered in this prospectus for our directors, officers and
employees. The number of shares of common stock available for
sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which
are not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered in
this prospectus.
</FONT>

<P align="left">
<B><FONT size="2">Pricing of the Offering</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to this offering, there has been no public
market for the common stock. The initial public offering price
will be determined by negotiations between us, the selling
stockholder and the representative of the underwriters. Among
the factors to be considered in determining the initial public
offering price will be our future prospects and those of our
industry in general, our premiums, earnings and certain other
financial and operating information in recent periods, and the
price-earnings ratios, price-book value ratios, market prices of
securities and certain financial and operating information of
companies engaged in activities similar to ours. The estimated
initial public offering price range set forth on the cover page
of this preliminary prospectus is subject to change as a result
of market conditions and other factors.
</FONT>

<P align="center"><FONT size="2">166
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "LEGAL MATTERS" -->

<P align="center">
<B><FONT size="2">LEGAL MATTERS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The validity of the common stock will be passed
upon for us by Simpson Thacher&nbsp;&#38; Bartlett LLP, New
York, New York. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Skadden,
Arps, Slate, Meagher&nbsp;&#38; Flom LLP, New York, New York.
Skadden, Arps, Slate, Meagher &#38; Flom LLP has in the past
performed, and continues to perform, legal services for us and
our affiliates.
</FONT>

<!-- link1 "EXPERTS" -->

<P align="center">
<B><FONT size="2">EXPERTS</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements of Fortis,
Inc. as of December&nbsp;31, 2002 and 2001 and for each of the
three years in the period ended December&nbsp;31, 2002 included
in this prospectus, have been audited by PricewaterhouseCoopers
LLP, independent accountants, as stated in their report
appearing in this prospectus, given on the authority of said
firm as experts in auditing and accounting.
</FONT>

<!-- link1 "WHERE YOU CAN FIND MORE INFORMATION" -->

<P align="center">
<B><FONT size="2">WHERE YOU CAN FIND MORE INFORMATION</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">We have filed with the SEC, a Registration
Statement on Form&nbsp;S-1 under the Securities Act with respect
to the common stock offered in this prospectus. This prospectus,
filed as part of the registration statement, does not contain
all of the information set forth in the registration statement
and its exhibits and schedules, portions of which have been
omitted as permitted by the rules and regulations of the SEC.
For further information about us and our common stock, we refer
you to the registration statement and to its exhibits and
schedules. Statements in this prospectus about the contents of
any contract, agreement or other document are not necessarily
complete and, in each instance, we refer you to the copy of such
contract, agreement or document filed as an exhibit to the
registration statement, with each such statement being qualified
in all respects by reference to the document to which it refers.
Anyone may inspect the registration statement and its exhibits
and schedules without charge at the public reference facilities
the SEC maintains at 450&nbsp;Fifth Street, N.W., Washington,
D.C. 20549. You may obtain copies of all or any part of these
materials from the SEC upon the payment of certain fees
prescribed by the SEC. You may obtain further information about
the operation of the SEC&#146;s Public Reference Room by calling
the SEC at 1-800-SEC-0330. You may also inspect these reports
and other information without charge at a web site maintained by
the SEC. The address of this site is http://www.sec.gov.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Upon completion of this offering, we will become
subject to the informational requirements of the Exchange Act
and will be required to file reports, proxy statements and other
information with the SEC. You will be able to inspect and copy
these reports, proxy statements and other information at the
public reference facilities maintained by the SEC at the address
noted above. You also will be able to obtain copies of this
material from the Public Reference Room of the SEC as described
above, or inspect them without charge at the SEC&#146;s web
site. We intend to furnish our stockholders with annual reports
containing consolidated financial statements audited by an
independent accounting firm.
</FONT>

<P align="center"><FONT size="2">167
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "INDEX TO CONSOLIDATED FINANCIAL STATEMENTS" -->

<P align="center">
<B><FONT size="2">INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="90%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Page</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Report of Independent Accountants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Balance Sheets of Fortis, Inc. at
    December&nbsp;31, 2002 and December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Operations of Fortis,
    Inc. for the Three Fiscal Years in the Period Ended
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Changes in
    Stockholders&#146; Equity of Fortis, Inc. for the Three Fiscal
    Years in the Period Ended December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Consolidated Statements of Cash Flows of Fortis,
    Inc. for the Three Fiscal Years in the Period Ended
    December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Consolidated Financial Statements of
    Fortis, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Interim Consolidated Balance Sheets of
    Fortis, Inc. at June&nbsp;30, 2003 and December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-54</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Interim Consolidated Statements of
    Operations of Fortis, Inc. for the Six Months Ended
    June&nbsp;30, 2003 and June&nbsp;30, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Interim Consolidated Statements of
    Changes in Stockholders&#146; Equity of Fortis, Inc. for the Six
    Months Ended June&nbsp;30, 2003 and June&nbsp;30, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-56</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unaudited Interim Consolidated Statements of Cash
    Flows of Fortis, Inc. for the Six Months Ended June&nbsp;30,
    2003 and June&nbsp;30, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-57</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Notes to Unaudited Interim Consolidated Financial
    Statements of Fortis, Inc.&nbsp;</FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">F-58</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link2 "REPORT OF INDEPENDENT ACCOUNTANTS" -->

<P align="center">
<B><FONT size="2">REPORT OF INDEPENDENT ACCOUNTANTS</FONT></B>

<P align="left">
<FONT size="2">To the Board of Directors and Stockholders of
Fortis, Inc.:
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of changes in stockholders&#146; equity and of cash
flows present fairly, in all material respects, the financial
position of Fortis, Inc. and its subsidiaries at
December&nbsp;31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December&nbsp;31, 2002 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company&#146;s management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
</FONT>

<P align="left">
<FONT size="2">/s/ PricewaterhouseCoopers LLP
</FONT>

<P align="left">
<FONT size="2">New York, New York
</FONT>

<DIV align="left">
<FONT size="2">March&nbsp;28, 2003, except as to Note 23
</FONT>
</DIV>

<DIV align="left">
<FONT size="2">as to which the date is October&nbsp;20, 2003
</FONT>
</DIV>

<P align="center"><FONT size="2">F-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<DIV align="center">
<B><FONT size="2">At December&nbsp;31, 2002 and 2001</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="60%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">At December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands except</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">number of shares and per</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale, at fair
    value (amortized cost&#151;$7,630,576 in 2002 and $7,470,641 in
    2001)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale, at fair
    value (cost&#151;$264,635 in 2002 and $243,352 in 2001)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate at
    amortized cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">868,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,028,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,600,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums and accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reinsurance recoverables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,649,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,751,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,161</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred acquisition costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,313,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, at cost less accumulated
    depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">336,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,089,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value of businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">285,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets held in separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,449,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="12"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Future policy benefits and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,392,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,267,197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Claims and benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,543,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,405,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">348,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">366,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reinsurance balances payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">133,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funds held under reinsurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">183,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">462,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">542,271</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,204,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,281,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">223,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities related to separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,192,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,526,238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and contingencies (note 24)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><BR><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><BR><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $.10 per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A: 40,000,000 shares authorized,
    7,750,000 shares issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B: 150,001 shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C: 400,001 shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Class&nbsp;B and C; 40,000,000 total shares
    authorized)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,289,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,452,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities, mandatorily redeemable
    preferred securities of subsidiary trusts, mandatorily
    redeemable preferred stock and stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,449,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
financial statements
</FONT>

<P align="center"><FONT size="2">F-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<DIV align="center">
<B><FONT size="2">Years Ended December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="54%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands except number of shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">and per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,186,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,211,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">766,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,738,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,620,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,001</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,161,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,981,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,017,795</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income before cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle (note&nbsp;18)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Earnings per share:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average of basic and diluted shares of
    common stock outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,208,335</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)&nbsp;per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <I><FONT size="2">Basic and Diluted</FONT></I></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Before cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31.29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(151.92</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
financial statements
</FONT>

<P align="center"><FONT size="2">F-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS&#146; EQUITY</FONT></B>

<DIV align="center">
<B><FONT size="2">Years Ended December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="22%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income (Loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common Stock</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands except number of shares and per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, January&nbsp;1, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,234,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134,576</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,164,297</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,750,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of common stock to Parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(55</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">550,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends on common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(947</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(947</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in unrealized gains on securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,585</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,585</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">203,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,301,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,367,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends on common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(109,298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(109,298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,053</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,053</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in unrealized gains on securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,633</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,633</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,289,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,452,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends on common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,052</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,052</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in unrealized gains on securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pension under-funding, net of income tax benefit
    of $18,980
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total comprehensive loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(897,346</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
financial statements
</FONT>

<P align="center"><FONT size="2">F-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Years Ended December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands except number of shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">and per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss)&nbsp;income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,260,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in reinsurance recoverable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">335,306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(577,739</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in premiums and accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,406</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(82,085</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,954</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,867</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,897</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in deferred acquisition costs and value of
    businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(126,424</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(195,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(297,670</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in accrued investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,600</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,954</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in insurance policy reserves and
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">325,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">130,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">928,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in accounts payable and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(102,996</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,449</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,068</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in commissions payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,986</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,729</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in reinsurance balances payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">129,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,340</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in funds held under reinsurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(31,976</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(63,315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(79,801</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(68,296</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,284</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(108,050</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,259</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,672</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(61,688</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,994</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,103</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,878</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by operating activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">394,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">536,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">532,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,626,752</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,607,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,246,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">169,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other invested assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities, prepayments, and scheduled redemption
    of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">860,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">528,483</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">383,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchases of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,780,009</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,164,948</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,483,522</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(131,775</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(212,736</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(225,159</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,667</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(47,783</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,454</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other invested assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42,311</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(115,853</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(102,617</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in commercial mortgage loans on real
    estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,814</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in short term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(57,623</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(187,340</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) in policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,182</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,501</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash received (paid)&nbsp;related to
    acquisition/sale of business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">137,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(326,666</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash (used in) investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(361,021</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(175,147</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(28,125</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Years Ended December&nbsp;31, 2002, 2001 and
2000&#151;(Continued)</FONT></B>
</DIV>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="55%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">(in thousands except number of shares</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">and per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Activities related to investment products:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Considerations received
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">231,779</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Surrenders and death benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(79,646</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(453,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest credited to policyholders
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,258</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Proceeds from issuance of trust preferred
    securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of preferred securities of subsidiary
    trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,664</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of mandatorily redeemable preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Borrowings from Parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">216,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Repayment of borrowings from Parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(455,907</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(850,256</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(41,876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(109,298</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,111</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,052</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,053</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(947</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(43,428</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(379,809</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(428,655</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,657</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,800</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,036</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">578,104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">502,068</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">578,104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental information:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,866</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on mandatorily redeemable preferred
    securities of subsidiary trusts and interest paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">117,114</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">133,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">112,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non cash activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pension under funding, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,633</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,585</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of preferred shares
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Issuance of 550,002 shares to the parent
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
financial statements
</FONT>

<P align="center"><FONT size="2">F-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nature of
Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis, Inc. (the &#147;Company&#148;) is a
holding company provider of specialized insurance products and
related services in North America and selected other markets.
The Company is incorporated in the State of Nevada and is
indirectly wholly owned by Fortis N.V. of The Netherlands and
Fortis SA/NV of Belgium (collectively, the &#147;Parent&#148;)
through their affiliates, including their wholly owned
subsidiary, Fortis Insurance N.V. (see note&nbsp;11).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through its operating subsidiaries, the Company
provides creditor-placed homeowners insurance, manufactured
housing homeowners insurance, debt protection administration,
credit insurance, warranties and extended service contracts,
individual health and small employer group health insurance,
group dental insurance, group disability insurance, group life
insurance and pre-funded funeral insurance. The Company had
certain individual life insurance policies, annuity contracts
and mutual fund operations during 2001 and 2000, which were sold
to The Hartford Financial Services Group (&#147;The
Hartford&#148;) (see note&nbsp;4).
</FONT>

<P align="left">
<B><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summary of
Significant Accounting Policies</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Basis of Presentation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
(&#147;GAAP&#148;). The preparation of financial statements in
conformity with GAAP requires management to make estimates when
recording transactions resulting from business operations based
on information currently available. The most significant items
on the Company&#146;s balance sheet that involve accounting
estimates and actuarial determinations are the value of business
acquired, goodwill, reinsurance recoverables, valuation of
investments, deferred acquisition costs (&#147;DAC&#148;),
liabilities for future policy benefits and expenses, and claims
and benefits payable. The accounting estimates and actuarial
determinations are sensitive to market conditions, investment
yields, mortality, morbidity, commissions and other acquisition
expenses, and terminations by policyholders. As additional
information becomes available, or actual amounts are
determinable, the recorded estimates will be revised and
reflected in operating results. Although some variability is
inherent in these estimates, the Company believes the amounts
provided are reasonable.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dollar amounts are presented in U.S.&nbsp;dollars
and all amounts are in thousands except for number of shares and
per share amounts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Principles of Consolidation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The consolidated financial statements include the
accounts of the Company and all of its wholly owned
subsidiaries. All significant inter-company transactions and
balances are eliminated in consolidation. See notes&nbsp;3 and 4
for acquisitions and dispositions of businesses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Comprehensive Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Comprehensive income is comprised of net income
and other comprehensive income, which includes foreign currency
translation, unrealized gains and losses on securities
classified as available for sale, less deferred income taxes,
amounts attributable to universal life and annuity contracts,
and direct charges for additional minimum pension liability.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reclassifications</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Certain amounts in the 2001 and 2000 financial
statements have been reclassified to conform to the 2002
presentation.
</FONT>

<P align="center"><FONT size="2">F-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Cash and Cash Equivalents</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company considers cash on hand, all operating
cash and working capital cash to be cash equivalents. These
amounts are carried principally at cost, which approximates fair
value.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Investments</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s investment strategy is
developed based on many factors including appropriate insurance
asset and liability management, rate of return, maturity, credit
risk, tax considerations and regulatory requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fixed maturities and equity securities are
classified as available-for-sale and reported at fair value. If
the fair value is higher than the amortized cost for debt
securities or the purchase cost for equity securities, the
excess is an unrealized gain; and if lower than cost, the
difference is an unrealized loss. The net unrealized gains and
losses, less deferred income taxes and amounts attributable to
universal life and annuity contracts, are included in
accumulated other comprehensive income.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Commercial mortgage loans on real estate are
reported at unpaid balances, adjusted for amortization of
premium or discount, less allowance for losses. Allowances, if
necessary, are established for mortgage loans based on the
difference between the unpaid loan balance and the estimated
fair value of the underlying real estate when such loans are
determined to be in default as to scheduled payments. The change
in the allowance for losses is recorded as realized gains and
losses on investments. Such allowances are based on the present
value of expected future cash flows discounted at the
loan&#146;s effective interest rate or at the loan&#146;s
observable market price, or the fair market value of the
collateral if the loan is collateral dependent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Policy loans are reported at unpaid principal
balances, which do not exceed the cash surrender value of the
underlying policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Short-term investments include all investment
cash and highly liquid investments. These amounts are carried
principally at cost, which approximates fair value.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other investments consist primarily of
investments in joint ventures and partnerships. The joint
ventures and partnerships are valued according to the equity
method.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company regularly monitors its investment
portfolio to ensure that investments that may be other than
temporarily impaired are identified in a timely fashion and
properly valued, and that any impairments are charged against
earnings in the proper period. The Company&#146;s methodology to
identify potential impairments requires professional judgment
and considers securities whose market price is equal to 85% or
less of their original purchase price. Any security that meets
this criterion, along with any other holdings related to this
issuer that the Company believes warrant monitoring, are added
to the impairment watchlist, which is discussed at monthly
meetings attended by members of the Company&#146;s investment,
accounting and finance departments. Any security whose price
decrease is deemed other-than-temporary is written down to its
then current market level. Inherently, there are risks and
uncertainties involved in making these judgments. Changes in
circumstances and critical assumptions such as a continued weak
economy, a more pronounced economic downturn or unforeseen
events which affect one or more companies, industry sectors or
countries could result in additional write downs in future
periods for impairments that are deemed to be
other-than-temporary.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Realized gains and losses on sales of investments
and declines in value judged to be other-than-temporary are
recognized on the specific identification basis.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Investment income is recorded as earned net of
investment expenses.
</FONT>

<P align="center"><FONT size="2">F-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company anticipates prepayments of principal
in the calculation of the effective yield for mortgage-backed
securities and structured securities. For such securities, the
retrospective method is used to adjust the effective yield
except for interest-only securities, which are valued using the
prospective method.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reinsurance</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance recoverables include amounts related
to paid benefits and estimated amounts related to unpaid policy
and contract claims, future policyholder benefits and
policyholder contract deposits. The cost of reinsurance is
accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account
for the policies. Amounts recoverable from reinsurers are
estimated in a manner consistent with claim and claim adjustment
expense reserves or future policy benefits reserves and are
reported in the consolidated balance sheets. The cost of
reinsurance related to long-duration contracts is accounted for
over the life of the underlying reinsured policies. The ceding
of insurance does not discharge the Company&#146;s primary
liability to insureds. An estimated allowance for doubtful
accounts is recorded on the basis of periodic evaluations of
balances due from reinsurers, reinsurer solvency,
management&#146;s experience and current economic conditions.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Deferred Acquisition Costs</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The costs of acquiring new business that vary
with and are primarily related to the production of new business
have been deferred to the extent that such costs are deemed
recoverable from future premiums or gross profits. Acquisition
costs primarily consist of commissions, policy issuance
expenses, premium tax and certain direct marketing expenses.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A premium deficiency is recognized immediately by
a charge to the statement of operations as a reduction of DAC to
the extent that future policy premiums, including anticipation
of interest income, are not adequate to recover all DAC and
related claims, benefits and expenses.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">DAC relating to property contracts, warranty and
extended service contracts, and single premium credit insurance
contracts amortized over the term of the contracts in relation
to premiums earned.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs relating to monthly pay credit
insurance business consist mainly of direct marketing costs and
are deferred and amortized over the estimated average terms of
the underlying contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs on small group medical, group
term life and group disability consist primarily of commissions
to agents and brokers, which are level, and compensation to
representatives, which is spread out and is not front-end
loaded. These costs do not vary with the production of new
business. As a result, these costs are not deferred, but rather
they are recorded in the statement of operations in the period
in which they are incurred.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs for pre-funded funeral life
insurance policies and life insurance policies no longer offered
are deferred and amortized in proportion to anticipated premiums
over the premium-paying period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For pre-funded funeral annuity contracts and
universal life and annuities no longer offered, DAC is amortized
in proportion to the present value of estimated gross margins or
profits from investment, mortality, expense margins and
surrender charges over the estimated life of the policy or
contract. The assumptions used for the estimates are consistent
with those used in computing the policy or contract liabilities.
</FONT>

<P align="center"><FONT size="2">F-10
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs relating to individual medical
contracts are deferred and amortized over the estimated average
terms of the underlying contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Acquisition costs on the FFG and LTC disposed
businesses were written off when the businesses were sold.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Property and Equipment</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment are reported at cost less
accumulated depreciation. Depreciation is calculated on a
straight-line basis over estimated useful lives with a maximum
of 39.5&nbsp;years for buildings and 7&nbsp;years for furniture
and equipment. Expenditures for maintenance and repairs are
charged to income as incurred. Expenditures for improvements are
capitalized and depreciated over the remaining useful life of
the asset.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Goodwill</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Goodwill represents the excess of acquisition
costs over the net fair values of identifiable assets acquired
and liabilities assumed in a business combination. The Company
adopted Statement of Financial Accounting Standards No.&nbsp;142
(&#147;FAS&nbsp;142&#148;), <I>Goodwill and Other Intangible
Assets,</I> as of January&nbsp;1, 2002. Pursuant to
FAS&nbsp;142, goodwill is deemed to have an indefinite life and
should not be amortized, but rather tested at least annually for
impairment. The goodwill impairment test has two steps. The
first identifies potential impairments by comparing the fair
value of a reporting unit with its book value, including
goodwill. If the fair value of the reporting unit exceeds the
carrying amount, goodwill is not impaired and the second step is
not required. If the carrying value exceeds the fair value, the
second step calculates the possible impairment loss by comparing
the implied fair value of goodwill with the carrying amount. If
the implied goodwill is less than the carrying amount, a write
down is recorded. Prior to the adoption of FAS&nbsp;142,
goodwill was amortized over 20&nbsp;years. Upon the adoption of
FAS&nbsp;142, the Company ceased amortizing goodwill, and the
Company recognized a $1,260,939 impairment charge as the
cumulative effect of a change in accounting principle. The
measurement of fair value was determined based on a valuation
report prepared by an independent valuation firm. The valuation
was based on an evaluation of ranges of future discounted
earnings, public company trading multiples and acquisitions of
similar companies. Certain key assumptions considered include
forecasted trends in revenues, operating expenses and effective
tax rates.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Value of Businesses Acquired</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The value of businesses acquired
(&#147;VOBA&#148;) is the identifiable intangible asset
representing the value of the insurance businesses acquired. The
amount is determined using best estimates for mortality, lapse,
maintenance expenses and investment returns at date of purchase.
The amount determined represents the purchase price paid to the
seller for producing the business. Similar to the amortization
of DAC, the amortization of VOBA is generally over the premium
payment period for traditional life insurance policies over the
expected lifetime of the policies for limited payment policies
or over the estimated gross profits or margins for universal
life or annuities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">VOBA is tested for recoverability annually. If it
is determined that future policy premiums and investment income
or gross profits are not adequate to cover related losses or
loss expenses, then VOBA is charged to current earnings.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Separate Accounts</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assets and liabilities associated with separate
accounts relate to premium and annuity considerations for
variable life and annuity products for which the
contract-holder, rather than the Company, bears the investment
risk. Separate account assets are reported at fair value.
Revenues and expenses related to the
</FONT>

<P align="center"><FONT size="2">F-11
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">separate account assets and liabilities, to the
extent of benefits paid or provided to the separate account
policyholders, are excluded from the amounts reported in the
accompanying consolidated statements of operations. Through
April&nbsp;1, 2001, the Company received administrative fees for
managing the funds and other fees for assuming mortality and
certain expense risks. Such fees were included in net earned
premiums and other considerations in the consolidated statements
of operations. Since April&nbsp;1, 2001, all fees have been
ceded to The Hartford (see note&nbsp;4).
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Income Taxes</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Current federal income taxes are charged to
operations based upon amounts estimated to be payable or
recoverable as a result of taxable operations for the current
year. Deferred income taxes are recognized for temporary
differences between the financial reporting basis and income tax
basis of assets and liabilities, based on enacted tax laws and
statutory tax rates applicable to the periods in which we expect
the temporary differences to reverse.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Other Assets</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Other assets include prepaid items and intangible
assets. Identifiable intangible assets with finite lives,
including costs capitalized relating to developing software for
internal use, are amortized on a straight line basis over their
estimated useful lives. The Company tests the intangible assets
for impairment whenever circumstances warrant, but at least
annually. If impairment exists, the excess of the un-amortized
balance over the fair value of the intangible assets will be
charged to income at that time. Other assets also include the
Company&#146;s 28% interest in Private Health Care Systems
(&#147;PHCS&#148;). The Company was a co-founder of PHCS, a
provider network. The Company accounts for PHCS according to the
equity method.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Foreign Currency Translation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For those foreign affiliates where the foreign
currency is the functional currency, unrealized foreign exchange
gains (losses) net of income taxes have been reflected in
Stockholders&#146; Equity under the caption &#147;Accumulated
other comprehensive income.&#148;
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Premiums</FONT></I></B></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s short duration contracts are
those on which the Company recognizes revenue on a pro-rata
basis over the contract term. The Company&#146;s short duration
contracts primarily include group term life, group disability,
medical and dental, property, credit insurance, warranties and
extended service contracts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Currently, the Company&#146;s long duration
contracts being sold are pre-funded life insurance and
annuities. Revenue is recognized in the life insurance contracts
when due over the premium paying period. For annuity contracts,
revenues consist of charges assessed against policy balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For universal life insurance and annuity
contracts no longer offered, revenues also consist of charges
assessed against policy balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For the FFG and LTC businesses previously sold,
all revenue is ceded to The Hartford and John Hancock,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For pre-funded funeral life insurance policies
and annuity contracts any excess of the gross premium over the
net premium is deferred and is recognized in income in a
constant relationship with the insurance in force.
</FONT>

<P align="center"><FONT size="2">F-12
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Premiums for LTC life insurance, annuity
contracts no longer offered, and traditional life insurance
contracts within FFG are recognized as revenue when due from the
policyholder.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Reinsurance Assumed</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reinsurance premiums assumed are estimated based
on information received from ceding companies and any subsequent
differences arising on such estimates are recorded in the period
in which they are determined.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fee Income</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company derives income from fees received
from providing administration services. Fee income is earned
when services are performed.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Reserves</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reserves are established according to generally
accepted actuarial principles and are based on a number of
factors. These factors include experience derived from
historical claim payments and actuarial assumptions to arrive at
loss development factors. Such assumptions and other factors
include trends, the incidence of incurred claims, the extent to
which all claims have been reported, and internal claims
processing charges. The process used in computing reserves
cannot be exact, particularly for liability coverages, since
actual claim costs are dependent upon such complex factors as
inflation, changes in doctrines of legal liability and damage
awards. The methods of making such estimates and establishing
the related liabilities are periodically reviewed and updated.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Short Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For short duration contracts, claims and benefits
payable reserves are recorded when insured events occur. The
liability is based on the expected ultimate cost of settling the
claims. The claims and benefits payable reserves include
(1)&nbsp;case basis reserves for known but unpaid claims as of
the balance sheet date; (2)&nbsp;incurred but not reported
(&#147;IBNR&#148;) reserves for claims where the insured event
has occurred but has not been reported to the Company as of the
balance sheet date; and (3)&nbsp;loss adjustment expense
reserves for the expected handling costs of settling the claims.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For group disability the case base reserves and
the IBNR are calculated based on historical experience and on
assumptions relating to claim severity, frequency, and other
factors. These assumptions are modified as necessary to reflect
anticipated trends, with any adjustment being reflected in
current operations. We establish reserves for disability
policies in an amount equal to the net present value of the
expected claims future payments. Group long-term disability
reserves are discounted to the valuation date at the valuation
interest rate. The valuation interest rate is determined by
taking into consideration actual and expected earned rates on
our asset portfolio, with adjustments for investment expenses
and provisions for adverse deviation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has exposure to asbestos,
environmental and other general liability claims arising from
its participation in various reinsurance pools from 1971 through
1983. The Company carried case reserves for these liabilities as
recommended by the various pool managers and bulk reserves for
claims incurred but not yet reported of $40&nbsp;million (before
reinsurance) and $39&nbsp;million (after reinsurance) in the
aggregate at December&nbsp;31, 2002. It is not possible to make
a reasonable actuarial estimate of the ultimate liabilities due
to the general lack of sufficient detailed data, reporting
delays, and absence of a generally accepted actuarial
methodology for those exposures. There are significant
unresolved industry legal issues, including such items as
whether coverage exists and what constitutes an occurrence. In
addition, the determination of ultimate damages and the final
allocation of losses to financially responsible parties are
highly uncertain. Accordingly, any estimation of these
liabilities is subject to greater than normal variation and
uncertainty.
</FONT>

<P align="center"><FONT size="2">F-13
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Unearned premium reserves are maintained for the
portion of the premiums on short duration contracts that is
related to the unexpired period of the policy.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <I><FONT size="2">Long Duration Contracts</FONT></I></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefits and expense reserves on
LTC, life insurance policies that are no longer offered,
individual medical and the traditional life insurance contracts
within FFG are recorded at the present value of future benefits
to be paid to policyholders and related expenses less the
present value of the future net premiums. These amounts are
estimated and include assumptions as to the expected investment
yield, inflation, mortality, morbidity and withdrawal rates as
well as other assumptions that are based on the Company&#146;s
experience. These assumptions reflect anticipated trends and
include provisions for possible unfavorable deviations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefits and expense reserves for
pre-funded funeral annuities, universal life insurance policies
and annuity contracts no longer offered, and the variable life
insurance and annuity contracts in FFG consist of policy account
balances before applicable surrender charges and certain
deferred policy initiation fees that are being recognized in
income over the terms of the policies. Policy benefits charged
to expense during the period include amounts paid in excess of
policy account balances and interest credited to policy account
balances.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The benefit liability for pre-funded funeral life
insurance contracts includes the amount of gross premium that is
received in excess of the net premium and accounted for as
unearned premium revenue.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Changes in the estimated liabilities are charged
or credited to operations as the estimates are revised.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Stock Based Compensation</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for the Fortis, Inc. stock
option plan as prescribed by APB Opinion No.&nbsp;25,
<I>Accounting for Stock Issued to Employees</I>
(&#147;APB&nbsp;25&#148;) and related interpretations.
Accordingly, compensation cost is charged to income over the
service period (vesting period) and is adjusted for subsequent
changes in the market value of the stock that are subsequently
amortized over the vesting period.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table illustrates the effect of
applying the fair value recognition provisions of FAS&nbsp;123,
<I>Accounting for Stock Based Compensation</I> on net income and
earnings per share. Pro forma information of net (loss) income
and net (loss) income per share assuming the Company had applied
the fair value recognition provisions of FAS&nbsp;123, is as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss)&nbsp;income as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(630</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(740</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(874</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: Total stock-based employee compensation
    expense determined under intrinsic value based method for all
    awards, net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(703</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">) <SUP>(A)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net (loss)&nbsp;income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,829</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earnings per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss)&nbsp;income per
    share as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.81</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss)&nbsp;income per
    share pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11.64</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10.87</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-14
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<HR size="1" width="15%" align="left" noshade>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">(A)&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">Represents reversal of expense accrual due to
    reduction of intrinsic value.
    </FONT></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of each option granted was
estimated at the date of grant using the Black-Scholes multiple
option approach with the following assumptions for options
granted during the three-year period ended December&nbsp;31,
2002.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk-free U.S.&nbsp;dollar interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.03</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.09</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.44</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Risk-free Euro interest rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.92</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.07</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted averaged expected life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected volatility
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32.70</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected dividend yield
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.98</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.98</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.98</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Business Combinations</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective July&nbsp;1, 2001, the Company adopted
Financial Accounting Standard&nbsp;141, <I>Business
Combinations</I> (&#147;FAS&nbsp;141&#148;). FAS 141 requires
that all business combinations initiated after June&nbsp;30,
2001 be accounted for under the purchase method of accounting
and establishes specific criteria for the recognition of
intangible assets separately from goodwill. The Company followed
this statement for the acquisitions of the Dental Benefits
Division (&#147;DBD&#148;) of Protective Life Corporation
(&#147;Protective&#148;) and CORE, Inc. (&#147;CORE&#148;) (see
note&nbsp;3). For the years ended December &nbsp;31, 2002 and
2001, the Company recognized $2,700 and $0, respectively, of
amortization expense related to other identifiable intangible
assets, which are included in underwriting, general and
administrative expenses in the consolidated statements of
operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Recent Accounting
    Pronouncements</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued FAS&nbsp;146, <I>Accounting for
Costs Associated with Exit or Disposal Activities</I>
(&#147;FAS&nbsp;146&#148;). This statement addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
(&#147;EITF&#148;) Issue&nbsp;94-3, <I>Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit on
Activity (Including Certain Costs Incurred in Restructuring</I>
(&#147;EITF&nbsp;94-3&#148;). EITF&nbsp;94-3 required accrual of
liabilities related to exit and disposal activities at a plan
(commitment) date. FAS&nbsp;146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. The provisions of this statement
are effective for exit or disposal activities that are initiated
after December&nbsp;31, 2002. The Company adopted this Statement
on January&nbsp;1, 2003. The adoption of this standard did not
have a material impact on the Company&#146;s financial position
or the results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, the FASB issued
Interpretation&nbsp;45, <I>Guarantor&#146;s Accounting and
Disclosure Requirements for Guarantees</I>
(&#147;FIN&nbsp;45&#148;). FIN&nbsp;45 requires that a liability
be recognized at the inception of certain guarantees for the
fair value of the obligation, including the ongoing obligation
to stand ready to perform over the term of the guarantee.
Guarantees, as defined in FIN 45, include contracts that
contingently require the Company to make payments to a
guaranteed party based on changes in an underlying obligation
that is related to an asset, liability or equity security of the
guaranteed party, performance guarantees, indemnification
agreements and indirect guarantees of indebtedness of others.
This new accounting standard is effective for certain guarantees
issued or modified after December&nbsp;31, 2002. In addition,
FIN&nbsp;45 requires certain additional disclosures. The Company
adopted this standard on January&nbsp;1, 2003, and the adoption
did not have a material impact on the Company&#146;s financial
position or the results of operations.
</FONT>

<P align="center"><FONT size="2">F-15
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December 2002, the FASB issued FAS&nbsp;148,
<I>Accounting for Stock-Based Compensation&#151;Transition and
Disclosure&#151;an Amendment of FAS No.&nbsp;123</I>
(&#147;FAS&nbsp;148&#148;). FAS&nbsp;148 provides alternative
methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee
compensation. FAS&nbsp;148 also amends the disclosure
requirements of FAS&nbsp;123, <I>Accounting for Stock-Based
Compensation,</I> to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. This guidance is
effective for fiscal years ending after December&nbsp;15, 2002,
for transition guidance and annual disclosure provisions and is
effective for interim reports beginning after December&nbsp;15,
2002, for interim disclosure provisions. The Company adopted
this standard for the year ended December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January 2003, the FASB issued
Interpretation&nbsp;46 (&#147;FIN&nbsp;46&#148;),
<I>Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No.&nbsp;51
</I>(&#147;ARB&nbsp;51&#148;), which clarifies the consolidation
accounting guidance in ARB&nbsp;51, <I>Consolidated Financial
Statements,</I> as it applies to certain entities in which
equity investors who do not have the characteristics of a
controlling financial interest or do not have sufficient equity
at risk for the entities to finance their activities without
additional subordinated financial support from other parties.
Such entities are known as variable interest entities
(&#147;VIEs&#148;). FIN&nbsp;46 requires that the primary
beneficiary of a VIE consolidates the VIE. FIN&nbsp;46 also
requires new disclosures for significant relationships with
VIEs, whether or not consolidation accounting is used or
anticipated. The consolidation requirements of FIN&nbsp;46 apply
immediately to VIEs created after January&nbsp;31, 2003. They
apply in the first fiscal year or interim period beginning after
June&nbsp;15, 2003 to VIEs in which an enterprise holds a
variable interest that was acquired before February&nbsp;1,
2003. On October&nbsp;8, 2003, the FASB deferred the adoption of
FIN&nbsp;46 until reporting periods ending after
December&nbsp;15, 2003. The Company is assessing whether the
adoption of this interpretation will have a material impact on
the Company&#146;s financial position or the results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2003, the FASB&#146;s Derivative
Implementation Group (&#147;DIG&#148;) released FAS&nbsp;133
Implementation Issue&nbsp;B36, <I>Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments that Incorporate
Credit Risk Exposures that are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under those
Instruments</I> (&#147;DIG&nbsp;B36&#148;). DIG&nbsp;B36
addresses whether FAS&nbsp;133 requires bifurcation of a debt
instrument into a debt host contract and an embedded derivative
if the debt instrument incorporates both interest rate risk and
credit risk exposures that are unrelated or only partially
related to the creditworthiness of the issuer of that
instrument. Under DIG&nbsp;B36, modified coinsurance and
coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or a
total return debt index are examples of arrangements containing
embedded derivatives requiring bifurcation. The effective date
of the implementation guidance is October&nbsp;1, 2003. The
Company is assessing whether adoption of DIG&nbsp;B36 will have
a material impact on the Company&#146;s financial position or
the results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2003, the FASB issued FAS&nbsp;149,
<I>Amendment of Statement&nbsp;133 on Derivative Instruments and
Hedging Activities</I> (&#147;FAS&nbsp;149&#148;). This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under
FAS&nbsp;133, <I>Accounting for Derivative Instruments and
Hedging Activities</I>. This Statement is effective
prospectively for contracts entered into or modified after
June&nbsp;30, 2003 and prospectively for hedging relationships
designated after June&nbsp;30, 2003. The Company has assessed
that the adoption of this standard will not have a material
impact on the Company&#146;s financial position or the results
of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued FAS&nbsp;150,
<I>Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity</I>
(&#147;FAS&nbsp;150&#148;). This statement improves the
accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity, and
requires that these
</FONT>

<P align="center"><FONT size="2">F-16
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">instruments be classified as liabilities in the
consolidated balance sheets. This statement is effective
prospectively for financial instruments entered into or modified
after May&nbsp;31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after
June&nbsp;15, 2003. This statement shall be implemented by
reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance
date of the statement and still existing at the beginning of the
interim period of adoption. The Company has assessed that the
adoption of this standard will result in a reclassification of
mandatorily redeemable preferred securities of subsidiary trusts
and mandatorily redeemable preferred stock from mezzanine to
liabilities, and will not have a material impact on the
Company&#146;s results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;7, 2003, the Accounting Standards
Executive Committee (&#147;AcSEC&#148;) of the American
Institute of Certified Public Accountants (&#147;AICPA&#148;)
issued Statement of Position 03-1, <I>Accounting and Reporting
by Insurance Enterprises for Certain Nontraditional Long
Duration Contracts and for Separate Accounts </I>(&#147;SOP
03-1&#148;). SOP 03-1 provides guidance on a number of topics
unique to insurance enterprises, including separate account
presentation, interest in separate accounts, gains and losses on
the transfer of assets from the general account to a separate
account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts
that contain death or other insurance benefit features,
accounting for reinsurance and other similar contracts,
accounting for annuitization benefits and sales inducements to
contract holders. SOP 03-1 will be effective for the
Company&#146;s financial statements on January&nbsp;1, 2004. The
Company is assessing whether adoption of this statement will
have a material impact on the Company&#146;s financial position
or the results of operations.
</FONT>

<P align="left">
<B><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Acquisitions</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following transactions have been accounted
for under the purchase method. Consequently, the purchase price
has been allocated to assets acquired and liabilities assumed
based on the relative fair values. The results of operations of
the businesses acquired have been included in the consolidated
financial statements since the date of acquisition.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Dental Benefits Division (&#147;DBD&#148;)
    of Protective Life Corporation
    (&#147;Protective&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On December&nbsp;31, 2001, the Company acquired
DBD, including the acquisition through reinsurance of
Protective&#146;s indemnity dental, life, and disability
businesses and purchase of the stock of its prepaid dental
subsidiaries.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Protective&#146;s Dental Benefits Division at the
time of acquisition was a leading provider of voluntary
(employee-paid) indemnity dental and prepaid dental coverage for
employee groups. As a result of the acquisition, the Company
expects to be a leading provider of dental insurance products in
the voluntary (employee-paid) market. It also expects to reduce
costs through economies of scale.
</FONT>

<P align="center"><FONT size="2">F-17
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the purchase price
and net cash paid for the transaction:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="8%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Invested assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other intangible assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts receivable and other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">320,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net liabilities assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Of the $54,300 of acquired intangible assets,
$5,600 was assigned to licenses that are not subject to
amortization. The remaining $48,700 consists of the current
groups in force and a dental provider network, which are
amortized on a straight-line basis over their estimated useful
lives, which range from 20 to 30&nbsp;years.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table reflects the results of
operations on an unaudited pro forma basis as if the acquisition
of DBD had been completed on January&nbsp;1, 2000. The pro forma
results include estimates and assumptions which management
believes are reasonable. However, pro forma results do not
include the effects of synergies and cost reduction initiatives
directly related to the acquisitions. The pro forma financial
information is not necessarily indicative of the operating
results that would have occurred had the acquisitions been
consummated as of the dates indicated, nor are they necessarily
indicative of future operating results.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Unaudited Pro</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Forma Information</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">for the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">321,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">CORE, Inc. (&#147;CORE&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;12, 2001, the Company acquired 100%
of the outstanding common shares of CORE for approximately
$57,000 in cash. CORE at the time of acquisition was a leading
national provider of employee absence management services and a
major provider of disability reinsurance management services to
middle-market insurance carriers. As a result of the
acquisition, the Employee Benefits segment derives expertise in
disability services and solutions, including clinical disability
management and Family and Medical Leave Act administration. The
segment also expects to realize improvements in pricing accuracy
and duration care management through direct access to
CORE&#146;s data.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">American Memorial Life Insurance Company
    (&#147;AMLIC&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2000, the Company acquired
100% of the outstanding common shares of AMLIC from Service
Corporation International (&#147;SCI&#148;) for $210,420 in
cash. AMLIC is a South Dakota-based pre-funded funeral insurance
company. At the date of purchase the Company entered into a
10-year exclusive North American pre-funded funeral insurance
marketing agreement with SCI. Goodwill of $14,806 was recorded
on the purchase.
</FONT>

<P align="center"><FONT size="2">F-18
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes the estimated fair
values of the assets and liabilities at the date of acquisition.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="77%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">October&nbsp;1,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">774,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">VOBA
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">170,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">329,014</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,288,067</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">743,956</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">333,691</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,077,647</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net purchase price
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">210,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table reflects the results of
operations on an unaudited pro forma basis as if the acquisition
of AMLIC had been completed on January&nbsp;1, 2000. The pro
forma results for 2000 include estimates and assumptions which
management believes are reasonable. However, pro forma results
do not include the effects of synergies and cost reduction
initiatives directly related to the acquisition. The pro forma
financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition
been consummated as of the date indicated, nor is it necessarily
indicative of future operating results.
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="78%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unaudited</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pro Forma</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Information for</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dispositions</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Neighborhood Health Partnership
    (&#147;NHP&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;28, 2002, the Company sold its 50%
ownership in NHP to NHP Holding LLC for $12,000. NHP is a
Florida Health Maintenance Organization. The Company recorded a
pre-tax gain on sale of $10,672.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fortis Financial Group
    (&#147;FFG&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On April&nbsp;2, 2001, the Company sold its FFG
business to The Hartford for $1,086,752, net of expenses. FFG
included certain individual life insurance policies, annuities
and mutual fund operations. The transaction was structured as a
stock sale for the mutual fund management operations and as a
reinsurance arrangement for the insurance operations (see
note&nbsp;13).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reinsurance contracts did not legally replace
the Company as the insurer to policyholders or extinguish the
Company&#146;s liabilities to its policyholders. The reserves
for this block of business are included in the Company&#146;s
reserves (see note&nbsp;14).
</FONT>

<P align="center"><FONT size="2">F-19
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The sale resulted in a pre-tax gain of $623,071
of which $61,688 was for the mutual fund operations and $3,854
was for property and equipment. The net assets sold related to
the stock and property and equipment sale were $66,210.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A $557,529 pre-tax gain related to the
reinsurance contracts was deferred and is being recognized over
the remaining life of the related contracts. During 2002 and
2001, the Company recognized pre-tax income of approximately
$73,024 and $59,647, respectively, reflecting the amortization
of a portion of the deferred gain in the results of operations.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Associated California State Insurance
    Agencies, Inc. (&#147;ACSIA&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On May&nbsp;11, 2000, the Company sold 100% of
the issued and outstanding stock of ACSIA to Conseco Corporation
for approximately $32,905 in cash. ACSIA is a distributor of
long-term care insurance. The Company recorded a pre-tax gain on
sale of $11,994.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Long-Term Care (&#147;LTC&#148;) Insurance
    Business</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On March&nbsp;1, 2000, the Company sold its LTC
business to John Hancock Mutual Life Insurance Company for
$164,000. The business was sold via a 100% coinsurance agreement
whereby the Company ceded substantially all assets and
liabilities related to its long-term care business. The
reinsurance contracts entered into did not legally replace the
Company as the insurer to policyholders or extinguish its
liabilities to these policyholders. Therefore, the transaction
resulted in a deferred pre-tax gain of $51,431, which is being
recognized over the remaining lives of the related contracts.
During 2002, 2001 and 2000, the Company recognized pre-tax
income of approximately $5,297, $6,979 and $8,384, respectively,
reflecting the amortization of a portion of the deferred gain in
the results of operations. As part of the sale, the Company
transferred various other assets and liabilities and recorded
reinsurance recoverables of $321,000.
</FONT>

<P align="center"><FONT size="2">F-20
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Investments</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and fair value of fixed
maturities and equity securities at December&nbsp;31, 2002 were
as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Fixed maturities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Bonds:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States Government and government agencies
    and authorities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,576,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,549</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,646,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">States, municipalities and political subdivisions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(115</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,512</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign governments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,413</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">203,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Public utilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,875</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">879,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other corporate bonds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,821,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">298,955</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,598</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,094,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">458,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(54,027</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Equity securities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Common stocks:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Public utilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Banks, trusts and insurance companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,410</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,641</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Industrial, miscellaneous and all other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,737</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Non-redeemable preferred stocks:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-sinking fund preferred stocks
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,592</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,926</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">253,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">264,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,674</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-21
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and fair value of fixed
maturities and equity securities at December&nbsp;31, 2001 were
as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="39%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost or</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gross</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Losses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Fixed maturities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Bonds:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States Government and government agencies
    and authorities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,160,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,778</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,191,841</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">States, municipalities and political subdivisions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">239,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,235</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,042</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign governments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(450</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">234,237</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Public utilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,228,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,235,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other corporate bonds
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,614,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">183,033</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(76,893</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,720,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,470,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,278</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(111,487</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Equity securities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Common stocks:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Banks, trusts and insurance companies
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,486</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Industrial, miscellaneous and all other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(39</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,893</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Non-redeemable preferred stocks:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non-sinking fund preferred stocks
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">195,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,352</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(8,022</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amortized cost and fair value of fixed
maturities at December&nbsp;31, 2002 by contractual maturity are
shown below. Expected maturities may differ from contractual
maturities because issuers of the securities may have the right
to call or prepay obligations with or without call or prepayment
penalties.
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amortized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Cost</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair Value</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due in one year or less
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">273,644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after one year through five years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,990,498</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,084,678</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after five years through ten years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,646,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,732,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Due after ten years
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,312,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,482,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,221,272</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,573,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mortgage and asset backed securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,409,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,462,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Proceeds from sales of available for sale
securities were $3,740,619, $3,857,865 and $3,515,453 during
2002, 2001 and 2000 respectively. Gross gains of $117,612,
$115,202 and $59,917 and gross losses of $150,951, $140,472 and
$114,077 were realized on these sales in 2002, 2001 and 2000,
respectively.
</FONT>

<P align="center"><FONT size="2">F-22
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Major categories of net investment income were as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="62%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years ended December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">510,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">564,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">540,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,055</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,526</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,959</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,331</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The net realized gains (losses)&nbsp;recorded in
income for 2002, 2001 and 2000 are summarized as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(90,727</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(77,964</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,776</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,382</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total marketable securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,634</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(103,503</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,582</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,157</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recorded $85,295, $78,232 and $5,421
of pre-tax realized losses in 2002, 2001 and 2000, respectively,
associated with other-than-temporary declines in value of
available for sale securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has made commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the United States. At December&nbsp;31, 2002,
approximately 47% of the outstanding principal balance of
commercial mortgage loans were concentrated in the states of
California, New York, Connecticut, Pennsylvania and Florida.
Although the Company has a diversified loan portfolio, an
economic downturn could have an adverse impact on the ability of
its debtors to repay their loans. The outstanding balance of
commercial mortgage loans range in size from $1 to $9,495 at
December&nbsp;31, 2002. The mortgage loan balance is net of an
allowance for losses of $19,106 and $25,091 at December&nbsp;31,
2002 and 2001, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, loan commitments
outstanding totaled approximately $29,050. Furthermore, at
December&nbsp;31, 2002, the Company is committed to funding
additional capital contributions of $27,000 to certain
investments in limited partnerships.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had fixed maturities carried at
$216,055 and $262,694 at December&nbsp;31, 2002 and 2001,
respectively, on deposit with various governmental authorities
as required by law.
</FONT>

<P align="left">
<B><FONT size="2">Security lending</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company engages in transactions in which
fixed maturities, especially bonds issued by the United States
Government and Government agencies and authorities, are loaned
to selected broker/ dealers. Collateral, greater than or equal
to 102% of the fair value of securities lent plus interest, is
received in the form
</FONT>

<P align="center"><FONT size="2">F-23
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">of cash or marketable securities. The Company
monitors the fair value of securities loaned and the collateral
received on a daily basis, with additional collateral obtained
as necessary. The Company is subject to the risk of loss to the
extent that the loaned securities are not returned and the value
of the collateral is less than the market value of the
securities loaned. Management believes such an event is
unlikely. At December&nbsp;31, 2002 and 2001, securities with a
fair value of $419,000 and $289,000, respectively, were on loan
to selected brokers.
</FONT>

<P align="left">
<B><FONT size="2">6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property and
Equipment</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Property and equipment consist of the following:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Land
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,788</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Buildings and improvements
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,627</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Furniture, fixtures and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">345,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">299,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">489,577</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">445,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Less accumulated depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(238,792</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(211,820</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Depreciation expense for 2002, 2001 and 2000
amounted to $46,871, $39,958 and $45,213, respectively.
Depreciation expense is included in underwriting, general and
administrative expenses in the consolidated results of
operations.
</FONT>

<P align="left">
<B><FONT size="2">7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Premiums and
Accounts Receivable</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Receivables are reported at the estimated amounts
collectable net of an allowance for uncollectible items. A
summary of such items is as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">As of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Insurance premiums receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">303,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">272,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other receivables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Allowance for uncollectible items
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,965</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(32,161</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-24
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">8.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Mandatorily Redeemable Preferred Securities of
    Subsidiary Trusts</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mandatorily redeemable preferred securities of
subsidiary trusts consisted of the following as of
December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Security</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Interest Rate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Maturity</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000 Trust Capital Securities I
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">03/01/30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2000 Trust Capital Securities II
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">03/01/30</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">400,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1999 Trust Capital Securities I
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.60</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">04/26/29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">200,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1999 Trust Capital Securities II
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.876</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">04/26/29</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">499,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1997 Capital Securities I
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">05/30/27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">150,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">1997 Capital Securities II
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.94</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">07/31/27</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="5" align="left" valign="top">
    <FONT size="2">Total
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Distributions on preferred securities of
subsidiary trusts were $118,396, $118,370 and $110,142 for the
years ended December&nbsp;31, 2002, 2001 and 2000, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2000 Trust Capital Securities and
    Subordinated Debentures</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In March 2000, two subsidiary trusts of the
Company, Fortis Capital Proceeds Trust 2000-1 and Fortis Capital
Proceeds Trust 2000-2, issued 150,000 8.48% and 400,000 8.40%
trust capital securities (collectively, the &#147;2000 Trust
Capital Securities&#148;), respectively, to Fortis Insurance
N.V. (formerly, Fortis Insurance Holding N.V.), in each case
with a liquidation amount of $1,000 per security.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis Capital Proceeds Trust 2000-1 and Fortis
Capital Proceeds Trust 2000-2 used the proceeds from the sale of
the applicable 2000 Trust Capital Securities and trust common
securities to purchase $150,001 and $400,001, respectively, of
the Company&#146;s 8.48% and 8.40% subordinated debentures due
2030 (collectively, the &#147;2000 Subordinated
Debentures&#148;), respectively. These debentures are the sole
assets of the trusts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments the Company makes on the applicable
2000 Subordinated Debentures are the sole source of funds
available for the applicable trust to make the distributions on
the applicable 2000 Trust Capital Securities. Interest on the
2000 Subordinated Debentures is payable semi-annually, except
the Company has the right to extend the interest payment period
under the applicable 2000 Subordinated Debentures for up to ten
consecutive semi-annual periods, during which periods interest
will compound semi-annually. Distributions on the 2000 Trust
Capital Securities are cumulative and payable semi-annually,
except distributions are deferrable to the extent the Company
exercises its right described in the preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2000 Subordinated Debentures restrict the
Company&#146;s ability to (i)&nbsp;declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of the Company&#146;s capital stock,
(ii)&nbsp;make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any of the
Company&#146;s debt securities that rank pari passu with or
junior in right of payment to the applicable 2000 Subordinated
Debentures or (iii)&nbsp;make any guarantee payments with
respect to any guarantee by the Company of any securities of any
subsidiary of the Company if such guarantee ranks pari passu or
junior in right of payment to the applicable 2000 Subordinated
Debentures, if at any time (1)&nbsp;any 2000 Subordinated
Debentures are held by Fortis Capital Proceeds Trust 2000-1 or
2, as applicable, and there shall have occurred and be
continuing an event of default under the declaration of trust of
Fortis Capital Proceeds Trust 2000-1 or 2, as applicable,
(2)&nbsp;there shall have occurred and be continuing an event of
default under the applicable indenture pursuant to which the
applicable 2000 Subordinated Debentures were issued or
(3)&nbsp;the Company shall have given notice of its election to
extend the interest payment period under the applicable 2000
</FONT>

<P align="center"><FONT size="2">F-25
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Subordinated Debentures as described above and
the Company shall not have rescinded such notice, and such
extension period has commenced and is continuing.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On or after April&nbsp;2005 and April&nbsp;2010,
respectively, the Company has the right to redeem the applicable
2000 Subordinated Debentures, respectively, in each case at a
redemption price equal to 100% of the principal amount, plus
accrued and unpaid interest. The 2000 Trust Capital Securities
are mandatorily redeemable upon the maturity of the applicable
2000 Subordinated Debentures in March&nbsp;2030 or such earlier
date as the applicable 2000 Subordinated Debentures may be
redeemed. On April&nbsp;1, 2005 and April&nbsp;1, 2010, Fortis
Insurance N.V., as holder of the 2000 Trust Capital Securities,
has the right to require Fortis Capital Proceeds Trust 2000-1
and 2, respectively, to repurchase all (but not less than all)
of Fortis Insurance N.V.&#146;s applicable 2000 Trust Capital
Securities at a purchase price equal to 100% of the liquidation
amount of the applicable 2000 Trust Capital Securities plus an
amount equal to accumulated and unpaid distributions, in which
case the Company would be required to repurchase all the
applicable 2000 Subordinated Debentures at a repurchase price
equal to the principal amount, plus accrued and unpaid interest.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">1999 Trust Capital Securities and
    Subordinated Debentures</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 1999, two subsidiary trusts of the
Company, 1999 Fortis Capital Trust&nbsp;I and 1999 Fortis
Capital Trust&nbsp;II, issued 200,000 7.60% and 499,850 7.876%
trust capital securities (collectively, the &#147;1999 Trust
Capital Securities&#148;), respectively, to Fortis Capital
Funding LP and Fortis Insurance N.V. (formerly, Fortis Insurance
Holding N.V.), respectively, in each case with a liquidation
amount of $1,000 per security.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">1999 Fortis Capital Trust&nbsp;I and 1999 Fortis
Capital Trust&nbsp;II used the proceeds from the sale of the
applicable 1999 Trust Capital Securities and trust common
securities to purchase $200,001 and $499,851, respectively, of
the Company&#146;s 7.60% and 7.876% subordinated debentures due
2029 (collectively, the &#147;1999 Subordinated
Debentures&#148;), respectively. These debentures are the sole
assets of the trusts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments the Company makes on the applicable
1999 Subordinated Debentures are the sole source of funds
available for the applicable trust to make the distributions on
the applicable 1999 Trust Capital Securities. Interest on the
1999 Subordinated Debentures is payable quarterly, except the
Company has the right to extend the interest payment period
under the applicable 1999 Subordinated Debentures for up to
twenty consecutive quarterly periods, during which periods
interest will compound quarterly. Distributions on the 1999
Trust Capital Securities are cumulative and payable quarterly,
except distributions are deferrable to the extent the Company
exercises its right described in the preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1999 Subordinated Debentures restrict the
Company&#146;s ability to (i)&nbsp;declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of the Company&#146;s capital stock,
(ii)&nbsp;make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any of the
Company&#146;s debt securities that rank pari passu with or
junior in right of payment to the applicable 1999 Subordinated
Debentures or (iii)&nbsp;make any guarantee payments with
respect to any guarantee by the Company of any securities of any
subsidiary of the Company if such guarantee ranks pari passu or
junior in right of payment to the applicable 1999 Subordinated
Debentures, if at any time (1)&nbsp;any 1999 Subordinated
Debentures are held by 1999 Fortis Capital Trust&nbsp;I or II,
as applicable, and there shall have occurred and be continuing
an event of default under the declaration of trust of 1999
Fortis Capital Trust I or II, as applicable, (2)&nbsp;there
shall have occurred and be continuing an event of default under
the applicable indenture pursuant to which the applicable 1999
Subordinated Debentures were issued or (3)&nbsp;the Company
shall have given notice of its election to extend the interest
payment period under the applicable 1999 Subordinated Debentures
as described above and the Company shall not have rescinded such
notice, and such extension period has commenced and is
continuing.
</FONT>

<P align="center"><FONT size="2">F-26
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On June&nbsp;30, 2009 or any interest payment
date thereafter, the Company has the right to redeem the 1999
Subordinated Debentures at a redemption price equal to 100% of
the principal amount or the principal amount multiplied by a
percentage that ranges from 103.8% to 100.0%, depending on the
year of redemption and depending on the series, plus accrued and
unpaid interest. The 1999 Trust Capital Securities are
mandatorily redeemable upon the maturity of the applicable 1999
Subordinated Debentures in April&nbsp;2029 or such earlier date
as the applicable 1999 Subordinated Debentures may be redeemed.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">1997 Capital Securities I &#38;
    II</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May&nbsp;1997, Fortis Capital Trust, a trust
declared and established by the Company and other parties,
issued 150,000 8.40% capital securities (the &#147;1997 Capital
Securities&nbsp;I&#148;) to purchasers and 4,640 8.40% common
securities (the &#147;1997 Common Securities&nbsp;I&#148;) to
the Company, in each case with a liquidation amount of $1,000
per security. Fortis Capital Trust used the proceeds from the
sale of the 1997 Capital Securities I and the 1997 Common
Securities&nbsp;I to purchase $154,640 of the Company&#146;s
8.40% junior subordinated debentures due 2027 (the &#147;1997
Junior Subordinated Debentures&nbsp;I&#148;). These debentures
are the sole assets of Fortis Capital Trust.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In July&nbsp;1997, Fortis Capital Trust&nbsp;II,
a trust declared and established by the Company and other
parties, issued 50,000 7.94% capital securities (the &#147;1997
Capital Securities&nbsp;II&#148; and, together with the 1997
Capital Securities, the &#147;1997 Capital Securities&#148;) to
purchasers and 1,547 7.94% common securities (the &#147;1997
Common Securities II&#148;) to the Company, in each case with a
liquidation amount of $1,000&nbsp;per security. Fortis Capital
Trust&nbsp;II used the proceeds from the sale of the 1997
Capital Securities&nbsp;II and the 1997 Common
Securities&nbsp;II to purchase $51,547 of the Company&#146;s
7.94% junior subordinated debentures due 2027 (the &#147;1997
Junior Subordinated Debentures&nbsp;II&#148; and, together with
the 1997 Junior Subordinated Debentures&nbsp;I, the &#147;1997
Junior Subordinated Debentures&#148;). These debentures are the
sole assets of Fortis Capital Trust&nbsp;II.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">With respect to each of Fortis Capital Trust and
Fortis Capital Trust&nbsp;II, the Company, Fortis SA/NV and
Fortis N.V. entered into a junior subordinated guarantee of the
distributions and payments on the liquidation and redemption of
the 1997 Capital Securities I and the 1997 Capital
Securities&nbsp;II, respectively, but only to the extent the
funds are held by Fortis Capital Trust and Fortis Capital
Trust&nbsp;II, respectively. Fortis SA/NV and Fortis N.V. also
entered into a junior subordinated guarantee of the payment of
the principal, premium, if any, and interest on the 1997 Junior
Subordinated Debentures. The 1997 Junior Subordinated Debentures
and the guarantees are unsecured, junior subordinated
obligations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payments the Company or the guarantors make
on the applicable 1997 Junior Subordinated Debentures are the
sole source of funds available for the applicable trust to make
the distributions on the applicable 1997 Capital Securities.
Interest on the 1997 Junior Subordinated Debentures are payable
semi-annually, except the Company, so long as no event of
default has occurred or is continuing and with the consent of
the guarantors, may exercise its right to defer payment on the
1997 Junior Subordinated Debentures for up to ten consecutive
semi-annual periods, during which periods interest will compound
semi-annually. Distributions on the 1997 Capital Securities are
cumulative and payable semi-annually, except distributions are
deferrable to the extent the Company exercises its right
described in the preceding sentence.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Junior Subordinated Debentures&nbsp;I
and the 1997 Junior Subordinated Debentures&nbsp;II each
restrict the Company&#146;s and the guarantors&#146; ability to:
(i)&nbsp;declare or pay any dividends on or distributions on or
redeem, purchase, acquire or make a liquidation payment on any
of the capital stock of the Company or such guarantor,
(ii)&nbsp;make any payment of principal, premium, if any, or
interest on or repay, redeem or repurchase any debt securities
that rank pari passu with or junior to the applicable 1997
Junior Subordinated Debentures or the guarantees or
(iii)&nbsp;make any guarantee payment with respect to any
guarantee of the debt securities of any subsidiary if such
guarantee ranks pari passu with or junior to the applicable 1997
Junior Subordinated
</FONT>

<P align="center"><FONT size="2">F-27
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">Debentures or the guarantees, if at any time
(1)&nbsp;the Company elects to defer payment on the applicable
1997 Junior Subordinated Debentures, (2)&nbsp;at any time there
has occurred any event of which the Company or a guarantor has
knowledge that would constitute an event of default under the
applicable 1997 Junior Subordinated Debentures and that the
Company and the guarantors have not taken reasonable steps to
cure or (3)&nbsp;the Company or the guarantors are in default
with respect to the payment of obligations under the guarantees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Capital Securities rank pari passu with
the 1997 Common Securities with respect to cash distributions
and amounts payable on liquidation, except that the 1997 Common
Securities will be subordinated to the 1997 Capital Securities
if an event of default has occurred and is continuing as a
result of any failure by the Company to pay amounts when due in
respect of the applicable 1997 Junior Subordinated Debentures.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Junior Subordinated Debentures&nbsp;I
and the 1997 Junior Subordinated Debentures&nbsp;II mature in
May and July&nbsp;2027, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 1997 Capital Securities are subject to
mandatory redemption, in whole or in part, upon repayment of the
applicable 1997 Junior Subordinated Debentures at their stated
maturity or earlier redemption. The 1997 Junior Subordinated
Debentures are redeemable prior to maturity at the
Company&#146;s option in whole at any time or in part from time
to time at redemption prices calculated according to a specified
formula.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Events of default under the 1997 Junior
Subordinated Debentures include: (i)&nbsp;failure for
30&nbsp;days to pay interest when due (subject to any deferral
as described above), (ii)&nbsp;failure to pay principal or
premium, if any, when due, (iii)&nbsp;failure to perform the
covenants in the indenture for 90&nbsp;days after notice and
(iv)&nbsp;certain events of bankruptcy, insolvency or
reorganization of the Company or the guarantors. Events of
default under the guarantees of the 1997 Capital Securities
include the failure of the Company or the guarantors to perform
any payment obligations thereunder or to perform any non-payment
obligation for 30&nbsp;days.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and the guarantors have also agreed
to guarantee to each person to whom the applicable trust becomes
indebted or liable, the full payment of any costs, expenses or
liabilities of the trust (other than the obligations to pay
amounts due to the holders of the 1997 Capital Securities and
the 1997 Common Securities pursuant to their terms).
</FONT>

<P align="center"><FONT size="2">F-28
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and the majority of its subsidiaries
are subject to U.S. tax and file a U.S. consolidated federal
income tax return. Certain life insurance subsidiaries that were
acquired in 1997, 1998, 1999 and 2000 are not included in the
consolidated return. Information about current and deferred tax
expense follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Current expense:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">256,045</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total current expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">267,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred expense (benefit):
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Federal
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92,209</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160,222</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,562</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(167</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total deferred expense (benefit)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">90,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160,175</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">81,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total income tax expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The provision for foreign taxes includes amounts
attributable to income from U.S. possessions that are considered
foreign under U.S. tax laws. International operations of the
Company are subject to income taxes imposed by the jurisdiction
in which they operate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A reconciliation of the federal income tax rate
to the Company&#146;s effective income tax rate follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="70%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Federal income tax rate:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35.0</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Reconciling items:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Tax exempt interest
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.7</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends received deduction
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Subpart F income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.2</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(0.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Permanent nondeductible expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment for deferred liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign tax credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.1</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.6</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Low-income housing credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.5</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Low-income housing adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">0.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Effective income tax rate:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29.9</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52.3</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53.8</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-29
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The tax effects of temporary differences that
result in significant deferred tax assets and deferred tax
liabilities are as follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="72%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Deferred tax assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder and separate account reserves
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">754,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">701,492</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investment adjustments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">66,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross deferred tax assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">981,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">930,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Deferred tax liabilities:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred acquisition costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">380,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">291,908</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">184,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrealized gains on fixed maturities and equities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">140,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross deferred tax liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">813,133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">593,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net deferred income tax asset</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">336,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Deferred taxes have not been provided on the
undistributed earnings of wholly owned foreign subsidiaries
since the Company intends to indefinitely reinvest these
earnings. The cumulative amount of undistributed earnings for
which the Company has not provided deferred income taxes is
approximately $134,000. Upon distribution of such earnings in a
taxable event, the Company would incur additional U.S. income
taxes in the amount of $34,000 net of anticipated foreign tax
credits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under pre-1984 life insurance company income tax
laws, a portion of a life insurance company&#146;s &#147;gain
from operations&#148; was not subject to current income taxation
but was accumulated, for tax purposes, in a memorandum account
designated as &#147;policyholders&#146; surplus account.&#148;
Amounts in this account only become taxable upon the occurrence
of certain events. The approximate amount in this account was
$95,163 at December&nbsp;31, 2002 and 2001. Deferred taxes have
not been provided on amounts in this account since the Company
neither contemplates any action nor foresees any events
occurring that would create such tax.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, the Company and its
subsidiaries had capital loss carryforwards for U.S. federal
income tax purposes. Capital loss carryforwards total $84,007
and will expire if unused as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="84%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Expiration Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">78,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Mandatorily Redeemable Preferred
    Stocks</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has three classes of mandatorily
redeemable preferred stock: Series&nbsp;A, Series&nbsp;B and
Series&nbsp;C. The carrying value equals the redemption value
for all classes of preferred stock. The Company&#146;s board of
directors has the authority, without further action of the
Parent, to issue up to 20,000,000 shares of
</FONT>

<P align="center"><FONT size="2">F-30
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">preferred stock, par value $1.00 per share, in
one or more series and to fix the powers, preferences, rights
and qualifications, limitations or restrictions thereof, which
may include dividend rights, conversion rights, voting rights,
terms of redemption, liquidation preferences and the number of
shares constituting any series or the designations of the series.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information about the preferred stock is as
follows:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Preferred stock, par value $1.00 per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;A: 10,000 shares authorized, none
    issued or outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;B: 30,000 shares authorized, 19,660
    and 20,160 shares issued and outstanding in 2002 and 2001,
    respectively
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Series&nbsp;C: 5,000 shares authorized, issued
    and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There was no change in the outstanding shares of
Series&nbsp;A or Series&nbsp;C for the years ended
December&nbsp;31, 2002, 2001 and 2000. Changes in the number of
Series&nbsp;B shares outstanding are as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">For the Years Ended</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares outstanding, beginning
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares redeemed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Shares outstanding, ending
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">All shares have a liquidation price of $1,000 per
share and rank senior to common stock with respect to rights to
receive dividends and to receive distributions upon the
liquidation, dissolution or winding up of the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Series&nbsp;A: Series&nbsp;A shares were redeemed
in 1999 and have the status of authorized and unissued preferred
stock and may be reissued by the Company.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Series&nbsp;B and C: Holders of the Series&nbsp;B
Preferred Stock are entitled to receive cumulative dividends at
the rate of 4.0% per share per annum, multiplied by the $1,000
liquidation price, and holders of the Series&nbsp;C Preferred
Stock are entitled to receive dividends at the rate of 4.5% per
share per annum multiplied by the $1,000 liquidation price. All
dividends are payable in arrears on a quarterly basis. Any
dividend that is not paid on a specified dividend payment date
with respect to a share of such Preferred Stock shall be deemed
added to the liquidation price of such share for purposes of
computing the future dividends on such share, until such
delinquent dividend has been paid.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Holders of the Series&nbsp;B Preferred Stock may
elect to have any or all of their shares redeemed by the Company
at any time after April&nbsp;1, 2002, and the Company must
redeem all shares of the Series&nbsp;B Preferred Stock no later
than July&nbsp;1, 2017. Holders of the Series&nbsp;C Preferred
Stock may elect to have any or all of their shares redeemed by
the Company any time after April&nbsp;1, 2022, and the Company
must redeem all shares of the Series&nbsp;C Preferred Stock no
later than July&nbsp;1, 2027. The Company also has the right and
the obligation to redeem the Series&nbsp;B Preferred Stock and
Series&nbsp;C Preferred Stock upon the occurrence of certain
specified events. The redemption price in all cases shall equal
the $1,000 per share liquidation price plus all accumulated and
unpaid dividends. The Company is not required to establish any
sinking fund or similar funds
</FONT>

<P align="center"><FONT size="2">F-31
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">with respect to such redemptions. None of the
shares of Series&nbsp;B Preferred Stock or Series C Preferred
Stock are convertible into common stock or any other equity
security of the Company. However, holders of the Series&nbsp;B
Preferred Stock and Series&nbsp;C Preferred Stock are entitled
to one vote per share owned of record on all matters voted upon
by the Company stockholders, voting with the holders of common
stock as a single class, and not as a separate class or classes.
The shares of Series&nbsp;B Preferred Stock and Series&nbsp;C
Preferred Stock are subject to certain restrictions on
transferability, and the Company has the right of first refusal
to acquire the shares if any holder thereof desires to make a
transfer not otherwise permitted by the terms thereof.
</FONT>

<P align="left">
<B><FONT size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders&#146;
Equity</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Common Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors of the Company has
authorized 80,000,000 shares of common stock with a par value of
$0.10 per share, designated as Class&nbsp;A, Class&nbsp;B and
Class&nbsp;C shares. The Class&nbsp;B and Class&nbsp;C shares
rank senior to the Class&nbsp;A shares solely with respect to
dividend payments and payments on liquidation. There are 150,001
Class&nbsp;B shares and 400,001 Class&nbsp;C shares outstanding,
all of which are owned by Fortis (US) Funding Partners&nbsp;I LP
(&#147;Partnership&nbsp;I&#148;) and Fortis (US) Funding
Partners&nbsp;II LP (&#147;Partnership&nbsp;II&#148;),
respectively. Affiliates of Fortis own the general partnership
and limited partnership interests in Partnership&nbsp;I and
Partnership&nbsp;II. Partnership&nbsp;I and Partnership&nbsp;II
have each issued a series of Preference Securities.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following dividends have been paid for the
years ended December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="27%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74.69</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,316</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,649</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">77.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.65</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,462</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">109,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,111</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Preferred Stock</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Board of Directors of the Company has
designated Preferred Stock shares as Series&nbsp;A,
Series&nbsp;B and Series&nbsp;C (see Note&nbsp;10) and in
connection with the stock option plan designated certain shares
as Series&nbsp;D (see Note&nbsp;20).
</FONT>

<P align="left">
<B><FONT size="2">12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statutory
Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s insurance subsidiaries prepare
financial statements on the basis of statutory accounting
practices (&#147;SAP&#148;) prescribed or permitted by the
insurance departments of their states of domicile. Prescribed
SAP includes the Accounting Practices and Procedures Manual of
the National Association of Insurance Commissioners
(&#147;NAIC&#148;) as well as state laws, regulations and
administrative rules.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The principal differences between SAP and GAAP
are: 1)&nbsp;policy acquisition costs are expensed as incurred
under SAP, but are deferred and amortized under GAAP;
2)&nbsp;the value of business acquired is not capitalized under
SAP but is under GAAP; 3)&nbsp;amounts collected from holders of
universal life-type and annuity products are recognized as
premiums when collected under SAP, but are initially recorded as
contract deposits under GAAP, with cost of insurance recognized
as revenue when assessed and other contract charges recognized
over the periods for which services are provided; 4)&nbsp;the
classification and carrying amounts of investments in certain
securities are different under SAP than under GAAP; 5)&nbsp;the
criteria for providing asset valuation allowances, and the
methodologies used to determine the amounts thereof, are
different under SAP
</FONT>

<P align="center"><FONT size="2">F-32
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">than under GAAP; 6)&nbsp;the timing of
establishing certain reserves, and the methodologies used to
determine the amounts thereof, are different under SAP than
under GAAP; and 7)&nbsp;certain assets are not admitted for
purposes of determining surplus under SAP.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The combined statutory net income and capital and
surplus of the insurance subsidiaries follow:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended and at</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statutory Net Income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">387,639</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">387,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Statutory Capital and Surplus
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,939,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,767,624</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,867,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Insurance enterprises are required by state
insurance departments to adhere to minimum risk-based capital
(&#147;RBC&#148;) requirements developed by the NAIC. All of the
Company&#146;s insurance subsidiaries exceed minimum RBC
requirements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The payment of dividends to the Company by the
Company&#146;s insurance subsidiaries in excess of a certain
amount (i.e., extraordinary dividends) must be approved by the
subsidiaries&#146; domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which the Company&#146;s subsidiaries are
domiciled is the lesser of (i)&nbsp;10% of the statutory surplus
as of the end of the prior year or (ii)&nbsp;the prior
year&#146;s statutory net income. In some states, the formula is
the greater amount of clauses&nbsp;(i) and (ii). Some states,
however, have an additional stipulation that dividends may only
be paid out of earned surplus. If insurance regulators determine
that payment of an ordinary dividend or any other payments by
the Company&#146;s insurance subsidiaries to the Company (such
as payments under a tax sharing agreement or payments for
employee or other services) would be adverse to policyholders or
creditors, the regulators may block such payments that would
otherwise be permitted without prior approval. In connection
with the acquisition of American Bankers Insurance Group
(&#147;ABIG&#148;) in 1999, the Company entered into an
agreement with the Florida Insurance Department pursuant to
which American Bankers Insurance Company and American Bankers
Life Assurance Company have agreed to limit the amount of
ordinary dividends they would pay to the Company to an amount no
greater than 50% of the amount otherwise permitted under Florida
law. This agreement expires in August 2004. In addition, the
Company entered into an agreement with the New York Insurance
Department in connection with the merger of Bankers Atlantic
Life Assurance Company, one of the Company&#146;s New
York-domiciled insurance subsidiaries, into First Fortis Life
Insurance Company (&#147;FFLIC&#148;) in 2001, pursuant to which
FFLIC agreed not to pay any dividends to the Company until
fiscal year 2004. No assurance can be given that there will not
be further regulatory actions restricting the ability of the
Company&#146;s insurance subsidiaries to pay dividends. Based on
the dividend restrictions under applicable laws and regulations,
the maximum amount of dividends that the Company&#146;s
subsidiaries could pay to the Company in 2003 without regulatory
approval is approximately $289,806. The Company expects that as
a result of statutory accounting for sold businesses, the
maximum amount of dividends the Company&#146;s subsidiaries will
be able to pay to the Company will be significantly lower in
2004.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Effective January&nbsp;1, 2001, the NAIC revised
the Accounting Practices and Procedures Manual in a process
referred to as Codification. The domiciliary states of the
Company&#146;s insurance subsidiaries have adopted the
provisions of the revised manual with certain exceptions.
Codification has changed, to some extent, prescribed statutory
accounting practices and resulted in changes to the accounting
practices that the Company&#146;s insurance subsidiaries use to
prepare their statutory basis financial statements. The
cumulative effect of all changes resulting from the Codification
guidance was recorded as a direct adjustment to statutory
surplus on January&nbsp;1, 2001. The effect of adoption
increased statutory surplus by approximately $85,000.
</FONT>

<P align="center"><FONT size="2">F-33
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reinsurance</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of business, the Company
is involved in both the assumption and cession of reinsurance
with non-affiliated companies. The following table provides
details of the reinsurance recoverables balance for the years
ended December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="68%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded future policy holder benefits and expense
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,451,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,348,208</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded unearned premium
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,247,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,495,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded claims and benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">756,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">737,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ceded paid losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">194,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">169,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,649,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,751,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The effect of reinsurance on premiums earned and
benefits incurred was as follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="52%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,813,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,862,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,430,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">515,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">235,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">290,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums ceded
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,647,608</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,855,803</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,576,330</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gross policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,798,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,504,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,781,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits assumed
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">487,965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">292,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits ceded
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,856,855</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,557,677</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(853,350</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company had $451,135 of assets held in trusts
as of December&nbsp;31, 2002 for the benefit of others related
to certain reinsurance arrangements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company utilizes ceded reinsurance for loss
protection and capital management, business dispositions, and,
in the Solutions segment, for client risk and profit sharing.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Loss Protection and Capital
    Management</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As part of the Company&#146;s overall risk and
capacity management strategy, the Company purchases reinsurance
for certain risks underwritten by the Company&#146;s various
segments, including significant individual or catastrophic
claims, and to free up capital to enable the Company to write
additional business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">For those product lines where there is exposure
to catastrophes, the Company closely monitors and manages the
aggregate risk exposure by geographic area and the Company has
entered into reinsurance treaties to manage exposure to these
types of events.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under indemnity reinsurance transactions in which
the Company is the ceding insurer, the Company remains liable
for policy claims if the assuming company fails to meet its
obligations. To limit this risk, the Company has control
procedures in place to evaluate the financial condition of
reinsurers and to monitor the concentration of credit risk to
minimize this exposure. The selection of reinsurance companies
is based on criteria related to solvency and reliability and, to
a lesser degree, diversification as well as on developing strong
relationships with the Company&#146;s reinsurance partners for
the sharing of risks.
</FONT>

<P align="center"><FONT size="2">F-34
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Business Dispositions</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has used reinsurance to exit certain
businesses, such as the disposals of FFG and LTC (see
note&nbsp;4). Reinsurance was used in these cases to facilitate
the transactions because the businesses shared legal entities
with business segments that the Company retained. Assets backing
the liabilities ceded related to these businesses are held in
trusts for the benefit of the Company and the separate accounts
relating to FFG are still reflected in the Company&#146;s
balance sheet.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reinsurance recoverable from The Hartford was
$1,679,681 and $1,748,099 as of December&nbsp;31, 2002 and 2001,
respectively. The reinsurance recoverable from John Hancock was
$693,373 and $545,690 as of December&nbsp;31, 2002 and 2001,
respectively. The Company would be responsible for administering
this business in the event of a default by reinsurers. In
addition, under the reinsurance agreement, The Hartford is
obligated to contribute funds to increase the value of the
separate accounts relating to the business sold if such value
declines. If The Hartford fails to fulfill these obligations,
the Company will be obligated to make these payments.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Solutions&#146; Segment Client Risk and
    Profit Sharing:</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Solutions segment writes business produced by
its clients, such as mortgage lenders and servicers and
financial institutions, and reinsures all or a portion of such
business to insurance subsidiaries of the clients. Such
arrangements allow significant flexibility in structuring the
sharing of risks and profits on the underlying business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A substantial portion of Solutions&#146;
reinsurance activities are related to agreements to reinsure
premiums generated by certain clients to the clients&#146; own
captive insurance companies or to reinsurance subsidiaries in
which the clients have an ownership interest. Collateral is
obtained in amounts equal to the outstanding reserves when
captive companies are not authorized to operate in the
Company&#146;s insurance subsidiary&#146;s state of domicile as
required by statutory accounting principles.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s reinsurance agreements do not
relieve the Company from its direct obligation to its insured.
Thus, a credit exposure exists to the extent that any reinsurer
is unable to meet the obligations assumed in the reinsurance
agreements. To minimize its exposure to reinsurance
insolvencies, the Company evaluates the financial condition of
its reinsurers and holds substantial collateral (in the form of
funds, trusts, and letters of credit) as security under the
reinsurance agreements.
</FONT>

<P align="center"><FONT size="2">F-35
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reserves</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table provides reserve information
by the Company&#146;s major lines of business as of:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="26%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Future Policy</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Claims and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Future Policy</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Claims and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits and</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unearned</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Premiums</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payable</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Expenses</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Premiums</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Payable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Long Duration Contracts:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pre-funded funeral life insurance policies and
    annuity contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,990,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,764,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Life insurance no longer offered
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">693,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,182</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">704,066</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Universal life and annuities no longer offered
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">334,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">358,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,859</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">FFG and LTC disposed businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,619,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,565,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">120,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Short Duration Contracts:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group term life
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">456,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,480</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">438,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Group disability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,298,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,203,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Medical and dental
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">583,075</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">739,251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">231,664</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">603,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">332,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Credit
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,385,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">414,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,707,745</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">431,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Warranties and extended service contracts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">721,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">All other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">359,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,116</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Total</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,543,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,392,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,267,197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,405,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Long Duration
Contracts</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s long duration contracts are
comprised of pre-funded funeral life insurance policies and
annuity contracts, life insurance policies no longer offered,
universal life and annuities no longer offered and FFG and LTC
disposed businesses. The principal products and services
included in these categories are described in the summary of
significant accounting policies (see note&nbsp;2).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s PreNeed segment distributes
pre-funded funeral insurance products through two separate
divisions, the independent division and the AMLIC division. The
reserves for future policy benefits and expenses for pre-funded
funeral life and annuity contracts and life insurance no longer
offered by the PreNeed segment differ by division and are
established based upon the following assumptions:
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Independent
Division</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest and discount rates for pre-funded
funeral life insurance are level, vary by year of issuance and
product, and ranged from 7.0% to 7.3% in 2002 and 2001 before
provisions for adverse deviation, which ranged from 0.2% to 0.5%
in both 2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest and discount rates for pre-funded life
insurance no longer offered vary by year of issuance and
products and were 7.5% grading to 5.25% over 20&nbsp;years in
2002 and 2001 with the exception of a block of pre-1980 business
which had a level 8.75% discount rate in both 2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mortality assumptions are based upon pricing
assumptions and modified to allow provisions for adverse
deviation. Surrender rates vary by product and are based upon
pricing assumptions. The weighted average
</FONT>

<P align="center"><FONT size="2">F-36
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">lapse rate, including surrenders, for all life
policies issued by the independent channel was approximately
3.2% and 3.8% in 2002 and 2001, respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefit increases on pre-funded
life insurance policies ranged from 2.5 to 6.5% in 2002 and
2001. Some policies have future policy benefit increases, which
are guaranteed or tied to equal some measure of inflation. The
inflation assumption for these inflation-linked benefits was
3.0% in 2002 and 2001. Traditional life products issued by the
PreNeed segment have level benefits.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reserves for annuities issued by the
independent division are based on assumed interest rates
credited on deferred annuities, which vary by year of issuance,
and ranged from 3.5% to 5.0% in 2002 and 2001. Withdrawal
charges, if any, generally range from 7.0% to 0%, grading to
zero over a period of seven years for business issued in the
United States. Canadian annuity products have a surrender charge
that varies by product series and premium paying period,
typically grading to zero after all premiums have been paid.
</FONT>

<P align="left">
<B><I><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;AMLIC
Division</FONT></I></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Interest and discount rates for pre-funded
funeral life insurance policies issued October 2000 and beyond
vary by issue year and are based on pricing assumptions and
modified to allow for provisions for adverse deviation. 2002
issues used a level 5.75% discount rate, 2001 issues used a
level 6% discount rate and 2000 issues used a discount rate of
7% grading to 6.25% over nine years. Pre-funded life insurance
policies issued prior to October 2000 and all traditional life
policies issued by the AMLIC division use discount rates, which
vary by issue year and product and ranged from 2.5% to 7.5% in
2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Mortality assumptions for pre-funded life
insurance products issued in October 2000 and beyond are based
upon pricing assumptions and modified to allow for provisions
for adverse deviation. Surrender rates for pre-funded life
insurance products issued in October 2000 and beyond vary by
product and are based upon pricing assumptions. Mortality
assumptions for all pre-funded funeral life insurance and
traditional life insurance issued by the AMLIC division prior to
October 2000 are based on Statutory valuation requirements with
no explicit provision for lapses. The weighted average lapse
rate, including surrenders, for all life policies issued by the
AMLIC division was approximately 1.1% and 1.3% in 2002 and 2001,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Future policy benefit increases are based upon
pricing assumptions. First-year guaranteed benefit increases
range from 0.0% to 6.0% in 2002 and 2001. Renewal guaranteed
benefit increases range from 0.0% to 3.0% in 2002 and 2001. For
contracts with minimum benefit increases associated with an
inflation index, assumed benefit increases equaled the discount
rate less 3% in 2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reserves for annuities issued by the AMLIC
division are based on assumed interest rates credited on
deferred annuities and ranged from 1.0% to 6.5% in 2002 and
2001. Withdrawal charges ranged from 0.0% to 8.0% grading to
zero over eight years for business issued in the United States.
Canadian annuity products have a flat 35% surrender charge.
Nearly all the deferred annuities contracts have a 3.0%
guaranteed interest rate.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="94%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Universal Life and Annuities No Longer
    Offered</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The reserves for universal life and annuity
products no longer offered in the Assurant Solutions segment
have been established based on the following assumptions:
Interest rates credited on annuities, which vary by product and
time when funds were received, ranged from 4.0% to 5.0% in 2001
and were universally 4.0% in 2002. Guaranteed crediting rates on
annuities range from 3.5% to 4.0%. Annuities are also subject to
surrender charges, which vary by contract year and grade to zero
over a period no longer than seven years. Surrender values will
never be less than the amount of paid-in premiums regardless of
the surrender charge. Credited interest rates on universal life
funds vary by product and the funds received ranged from 4.0% to
5.5% in 2002 and 4.0% to 7.0% in 2001. Guaranteed crediting
rates where present are equal to 4%. Additionally, universal
</FONT>

<P align="center"><FONT size="2">F-37
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">life funds are subject to surrender charges that
vary by product, age, sex, year of issue, risk class and face
amount grading to zero over a period not longer than
20&nbsp;years.
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FFG
and LTC</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A description of the disposal of FFG and LTC can
be found in the dispositions footnote (see note&nbsp;4). The
reserves for these blocks of business are included in the
Company&#146;s reserves in accordance with FAS&nbsp;113,
<I>Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts. </I>The Company maintains an
offsetting reinsurance recoverable related to these reserves
(see note&nbsp;13).
</FONT>

<P align="left">
<B><FONT size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Short
Duration Contracts</I></FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s short duration contracts are
comprised of group term life, group disability, medical and
dental, property, credit, warranty and all other. The principal
products and services included in these categories are described
in the summary of significant accounting policies (see
note&nbsp;2).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The disability category includes short and long
term disability products. Claims and benefits payable for
long-term disability have been discounted at 6%. The
December&nbsp;31, 2002 and 2001 liabilities include $1,286,463
and $1,190,618, respectively, of such reserves. The amount of
discounts deducted from outstanding reserves as of
December&nbsp;31, 2002 and 2001 are $405,507 and $390,803,
respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">15.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</FONT></B></TD>
    <TD>
    <B><I><FONT size="2">Fair Value Disclosures</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Statement of Financial Accounting Standards
No.&nbsp;107, <I>Disclosures About Fair Value of Financial
Instruments </I>(&#147;FAS&nbsp;107&#148;) requires disclosure
of fair value information about financial instruments, as
defined therein, for which it is practicable to estimate such
fair value. These financial instruments may or may not be
recognized in the consolidated balance sheets. In the
measurement of the fair value of certain financial instruments,
if quoted market prices were not available other valuation
techniques were utilized. These derived fair value estimates are
significantly affected by the assumptions used. Additionally,
FAS&nbsp;107 excludes certain financial instruments including
those related to insurance contracts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In estimating the fair value of the financial
instruments presented, the Company used the following methods
and assumptions:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Cash, cash equivalents and short-term
    investments:</FONT></I><FONT size="2"> the carrying amount
    reported approximates fair value because of the short maturity
    of the instruments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Fixed maturity
    securities:</FONT></I><FONT size="2"> the fair value for fixed
    maturity securities is based on quoted market prices, where
    available. For fixed maturity securities not actively traded,
    fair values are estimated using values obtained from independent
    pricing services or, in the case of private placements, are
    estimated by discounting expected future cash flows using a
    current market rate applicable to the yield, credit quality, and
    maturity of the investments.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Equity securities:</FONT></I><FONT size="2">
    fair value of equity securities and non-sinking fund preferred
    stocks is based upon quoted market prices.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Commercial mortgage loans and policy
    loans:</FONT></I><FONT size="2"> the fair values of mortgage
    loans are estimated using discounted cash flow analyses, based
    on interest rates currently being offered for similar loans to
    borrowers with similar credit ratings. Mortgage loans with
    similar characteristics are aggregated for purposes of the
    calculations. The carrying amounts of policy loans reported in
    the balance sheets approximate fair value.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">F-38
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Other investments:</FONT></I><FONT size="2">
    the fair values of joint ventures are calculated based on fair
    market value appraisals. The carrying amounts of the remaining
    other investments approximate fair value.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Policy reserves under investment
    products:</FONT></I><FONT size="2"> the fair values for the
    Company&#146;s policy reserves under the investment products are
    determined using cash surrender value.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
    <I><FONT size="2">Separate account assets and
    liabilities:</FONT></I><FONT size="2"> separate account assets
    and liabilities are reported at their estimated fair values in
    the balance sheet.
    </FONT></TD>
</TR>

</TABLE>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="48%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">December 31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Carrying</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Fair</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Value</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financial assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,630,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,139</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">969,247</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">868,754</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">930,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,236</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">626,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">158,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">159,217</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180,971</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets held in separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financial liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy reserves under investment products
    (Individual and group annuities, subject to discretionary
    withdrawal)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">533,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527,575</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">523,726</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">513,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities related to separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,698,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The fair value of the Company&#146;s liabilities
for insurance contracts other than investment-type contracts are
not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into
consideration in the Company&#146;s overall management of
interest rate risk, such that the Company&#146;s exposure to
changing interest rates is minimized through the matching of
investment maturities with amounts due under insurance contracts.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Retirement and Other Employee
    Benefits</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and its subsidiaries participate in a
noncontributory defined benefit pension plan covering
substantially all of their employees. Benefits are based on
certain years of service and the employee&#146;s compensation
during certain such years of service. The Company&#146;s funding
policy is to contribute amounts to the plan sufficient to meet
the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional
amounts as the Company may determine to be appropriate from time
to time up to the maximum permitted. Contributions are intended
to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future. The
Company also has noncontributory, nonqualified supplemental
programs covering certain employees.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, the Company provides certain life
and healthcare benefits for retired employees and their
dependents. Substantially all employees of the Company may
become eligible for these benefits depending on age and years of
service. The Company has the right to modify or terminate these
benefits.
</FONT>

<P align="center"><FONT size="2">F-39
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Summarized information on the Company&#146;s
qualified pension benefits and postretirement plans for the
years ended December&nbsp;31 is as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="30%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Pension Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Retirement Health Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Change in benefit obligation</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit obligation at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(236,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(216,588</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(177,608</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,359</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(11,317</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(9,322</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,913</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,662</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(527</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,806</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,481</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,894</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,847</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,604</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,120</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,654</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,724</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actuarial losses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,141</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,494</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(492</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,785</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,960</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">958</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Plan amendments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,524</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,996</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(18,938</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Acquisition
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,297</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Curtailment gains
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,910</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Settlement gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,483</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefit obligation at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(269,959</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(236,500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(216,588</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Change in plan assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">178,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">190,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">182,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Actual return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(24,961</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,798</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Employer contributions
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">652</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Benefits paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,654</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,511</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,724</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,200</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(652</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(750</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(750</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Settlement gain
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,483</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fair value of plan assets at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">174,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">178,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">190,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funded status at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(95,358</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(57,534</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(26,080</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(46,405</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(37,763</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(33,334</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized actuarial loss or (gain)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(13,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,777</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,008</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,988</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized transition asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unrecognized prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,689</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,438</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued net periodic pension cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,089</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,190</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,991</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,384</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amounts recognized in the statement of financial
    position consist of accrued benefits liability
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,624</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,089</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,190</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,991</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,384</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Intangible asset
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net amount recognized
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(14,089</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,625</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,190</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,991</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,384</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The curtailment and settlement gains in 2001
resulted from the sale of FFG (see note&nbsp;4).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s nonqualified plans are
unfunded. At December&nbsp;31, 2002, 2001 and 2000 these plans
had projected benefit obligations of $64,118, $52,790 and
$45,780, respectively, and accumulated benefit obligations of
$53,511, $44,495 and $38,803, respectively.
</FONT>

<P align="center"><FONT size="2">F-40
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Determination of the projected benefit obligation
was based on the following weighted average assumptions at
December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="58%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Retirement Health</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Pension Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Discount rate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.40</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.75</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.25</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.00</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Components of net pension cost for the year ended
December&nbsp;31 were as follows:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Retirement Health</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Pension Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,317</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,662</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">527</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">13,894</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,846</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Expected return on plan assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(17,606</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(15,849</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,198</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of prior service cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,946</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of transition (asset)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(171</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(179</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Recognized actuarial (gain)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(393</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(332</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Curtailment loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Settlement loss
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net periodic benefit cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,618</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,315</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">A one percentage point change in assumed health
care cost trend rates would have the following effects:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="73%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Retirement Health</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">One percentage point increase in health care
    cost trend rate</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on total of service and interest cost
    components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on postretirement benefit obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">560</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">One percentage point decrease in health care
    cost trend rate</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on total of service and interest cost
    components
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(48</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(47</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Effect on postretirement benefit obligation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(677</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(650</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(530</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and its subsidiaries have a defined
contribution plan covering substantially all employees which
provides benefits payable to participants on retirement or
disability and to beneficiaries of participants in the event of
the participant&#146;s death. Amounts contributed to the plan
and expensed by the Company were $23,669, $21,792 and $14,071 in
2002, 2001 and 2000, respectively.
</FONT>

<P align="center"><FONT size="2">F-41
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">17.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Deferred Acquisition Costs</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information about deferred acquisition costs
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beginning Balance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,283,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">907,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Costs deferred
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,002,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,075,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,069,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(782,473</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(729,223</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(590,166</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment related to sale of FFG and LTC
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(531,329</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(98,126</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,283</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,122</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,867</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ending Balance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,313,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,094,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,283,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">18.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Goodwill and
VOBA</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Information about goodwill and VOBA follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Goodwill for the Year Ended</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">VOBA for the Year Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Beginning Balance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,089,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,995,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,994,322</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">471,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">474,098</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amounts acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">207,849</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,482</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">174,535</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization, net of interest accrued
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(113,300</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,773</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(93,712</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(146,480</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(176,738</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustment related to FFG sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,000</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Impairment charge
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Ending Balance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,089,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,995,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">308,933</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">471,895</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As of December&nbsp;31, 2002, the majority of the
outstanding balance of VOBA is in the Company&#146;s PreNeed
segment. VOBA in this segment assumes an interest rate ranging
from 6.5% to 7.5%.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">At December&nbsp;31, 2002, the estimated
amortization of VOBA for the next five years is as follows:
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="center" nowrap><B><FONT size="1">Year</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Amount</FONT></B></TD>
</TR>

<TR>
    <TD align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Prior to January&nbsp;1, 2002, goodwill was
amortized over 20&nbsp;years. Upon the adoption of FAS&nbsp;142,
amortization of goodwill ceased and the Company recognized a
$1,260,939 impairment reflecting the
</FONT>

<P align="center"><FONT size="2">F-42
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">cumulative effect of change in accounting
principle. Had the provisions of FAS&nbsp;142 been applied as of
January&nbsp;1, 2000 net income would have been adjusted as
follows:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="65%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><B><FONT size="1">Years Ended December&nbsp;31,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="11" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss)&nbsp;income, as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill amortization, net of tax
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">113,300</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss) income excluding goodwill amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net (loss) income per share
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(120.63</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25.46</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23.93</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">19.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Segment
Information</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has five reportable segments, which
are defined based on the nature of the products and services
offered: Solutions, Health, Employee Benefits, PreNeed, and
Corporate and Other. Solutions provides credit insurance,
including life, disability and unemployment, debt protection
administration services, creditor-placed homeowners insurance,
and manufactured housing homeowners insurance. Health provides
individual, short-term, and small group health insurance.
Employee Benefits provides employee-paid dental insurance and
employer-paid dental, disability and life insurance products and
related services. PreNeed provides life insurance policies and
annuity products that provide benefits to fund pre-arranged
funerals. Corporate and Other includes activities of the holding
company, financing expenses, realized gains (losses) on
investments, interest income earned from short-term investments
held, and interest income from excess surplus of insurance
subsidiaries not allocated to other segments. Corporate and
Other also includes results of operations of FFG for 2000 and
the period from January&nbsp;1 through March&nbsp;31, 2001 and
LTC (from January&nbsp;1 through March&nbsp;1, 2000). Corporate
and Other also includes the amortization of deferred gains
associated with the sales of FFG and LTC via reinsurance
agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company evaluates performance based on
segment income after-tax, excluding realized gains (losses) on
investments. The Company determines reportable segments in a
manner consistent with the way the Company organizes for
purposes of making operating decisions and assessing
performance. The accounting policies of the reportable segments
are the same as those described in the summary of significant
accounting policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company allocates a notional amount of
invested assets to the segments primarily based on future policy
benefits, claims and unearned premiums, and capital allocated to
each segment. The Company assigns net deferred acquisition
costs, value of businesses acquired, reinsurance recoverables,
and other assets and liabilities to the respective segments
where those assets or liabilities originate.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income is allocated based on a
segment&#146;s proportional share of assets and capital required
to support their business.
</FONT>

<P align="center"><FONT size="2">F-43
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize selected financial
information by segment for the year ended or as of
December&nbsp;31, 2002, 2001 and 2000:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#38; Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,077,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,833,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,232,942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">537,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">147,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">183,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(118,372</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,801</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,949</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,123</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">246,675</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,401,263</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,911,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,454,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">726,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,831</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">755,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,222,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">944,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">507,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">714,178</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">876,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">735,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">482,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">422,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,818</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,738,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense and distributions on preferred
    securities of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,204,326</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,768,135</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,366,823</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">649,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">172,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,161,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,937</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">143,505</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">88,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">76,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134,811</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370,397</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,048</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(61,175</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">110,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132,155</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">94,446</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,117</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,658</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(73,636</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">259,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,001,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment Assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Segments assets, excluding goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,074,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,062,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,458,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,509,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,278,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,383,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-44
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31, 2001</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#38; Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,906,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,837,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">933,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">506,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">218,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">144,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">179,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">112,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(119,016</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,336</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,121</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">221,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,222,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,910,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,117,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">689,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,724</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,186,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">639,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,306,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">737,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">484,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">733,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">85,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,542</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">875,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">711,137</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">452,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">316,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,864</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">105,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,620,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense and distributions on preferred
    securities of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">132,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,084,228</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,054,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">605,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,010</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,867,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">138,096</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">63,428</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(74,286</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">318,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,184</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,310</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">107,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,187</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">70,621</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">41,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,976</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,353</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(113,300</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment Assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Segments assets, excluding goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,822,052</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,066,290</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,117,443</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,316,830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,037,558</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,360,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,089,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,449,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-45
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="33%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Year Ended December&nbsp;31, 2000</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">&#38; Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,780,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,966,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">903,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">276,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">211,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">128,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">156,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(44,977</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,253</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,171</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">399,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,060,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,036,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,046,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">406,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">661,641</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,211,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">525,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,498,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">701,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">203,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">646,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">766,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">658,254</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">433,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">280,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">404,174</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,801,196</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense and distributions on preferred
    securities of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">134,868</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,829,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,969,293</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">981,708</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">354,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,911,022</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230,743</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">65,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(113,730</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">300,957</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">75,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">23,011</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,575</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">104,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">154,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">42,070</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,422</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(78,155</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,773</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company operates primarily in the United
States and Canada. The following table summarizes selected
financial information by geographic location for the years ended
or at December&nbsp;31:
</FONT>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="67%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Long-lived</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Location</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Revenues</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Assets</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2002</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,335,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">196,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,849</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,532,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2001</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,001,842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">230,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">185,032</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,467</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,186,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">233,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">2000</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">United States
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,046,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">226,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">165,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,211,979</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">229,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Revenue is based in the country where the product
was sold and long-lived assets are based on the physical
location of those assets. The Company has no reportable major
customers.
</FONT>

<P align="center"><FONT size="2">F-46
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">20.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Incentive
Plans</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fortis Appreciation Incentive Rights Plan
    (&#147;FAIR Plan&#148;):</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Since January&nbsp;1, 1999, the Company has
maintained the Fortis Appreciation Incentive Rights Plan, which
provides key employees with the right to receive long-term
incentive cash compensation based on the appreciation in value
of incentive units of the Company and incentive units of each of
its operating business segments. The FAIR Plan is administered
by a committee appointed by the Company&#146;s board of
directors. See note&nbsp;23 for subsequent amendment to the FAIR
Plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for the FAIR Plan as a
variable plan in accordance with the provisions of APB&nbsp;25
and its interpretations. Therefore, compensation expense is
recognized based on the intrinsic value method.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The value of each right is based on an
independent valuation of the Company performed by a qualified
appraiser. Each year, the appraiser determines a fair market
value for Fortis, Inc. and the individual business segments.
Based on this valuation, &#147;phantom share prices&#148; are
established for Fortis, Inc. and each business segment. These
share prices are calculated by dividing the market value, as
determined by the appraiser of Fortis, Inc. or a business
segment by the number of outstanding &#147;phantom shares&#148;
in Fortis, Inc. or in that segment.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The phantom share price established for a given
grant year becomes the strike price for that year and the
exercise price for prior grant years. When the phantom share
price determined by subsequent annual valuations increases above
the strike price, the rights accrue intrinsic value that will be
paid in cash when exercised.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Employees of Fortis, Inc. receive 75% of their
award value in Fortis, Inc. incentive rights and the remaining
25% in equal portions of incentive rights from the business
segments. Segment participants receive 75% of their award value
from their own particular business segment and 25% from Fortis,
Inc.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The incentive rights vest over a three-year
period from the date of grant and are exercisable for a period
of 7&nbsp;years from the date the rights are fully vested.
Unexercised vested incentive rights are exercised automatically
following the tenth anniversary of the date of grant. If upon
expiration of the award the strike price is below the exercise
price, then the award is automatically forfeited.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company recognized $19,570, $7,605, and
$5,484 of compensation expense for the FAIR Plan in 2002, 2001,
and 2000, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fortis, Inc. Stock Option Plan (&#147;Stock
    Option Plan&#148;):</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Under the Company&#146;s Stock Option Plan, the
compensation committee of the Board of Directors may award
nonqualified stock options to acquire shares of Series&nbsp;D
Preferred Stock to eligible members of senior management. The
Stock Option Plan was adopted in 1998.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Series&nbsp;D Preferred Stock consists of
10,000,000 authorized, non-redeemable shares, none of which are
outstanding at December&nbsp;31, 2002 and 2001. Because the
intention of the Stock Option Plans is to permit senior
management to participate in the growth in value of the Parent,
as a consolidated group, certain terms of the Series&nbsp;D
Preferred Stock are based upon the performance and value of the
capital stock of Fortis N.V. and Fortis SA/NV.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Series&nbsp;D Preferred Stock has a
liquidation price per share equal to the fair market value of
one unit of &#147;Euro Fortis Stock,&#148; which is defined as
the aggregate of (i)&nbsp;nine-tenths (.9) of one share of the
common stock of Fortis N.V. and (ii)&nbsp;nine-tenths (.9) of
one share of the common stock of Fortis SA/NV.
</FONT>

<P align="center"><FONT size="2">F-47
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The exercise price of the option is set by the
compensation committee of the Board of Directors and may not be
less than the market value of the Parent&#146;s common stock on
the date of the grant. Under the stock option plan, 33% of the
award vests annually starting the year of grant. Additionally,
the option can be exercised upon vesting and it expires in a ten
year period from the date of grant.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company accounts for the Stock Option Plan as
a variable plan in accordance with the provisions of APB 25 and
its interpretations. Therefore, compensation expense is
recognized based on the intrinsic value method. Compensation
cost charged to income was $0, $(1,081) (represents reversal of
expense accrual due to reduction of intrinsic value), and $698
for the years ended December&nbsp;31, 2002, 2001 and 2000,
respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Summarized information about the Company&#146;s
Stock Option Plan as of December 31, 2002, 2001 and 2000, and
changes during the years ended on those dates is presented below:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="24%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2001</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2000</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Weighted-Average</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercise Price</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per Share</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding beginning of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.66</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49.49</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">204,050</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54.68</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Granted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46.25</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">43.44</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercised
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Forfeited
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(56,550</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">55.71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,751</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51.80</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(16,199</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">50.06</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Outstanding end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">314,250</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.73</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">243,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52.42</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Exercisable at end of year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">54.84</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">48.47</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">45.01</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average fair value of options granted
    during the year
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.21</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16.45</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14.61</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table summarizes certain stock
option information at December 31, 2002:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="44%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Exercise</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1"># of Options</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Remaining</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1"># of Options</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><B><FONT size="1">Price</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Contractual Life</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exercisable</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">$47.75
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">83,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">48.37
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">51,750</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">50.11
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">54.43
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">67,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    &nbsp;<FONT size="2">65.45
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,450</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">340,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189,800</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Fortis Investment Plan
    (&#147;FIP&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has adopted the FIP, which provides
key employees the ability to exchange a portion of their
compensation for options to purchase certain third-party mutual
funds. The plan became effective as of January&nbsp;1, 1999 and
is administered by the Company&#146;s Senior Vice
President&#151;Compensation and Benefits, who is referred to as
the administrator. Under the FIP, a participant may exchange all
or a portion of his or her eligible compensation for a specific
number of options under the plan. Each option represents the
right to purchase shares of a third-party mutual fund, as
selected by the participant. Each option is exercisable for a
dollar amount equal to the greater of 25% of the trading price
of the applicable mutual fund units at the date the option is
granted and 50% of the trading price of the applicable mutual
fund units on the date the option is exercised. Each option is
fully vested and exercisable on the grant date. Options may not
be exercised more
</FONT>

<P align="center"><FONT size="2">F-48
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">than twice in any calendar year, except with the
consent of the administrator. For most options, the exercise
period generally will expire on the earlier of 120&nbsp;months
after the participant&#146;s death, disability or retirement and
60&nbsp;months after the participant&#146;s termination of
employment for any other reason. Until the options are
exercised, a participant may instruct the administrator to
exchange some or all of the options to purchase different
underlying mutual fund units. The amounts included in other
assets and other liabilities was $55,311 and $50,028 at
December&nbsp;31, 2002 and 2001, respectively.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">21.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Other Comprehensive Income (Loss)</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company&#146;s components of other
comprehensive income (loss)&nbsp;net of tax at December&nbsp;31
are as follows:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="41%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Foreign</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Unrealized</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Currency</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Gains</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Pension</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Translation</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Losses) on</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Under-</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Adjustment</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Securities</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">funding</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">(Loss)</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 1999
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,360</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(135,936</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134,576</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Activity in 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(3,585</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">135,790</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2000
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,225</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,214</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Activity in 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,633</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">102,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">96,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2001
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,858</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">106,062</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">98,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Activity in 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">173,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">146,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance at December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">279,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(35,250</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">22.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Related Party Transactions</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the ordinary course of business, the Company
has entered into a number of agreements with the Parent.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Historically, the Parent has maintained a
$1,000,000 commercial paper facility that the Company has been
able to access (via intercompany loans) for up to $750,000. The
Company has used the commercial paper facility to cover any cash
shortfalls, which may occur from time to time. The Company had
no intercompany loans with the Parent associated with this
commercial paper facility during the year ended
December&nbsp;31, 2002. In 2001, $235,000 in commercial paper
was issued and redeemed by the Parent on the Company&#146;s
behalf. The Company had no outstanding intercompany loans with
the Parent related to this commercial paper facility at year-end
December&nbsp;31, 2002 and 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, we previously had indebtedness
outstanding in the amount of $225,000 to Fortis Finance N.V.,
which was repaid in April 2001.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During 2002, 2001 and 2000, the Company paid
$749, $516, and $0, respectively, to Fortis for costs
representing salary, benefits and other expenses of a director
of the Company, who was then an employee of one of the
Parent&#146;s subsidiaries, and his support staff. We
discontinued these payments as of October&nbsp;3, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The other related party transactions are
disclosed in notes&nbsp;1, 8, 10 and 11.
</FONT>

<P align="center"><FONT size="2">F-49
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">23.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Subsequent Events</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant, Inc. (&#147;Assurant&#148;) was
incorporated in October 2003 as a Delaware corporation and a
wholly owned subsidiary of Fortis, Inc. In connection with the
planned offering, the parent company and the board of directors
of Assurant, Inc. approved certain employee benefits programs on
October&nbsp;15, 2003 as follows:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Long-Term Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan will be
effective as of the closing of the initial public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, and directors in the
following forms: (1)&nbsp;options to purchase shares of
Assurant&#146;s common stock, which may be non-statutory stock
options or incentive stock options under the U.S. tax code;
(2)&nbsp;stock appreciation rights, which give the holder the
right to receive the difference between the fair market value
per share on the date of exercise over the grant price;
(3)&nbsp;performance awards, which are payable in cash or stock
upon the attainment of specified performance goals;
(4)&nbsp;restricted stock, which is subject to restrictions on
transferability and subject to forfeiture on terms set by the
Compensation Committee; (5)&nbsp;dividend equivalents, which
entitle the participant to payments equal to any dividends paid
on the shares of stock underlying an award; and (6)&nbsp;other
stock-based awards in the discretion of the Compensation
Committee, including unrestricted stock grants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are 10,000,000 shares reserved and
available for issuance under the plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No awards will be granted under the plan prior to
its effective date. Any awards will be made at the discretion of
the Compensation Committee. Therefore, it is not presently
possible to determine the benefits or amounts that will be
received by any individuals or groups pursuant to the 2004
Long-Term Incentive Plan in the future.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Employee Stock Purchase
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Employee Stock Purchase Plan will go
into effect as of the earliest of July&nbsp;1 or January&nbsp;1
following the closing of the initial public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company. The stock purchase plan is designed to allow eligible
employees to purchase shares of Assurant&#146;s common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are designated by
the Compensation Committee and if they are customarily employed
for at least 20&nbsp;hours per week and five months per calendar
year, and provided they have served as an employee for at least
six months. A total of 5,000,000&nbsp;shares of Assurant&#146;s
common stock have been reserved for issuance under the stock
purchase plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Executive Management Incentive
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Executive Management Incentive Plan will be
effective as of January&nbsp;1, 2004. Participation in the
Executive Management Incentive Plan is limited to senior
officers of the Company and its subsidiaries who are selected to
participate in the plan for a given year by the Compensation
Committee. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant&#146;s base salary based upon the achievement of
certain designated performance goals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of awards under the plan will be
determined at the discretion of the Compensation Committee.
Therefore, it is not presently possible to determine the
benefits or amounts that will be received by any individuals or
groups pursuant to this plan.
</FONT>

<P align="center"><FONT size="2">F-50
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Amendment to Fortis Appreciation Incentive
    Rights Plan (&#147;FAIR Plan&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FAIR Plan was amended to provide for the
cash-out and replacement of Fortis, Inc. incentive rights with
stock appreciation rights on the Assurant common stock from and
after the closing of the initial public offering contemplated.
The business segment rights outstanding under the plan will not
be changed or effected. The conversion of outstanding Fortis,
Inc. incentive rights will take place as described in this
paragraph. The Fortis, Inc. incentive rights will be valued as
of December&nbsp;31, 2003 using a special valuation method, as
follows. The measurement value of each Fortis, Inc. incentive
right as of December&nbsp;31, 2002 will be adjusted to reflect
dividends paid by Fortis, Inc., consistent with past practice;
such adjusted value shall then be multiplied by the arithmetic
average of the change during calendar year 2003 in the Dow Jones
Life Insurance Index, the Dow Jones Property Casualty Index, and
the Dow Jones Healthcare Providers Index; and the result will be
the measurement value of a Fortis, Inc. incentive right as of
December&nbsp;31, 2003. As soon as practical after this special
valuation is completed, and before the closing of the initial
public offering contemplated, each Fortis, Inc. incentive right
then outstanding under the plan will be cashed out for a cash
payment equal to the difference, if any, between the measurement
value of the Fortis, Inc. incentive rights as of
December&nbsp;31st immediately preceeding the date of grant, and
the measurement value of that right determined as of
December&nbsp;31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, Assurant will grant to each participant whose
rights were cashed out a number of stock appreciation rights on
Assurant&#146;s common stock (referred to as &#147;replacement
rights&#148;). The number of replacement rights to be granted to
a participant will equal (1)&nbsp;the measurement value of the
participant&#146;s cashed-out Fortis, Inc. incentive rights,
divided by (2)&nbsp;the initial public offering price. Each
replacement right that replaces a vested cashed-out right will
be vested immediately, and each replacement right that replaces
a non-vested cashed-out right will become vested on the vesting
date for the corresponding cashed-out right, but no replacement
right, whether or not vested, may be exercised sooner than one
year from the closing date of the initial public offering
contemplated. After that waiting period, each replacement right
will be exercisable for the remaining term of the corresponding
cancelled right.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See note&nbsp;2 for a discussion of recent
accounting pronouncements issued and not adopted which contains
a description of the Company&#146;s current status of adopting
such pronouncements as of October&nbsp;20, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See note&nbsp;22 for a description of a change in
a related party transaction as of October&nbsp;3, 2003.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">See note&nbsp;24 for a description of an
October&nbsp;1, 2003 grand jury of Mower County, Minnesota,
indictment of ABIC and two corporate officers of the Solutions
segment.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">24.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and its subsidiaries lease office
space and equipment under operating lease arrangements. Certain
facility leases contain escalation clauses based on increases in
the lessors&#146; operating expenses. At December&nbsp;31, 2002,
the aggregate future minimum lease payments under operating
lease agreements that have initial or non-cancelable terms in
excess of one year are:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,840</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total minimum future lease payment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">208,806</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-51
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rent expense was $43,412, $32,546 and $32,931 for
2002, 2001 and 2000 respectively.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In the normal course of business, letters of
credit are issued primarily to support reinsurance arrangements.
These letters of credit are supported by commitments with
financial institutions. The Company had approximately
$120&nbsp;million and $109&nbsp;million of letters of credit
outstanding as of June&nbsp;30, 2003 and December&nbsp;31, 2002,
respectively. Additionally, as of June&nbsp;30, 2003, the
Company had an unused $50&nbsp;million letter of credit facility.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is regularly involved in litigation
in the ordinary course of business, both as a defendant and as a
plaintiff. The Company may from time to time be subject to a
variety of legal and regulatory actions relating to the
Company&#146;s current and past business operations. While the
Company cannot predict the outcome of any pending or future
litigation, examination or investigation, the Company does not
believe that any pending matter will have a material adverse
effect on the Company&#146;s financial condition or results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Solutions segment is subject to a number of
pending actions, primarily in the State of Mississippi, many of
which allege that the Company&#146;s credit insurance products
were packaged and sold with lenders&#146; products without buyer
consent. The judicial climate in Mississippi is such that the
outcome of these cases is extremely unpredictable. The Company
has been advised by legal counsel that the Company has
meritorious defenses to all claims being asserted against the
Company. The Company believes, based on information currently
available, that any liabilities that could result are not
expected to have a material adverse effect on the Company&#146;s
financial condition or results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">American Bankers Insurance Group, part of the
Solutions segment, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company (&#147;ABIC&#148;)
and American Bankers Life Assurance Company (&#147;ABLAC&#148;)
previously entered into a Consent Order and a comprehensive
Compliance Plan with 43&nbsp;participating states relating to
compliance with the often disparate state insurance laws,
regulations and administrative interpretations which have been
difficult to apply to the marketing of ABIG&#146;s credit
insurance products through financial institutions, retailers and
other entities offering consumer financing as a regular part of
their business. In addition to an initial settlement of
$12&nbsp;million, ABIG agreed to a multi-state market conduct
examination commencing November&nbsp;23, 1999, for review of
ABIG&#146;s implementation of the Compliance Plan. A final
report was issued on December&nbsp;19, 2001, and ABIG paid a
final settlement of $3&nbsp;million to participating states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, two of
the Company&#146;s subsidiaries, in connection with certain
alleged regulatory violations. Thereafter, ABIC and ABLAC filed
suit in Minnesota state court seeking to enjoin the enforcement
action because the alleged regulatory matters included within
the enforcement action were resolved as a part of the
above-described Consent Order and Compliance Plan to which
Minnesota was a party. In February 2003, the State of Minnesota,
ABIC and ABLAC reached a final settlement of all matters
included within the enforcement action and the separate state
court action filed by ABIC and ABLAC. Pursuant to the
settlement, ABIC and ABLAC each agreed to pay $100,000 to the
State of Minnesota and agreed to compensate the state for its
investigative costs which totaled $1.8&nbsp;million. In
addition, ABIC and ABLAC agreed to stop selling insurance in
Minnesota for five years, though they could apply for
reinstatement in 20&nbsp;months. Other member companies of the
Solutions segment with product lines that overlap those offered
by ABIC and ABLAC currently remain authorized to do business in
the State of Minnesota. The Company does not believe that the
effect of the settlement during the next five years will have a
material impact on the Company&#146;s financial condition or
results of its operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of the Solutions segment. The indictment alleges that
ABIC and its two named corporate
</FONT>

<P align="center"><FONT size="2">F-52
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">December&nbsp;31, 2002, 2001 and
2000</FONT></B>
</DIV>

<P align="left">
<FONT size="2">officers each violated the Minnesota Fair
Campaign Practices Act in connection with two contributions by
ABIC to the Republican National State Election Committee
totaling $15,000. The maximum penalty for ABIC is a $40,000 fine
for each alleged violation and/or forfeiture of ABIC&#146;s
license to conduct business in Minnesota. Other member companies
of the Solutions segment with product lines that overlap those
offered by ABIC currently remain authorized to conduct business
in the State of Minnesota. ABIC believes that it has meritorious
defenses to the claims being asserted against it, and the
Company believes, based on information currently available, that
any liabilities that could result are not expected to have a
material effect on the Company&#146;s financial condition or
results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, one of the Company&#146;s
subsidiaries, American Reliable Insurance Company
(&#147;ARIC&#148;), participated in certain excess of loss
reinsurance programs in the London market and, as a result,
reinsured certain personal accident, ransom and kidnap insurance
risks from 1995 to 1997. ARIC and a foreign affiliate ceded a
portion of these risks to other reinsurers (retrocessionaires).
ARIC ceased reinsuring such business in 1997. However, certain
risks continued beyond 1997 due to the nature of the reinsurance
contracts written. ARIC and some of the other reinsurers
involved in the programs are seeking to avoid certain treaties
on various grounds, including material misrepresentation and
non-disclosure by the ceding companies and intermediaries
involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of certain treaties with
ARIC and the other reinsurers. The disputes generally involve
multiple layers of reinsurance, and allegations that the
reinsurance programs involved interrelated claims
&#147;spirals&#148; devised to disproportionately pass claims
losses to higher-level reinsurance layers. Many of the companies
involved in these programs, including ARIC, are currently
involved in negotiations, arbitration and/or litigation between
multiple layers of retrocessionaires, reinsurers, ceding
companies and intermediaries, including brokers, in an effort to
resolve these disputes. Based on information currently available
to the Company, and after consideration of the reserves
reflected in the Company&#146;s financial statements, the
Company believes that it is not likely that any liabilities the
Company experiences in connection with these programs would have
a material adverse effect on the Company&#146;s financial
condition or results of operations. However, the inherent
uncertainty of arbitrations and lawsuits, including the
uncertainty of estimating whether any settlements the Company
may enter into in the future would be on favorable terms, makes
it difficult to predict the outcomes with certainty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of regulatory scrutiny of the
Company&#146;s industry practices or its businesses, such as
examinations of race-based premiums charged in the past by two
of the Company&#146;s acquired subsidiaries, it is possible that
the Company may be subject to legal proceedings in the future
relating to those practices and businesses.
</FONT>

<P align="center"><FONT size="2">F-53
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED BALANCE SHEETS</FONT></B>

<DIV align="center">
<B><FONT size="2">At June&nbsp;30, 2003 and December&nbsp;31,
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="59%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">June 30,</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">December 31,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands except</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">number of shares and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Assets</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Investments:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale, at fair
    value (amortized cost&#151;$8,066,032 in 2003 and $7,630,576 in
    2002)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,765,857</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale, at fair
    value (cost&#151;$422,228 in 2003 and $264,635 in 2002)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commercial mortgage loans on real estate at
    amortized cost
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">869,557</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Short-term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">446,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">136,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,734,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,028,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premiums and accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">361,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">401,094</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reinsurance recoverables
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,577,993</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">4,649,909</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accrued investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">131,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">126,761</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred acquisition costs
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,409,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,313,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment, at cost less accumulated
    depreciation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">278,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred income taxes, net
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37,509</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">168,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Value of businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">180,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">215,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">257,464</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Assets held in separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,531,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,738,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Liabilities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Future policy benefits and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,849,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,637,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Unearned premiums
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,141,118</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Claims and benefits payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,641,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,543,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commissions payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">404,526</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">348,188</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Reinsurance balances payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">108,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">167,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Funds held under reinsurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">176,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">183,838</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deferred gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">433,778</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">462,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accounts payable and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,198,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,204,602</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income tax payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Liabilities related to separate accounts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,531,540</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,411,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,489,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,192,216</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Commitments and contingencies (note&nbsp;10)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Mandatorily redeemable preferred stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Stockholders&#146; equity</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Common stock, par value $.10 per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A: 40,000,000 shares authorized,
    7,750,000 shares issued and outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B: 150,001 shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C: 400,001 shares issued and
    outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Class&nbsp;B and C: 40,000,000 total shares
    authorized)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Additional paid-in capital
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Retained earnings
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Accumulated other comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">465,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,778,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total liabilities, mandatorily redeemable
    preferred securities of subsidiary trusts, mandatorily
    redeemable preferred stock, and stockholders&#146; equity
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,738,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
interim financial statements
</FONT>

<P align="center"><FONT size="2">F-54
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF
OPERATIONS</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<CENTER>
<TABLE width="80%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="63%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six Months Ended June 30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands except number</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">of shares and per share</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,787,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">305,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains (losses)&nbsp;on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,224,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,774,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,678,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">443,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">794,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">842,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions on preferred securities of
    subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,023,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income before income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income before cumulative effect of change in
    accounting principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Earnings per share:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Weighted average of basic and diluted shares of
    common stock outstanding
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss)&nbsp;per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and Diluted
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Before cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.07</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of accounting change
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(151.92</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134.85</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
interim financial statements
</FONT>

<P align="center"><FONT size="2">F-55
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS&#146; EQUITY</FONT></B>

<DIV align="center">
<B><FONT size="2">At June&nbsp;30, 2003 and 2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="23%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Accumulated</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Outstanding</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Additional</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Shares of</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Paid-in</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Retained</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Comprehensive</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Common</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Capital</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Earnings</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Income (Loss)</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Stock</FONT></B></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="4"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">(in thousands except number of shares and per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, December&nbsp;31, 2002
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">245,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends on common stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(516</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(516</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Comprehensive income (loss)
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net change in unrealized gains on securities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">202,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total comprehensive income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">384,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="4" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Balance, June&nbsp;30, 2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">830</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">248,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">465,579</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,778,890</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,300,002</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="4"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
interim financial statements.
</FONT>

<P align="center"><FONT size="2">F-56
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">CONSOLIDATED STATEMENTS OF CASH
FLOWS</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="66%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Six-Months Ended</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">June&nbsp;30,</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">(in thousands except</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">number of shares and</FONT></B></TD>
</TR>

<TR>
    <TD colspan="2"></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">per share amounts)</FONT></B></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Operating activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Adjustments to reconcile net income to net cash
    provided by operating activities:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in reinsurance recoverable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">71,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">8,507</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in premiums and accounts receivable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">39,615</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(106,554</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Depreciation and amortization
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,287</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in deferred acquisition costs and value of
    businesses acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(64,497</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(36,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,260,939</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in accrued investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(4,990</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(29,051</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in insurance policy reserves and
    liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">292,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">118,544</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in accounts payable and other liabilities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(5,696</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(124,426</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in commissions payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">56,338</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(30,328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in reinsurance balances payable
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(58,711</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,034</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in funds held under reinsurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,613</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,352</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(34,873</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(40,030</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(522</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(176,648</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized (gains)&nbsp;losses on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,474</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">47,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(10,672</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in other assets and other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(59,276</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">35,215</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash provided by (used in) operating
    activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">402,039</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(196,652</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Investing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Sales of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">649,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,168,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">73,302</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other invested assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,699</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Maturities, prepayments, and scheduled redemption
    of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">643,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">381,670</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Purchase of:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fixed maturities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,670,515</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(2,734,010</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Equity securities available for sale
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(231,003</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(132,324</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Property and equipment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(66,170</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(58,835</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other invested assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,061</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(52,453</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in commercial mortgage loans
    on real estate
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(27,617</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,434</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Decrease in short term investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">237,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">255,529</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">(Increase) decrease in policy loans
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(589</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash received related to sale of business
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in investing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(386,933</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(22,672</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Financing activities</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Redemption of mandatorily redeemable preferred
    stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(500</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Dividends paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(160,134</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(20,477</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Other
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(516</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(527</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net cash used in financing activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(161,150</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(21,004</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Change in cash and cash equivalents
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(146,044</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(240,328</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at beginning of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">549,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">559,305</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cash and cash equivalents at end of period
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">403,604</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">318,977</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Supplemental Information:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income Taxes Paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">205,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Distributions or mandatorily redeemable preferred
    securities of subsidiary trusts and interest paid
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">44,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Non cash activities
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Foreign currency translation
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">12,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center">
<FONT size="2">See the accompanying notes to the consolidated
interim financial statements
</FONT>

<P align="center"><FONT size="2">F-57
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(In thousands except number of shares and per
share amounts)</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">
<B><FONT size="2">1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nature of
Operations</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis, Inc. (the &#147;Company&#148;) is a
holding company provider of specialized insurance products and
related services in North America and selected other markets.
The Company is incorporated in the State of Nevada and is
indirectly wholly owned by Fortis N.V. of The Netherlands and
Fortis SA/NV of Belgium (collectively, the &#147;Parent&#148;).
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Through its operating subsidiaries, the Company
provides creditor-placed homeowners insurance, manufactured
housing homeowners insurance, debt protection administration,
credit insurance, warranties and extended service contracts,
individual health insurance and small employer group health
insurance, group dental insurance, group disability insurance,
group life insurance and pre-funded funeral insurance. The
Company had certain individual life insurance policies, annuity
contracts and mutual fund operations during 2001 and 2000, which
were sold to The Hartford Financial Services Group (&#147;The
Hartford&#148;)(see note&nbsp;4).
</FONT>

<P align="left">
<B><FONT size="2">2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Basis of
Presentation</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America for interim financial information. Accordingly, these
statements do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain
prior period amounts have been reclassified to conform to the
2003 presentation.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Dollar amounts are presented in U.S.&nbsp;dollars
and all amounts are in thousands except number of shares and per
share amounts.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Operating results for the six months ended
June&nbsp;30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December&nbsp;31, 2003.
The accompanying interim consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements and related notes for the year ended
December&nbsp;31, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The balance sheet at December&nbsp;31, 2002,
presented herein, has been derived from the audited financial
statements at that date but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements.
</FONT>

<P align="left">
<B><FONT size="2">3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recently
Adopted Accounting Pronouncements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In June 2002, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued FAS 146, <I>Accounting for Costs
Associated with Exit or Disposal Activities</I>
(&#147;FAS&nbsp;146&#148;). This statement addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
(&#147;EITF&#148;) Issue&nbsp;94-3, <I>Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit on
Activity (Including Certain Costs Incurred in Restructuring</I>
(&#147;EITF&nbsp;94-3&#148;). EITF&nbsp;94-3 required accrual of
liabilities related to exit and disposal activities at a plan
(commitment)&nbsp;date. FAS&nbsp;146 requires that a liability
for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. The provisions of
this statement are effective for exit or disposal activities
that are initiated after December&nbsp;31, 2002. The Company
adopted this Statement on January&nbsp;1, 2003. The adoption of
this standard did not have a material impact on the
Company&#146;s financial position or the results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In November 2002, the FASB issued
Interpretation&nbsp;45, <I>Guarantor&#146;s Accounting and
Disclosure Requirements for Guarantees</I>
(&#147;FIN&nbsp;45&#148;). FIN&nbsp;45 requires that a liability
be recognized at the inception of
</FONT>

<P align="center"><FONT size="2">F-58
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">certain guarantees for the fair value of the
obligation, including the ongoing obligation to stand ready to
perform over the term of the guarantee. Guarantees, as defined
in FIN&nbsp;45, include contracts that contingently require the
Company to make payments to a guaranteed party based on changes
in an underlying obligation that is related to an asset,
liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements and indirect
guarantees of indebtedness of others. This new accounting
standard is effective for certain guarantees issued or modified
after December&nbsp;31, 2002. In addition, FIN&nbsp;45 requires
certain additional disclosures. The Company adopted this
interpretation on January&nbsp;1, 2003, and the adoption did not
have a material impact on the Company&#146;s financial position
or the results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In December&nbsp;2002, the FASB issued
FAS&nbsp;148, <I>Accounting for Stock-Based
Compensation&nbsp;&#151; Transition and Disclosure&nbsp;&#151;
an Amendment of FAS No.&nbsp;123</I> (&#147;FAS&nbsp;148&#148;).
FAS&nbsp;148 provides alternative methods of transition for a
voluntary change to the fair value-based method of accounting
for stock-based employee compensation. FAS&nbsp;148 also amends
the disclosure requirements of FAS&nbsp;123, <I>Accounting for
Stock-Based Compensation</I>, to require prominent disclosures
in both annual and interim financial statements about the method
of accounting for stock-based employee compensation and the
effect of the method used on reported results. This guidance is
effective for fiscal years after December&nbsp;15, 2002 for
transition guidance and annual disclosure provisions and is
effective for interim reports beginning after December&nbsp;15,
2002 for interim disclosure provisions. The Company adopted this
standard for the year ended December&nbsp;31, 2002.
</FONT>

<P align="left">
<B><FONT size="2">4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Recent
Accounting Pronouncements</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In January&nbsp;2003, the FASB issued
Interpretation&nbsp;46 (&#147;FIN&nbsp;46&#148;),
<I>Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No.&nbsp;51</I>
(&#147;ARB&nbsp;51&#148;), which clarifies the consolidation
accounting guidance in ARB&nbsp;51, <I>Consolidated Financial
Statements</I>, as it applies to certain entities in which
equity investors who do not have the characteristics of a
controlling financial interest or do not have sufficient equity
at risk for the entities to finance their activities without
additional subordinated financial support from other parties.
Such entities are known as variable interest entities
(&#147;VIEs&#148;). FIN&nbsp;46 requires that the primary
beneficiary of a VIE consolidate the VIE. FIN&nbsp;46 also
requires new disclosures for significant relationships with
VIEs, whether or not consolidation accounting is either used or
anticipated. The consolidation requirements of FIN&nbsp;46 apply
immediately to VIEs created after January&nbsp;31, 2003 and to
VIEs in which an enterprise obtains an interest after that date.
They apply in the first fiscal year or interim period beginning
after June&nbsp;15, 2003 to VIEs in which an enterprise holds a
variable interest that is acquired before February&nbsp;1, 2003.
On October&nbsp;8, 2003, the FASB deferred the adoption of
FIN&nbsp;46 until reporting periods ending after
December&nbsp;15, 2003. The Company is assessing whether the
adoption of this interpretation will have a material impact on
the Company&#146;s financial position or the results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April&nbsp;2003, the FASB&#146;s Derivative
Implementation Group (&#147;DIG&#148;) released FAS&nbsp;133
Implementation Issue&nbsp;B36, <I>Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments that Incorporate
Credit Risk Exposures that are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under those
Instruments</I> (&#147;DIG&nbsp;B36&#148;). DIG&nbsp;B36
addresses whether FAS 133 requires bifurcation of a debt
instrument into a debt host contract and an embedded derivative
if the debt instrument incorporates both interest rate risk and
credit risk exposures that are unrelated or only partially
related to the creditworthiness of the issuer of that
instrument. Under DIG&nbsp;B36, modified coinsurance and
coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or a
total return debt index are examples of arrangements containing
embedded derivatives requiring bifurcation. The effective date
of the implementation guidance is October&nbsp;1, 2003. The
Company is assessing whether the adoption of DIG B36 will have a
material impact on the Company&#146;s financial position or the
results of operations.
</FONT>

<P align="center"><FONT size="2">F-59
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In April 2003, the FASB issued FAS&nbsp;149,
<I>Amendment of Statement&nbsp;133 on Derivative Instruments and
Hedging Activities </I>(&#147;FAS&nbsp;149&#148;). This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under
FAS&nbsp;133, <I>Accounting for Derivative Instruments and
Hedging Activities</I>. This Statement is effective
prospectively for contracts entered into or modified after
June&nbsp;30, 2003 and prospectively for hedging relationships
designated after June&nbsp;30, 2003. The Company has assessed
that the adoption of this standard will not have a material
impact on the Company&#146;s financial position or the results
of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In May 2003, the FASB issued FAS&nbsp;150,
<I>Accounting For Certain Financial Instruments with
Characteristics of Both Liabilities and Equity
</I>(&#147;FAS&nbsp;150&#148;). This statement improves the
accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity, and
requires that these instruments be classified as liabilities in
the consolidated balance sheets. This statement is effective
prospectively for financial instruments entered into or modified
after May&nbsp;31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after
June&nbsp;15, 2003. This statement shall be implemented by
reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance
date of the statement and still existing at the beginning of the
interim period of adoption. The Company has assessed that the
adoption of this standard will result in a reclassification of
mandatorily redeemable preferred securities of subsidiary trusts
and mandatorily redeemable preferred stock from mezzanine to
liabilities, and will not have a material impact on the
Company&#146;s results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On July&nbsp;7, 2003, the Accounting Standards
Executive Committee (&#147;AcSEC&#148;) of the American
Institute of Certified Public Accountants (&#147;AICPA&#148;)
issued Statement of Position&nbsp;03-1, <I>Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional
Long Duration Contracts and for Separate Accounts
</I>(&#147;SOP&nbsp;03-1&#148;). SOP&nbsp;03-1 provides guidance
on a number of topics unique to insurance enterprises, including
separate account presentation, interest in separate accounts,
gains and losses on the transfer of assets from the general
account to a separate account, liability valuation, returns
based on a contractually referenced pool of assets or index,
accounting for contracts that contain death or other insurance
benefit features, accounting for reinsurance and other similar
contracts, accounting for annuitization benefits and sales
inducements to contract holders. SOP&nbsp;03-1 will be effective
for the Company&#146;s financial statements on January&nbsp;1,
2004. The Company is assessing whether the adoption of this
statement will have a material impact on the Company&#146;s
financial position or the results of operations.
</FONT>

<P align="left">
<B><FONT size="2">5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dividends Per
Common Share</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has Class&nbsp;A, Class&nbsp;B and
Class&nbsp;C common stock. The following dividends have been
paid for the six months ended June&nbsp;30, 2003 and 2002:
</FONT>

<CENTER>
<TABLE width="90%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="53%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><B><FONT size="1">For the Six Months Ended June 30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="15" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Per share</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Total</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;A Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">17.98</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">139,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;B Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36.52</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">5,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Class&nbsp;C Common Stock
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">37.50</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,999</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-60
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">6.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Stock Based Compensation</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following pro forma information of net income
(loss) and net income (loss) per share was determined as if the
Company had accounted for the Stock Option Plan under the fair
value method of FAS 123:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="71%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7"></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">For the Six Months</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><B><FONT size="1">Ended June 30,</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="7" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2003</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">2002</FONT></B></TD>
</TR>

<TR>
    <TD></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net income (loss) as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(317</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(315</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Add: Total stock-based employee compensation
    expense determined under intrinsic value based method for all
    awards, net of related tax effects
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Pro forma net (loss)&nbsp;income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,587</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Earning per share:
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss)&nbsp;income per
    share as reported
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.75</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134.85</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Basic and diluted net (loss)&nbsp;income per
    share pro forma
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19.71</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(134.81</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">7.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Segment Information</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company has five reportable segments, which
are defined based on the nature of the products and services
offered: Solutions, Health, Employee Benefits, PreNeed, and
Corporate and Other. Solutions provides credit insurance,
including life, disability and unemployment, debt protection
administration, creditor-placed homeowners insurance, and
manufactured housing insurance. Health provides individual,
short-term, and small group health insurance. Employee Benefits
provides employee-paid dental insurance and employer-paid
dental, disability and life insurance products and related
services. PreNeed provides life insurance policies and annuity
products that provide benefits to fund pre-arranged funerals.
Corporate and Other includes activities of the parent company,
financing expenses realized gains (losses)&nbsp;on investments,
interest income earned from short-term investments held, and
interest income from excess surplus of insurance subsidiaries
not allocated to other segments. Corporate and Other also
includes results of operations of Fortis Financial Group
(&#147;FFG&#148;) for 2000 and the period from January 1 through
March&nbsp;31, 2001 and long-term care (&#147;LTC&#148;) (from
January 1 through March&nbsp;1, 2000). Corporate and Other also
includes the amortization of deferred gains associated with the
sales of FFG and LTC via reinsurance agreements.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company evaluates performance based on
segment income after tax, excluding realized gains
(losses)&nbsp;on investments. The Company determines reportable
segments in a manner consistent with the way the Company
organizes for purposes of making operating decisions and
assessing performance. The accounting policies of the reportable
segments are the same as those described in the summary of
significant accounting policies.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company allocates a notional amount invested
assets to the segments primarily based on future policy
benefits, claims and unearned premiums, and capital allocated to
each segment. The Company assigns net deferred acquisition
costs, value of businesses acquired, reinsurance recoverables,
and other assets and liabilities to the respective segments
where those assets or liabilities originate.
</FONT>

<P align="center"><FONT size="2">F-61
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Net investment income is allocated based on a
segment&#146;s proportional share of assets and capital required
to support their business.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following tables summarize selected financial
information by segment:
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="29%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Six Months Ended June&nbsp;30, 2003</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate&nbsp;&#38;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,123,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">968,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">623,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">271,222</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,987,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,877</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">69,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">93,490</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">305,885</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,873</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">15,141</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,063</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">119,881</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,287,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,008,976</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">726,018</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">367,200</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,455,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">410,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">630,522</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">470,773</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">262,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,774,243</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">487,990</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">38,418</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">53,523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">580,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">287,816</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">244,485</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">214,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">794,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense and distributions on preferred
    securities of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,186,199</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">913,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">685,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">338,042</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,314</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,207,169</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">101,785</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">95,551</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,829</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">29,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,350</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">247,973</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,105</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">33,585</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,291</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(7,047</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">84,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">68,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">61,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">19,006</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(12,303</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">163,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment Assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Segments assets, excluding goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">6,965,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,080,674</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,387,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,577,497</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,910,083</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,920,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">817,173</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,738,162</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Six Months Ended June 30, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate&nbsp;&#38;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Revenues</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net earned premiums and other considerations
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">995,061</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">903,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">620,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">268,269</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,787,519</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net investment income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">100,730</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">28,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">72,441</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">92,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">16,456</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">310,539</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Net realized gains on investments
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(49,204</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred gain on disposal of
    businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,030</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Gain on disposal of businesses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">10,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and other income
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">57,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">9,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,591</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,669</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">125,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total revenues
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,153,332</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">941,536</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">730,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">363,491</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">36,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,224,991</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-62
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="34%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="2%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><B><FONT size="1">Six Months Ended June 30, 2002</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="23" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="7"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Employee</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Corporate&nbsp;&#38;</FONT></B></TD>
    <TD></TD>
    <TD colspan="3"></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Solutions</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Health</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Benefits</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">PreNeed</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Other</FONT></B></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Consolidated</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Benefits, losses and expenses</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Policyholder benefits
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">345,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">601,915</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">480,698</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">250,439</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,678,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Amortization of deferred acquisition costs and
    value of business acquired
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">370,478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">24,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">46,687</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">443,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Underwriting, general and administrative expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">339,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">240,927</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">217,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">18,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">842,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Interest expense and distributions on preferred
    securities of subsidiary trusts
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">58,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total benefits, losses and expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,055,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">866,842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">698,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">322,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">79,508</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,023,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income before income tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">97,471</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">74,694</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">40,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(42,885</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">201,793</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Income taxes
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">32,476</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">25,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">11,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">14,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(23,356</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">60,126</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment income after tax</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">64,995</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">49,065</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,780</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">26,356</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(19,529</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">141,667</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Cumulative effect of change in accounting
    principle
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,260,939</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Net income (loss)</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">(1,119,272</FONT></TD>
    <TD align="left" valign="bottom" nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD colspan="3" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <B><FONT size="2">Segment Assets:</FONT></B></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Segments assets, excluding goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,074,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">1,062,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">2,458,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">3,509,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">7,278,409</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">21,383,871</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Goodwill
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">834,138</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total assets
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,218,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">
<B><FONT size="2">8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subsequent
Events</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Assurant, Inc. (&#147;Assurant&#148;) was
incorporated in October 2003 as a Delaware corporation and a
wholly owned subsidiary of Fortis, Inc. In connection with the
planned offering, the parent company and the board of directors
of Assurant, Inc. approved certain employee benefits programs on
October&nbsp;15, 2003 as follows:
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Long-Term Incentive Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan will be
effective as of the closing of the initial public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, and directors in the
following forms: (1)&nbsp;options to purchase shares of
Assurant&#146;s common stock, which may be non-statutory stock
options or incentive stock options under the U.S. tax code;
(2)&nbsp;stock appreciation rights, which give the holder the
right to receive the difference between the fair market value
per share on the date of exercise over the grant price;
(3)&nbsp;performance awards, which are payable in cash or stock
upon the attainment of specified performance goals;
(4)&nbsp;restricted stock, which is subject to restrictions on
transferability and subject to forfeiture on terms set by the
Compensation Committee; (5)&nbsp;dividend equivalents, which
entitle the participant to payments equal to any dividends paid
on the shares of stock underlying an award; and (6)&nbsp;other
stock-based awards in the discretion of the Compensation
Committee, including unrestricted stock grants.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">There are 10,000,000 shares reserved and
available for issuance under the plan.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">No awards will be granted under the plan prior to
its effective date. Any awards will be made at the discretion of
the Compensation Committee. Therefore, it is not presently
possible to determine the benefits or amounts that will be
received by any individuals or groups pursuant to the 2004
Long-Term Incentive Plan in the future.
</FONT>

<P align="center"><FONT size="2">F-63
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">2004 Employee Stock Purchase
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The 2004 Employee Stock Purchase Plan will go
into effect as of the earliest of July&nbsp;1 or January&nbsp;1
following the closing of the initial public offering.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company. The stock purchase plan is designed to allow eligible
employees to purchase shares of Assurant&#146;s common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are designated by
the Compensation Committee and if they are customarily employed
for at least 20&nbsp;hours per week and five months per calendar
year, and provided they have served as an employee for at least
six months. A total of 5,000,000&nbsp;shares of Assurant&#146;s
common stock have been reserved for issuance under the stock
purchase plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Executive Management Incentive
    Plan</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Executive Management Incentive Plan will be
effective as of January&nbsp;1, 2004. Participation in the
Executive Management Incentive Plan is limited to senior
officers of the Company and its subsidiaries who are selected to
participate in the plan for a given year by the Compensation
Committee. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant&#146;s base salary based upon the achievement of
certain designated performance goals.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The amount of awards under the plan will be
determined at the discretion of the Compensation Committee.
Therefore, it is not presently possible to determine the
benefits or amounts that will be received by any individuals or
groups pursuant to this plan.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="97%"></TD>
</TR>

<TR valign="top">
    <TD></TD>
    <TD>
    <B><I><FONT size="2">Amendment to Fortis Appreciation Incentive
    Rights Plan (&#147;FAIR Plan&#148;)</FONT></I></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The FAIR Plan was amended to provide for the
cash-out and replacement of Fortis, Inc. incentive rights with
stock appreciation rights on the Assurant common stock from and
after the closing of the initial public offering contemplated.
The business segment rights outstanding under the plan will not
be changed or effected. The conversion of outstanding Fortis,
Inc. incentive rights will take place as described in this
paragraph. The Fortis, Inc. incentive rights will be valued as
of December&nbsp;31, 2003 using a special valuation method, as
follows. The measurement value of each Fortis, Inc. incentive
right as of December&nbsp;31, 2002 will be adjusted to reflect
dividends paid by Fortis, Inc., consistent with past practice;
such adjusted value shall then be multiplied by the arithmetic
average of the change during calendar year 2003 in the Dow Jones
Life Insurance Index, the Dow Jones Property Casualty Index, and
the Dow Jones Healthcare Providers Index; and the result will be
the measurement value of a Fortis, Inc. incentive right as of
December&nbsp;31, 2003. As soon as practical after this special
valuation is completed, and before the closing of the initial
public offering contemplated, the each Fortis, Inc. incentive
right then outstanding under the plan will be cashed out for a
cash payment equal to the difference, if any, between the
measurement value of the Fortis, Inc. incentive rights as of
December&nbsp;31st immediately preceeding the date of grant, and
the measurement value of that right determined as of
December&nbsp;31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, Assurant will grant to each participant whose
rights were cashed out a number of stock appreciation rights on
Assurant&#146;s common stock (referred to as &#147;replacement
rights&#148;). The number of replacement rights to be granted to
a participant will equal (1)&nbsp;the measurement value of the
participant&#146;s cashed-out Fortis, Inc. incentive rights,
divided by (2)&nbsp;the initial public offering price. Each
replacement right that replaces a vested cashed-out right will
be vested immediately, and each replacement right that replaces
a non-vested cashed-out right will become vested on the vesting
date for the corresponding cashed-out right, but no replacement
right, whether or not vested, may be exercised sooner than
</FONT>

<P align="center"><FONT size="2">F-64
</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">one year from the closing date of the initial
public offering contemplated. After that waiting period, each
replacement right will be exercisable for the remaining term of
the corresponding cancelled right.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="4%"></TD>
    <TD width="96%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">9.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Income Taxes</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The effective tax rate for the six months ended
June&nbsp;30, 2003 was 33.9% compared to 29.8% for the six
months ended June&nbsp;30, 2002. The increase in the effective
rate is due to the release in 2002 of approximately $6,000 of
previously provided tax accruals that were no longer considered
necessary based on the resolution of certain domestic tax
matters.
</FONT>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="5%"></TD>
    <TD width="95%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">10.</FONT></B></TD>
    <TD>
    <B><FONT size="2">Commitments and Contingencies</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company and its subsidiaries lease office
space and equipment under operating lease arrangements. Certain
facility leases contain escalation clauses based on increases in
the lessors&#146; operating expenses. At June&nbsp;30, 2003, the
aggregate future minimum lease payments under operating lease
agreements that have initial or non-cancelable terms in excess
of one year are:
</FONT>

<CENTER>
<TABLE width="70%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="86%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2003
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">20,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2004
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">34,682</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2005
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">31,564</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2006
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">27,304</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">2007
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">22,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Thereafter
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">52,860</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total minimum future lease payment
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">189,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Rent expense was $19,207 for the six months ended
June&nbsp;30, 2003 and $19,682 for the six months ended
June&nbsp;30, 2002.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Company is regularly involved in litigation
in the ordinary course of business, both as a defendant and as a
plaintiff. The Company may from time to time be subject to a
variety of legal and regulatory actions relating to the
Company&#146;s current and past business operations. While the
Company cannot predict the outcome of any pending or future
litigation, examination or investigation, the Company does not
believe that any pending matter will have a material adverse
effect on the Company&#146;s financial condition or results of
operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The Solutions segment is subject to a number of
pending actions, primarily in the State of Mississippi. Many of
which allege that the Company&#146;s credit insurance products
were packaged and sold with lenders&#146; products without buyer
consent. The judicial climate in Mississippi is such that the
outcome of these cases is extremely unpredictable. The Company
has been advised by legal counsel that the Company has
meritorious defenses to all claims being asserted against the
Company. The Company believes, based on information currently
available, that any liabilities that could result are not
expected to have a material adverse effect on the Company&#146;s
financial condition or the results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">American Bankers Insurance Group, part of the
Solutions segment, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company (&#147;ABIC&#148;)
and American Bankers Life Assurance Company (&#147;ABLAC&#148;),
previously entered into a Consent Order and a comprehensive
Compliance Plan with 43&nbsp;participating states relating to
compliance with the often disparate state insurance laws,
regulations and administrative interpretations which have been
difficult to apply to the marketing of ABIG&#146;s credit
insurance products through financial institutions, retailers and
other entities offering consumer financing as a regular part of
their business. In addition to an initial settlement of
$12&nbsp;million, ABIG agreed to a multi-
</FONT>

<P align="center"><FONT size="2">F-65
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">state market conduct examination commencing
November&nbsp;23, 1999, for review of ABIG&#146;s implementation
of the Compliance Plan. A final report was issued on
December&nbsp;19, 2001, and ABIG paid a final settlement of
$3&nbsp;million to participating states.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, two of
the Company&#146;s subsidiaries, in connection with certain
alleged regulatory violations. Thereafter, ABIC and ABLAC filed
suit in Minnesota state court seeking to enjoin the enforcement
action because the alleged regulatory matters included within
the enforcement action were resolved as a part of the
above-described Consent Order and Compliance Plan to which
Minnesota was a party. In February 2003, the State of Minnesota,
ABIC and ABLAC reached a final settlement of all matters
included within the enforcement action and the separate state
court action filed by ABIC and ABLAC. Pursuant to the
settlement, ABIC and ABLAC each agreed to pay $100,000 to the
State of Minnesota and agreed to compensate the state for its
investigative costs which totaled $1.8&nbsp;million. In
addition, ABIC and ABLAC agreed to stop selling insurance in
Minnesota for five years, though they could apply for
reinstatement in 20&nbsp;months. Other member companies of the
Solutions segment with product lines that overlap those offered
by ABIC and ABLAC currently remain authorized to do business in
the State of Minnesota. The Company does not believe that the
effect of the settlement during the next five years will have a
material impact on the Company&#146;s financial condition or
results of its operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">On October&nbsp;1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of the Solutions segment. The indictment alleges that
ABIC and its two named corporate officers each violated the
Minnesota Fair Campaign Practices Act in connection with two
contributions by ABIC to the Republican National State Election
Committee totaling $15,000. The maximum penalty for ABIC is a
$40,000 fine for each alleged violation and/or forfeiture of
ABIC&#146;s license to conduct business in Minnesota. Other
member companies of the Solutions segment with product lines
that overlap those offered by ABIC currently remain authorized
to conduct business in the State of Minnesota. ABIC believes
that it has meritorious defenses to the claims being asserted
against it, and the Company believes, based on information
currently available, that any liabilities that could result are
not expected to have a material effect on the Company&#146;s
financial condition or results of operations.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">In addition, one of the Company&#146;s
subsidiaries, American Reliable Insurance Company
(&#147;ARIC&#148;), participated in certain excess of loss
reinsurance programs in the London market and, as a result,
reinsured certain personal accident, ransom and kidnap insurance
risks from 1995 to 1997. ARIC and a foreign affiliate ceded a
portion of these risks to other reinsurers (retrocessionaires).
ARIC ceased reinsuring such business in 1997. However, certain
risks continued beyond 1997 due to the nature of the reinsurance
contracts written. ARIC and some of the other reinsurers
involved in the programs are seeking to avoid certain treaties
on various grounds, including material misrepresentation and
non-disclosure by the ceding companies and intermediaries
involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of
</FONT>

<P align="center"><FONT size="2">F-66
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV align="center">
<B><FONT size="2">FORTIS, INC. AND SUBSIDIARIES</FONT></B>
</DIV>

<P align="center">
<B><FONT size="2">NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS&#151;(Continued)</FONT></B>

<DIV align="center">
<B><FONT size="2">Six months ended June&nbsp;30, 2003 and
2002</FONT></B>
</DIV>

<DIV align="center">
<B><FONT size="2">(unaudited)</FONT></B>
</DIV>

<P align="left">
<FONT size="2">certain treaties with ARIC and the other
reinsurers. The disputes generally involve multiple layers of
reinsurance, and allegations that the reinsurance programs
involved interrelated claims &#147;spirals&#148; devised to
disproportionately pass claims losses to higher-level
reinsurance layers. Many of the companies involved in these
programs, including ARIC, are currently involved in
negotiations, arbitration and/or litigation between multiple
layers of retrocessionaires, reinsurers, ceding companies and
intermediaries, including brokers, in an effort to resolve these
disputes. Based on information currently available to the
Company, and after consideration of the reserves reflected in
the Company&#146;s financial statements, the Company believes
that it is not likely that any liabilities the Company
experiences in connection with these programs would have a
material adverse effect on the Company&#146;s financial
condition or results of operations. However, the inherent
uncertainty of arbitrations and lawsuits, including the
uncertainty of estimating whether any settlements the Company
may enter into in the future would be on favorable terms, makes
it difficult to predict the outcomes with certainty.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">As a result of regulatory scrutiny of the
Company&#146;s industry practices or its businesses, such as
examinations of race-based premiums charged in the past by two
of the Company&#146;s acquired subsidiaries, it is possible that
the Company may be subject to legal proceedings in the future
relating to those practices and businesses.
</FONT>

<P align="center"><FONT size="2">F-67
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<!-- link1 "GLOSSARY OF SELECTED INSURANCE AND REINSURANCE TERMS" -->

<P align="center">
<B><FONT size="2">GLOSSARY OF SELECTED INSURANCE AND REINSURANCE
TERMS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Accidental death and/or
    dismemberment</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Form of accident insurance that indemnifies or
    pays a stated benefit to an insured or his/her beneficiary in
    the event of bodily injury or death due to accidental means
    (other than natural causes).
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Administrative Services Only (ASO)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Services provided in an employee benefit plan.
    Specifically, as with a self-insured plan, the group may have an
    ASO contract with an insurance company or a third-party
    administrator to handle aspects of claims adjudication and
    administration.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Adverse selection</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Process by which an applicant who believes
    himself to be uninsurable, or at greater than average risk,
    seeks to obtain a policy from an insurance company at a standard
    premium rate.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Annuity</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A contract that provides for periodic payments to
    an annuitant, either beginning immediately (immediate annuity)
    or in the future (deferred annuity), for a specified period of
    time. In the case of the annuities sold by Assurant PreNeed, the
    benefits under the contract are scheduled to begin upon the
    death of the purchaser of the annuity and are used to fund the
    costs incurred in connection with pre-arranged funeral contracts.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Association</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">In the health insurance market, an entity that
    was formed and maintained in good faith for purposes other than
    obtaining insurance and does not make health insurance coverage
    offered through the association available other than in
    connection with a member of the association. The association is
    the policyholder, and individual association members may obtain
    certificates of coverage under the association&#146;s master
    policies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Assumption basis</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A form of reinsurance under which policy
    administration and the contractual relationship with the
    insured, as well as all liabilities, pass to the reinsurer; the
    novation of liability is evidenced by an assumption certificate
    issued to the insured who, in some jurisdictions, has the right
    to refuse the change in insurers.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Broker</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">One who negotiates contracts of insurance or
    reinsurance, receiving a commission for placement and other
    services rendered, between (i)&nbsp;a policyholder and a primary
    insurer, on behalf of the insured party, or (ii)&nbsp;a primary
    insurer and reinsurer, on behalf of the primary insurer or
    (iii)&nbsp;a reinsurer and a retrocessionaire on behalf of the
    reinsurer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Captive agent</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Representative of a single insurer or group of
    insurers who is obligated to submit business only to that
    company, or at a minimum, give that company first refusal rights
    on a sale.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Captive insurance company</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A company that is controlled by the insured or a
    group of insureds and that is formed for the purpose of
    reinsuring risks associated with the activities of its
    shareholders or members.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Case management</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A collaborative process which assesses, plans,
    implements, coordinates, monitors and evaluates options and
    services to meet an
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">individual&#146;s health needs using
    communication and available resources to promote quality
    cost-effective outcomes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Casualty insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Insurance that is primarily concerned with the
    losses caused by injuries to third persons (in other words,
    persons other than the policyholder) and the legal liability
    imposed on the insured resulting therefrom.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Cede; Cedent; Ceding company</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">When a party reinsures its liability with
    another, it &#147;cedes&#148; business and is referred to as the
    &#147;cedent&#148; or &#147;ceding company.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Claims</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Request by an insured or reinsured for
    indemnification by an insurance company or reinsurance company
    for loss incurred from an insured peril or event.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Claims expense</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The expenses of settling claims, including legal
    and other fees and the portion of general expenses allocated to
    claim settlement costs.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Claims management</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The use by an insurer of a variety of means to
    mitigate the extent of losses incurred by those insured under
    its policies and the corresponding benefit costs, for example,
    efforts to improve the quality of medical care provided to its
    insureds or efforts to assist its insureds with vocational
    services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Coinsurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">With respect to a direct medical contract between
    an insurer and the insured, the insured&#146;s share of covered
    losses in an arrangement pursuant to which the insured and the
    insurer share in a specific ratio of the covered losses. With
    respect to ceded reinsurance, a reinsurance arrangement in which
    coverage ceded to the reinsurer on an individual policy is in
    the same form as that of the direct policy issued to the
    policyholder. The reinsurer receives its proportionate share of
    the gross premium from the ceding company net of an expense
    allowance intended to reimburse the ceding company for
    commissions and other out of pocket expenses. The reinsurer
    establishes its proportionate share of reserves and shares
    proportionately in the risk of loss.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Consumer Price Index</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Measurement of the rate of inflation according to
    a weighted market basket of goods and services that includes
    such items as transportation costs, health care costs, housing
    costs and food costs. These statistics are released monthly by
    the U.S.&nbsp;Bureau of Labor Statistics.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Co-payments</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Partial payment of medical service expenses
    required in group health insurance. Typically, such payment is
    set at a fixed amount regardless of the expense of the services
    rendered or the actual costs of drugs and medicines provided.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Credit insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Insurance issued to a creditor or lender to cover
    the life (in the case of credit life insurance), unemployment
    (in the case of credit unemployment) or disability (in the case
    of credit disability) of a debtor or borrower for an outstanding
    loan. If the debtor dies before repayment of the debt, the
    policy will pay off the balance of the amount outstanding. If
    the debtor is unemployed or becomes disabled before repayment of
    the debt, the policy will typically pay any minimum amounts due
    under the outstanding loan until the debtor is no longer
    unemployed or disabled, as the case may be.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Debt protection</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A non-insurance product that cancels or defers
    the required monthly payment on an outstanding loan when a
    covered event occurs. Examples of covered events include death,
    disability and unemployment. If the protected cardholder dies
    before repayment of the debt, the contract will cancel the
    outstanding balance at the time of death. If the protected
    cardholder is unemployed or becomes disabled before repayment of
    the debt, the contract will typically cancel or defer the
    required minimum monthly payment, during the period of
    unemployment or disability, if the cardholder is unemployed or
    disabled longer than the waiting period.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Deductibles</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The amount of loss that an insured retains.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Disability insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Insurance that provides income payments to the
    insured wage earner when income is interrupted or terminated
    because of illness, sickness or accident. The insurance policy
    defines the nature of the disability it covers. Long-term
    disability policies typically provide coverage for a period
    greater than one year, which may be to age 65 or life.
    Short-term disability policies typically provide coverage for
    less than one year in duration.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Disease management</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A system of coordinated healthcare interventions
    and communications for populations with conditions in which
    patient self-care efforts are significant. Disease management:
    (1)&nbsp;supports the physician or practitioner/ patient
    relationship and plan of care, (2)&nbsp;emphasizes prevention of
    exacerbations and complications utilizing evidence-based
    practice guidelines and patient empowerment strategies, and
    (3)&nbsp;evaluates clinical, humanistic and economic outcomes on
    an ongoing basis with the goal of improving overall health.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Duration corridor</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Duration is a measure expressed in years of the
    price sensitivity of a financial instrument to changes in
    interest rates. The corridor refers to the minimum and maximum
    duration allowed.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Escrowed account</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Funds that a lender collects monthly to pay
    monthly mortgage insurance premiums, homeowners insurance policy
    premiums and yearly property taxes.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Excess of loss</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A generic term describing reinsurance that
    indemnifies the reinsured against all or a specified portion of
    losses on underlying insurance policies in excess of a specified
    amount, which is called a &#147;level&#148; or
    &#147;retention.&#148; Also known as non-proportional
    reinsurance. Excess of loss reinsurance is written in layers. A
    reinsurer or group of reinsurers accepts a band of coverage up
    to a specified amount. The total coverage purchased by the
    cedent is referred to as a &#147;program&#148; and will
    typically be placed with predetermined reinsurers in
    pre-negotiated layers. Any liability exceeding the outer limit
    of the program reverts to the ceding company, which also bears
    the credit risk of a reinsurer&#146;s insolvency.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Fire and dwelling insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Fire insurance is coverage protecting the insured
    against the loss to real or personal property from damage caused
    by the peril of fire or lightning. Dwelling insurance is
    coverage for property damage to a building used as a dwelling,
    as well as its contents. The property
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">coverage for the building includes items attached
    to the building such as equipment and fixtures.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Flood insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Insurance that provides mortgage banking
    institutions coverage for the peril of flood for those borrowers
    who fail to provide proof of flood insurance on their mortgaged
    property, thereby protecting the mortgagor&#146;s collateral
    interest in the property.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Generally accepted accounting principles
    (GAAP)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">United States generally accepted accounting
    principles as defined by the American Institute of Certified
    Public Accountants or statements of the Financial Accounting
    Standards Board and other authoritative guidance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Group insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Single policy under which individuals in a
    natural group (such as employees of a business firm) and their
    dependents are covered. More generally, the collection of all
    such policies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Group disability insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Coverage of a natural group, often an employee
    group, whose members receive a disability income benefit,
    subject to a maximum amount, if illness or an accident renders a
    member disabled as defined in the policy. Common requirements
    for disability are that the member is unable to perform the
    material duties of his or her own occupation, or at other times
    that the member is unable to perform the material duties of any
    gainful occupation for which he or she is suited by education,
    training or experience. Benefits are usually limited to a stated
    length of time, and the maximum income benefit is limited to a
    percentage of earnings prior to the disability or a flat dollar
    amount.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Group life insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Typically one-year coverage, provided as group
    insurance, that is renewable at the end of each year and that
    provides benefits in the event of the death of an insured. The
    premium rate upon renewal is based on the range of employee ages
    and, if the group is subject to experience rating, the loss
    record (deaths) of the group. Experience rating is a statistical
    procedure used to calculate a premium rate based on the loss
    experience of an insured group. The premiums paid are related to
    actual claims and expense experience expected for that specific
    group.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Guaranteed issue</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The right to purchase insurance without physical
    examination or the answering of health questions; the present
    and past physical condition of the applicant are not considered.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Guaranteed renewable</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">With respect to an insurance policy, renewable at
    the option of the insured for a specified number of years or to
    a stated age. The insurance company cannot refuse to renew the
    policy and cannot change any of its provisions except the
    premium rate. In individual insurance, if the insurance company
    changes the premium, it must do so for the entire class to which
    a policyholder belongs, not just for one or a few members of the
    class.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Guaranty fund</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">State-regulated mechanism that is financed by
    assessing insurers doing business in those states. These funds
    are maintained by contributions of companies operating in a
    particular state in proportion to their business written in the
    state. Should insolvencies
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">occur, these funds are available to meet some or
    all of the insolvent insurer&#146;s obligations to policyholders.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Health Reimbursement Accounts <BR>
     (HRAs)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Employer-funded accounts provided to employees
    for reimbursement of qualifying medical expenses, in which such
    reimbursements are excludable from employee gross income.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Homeowners insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Package of policies that combines
    (1)&nbsp;coverage against the insured&#146;s property being
    destroyed or damaged by various perils and (2)&nbsp;coverage for
    liability exposure of the insured. Our creditor-placed
    homeowners insurance policies generally cover only the property,
    including any adjacent structure of the home.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Incurred but not reported (IBNR)
    reserves</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Reserves for estimated losses and loss expenses
    which have been incurred but not yet reported to the insurer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Indemnity</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Coverage for the percentage of the health care
    costs paid by the health insurance company, which is typically a
    specified percentage above the insured&#146;s deductible up to a
    dollar amount. The insurance company then pays 100% of the costs
    up to the policy limits. The insured may select a physician of
    his or her choice.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Loss draft</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Payment of insurance proceeds for a claim
    resulting from a loss to insured mortgaged property.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Loss ratio</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Policyholder benefits divided by net earned
    premiums.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Loss reserve</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Liabilities established by insurers and
    reinsurers to reflect the estimated cost of claims payments and
    the related expenses that the insurer or reinsurer will
    ultimately be required to pay in respect of insurance or
    reinsurance it has written. Reserves are established for losses
    and for loss expenses.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Losses and loss expenses</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The expenses of settling claims, including legal
    and other fees and the portion of general expenses allocated to
    claim settlement costs (also known as claim adjustment expenses)
    plus losses incurred with respect to claims.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Master contract</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Single contract coverage on a group basis issued
    to an employer. Group members receive certificates as evidence
    of membership summarizing benefits provided.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Medical Savings Accounts (MSAs)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Savings accounts that have tax advantages
    combined with health insurance plans for the benefit of the
    employee. Both the employer and the employee are permitted to
    contribute to the MSA. The contributions can be directed to pay
    the deductible under the health insurance plan and/or the
    medical expenses not covered by the health insurance plan. Funds
    not spent are allowed to accumulate in the MSA on a continuous
    basis. When the employee reaches retirement age, the accumulated
    funds may be allocated to the employee&#146;s retirement income.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Modified coinsurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A form of reinsurance that differs from
    coinsurance only in that the reserves continue to be held by the
    ceding company while the risk is transferred to the reinsurer.
    The reinsurer transfers funds to the ceding company for future
    reserve increases and receives funds
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">from the ceding company for future reserve
    declines. The ceding company is required to pay interest to the
    reinsurer to replace the income that would have been earned by
    the reinsurer if it had held the assets backing the reserves in
    its own investment portfolio.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Morbidity; Morbidity rate</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#147;Morbidity&#148; refers to the incidence of
    disease or disability in a specific population over a specific
    period of time. The &#147;morbidity rate&#148; refers to the
    relationship of the incidence of disease or disability
    contracted by individual members of a group to the entire group
    membership over a specific period of time.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Mortality; Mortality rate</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">&#147;Mortality&#148; refers to the number of
    deaths in a specific population over a specific period of time.
    The &#147;mortality rate&#148; refers to the relationship of the
    frequency of deaths of individual members of a group to the
    entire group membership over a specific period of time.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">National Association of Insurance
    Commissioners (NAIC)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A voluntary organization of state insurance
    officials that promulgates model laws regulating the insurance
    industry, values securities owned by insurers, develops and
    modifies insurer financial reporting, statements and insurer
    performance criteria and performs other services with respect to
    the insurance industry.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Net earned premiums and other
    considerations</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The amount of net premiums written allocable to
    the expired period of an insurance policy or policies, including
    fees earned on interest sensitive policies.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Persistency</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Percentage of insurance policies or annuity
    contracts remaining in force between specified measurement
    dates. Also used with respect to premiums, to measure the amount
    of annualized premium remaining in force on a stated collection
    of policies between specified measurement dates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Pre-arranged funeral contracts</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">An arrangement between a funeral firm and an
    individual whereby the funeral firm agrees to perform a selected
    funeral upon the individual&#146;s death.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Preferred Provider Organization
    (PPO)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">An entity that acts as an intermediary between an
    insurer and a network of hospitals, physicians or other
    providers of health care who have agreed to provide care to
    insureds subject to contractually established reimbursement
    rates.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Pre-funded funeral insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Insurance policies designed to provide benefits
    to fund the costs incurred in connection with pre-arranged
    funeral contracts, which costs typically include funeral firm
    merchandise and services.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Pre-need</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Whole life insurance or annuity policies used to
    fund pre-arranged funerals. These policies provide cash benefits
    at the time of death of the insured to cover the costs incurred
    in connection with a funeral contract pre-arranged before the
    death of the insured.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Pro rata reinsurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A generic term describing all forms of
    reinsurance in which the reinsurer shares on a pro rata basis
    part of the original premiums and losses of the reinsured. Pro
    rata reinsurance is also known as
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
</TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">proportional reinsurance, quota share reinsurance
    or participating reinsurance.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Referable location</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Every occurrence of a practitioner at a location.
    For example, if a dentist practices at three locations, there
    are three referable locations; or, if a single dental office has
    ten dentists, then there are ten referable locations.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Reinsurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">An arrangement in which an insurance company, the
    reinsurer, agrees to indemnify another insurance or reinsurance
    company, the ceding company, against all or a portion of the
    insurance or reinsurance risks underwritten by the ceding
    company under one or more policies. Reinsurance can provide a
    ceding company with several benefits, including a reduction in
    net liability on individual risks and catastrophe protection
    from large or multiple losses. Reinsurance also provides a
    ceding company with additional underwriting capacity by
    permitting it to accept larger risks and write more business
    than would be possible without a concomitant increase in capital
    and surplus, and facilitates the maintenance of acceptable
    financial ratios by the ceding company. Reinsurance does not
    legally discharge the primary insurer from its liability with
    respect to its obligations to the insured.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Renewable term life insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Term life insurance coverage that is renewable at
    the option of the insured, who is not required to take a medical
    examination in order to renew existing amounts of coverage.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Renters&#146; insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Coverage for the contents of a renter&#146;s home
    or apartment and for liability. These policies are similar to
    homeowners insurance, except that they do not cover the
    structure. They do, however, cover changes made to the inside
    structure, such as kitchen appliances and built-in-bookshelves.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Reserves</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Liabilities established by insurers and
    reinsurers to reflect the estimated costs of claim payments and
    the related expenses that the insurer or reinsurer will
    ultimately be required to pay in respect of insurance or
    reinsurance it has written. Reserves are established for losses,
    for loss expenses and for unearned premiums. Loss reserves
    consist of &#147;case reserves,&#148; or reserves established
    with respect to individual reported claims. Unearned premium
    reserves constitute the portion of premium paid in advance for
    insurance or reinsurance that has not yet been provided. See
    also &#147;Loss reserves.&#148;
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Retention</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The amount or portion of risk that an insurer
    retains for its own account. Losses in excess of the retention
    level up to the outer limit of the program, if any, are paid by
    the reinsurer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Retrocessionaire</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A transaction whereby a reinsurer cedes to
    another reinsurer, the retrocessionaire, all or part of the
    reinsurance that the first reinsurer has assumed. Reinsurance
    companies cede risks to retrocessionaires for reasons similar to
    those that cause primary insurers to purchase reinsurance: to
    reduce net liability on individual risks, to protect against
    catastrophic losses, to stabilize financial ratios and to obtain
    additional underwriting capacity.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Risk management</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Procedure to minimize the adverse effect of a
    possible financial loss by (1)&nbsp;identifying potential
    sources of loss; (2)&nbsp;measuring the financial consequences
    of a loss occurring; and (3)&nbsp;using controls to minimize
    actual losses or their financial consequences.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Risk-based capital requirement (RBC)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A tool used by insurance regulators to analyze an
    insurance company&#146;s total adjusted capital, taking into
    consideration the risks associated with the company&#146;s
    particular assets, the risk that losses will be worse than
    expected, the company&#146;s exposure to interest rate risk and
    other business risks.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Separate account</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Assets of insurance companies allocated under
    certain policies and contracts that are segregated from the
    general account and other separate accounts. The policyholder or
    contractholder bears the risk of investments held in a separate
    account.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Standard industry code</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">An industry code assigned to an operating
    establishment by a U.S.&nbsp;government agency or agencies on
    the basis of the operating establishment&#146;s primary
    activity, which is determined by its principal product or group
    of products produced or distributed or services rendered. While
    recently superceded by North American Industry Classification
    System (NAICS)&nbsp;codes, SIC codes remain in common use, and
    templates for translating one code to the other are readily
    available.
    </FONT></TD>
</TR>

</TABLE>

<DIV align="left">

</DIV>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Statutory accounting principles <BR>
     (SAP)</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Recording transactions and preparing financial
    statements in accordance with the rules and procedures
    prescribed or permitted by United States state insurance
    regulatory authorities including the NAIC, which in general
    reflect a liquidating, rather than going concern, concept of
    accounting.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Statutory assets</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Assets determined in accordance with SAP. This
    valuation methodology is generally considered very conservative,
    but is deemed most appropriate by regulators in evaluating
    solvency.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Statutory earnings</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Earnings based on the conservative reserve
    requirements of various states.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Statutory net income</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Net income based on the conservative reserve
    requirements of various states.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Statutory surplus</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The excess of statutory admitted assets over
    statutory liabilities as shown on an insurer&#146;s statutory
    financial statements. Admitted assets are those assets which are
    permitted or admitted by the National Association of Insurance
    Commissioners or by the rules of a given state. The assets
    deemed as nonadmitted are those assets which are accorded
    limited or no value and are charged off directly to statutory
    capital and surplus. Nonadmitted assets are ones which are
    specifically identified in the statutory accounting principals
    as nonadmitted or not specifically identified as admitted.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Surrender charge</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Fee charged to a policyholder when a life
    insurance policy or annuity is surrendered for its cash value
    prior to the end of the surrender charge period. This fee is
    intended to recover policy acquisition costs and subsequent
    administrative expenses.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-8
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="28%"></TD>
    <TD width="1%"></TD>
    <TD width="71%"></TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Term life insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Life insurance written for a specified period and
    under which no cash value is generally available on surrender.
    If an insured dies within that period, the beneficiary receives
    the death payments. If the insured survives, the policy ends and
    the beneficiary receives nothing.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">True group</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Group insurance in which the employer or other
    group policyholder pays all or part of the premium on behalf of
    the insured members. This term is contrasted to
    &#147;voluntary&#148; group insurance, in which the insured
    members pay their own premium.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Turnkey</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Built, supplied or installed complete and ready
    to operate.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Unearned premium</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">The portion of premium that is allocable to the
    unexpired portion of the policy term and, therefore, that has
    not yet been earned.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Utilization review</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Review designed to control and limit medical
    expenses. This review includes: (1)&nbsp;requirement of
    certification for admission to a health care facility;
    (2)&nbsp;continuous analysis of the reasons for the patient to
    remain in the health care facility; (3)&nbsp;projected date for
    release of the patient; and (4)&nbsp;cost-effective ways of
    handling patients with catastrophic illnesses.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Variable insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">Investment-oriented life insurance policy that
    offers fixed premiums and a minimum death benefit as well as
    providing a return linked to an underlying portfolio of
    securities that may be in either a separate account or general
    account of the insurer.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Waiver of premium</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">In life insurance, provision in a policy pursuant
    to which an insured, with total disability that lasts for a
    specified period, no longer has to pay premiums for the duration
    of the disability or for a stated period, during which time the
    life insurance coverage provides continued protection.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR>
    <TD valign="top">
    <B><FONT size="2">Whole life insurance</FONT></B></TD>
    <TD></TD>
    <TD valign="top">
    <FONT size="2">A form of life insurance that provides guaranteed
    death benefits and guaranteed cash values to policyholders.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">G-9
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">[LOGO]</FONT></B>

<DIV>&nbsp;</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">PART II</FONT></B>

<P align="center">
<B><FONT size="2">INFORMATION NOT REQUIRED IN
PROSPECTUS</FONT></B>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;13.</FONT></B></TD>
    <TD>
    <B><FONT size="2">OTHER EXPENSES OF ISSUANCE AND
    DISTRIBUTION.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">The following table sets forth the expenses
payable by the Registrant in connection with the issuance and
distribution of the common stock being registered hereby. All of
such expenses are estimates, other than the filing and listing
fees payable to the Securities and Exchange Commission, the
New&nbsp;York Stock Exchange and the National Association of
Securities Dealers, Inc.
</FONT>

<CENTER>
<TABLE width="60%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="87%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Filing Fee&#151;Securities and Exchange Commission
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">80,900</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Listing Fee&#151;The New York Stock Exchange
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fee&#151;National Association of Securities
    Dealers
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom"><FONT size="2">$</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">30,500</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and Expenses of Counsel
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Printing Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Fees and Expenses of Accountants
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Blue Sky Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Transfer Agent Fees and Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Miscellaneous Expenses
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Premium for directors&#146; and officers&#146;
    liability insurance
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

<TR valign="bottom" bgcolor="#EEEEEE">
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Total
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="bottom" nowrap><FONT size="2">*</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left"><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>

</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be provided by amendment.
    </FONT></TD>
</TR>

</TABLE>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;14.</FONT></B></TD>
    <TD>
    <B><FONT size="2">INDEMNIFICATION OF DIRECTORS AND
    OFFICERS.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Section&nbsp;145 of the Delaware General
Corporation Law (the &#147;DGCL&#148;) provides, in summary,
that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against
all expenses and liabilities (including attorneys&#146; fees)
incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good
faith and in a manner they reasonably believed to be in or not
opposed to our best interests, and, with respect to any criminal
action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful; provided that no indemnification may
be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to
us, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper. Any such indemnification may be made by us only as
authorized in each specific case upon a determination by the
stockholders, disinterested directors or independent legal
counsel that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Our certificate of incorporation and by-laws
provide that we will indemnify our directors and officers to the
fullest extent permitted by law and that no director shall be
liable for monetary damages to us or our stockholders for any
breach of fiduciary duty, except to the extent provided by
applicable law.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Fortis currently maintains liability insurance
for our directors and officers. In connection with the offering,
we will obtain additional liability insurance for our directors
and officers. Such insurance would be available to our directors
and officers in accordance with its terms.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Reference is made to the form of underwriting
agreement to be filed as Exhibit&nbsp;1.1 hereto for provisions
providing that the underwriters are obligated under certain
circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities under the
Securities Act of 1933, as amended (Securities Act).
</FONT>

<P align="center"><FONT size="2">II-1
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;15.</FONT></B></TD>
    <TD>
    <B><FONT size="2">RECENT SALES OF UNREGISTERED
    SECURITIES.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">During the period from 2000 to 2003, pursuant to
the Assurant Investment Plan, the Company granted to key
employees, in exchange for all or a portion of such
employees&#146; eligible compensation, options to purchase
shares or other equity interests in certain third-party mutual
funds, which shares or other equity interests have been
registered under the Securities Act. The option grants were made
by the Company in reliance on the exemptions from the
registration requirements of the Securities Act provided by
(a)&nbsp;Rule&nbsp;701 under the Securities Act as issuances by
a company not subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (Exchange Act),
pursuant to a written compensatory benefit plan of such company
established for its directors and senior employees, and/or
(b)&nbsp;Section&nbsp;4(2) of the Securities Act as issuances to
a limited number of sophisticated investors in transactions not
involving any public offering.
</FONT>

<P align="center"><FONT size="2">II-2
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;16.</FONT></B></TD>
    <TD>
    <B><FONT size="2">EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Document</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Underwriting Agreement.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Certificate of Incorporation of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">By-Laws of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Shareholders Agreement between the
    Registrant and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Registration Rights Agreement between the
    Registrant and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Common Stock Certificate.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Simpson Thacher&nbsp;&#38; Bartlett
    LLP.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Cooperation Agreement, among the
    Registrant, Fortis Insurance N.V., Fortis SA/ NV and Fortis N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Option Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Long-Term Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Supplemental Executive Retirement Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Pension and 401(k) Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Pension Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant 401(k) Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with J.
    Kerry Clayton*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Robert
    B. Pollock*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with
    Benjamin M. Cutler*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Philip
    Bruce Camacho*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Lesley
    Silvester*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Long-Term Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Employee Stock Purchase Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Management Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Appreciation Incentive Rights Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Investment Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting, Non-Compete and Payments Agreement,
    dated July&nbsp;19, 1999, among Fortis, Inc., Allen R. Freedman
    and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Retirement Agreement among Fortis, Inc., Allen R.
    Freedman and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Subsidiaries of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Simpson Thacher&nbsp;&#38; Bartlett
    LLP (included as part of Exhibit&nbsp;5.1).*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney (included on signature pages to
    this Registration Statement).
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-3
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Financial
Statement Schedules
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="15%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="4%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="75%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;I
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Summary of Investments&nbsp;&#151; Other Than
    Investments in Related Parties.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;II
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Condensed Financial Information of Fortis, Inc.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;III
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Supplementary Insurance Information.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;IV
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Reinsurance.
    </FONT></TD>
</TR>

<TR>
    <TD align="left" valign="top">
    <DIV style="margin-left:10px; text-indent:-10px">
    <FONT size="2">Schedule&nbsp;V
    </FONT></DIV>
    </TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">&#151;
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Valuation and Qualifying Accounts.
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-4
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV>&nbsp;</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="10%"></TD>
    <TD width="90%"></TD>
</TR>

<TR valign="top">
    <TD><B><FONT size="2">ITEM&nbsp;17.</FONT></B></TD>
    <TD>
    <B><FONT size="2">UNDERTAKINGS.</FONT></B></TD>
</TR>

</TABLE>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned
Registrant hereby undertakes to provide to the underwriters at
the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names
as required by the underwriter to permit prompt delivery to each
purchaser.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned
Registrant hereby undertakes that:
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="6%"></TD>
    <TD width="5%"></TD>
    <TD width="89%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(1)</FONT></TD>
    <TD align="left">
    <FONT size="2">For purposes of determining any liability under
    the Securities Act of 1933, the information omitted from the
    form of prospectus filed as part of this registration statement
    in reliance upon Rule&nbsp;430A and contained in a form of
    prospectus filed by the Registrant pursuant to
    Rule&nbsp;424(b)(1) or (4)&nbsp;or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
    </FONT></TD>
</TR>

<TR>
    <TD>&nbsp;</TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(2)</FONT></TD>
    <TD align="left">
    <FONT size="2">For the purpose of determining any liability
    under the Securities Act of 1933, each post-effective amendment
    that contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="3%"></TD>
    <TD width="5%"></TD>
    <TD width="92%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">(c)</FONT></TD>
    <TD align="left">
    <FONT size="2">Insofar as indemnification for liabilities
    arising under the Securities Act of 1933 may be permitted to
    directors, officers and controlling persons of the Registrant
    pursuant to the foregoing provisions, or otherwise, the
    Registrant has been advised that in the opinion of the
    Securities and Exchange Commission such indemnification is
    against public policy as expressed in the Securities Act of 1933
    and is, therefore, unenforceable. In the event that a claim for
    indemnification against such liabilities (other than the payment
    by the Registrant of expenses incurred or paid by a director,
    officer or controlling person of the Registrant in the
    successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the Registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act of 1933 and will be governed by the final
    adjudication of such issue.
    </FONT></TD>
</TR>

</TABLE>

<P align="center"><FONT size="2">II-5
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">SIGNATURES</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York,
on the 24th day of October, 2003.
</FONT>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">ASSURANT, INC.
    </FONT></TD>
</TR>

</TABLE>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="2%"></TD>
    <TD width="58%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD><FONT size="2">By:&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">/s/ J. KERRY CLAYTON
    </FONT></TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="40%"></TD>
    <TD width="60%"></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <HR size="1" align="left" noshade></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Name:&nbsp;&nbsp;<I>J. Kerry Clayton</I>
    </FONT></TD>
</TR>

<TR valign="top">
    <TD>&nbsp;</TD>
    <TD align="left">
    <FONT size="2">Title:&nbsp;&nbsp;&nbsp;<I>President and Chief
    Executive Officer</I>
    </FONT></TD>
</TR>

</TABLE>

<P align="center">
<B><FONT size="2">POWER OF ATTORNEY</FONT></B>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Know all men by these presents, that the
undersigned directors and officers of the Registrant, a Delaware
corporation, which is filing a Registration Statement on
Form&nbsp;S-1 with the Securities and Exchange Commission,
Washington,&nbsp;D.C. 20549 under the provisions of the
Securities Act of 1933 hereby constitute and appoint J. Kerry
Clayton, Robert B. Pollock, Larry M. Cains, Katherine Greenzang,
Barbara R. Hege and Douglas Lowe, and each of them, the
individual&#146;s true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the
person and in his or her name, place and stead, in any and all
capacities, to sign such registration statement and any or all
amendments, including post-effective amendments to the
registration statement, including a prospectus or an amended
prospectus therein and any registration statement for the same
offering that is to be effective upon filing pursuant to
Rule&nbsp;462(b) under the Securities Act, and all other
documents in connection therewith to be filed with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
</FONT>

<P align="left">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<FONT size="2">Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities indicated on
the 24th day of October, 2003.
</FONT>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="7%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="31%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="56%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ J. KERRY CLAYTON<BR>
    <HR size="1" noshade>J. Kerry Clayton
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">President and Chief Executive Officer and
    Director<BR>
    (Principal Executive Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ROBERT B. POLLOCK<BR>
    <HR size="1" noshade>Robert B. Pollock
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Executive Vice President and Chief Financial
    Officer<BR>
    (Principal Financial Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ LARRY M. CAINS<BR>
    <HR size="1" noshade>Larry M. Cains
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Senior Vice President, Finance<BR>
    (Principal Accounting Officer)
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ JOHN MICHAEL PALMS<BR>
    <HR size="1" noshade>John Michael Palms
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ANTON VAN ROSSUM<BR>
    <HR size="1" noshade>Anton van Rossum
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-6
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="9%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="42%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="43%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Signature</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Title</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ MICHEL BAISE<BR>
    <HR size="1" noshade>Michel Baise
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ROBERT J. BLENDON<BR>
    <HR size="1" noshade>Robert J. Blendon
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ BETH L. BRONNER<BR>
    <HR size="1" noshade>Beth L. Bronner
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ HOWARD L. CARVER<BR>
    <HR size="1" noshade>Howard L. Carver
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ARIE A. FAKKERT<BR>
    <HR size="1" noshade>Arie A. Fakkert
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ ALLEN R. FREEDMAN<BR>
    <HR size="1" noshade>Allen R. Freedman
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ H. CARROLL MACKIN<BR>
    <HR size="1" noshade>H. Carroll Mackin
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ GILBERT MITTLER<BR>
    <HR size="1" noshade>Gilbert Mittler
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

<TR>
    <TD colspan="5"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" valign="top">
    <FONT size="2">/s/ GEORGES VALCKENAERE<BR>
    <HR size="1" noshade>Georges Valckenaere
    </FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top">
    <FONT size="2">Director
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<P align="center"><FONT size="2">II-7
</FONT>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center">
<B><FONT size="2">EXHIBIT INDEX</FONT></B>

<CENTER>
<TABLE width="100%" align="center" cellspacing="0" cellpadding="0" border="0">

<TR>
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="5%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="85%"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Exhibit</FONT></B></TD>
    <TD></TD>
    <TD></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><B><FONT size="1">Number</FONT></B></TD>
    <TD></TD>
    <TD align="center" nowrap><B><FONT size="1">Description of Document</FONT></B></TD>
</TR>

<TR>
    <TD colspan="3" align="center" nowrap><HR size="1" noshade></TD>
    <TD></TD>
    <TD align="center" nowrap><HR size="1" noshade></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">1.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Underwriting Agreement.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Certificate of Incorporation of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">By-Laws of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Shareholders Agreement between the
    Registrant and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">3.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Registration Rights Agreement between the
    Registrant and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">4.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Specimen Common Stock Certificate.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">5.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Opinion of Simpson Thacher &#38; Bartlett LLP.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Form of Cooperation Agreement, among the
    Registrant, Fortis Insurance N.V., Fortis SA/ NV and Fortis N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Stock Option Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Long-Term Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Supplemental Executive Retirement Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Pension and 401(k) Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Pension Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant 401(k) Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with J.
    Kerry Clayton*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Robert
    B. Pollock*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.10</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with
    Benjamin M. Cutler*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.11</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Philip
    Bruce Camacho*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.12</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Change in Control Severance Agreement with Lesley
    Silvester*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.13</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Long-Term Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">2004 Employee Stock Purchase Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.16</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Executive Management Incentive Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.17</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Appreciation Incentive Rights Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.18</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Assurant Investment Plan*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consulting, Non-Compete and Payments Agreement,
    dated July&nbsp;19, 1999, among Fortis, Inc., Allen R. Freedman
    and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">10.20</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Retirement Agreement among Fortis, Inc., Allen R.
    Freedman and Fortis Insurance N.V.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">21.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Subsidiaries of the Registrant.*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of PricewaterhouseCoopers LLP.
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">23.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Consent of Simpson Thacher&nbsp;&#38; Bartlett
    LLP (included as part of Exhibit&nbsp;5.1).*
    </FONT></TD>
</TR>

<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right" valign="top" nowrap><FONT size="2">24.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top">
    <FONT size="2">Power of Attorney (included on signature pages to
    this Registration Statement).
    </FONT></TD>
</TR>

</TABLE>
</CENTER>

<DIV align="left">
<HR size="1" width="15%" align="left" noshade>
</DIV>
<P>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">

<TR>
    <TD width="2%"></TD>
    <TD width="98%"></TD>
</TR>

<TR valign="top">
    <TD><FONT size="2">*&nbsp;</FONT></TD>
    <TD align="left">
    <FONT size="2">To be filed by amendment.
    </FONT></TD>
</TR>

</TABLE>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>REPORT OF INDEPENDENT ACCOUNTANTS ON<BR>
FINANCIAL STATEMENT SCHEDULES</B>
</FONT>

<P align="left"><FONT size="2">To the Board of Directors of Fortis, Inc.
</FONT>
<P align="left"><FONT size="2">Our audits of the consolidated financial statements of Fortis, Inc. referred to
in our report dated March&nbsp;28, 2003, except as to Note 23 as to which the date is
October&nbsp;20, 2003 appearing in this Registration Statement of Assurant, Inc. on
Form&nbsp;S-1 also included an audit of the financial statement schedules listed in
Item&nbsp;16(b). In our opinion, these financial statement schedules present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
</FONT>
<P align="left"><FONT size="2">/s/ PricewaterhouseCoopers LLP
</FONT>
<P align="left"><FONT size="2">New York, New York<BR>
March&nbsp;28, 2003, except as to Note 23<BR>
as to which the date is October&nbsp;20, 2003
</FONT>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
AT DECEMBER 31, 2002</B>
</FONT>

<P align="left"><FONT size="2">SCHEDULE I &#151; SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMOUNT AT</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMORTIZED</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>WHICH SHOWN IN THE</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COST</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>FAIR VALUE</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>BALANCE SHEET</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FIXED MATURITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BONDS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">United States Government and government
agencies and authorities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,576,339</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,646,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,646,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">States, municipalities and political subdivisions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">196,186</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">211,512</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">211,512</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Foreign governments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">202,154</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">203,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">203,837</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Public utilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">834,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">879,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">879,086</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">All other corporate bonds</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,821,876</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,094,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,094,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total fixed maturities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,630,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,035,530</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EQUITY SECURITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">COMMON STOCKS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Public utilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Banks, trusts and insurance companies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,043</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,812</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Industrial, miscellaneous and all other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,392</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NON-SINKING FUND PREFERRED STOCKS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">248,181</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">253,847</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total equity securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">264,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">271,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Commercial mortgage loans on real estate, at amortized cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">841,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Policy loans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,377</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Short-term investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">684,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">125,870</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,616,748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">10,028,767</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
AT DECEMBER 31, 2002</B>
</FONT>

<P align="center"><FONT size="2"><B>Schedule&nbsp;II &#151; - CONDENSED BALANCE SHEET (Parent Only)</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="68%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>(in thousands except number of</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>shares and per share amounts)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Investments:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity investment in subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,898,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,731,940</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Surplus Notes receivable from subsidiary</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">770,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">770,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">312</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total investments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,668,748</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,502,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">238,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Receivable from subsidiaries, net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,420</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155,922</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">380,511</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">353,862</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,310,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,218,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIABILITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable and other liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">273,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">191,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income tax payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,981</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">103,013</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">284,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">294,412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mandatorily redeemable preferred securities of
subsidiary trusts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,446,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Mandatorily redeemable preferred stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,160</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">STOCKHOLDERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Common stock, par value $.10 per share:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Class&nbsp;A: 40,000,000 shares authorized, 7,750,000
shares issued and outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Class&nbsp;B: 150,001 shares issued and outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Class&nbsp;C: 400,001 shares issued and outstanding</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Class&nbsp;B and C; 40,000,000 total shares authorized)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>


<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">Additional paid-in capital</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,064,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Retained earnings</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">245,219</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,289,346</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">244,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">98,204</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total stockholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,555,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,452,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total liabilities, mandatorily redeemable preferred securities of
subsidiary trusts, mandatorily redeemable preferred stock and
stockholders&#146; equity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,310,481</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,218,051</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
For the years ended December&nbsp;31, 2002, 2001, and 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>Schedule&nbsp;II &#151; -
CONDENSED STATEMENT OF OPERATIONS (Parent Only), continued</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="59%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="11"><FONT size="1"><B>Years Ended December 31,</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="11"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">REVENUES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash dividend income from consolidated subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">186,550</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">615,400</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">241,920</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net investment income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81,629</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76,180</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67,104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gain on disposal of businesses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,994</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fees and other income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,570</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,435</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">285,749</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">815,620</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">337,229</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">EXPENSES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">General and administrative expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,697</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,284</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Distributions on preferred securities of subsidiary
trusts and interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">132,371</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,869</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">151,092</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">201,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income before income taxes and equity in undistributed
net loss of consolidated subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,657</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">613,874</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">129,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,390</FONT></TD>
    <TD nowrap><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,338</FONT></TD>
    <TD nowrap><FONT size="2"></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,624</FONT></TD>
    <TD nowrap><FONT size="2"></FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income before equity in undistributed
net loss of subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">151,047</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">618,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">160,700</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity in undistributed net loss of consolidated
subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,152,246</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(520,159</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(71,016</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,001,199</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
For the years ended December&nbsp;31, 2002, 2001 and 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>Schedule&nbsp;II &#151; - CONDENSED CASH FLOWS (Parent Only), continued</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="58%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2000</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net (loss)&nbsp;income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">(1,001,199</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">98,053</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">89,684</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net income to net cash
provided by operating activities:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity in undistributed net loss of subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,152,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">520,159</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">71,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in receivables</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">161,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(199,389</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(67,052</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in income taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(97,923</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,374</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,732</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">246,660</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">522,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">153,021</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">INVESTING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capital contributed to subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(136,422</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,000</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(60,000</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Sale of subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">203,665</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of subsidiaries</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(142,921</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(207,642</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Subsidiary redemption of preferred stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">195,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(34,023</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(76,836</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(27,918</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(170,445</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21,092</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(81,308</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">FINANCING ACTIVITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Proceeds from issuance of trust preferred securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">549,888</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayment of preferred securities of subsidiary trusts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,664</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Redemption of mandatorily redeemable preferred stock</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(500</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Borrowings from Parent</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">216,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">81,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayment of borrowings from Parent</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(455,907</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(800,256</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Dividends paid</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(42,928</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(110,351</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(22,058</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(43,428</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(352,998</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(190,430</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,787</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">148,845</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(118,717</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at beginning of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">175,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents at end of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">238,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">206,015</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,170</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
As of and for the years ended December&nbsp;31, 2002, 2001 and 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>SCHEDULE III &#151; SUPPLEMENTARY INSURANCE INFORMATION</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="2" align="center" nowrap><FONT size="1"><B>SEGMENT (1)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD COLSPAN="3" align="center" nowrap><FONT size="1"><B>DEFERRED<BR>
ACQUISITION<BR>
COST</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD COLSPAN="3" align="center" nowrap><FONT size="1"><B>FUTURE POLICY<BR>
BENEFITS, LOSSES,<BR>
CLAIMS AND LOSS<BR>
EXPENSE</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD COLSPAN="3" align="center" nowrap><FONT size="1"><B>UNEARNED<BR>
PREMIUMS</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3" nowrap><FONT size="1"><B>OTHER
POLICY<BR>
CLAIMS AND<BR>
BENEFITS<BR>
PAYABLE</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD COLSPAN="3" align="center" nowrap><FONT size="1"><B>PREMIUM<BR>
REVENUE</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD COLSPAN="3" align="center" nowrap><FONT size="1"><B>NET<BR>
INVESTMENT<BR>
INCOME</B></FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="23"><FONT size="1"><B>(in thousands)</B></FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,018,749</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">334,038</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,013,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,037,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,077,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">205,037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">22,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,791,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,232,942</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">537,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,833,656</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">136,703</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,683,887</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,775</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,132</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">537,721</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">183,634</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,619,202</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">148,120</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,313,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,637,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,207,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,543,861</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">631,828</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">861,625</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">358,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,090,281</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,039,794</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,906,426</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">218,213</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,680,367</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">933,594</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">144,378</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">138,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">99,358</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">511,405</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,837,839</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">94,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,493,277</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,157</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">25,917</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">506,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">179,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,540,268</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,996</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147,944</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">57,610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">112,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,094,765</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,392,019</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,267,197</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,405,427</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">711,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,780,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">211,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">903,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">135,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,966,982</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58,319</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">276,640</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">128,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">217,058</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">156,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">690,732</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="27%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>BENEFITS CLAIMS,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMORTIZATION OF</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>LOSSES AND</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>DEFERRED</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>SETTLEMENT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ACQUISITION</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OTHER OPERATING</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>PREMIUMS</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="2"><FONT size="1"><B>SEGMENT (1)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>EXPENSES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COSTS</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>EXPENSES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>WRITTEN</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">755,140</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">638,074</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">811,112</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,109,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">944,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">422,230</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,222,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">482,057</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">507,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">80,370</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62,144</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,246</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">782,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,831,789</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,109,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">639,905</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">613,607</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">830,716</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,058,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">737,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">316,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,306,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,967</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">452,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">484,736</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,936</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70,005</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">111,921</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">729,223</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,767,411</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,058,619</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Solutions</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">525,270</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">493,692</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">810,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,017,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employee Benefits</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">701,704</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">280,004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Health</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,498,060</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">37,572</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">433,661</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Preneed</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">279,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,081</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Corporate and Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">203,583</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,454</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">417,466</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Segments</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">590,166</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,977,934</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,017,156</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
For the years ended December&nbsp;31, 2002, 2001 and 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>SCHEDULE IV &#151; REINSURANCE</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>PERCENTAGE</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>CEDED TO</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED FROM</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OF AMOUNT</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>GROSS</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="left"><FONT size="1"><B>2002:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>NET AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>TO NET</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><FONT size="1"><HR size="1" noshade></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIFE INSURANCE IN FORCE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">192,247,499</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">67,628,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,016,082</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">127,635,457</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.4</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PREMIUMS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,792,276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">796,026</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,096,782</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,065,768</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,046,245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">268,211</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,287,734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,955,494</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">805,337</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">146,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,297,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,813,538</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,647,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">515,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,681,596</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BENEFITS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,748,556</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,036,256</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">123,395</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">835,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.8</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,343,568</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">462,206</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">211,440</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,092,802</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">705,911</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">358,393</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">153,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">500,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,798,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,856,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">487,965</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,429,145</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.2</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
For the years ended December&nbsp;31, 2002, 2001 and 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>SCHEDULE IV &#151; REINSURANCE, continued</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED FROM</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>PERCENTAGE OF</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>CEDED TO OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMOUNT</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1"><B>2001:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>GROSS AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>NET AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED TO NET</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade><FONT size="1"></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIFE INSURANCE IN FORCE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">196,838,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">77,457,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">8,834,532</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">128,215,103</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PREMIUMS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,013,923</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">967,318</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">68,151</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,114,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,202,525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,196,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">94,514</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,100,663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,645,924</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">692,109</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">72,951</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,026,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,862,372</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,855,803</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">235,616</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,242,185</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BENEFITS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,517,288</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">718,510</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">101,565</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">900,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11.3</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,372,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">507,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">71,683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,936,183</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">614,759</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">331,324</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">118,964</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">402,399</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,504,390</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,557,677</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">292,212</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,238,925</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
for the years ended December&nbsp;31, 2002, 2001, 2000<BR>
SCHEDULE IV &#151; REINSURANCE, continued</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="34%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED FROM</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>PERCENTAGE OF</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>CEDED TO OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>OTHER</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>AMOUNT</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="left" colspan="2"><FONT size="1"><B>2000:</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>GROSS AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>COMPANIES</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>NET AMOUNT</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>ASSUMED TO NET</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="3"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIFE INSURANCE IN FORCE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">214,324,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">56,637,599</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,344,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">167,031,731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PREMIUMS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,494,003</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">577,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">148,601</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,065,347</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,518,997</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,318,274</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">86,321</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,287,044</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,417,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">680,799</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,606</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">791,984</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,430,177</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,576,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">290,528</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,144,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5.6</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BENEFITS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Life insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">741,403</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">79,541</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,240</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">796,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accident and health insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,558,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">483,992</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,719</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,131,643</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and liability insurance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">480,710</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">289,817</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">89,416</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">280,309</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31.9</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total premiums</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,781,029</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">853,350</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">280,375</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,208,054</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.7</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">&nbsp;</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>FORTIS, INC. AND SUBSIDIARIES<BR>
As of December&nbsp;31, 2002, 2001, 2000</B>
</FONT>

<P align="center"><FONT size="2"><B>SCHEDULE V &#151; VALUATION AND QUALIFYING ACCOUNTS</B>
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="7"><FONT size="1"><B>Additions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="7"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Balance at</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Charged to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Charged to</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Balance at</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Beginning of</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Costs and</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Other</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>End of</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Expenses</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Accounts</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Deductions</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Year</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD align="center" colspan="7"><FONT size="1"><B>(in thousands)</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2002:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
mortgage loans on real
estate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">5,985</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,106</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible agents
balances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,488</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,930</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">35,487</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">276</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,085</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">478</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">6,764</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">55</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,000</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">55,071</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2001:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
mortgage loans on real
estate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible agents
balances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,153</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,929</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,041</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">525</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,232</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">46,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">15,194</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">70</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">4,901</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,252</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2000:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
mortgage loans on real
estate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">28,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">3,134</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">25,091</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible agents
balances</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,796</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,152</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Valuation allowance for
uncollectible accounts</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,189</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">402</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,945</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">646</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">49,064</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">9,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">46,889</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="4"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">&nbsp;</FONT>




</BODY>
</HTML>
[{"type": "S-1", "sequence": "1", "filename": "y90597sv1.htm", "description": "ASSURANT, INC.", "secsgml_size_bytes": 3219858}]
{"company-data": {"conformed-name": "ASSURANT INC", "cik": "0001267238", "irs-number": "391126612"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-109984", "film-number": "03957098"}, "mail-address": {"street1": "ONE CHASE MANHATTAN PLAZA", "city": "NEW YORK", "state": "NY", "zip": "10005"}}
ASSURANT, INC.
As filed with the Securities and Exchange
Commission on October 24, 2003.
Registration
No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Assurant, Inc.
*
(Exact name of Registrant as specified in its
charter)
Delaware
6321
39-1126612
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
One Chase Manhattan Plaza, 41st
Floor
New York, NY 10005
Telephone: (212) 859-7000
(Address, including zip code, and telephone
number,
including area code, of Registrant's
principal executive offices)
Katherine Greenzang, Esq.
Senior Vice President, General Counsel and
Secretary
Assurant, Inc.
One Chase Manhattan Plaza,
41st Floor
New York, NY 10005
Telephone: (212) 859-7021
Facsimile: (212) 859-7034
(Name, address, including zip code, and
telephone number,
including area code, of agent for
service)
Copies to:
Gary I. Horowitz, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017-3954
Telephone: (212) 455-7113
Facsimile: (212) 455-2502
Susan J. Sutherland, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, NY 10036
Telephone: (212) 735-2388
Facsimile: (917) 777-2388
Approximate date of commencement of the
proposed sale of the securities to the
public:
As soon as practicable after
the Registration Statement becomes effective.
If any of the securities being registered on this
form are to be offered on a delayed or continuous basis pursuant
to Rule 415 under the Securities Act of 1933, check the
following
box.
o
If this form is filed to register additional
securities for an offering pursuant to Rule 462(b) under
the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier
effective registration statement for the same
offering.
o
If this form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If this form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the
following box and list the Securities Act registration statement
number of the earlier effective registration statement for the
same
offering.
o
If delivery of the prospectus is expected to be
made pursuant to Rule 434, check the following
box.
o
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Proposed Maximum Aggregate
Amount of
Securities to be Registered
Offering Price(1)(2)
Registration Fee
Common Stock, par value $.01 per share
$1,000,000,000
$80,900
(1)
Estimated solely for the purpose of calculating
    the registration fee pursuant to Rule 457(o) under the
    Securities Act of 1933, as amended.
(2)
Includes shares subject to the underwriters'
    over-allotment option.
The Registrant hereby amends this Registration
Statement on such date or dates as may be necessary to delay its
effective date until the Registrant shall file a further
amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the
Registration Statement shall become effective on such date as
the Commission, acting pursuant to said Section 8(a), may
determine.
*Prior to the effectiveness of this Registration
Statement and in connection with the reorganization for the
purpose of reincorporation as described in this Registration
Statement, Assurant, Inc., a Delaware corporation, will become
the successor to the business and operations of Fortis, Inc., a
Nevada corporation.
The information in this
prospectus is not complete and may be changed. These securities
may not be sold until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not
soliciting an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted.
PROSPECTUS
(Subject to Completion)
Issued                         ,
2004
Shares
Assurant, Inc.
Common Stock
Fortis Insurance N.V., the selling stockholder
in this offering, is
offering                      shares
of our common stock in an underwritten initial public offering.
This is our initial public offering and no public market
currently exists for our common stock. We will not receive any
of the proceeds from the sale of shares by the selling
stockholder. We anticipate that the initial public offering
price of our common stock will be between
$                    and
$                    per
share.
Fortis N.V. and Fortis SA/NV, through their
affiliates, including their wholly owned subsidiary, Fortis
Insurance N.V., currently indirectly own 100% of our outstanding
common stock. After the offering, Fortis Insurance N.V. will own
approximately           %
of our common stock.
We intend to apply to list our common stock on
the New York Stock Exchange under the symbol
"AIZ."
Investing in our common stock involves risks. See
"Risk Factors" beginning on page 10.
PRICE
$                    A
SHARE
Underwriting
Discounts and
Proceeds to Selling
Price to Public
Commissions
Stockholder
Per Share
$
$
$
Total
$
$
$
The selling stockholder has granted the
underwriters the right to purchase up to an
additional                    shares
to cover over-allotments.
The Securities and Exchange Commission and
state securities regulators have not approved or disapproved
these securities, or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the shares to
purchasers
on                     ,
2004.
MORGAN STANLEY
CREDIT SUISSE FIRST BOSTON
MERRILL LYNCH & CO.
,
2004
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
10
Forward-Looking Statements
30
Use of Proceeds
31
Dividend Policy
31
Corporate Structure and Reorganization
32
Capitalization
33
Selected Consolidated Financial Information
34
Management's Discussion and Analysis of
    Financial Condition and Results of Operations
37
Business
80
Regulation
115
Management
125
Principal and Selling Stockholders
146
Certain Relationships and Related Transactions
148
Certain United States Tax Consequences to
    Non-U.S. Holders
151
Description of Share Capital
153
Description of Other Securities
160
Shares Eligible for Future Sale
163
Underwriting
164
Legal Matters
167
Experts
167
Where You Can Find More Information
167
Index to Consolidated Financial Statements
F-1
Glossary of Selected Insurance and Reinsurance
    Terms
G-1
Until                     ,
2004, which is the 25th day after the date of this prospectus,
all dealers that buy, sell or trade our common stock, whether or
not participating in this offering, may be required to deliver a
prospectus. This delivery requirement is in addition to the
dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or
subscriptions.
You should rely only on the information
contained in this prospectus. We have not, and the underwriters
have not, authorized any other person to provide you with
information that is different from that contained in this
prospectus. We are offering to sell and seeking offers to buy
these securities only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is
accurate only as of the date of this prospectus, regardless of
the time of delivery of this prospectus or of any sale of common
stock.
The states in which our insurance subsidiaries
are domiciled have enacted laws which require regulatory
approval for the acquisition of "control" of insurance
companies. Under these laws, there exists a presumption of
"control" when an acquiring party acquires 10% or more
(5% or more, in the case of Florida) of the voting securities of
an insurance company or of a company which itself controls an
insurance company. Therefore, any person acquiring 10% or more
(5% or more, in the case of Florida) of our common stock would
need the prior approval of the state insurance regulators of
these states, or a determination from such regulators that
"control" has not been acquired.
In this prospectus, references to the
"Company," "Assurant," "we,"
"us" or "our" refer to (1) Fortis,
Inc., a Nevada corporation, and its subsidiaries, and
(2) Assurant, Inc., a Delaware corporation, and its
subsidiaries after the consummation of the reorganization for
the purpose of reincorporation as described under
"Corporate Structure and Reorganization." Unless we
specifically state otherwise or the context suggests otherwise,
the information in this prospectus assumes that the
reorganization as described under "Corporate Structure and
Reorganization" has occurred. Unless the context otherwise
requires, references to (1) "Assurant, Inc."
refer solely to Assurant, Inc., a Delaware corporation, and not
to any of its subsidiaries, (2) "Fortis, Inc."
refer solely to Fortis, Inc., a Nevada corporation, and not to
any of its subsidiaries, and (3) "Fortis" refer
collectively to Fortis N.V., a public company with limited
liability incorporated as naamloze
i
vennootschap under Dutch law, and Fortis SA/NV, a
public company with limited liability incorporated as
société anonyme/ naamloze vennootschap under Belgian
law, the ultimate parent companies of Fortis Insurance N.V., the
selling stockholder in this offering. Unless otherwise stated,
all figures assume no exercise of the underwriters'
over-allotment option. All share amounts contained in this
prospectus will be adjusted to reflect changes that will take
place in connection with the merger for the purpose of
reincorporation. For your convenience, we have provided a
glossary, beginning on page G-1, of selected insurance and
reinsurance terms and have printed these terms in bold-faced
type the first time they are used in this prospectus.
ii
PROSPECTUS SUMMARY
This summary highlights information contained
elsewhere in this prospectus and may not contain all of the
information that may be important to you. Although this summary
highlights important information about us and what we believe to
be the key aspects of this offering, you should read this
summary together with the more detailed information and our
financial statements and the notes to those financial statements
appearing elsewhere in this prospectus. You should read this
entire prospectus carefully, including the "Risk
Factors" and "Forward-Looking Statements"
sections before making an investment decision.
OUR COMPANY
Overview
We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed
homeowners
insurance
, manufactured housing homeowners insurance,
debt protection
administration,
credit insurance
,
warranties and extended service contracts, individual health and
small employer group health insurance, group dental insurance,
group disability insurance
,
group life insurance
and
pre-funded funeral insurance
. The markets we target
are generally complex, have a relatively limited number of
competitors and, we believe, offer attractive profit
opportunities. In these markets, we leverage the experience of
our management team and apply our expertise in
risk
management
, underwriting and business-to-business
management, as well as our technological capabilities in complex
administration and systems. Through these activities, we seek to
generate above-average returns by building on specialized market
knowledge, well-established distribution relationships and
economies of scale.
As a result of our strategy, we are a leader in
many of our chosen markets and products. We have leadership
positions or are partnered with clients who are leaders in
creditor-placed homeowners insurance, manufactured housing
homeowners insurance and debt protection administration. We are
also a leading writer of group dental plans measured by the
number of
master contracts
in force, and the largest
writer of pre-funded funeral insurance measured by face amount
of new policies sold. We believe that our leadership positions
give us a sustainable competitive advantage in our chosen
markets.
We currently have four decentralized operating
business segments to ensure focus on critical activities close
to our target markets and customers, while simultaneously
providing centralized support in key functions. Our four
operating business segments are: Assurant Solutions, Assurant
Health, Assurant Employee Benefits and Assurant PreNeed. Each
operating business segment has its own experienced management
team with the autonomy to make decisions on key operating
matters. These managers are eligible to receive incentive-based
compensation based in part on operating business segment
performance and in part on company-wide performance, thereby
encouraging strong business performance and cooperation across
all our businesses. At the operating business segment level, we
stress disciplined underwriting, careful analysis and constant
improvement and product redesign. At the corporate level, we
provide support services, including investment, asset/liability
matching and capital management, leadership development,
information technology support and other administrative and
finance functions, enabling the operating business segments to
focus on their target markets and distribution relationships
while enjoying the economies of scale realized by operating
these businesses together. Also, our overall strategy and
financial objectives are set and continuously monitored at the
corporate level to ensure that our capital resources are being
properly allocated.
Our Assurant Solutions segment provides specialty
property solutions and consumer protection solutions. Specialty
property solutions primarily include creditor-placed homeowners
insurance (including tracking services) and manufactured housing
homeowners insurance. Consumer protection solutions primarily
include debt protection administration, credit insurance and
warranties and extended service contracts. Our Assurant Health
segment provides individual health insurance, including
short-term and student health insurance, and small employer
group health insurance. Most of the health insurance products we
sell are
preferred provider organization (PPO)
plans. In
Assurant Employee Benefits, we provide employer- and
employee-paid group dental insurance, as well as group
disability insurance and group life insurance. In Assurant
PreNeed, we
1
provide pre-funded funeral insurance, which
provides
whole life insurance
death benefits or
annuity
benefits used to fund costs incurred in
connection with pre-arranged funerals.
We have created strong relationships with our
distributors and clients in each of the niche markets we serve.
In Assurant Solutions, we have strong long-term relationships in
the United States with six of the ten largest mortgage lenders
and servicers, four of the seven largest manufactured housing
builders, four of the six largest general purpose credit card
issuers and six of the ten largest consumer electronics and
appliances retailers. In Assurant Health, we have exclusive
distribution relationships with leading insurance companies,
through which we gain access to a broad distribution network and
a significant number of potential customers, as well as
relationships with independent
brokers
. In Assurant
Employee Benefits, we distribute our products primarily through
our sales representatives who work through independent employee
benefits advisors, including brokers and other intermediaries.
In Assurant PreNeed, we have an exclusive distribution
relationship with Service Corporation International (SCI), the
largest funeral provider in North America, as well as
relationships with approximately 2,000 funeral homes.
For the six months ended June 30, 2003, we
generated total revenues of $3,455 million and net income
of $164 million. For the year ended December 31, 2002,
we generated total revenues of $6,532 million and net
income before cumulative effect of change in accounting
principle of $260 million. As of June 30, 2003, we had
total assets of $22,738 million, including separate
accounts. For the six months ended June 30, 2003, we had
total revenues of $1,288 million in Assurant Solutions,
$1,009 million in Assurant Health, $726 million in
Assurant Employee Benefits and $367 million in Assurant
PreNeed. For the year ended December 31, 2002, we had total
revenues of $2,401 million in Assurant Solutions,
$1,912 million in Assurant Health, $1,455 million in
Assurant Employee Benefits and $727 million in Assurant
PreNeed.
Competitive Strengths
We believe our competitive strengths include:
•
Leadership Positions in Specialized Markets.
We are a market leader in many of our
    chosen markets, and we believe that our leadership positions
    provide us with the opportunity to generate high returns in
    these niche markets.
•
Strong Relationships with Key Clients and
    Distributors.
As a result of our
    expertise in business-to-business management, we have created
    strong relationships with our distributors and clients in each
    of the niche markets we serve. We believe these relationships
    enable us to market our products and services to our customers
    in an effective and efficient manner that would be difficult for
    our competitors to replicate.
•
History of Product Innovation and Ability to
    Adapt to Changing Market Conditions.
We are able to adapt quickly to
    changing market conditions by tailoring our product and service
    offerings to the specific needs of our clients. By understanding
    the dynamics of our core markets, we design innovative products
    and services to seek to sustain profitable growth and market
    leading positions.
•
Disciplined Approach to Underwriting and Risk
    Management.
We focus on generating
    profitability through careful analysis of risks, drawing on our
    experience in core specialized markets and continually seeking
    to improve and redesign our product offerings based on our
    underwriting experience. In addition, we closely monitor
    regulatory and market developments and adapt our approach as we
    deem necessary to achieve our underwriting and risk management
    goals.
•
Prudent Capital Management.
We focus on generating above-average
    returns on a risk-adjusted basis from our operating activities.
    We believe we have benefited from having the discipline and
    flexibility to deploy capital opportunistically and prudently to
    maximize returns to our stockholders. We invest capital in our
    business segments when we identify attractive profit
    opportunities in our target markets and also take a disciplined
    approach towards withdrawing capital when businesses are no
    longer anticipated to meet our expectations.
2
•
Diverse Business Mix and Superior Financial
    Strength.
We have four operating
    business segments, which are generally not affected in the same
    way by economic and operating trends. Our domestic operating
    subsidiaries have financial strength ratings of A
    ("Excellent") or A- ("Excellent") from
    A.M. Best Company (A.M. Best), and two of our domestic operating
    subsidiaries have financial strength ratings of A2
    ("Good") and A3 ("Good"), respectively, from
    Moody's Investor Services (Moody's). We believe our
    solid capital base and overall financial strength allow us to
    distinguish ourselves from our competitors and continue to
    enable us to attract clients that are seeking long-term
    financial stability.
•
Experienced Management Team with Proven Track
    Record and Entrepreneurial Culture.
We
    have a talented and experienced management team both at the
    corporate level and at each of our business segments. Our
    management team has successfully managed our business and
    executed our specialized niche strategy through numerous
    business cycles and political and regulatory challenges.
Growth Strategy
Our objective is to achieve superior financial
performance by enhancing our leading positions in our
specialized niche insurance and related businesses. We intend to
achieve this objective by continuing to execute the following
strategies in pursuit of profitable growth:
•
Enhance Market Position in Our Business Lines.
We have been selective in developing
    our product and service offerings and will continue to focus on
    providing products and services to those markets that we believe
    offer attractive growth opportunities. We will also seek to
    continue penetrating our target markets and expand our market
    positions by developing and introducing new products and
    services that are tailored to the specific needs of our clients.
•
Develop New Distribution Channels and
    Strategic Alliances.
Our strong,
    multi-channel distribution network comprised of leading market
    participants has been critical to our market penetration and
    growth. We will continue to be selective in developing new
    distribution channels as we seek to expand our market share,
    enter new geographic markets and develop new niche businesses.
•
Deploy Capital and Resources to Maintain
    Flexibility and Establish or Enhance Market Leading Positions.
We seek to deploy our capital and
    resources in a manner that provides us with the flexibility to
    grow internally through product development, new distribution
    relationships and investments in technology, as well as to
    pursue acquisitions. As we expand through internal growth and
    acquisitions, we intend to leverage our expertise in risk
    management, underwriting and business-to-business management, as
    well as our technological capabilities in running complex
    administration systems and support services.
•
Maintain Disciplined Pricing Approach.
We intend to maintain our disciplined
    pricing approach by seeking to focus on profitable products and
    markets and by pursuing a flexible approach to product design.
    We will continue to pursue pricing strategies and adjust our mix
    of businesses by geography and by product so that we can
    maintain attractive pricing and margins.
•
Continue to Manage Capital Prudently.
We intend to manage our capital
    prudently relative to our risk exposure to maximize
    profitability and long-term growth in stockholder value. Our
    capital management strategy is to maintain financial strength
    through conservative and disciplined risk management practices.
    We will also maintain our conservative investment portfolio
    management philosophy and properly manage our invested assets in
    order to match the duration of our insurance product liabilities.
3
Risks Relating to Our Company
As part of your evaluation of our Company, you
should take into account the risks associated with our business.
These risks include:
•
Reliance on Relationships with Significant
    Clients, Distribution Partners and Other Parties.
If our significant clients,
    distribution partners and other parties with which we do
    business decline to renew or seek to terminate our relationships
    or contractual arrangements, our results of operations and
    financial condition could be materially adversely affected. We
    are also subject to the risk that these parties may face
    financial difficulties, reputational issues or problems with
    respect to their own products and services, which may lead to
    decreased sales of products and services.
•
Failure to Attract and Retain Sales
    Representatives or Develop and Maintain Distribution Sources.
An interruption in, or changes to, our
    relationships with various third-party distributors or our
    inability to respond to regulatory changes could impair our
    ability to compete and market our insurance products and
    services and materially adversely affect our results of
    operations and financial condition.
•
Effect of General Economic, Financial Market
    and Political Conditions.
Our results
    of operations and financial condition may be materially
    adversely affected by general economic, financial market and
    political conditions, including insurance industry cycles,
    levels of employment, levels of consumer lending, levels of
    inflation and movements of the financial markets, as well as
    fluctuations in interest rates, monetary policy, demographics,
    and legislative and competitive factors.
•
Failure to Accurately Predict Benefits and
    Other Costs and Claims.
We may be
    unable to accurately predict benefits,
claims
and other
    costs or to manage such costs through our loss limitation
    methods, which could have a material adverse effect on our
    results of operations and financial condition if claims
    substantially exceed our expectations.
•
Changes in
    Regulation.
Legislation or other
    regulatory reform that increases the regulatory requirements
    imposed on us or that changes the way we are able to do business
    may significantly harm our business or results of operations in
    the future.
For more information about these and other risks,
see "Risk Factors" beginning on page 10. You
should carefully consider these risk factors together with all
the other information included in this prospectus.
OUR CORPORATE STRUCTURE AND
REORGANIZATION
Assurant, Inc. is a Delaware corporation and is
currently a wholly owned subsidiary of Fortis, Inc. Assurant,
Inc. has had no operations and nominal financial activity and
will be used solely for the purpose of the reincorporation of
Fortis, Inc., which is organized as a Nevada corporation and of
which 100% of the outstanding common stock is currently
indirectly owned by Fortis N.V. and Fortis SA/NV. Prior to the
closing of this offering, we will effectuate a merger of Fortis,
Inc. with and into Assurant, Inc. for the purpose of
reincorporating Fortis, Inc. in Delaware. As a result of the
reorganization, Assurant, Inc. will be domiciled in Delaware and
will be the successor to the business, operations and
obligations of Fortis, Inc. After the reorganization, our
Company will use the name Assurant, Inc. The ongoing operations
of Assurant, Inc. will be comprised of the existing operations
of Fortis, Inc. and its subsidiaries. Our existing Class A
Common Stock will become Common Stock of Assurant, Inc. in
connection with the merger.
Assurant, Inc. was incorporated in October 2003.
Fortis, Inc. was incorporated in April 1969. Our principal
executive offices are located at One Chase Manhattan Plaza,
41st Floor, New York, New York 10005. Our telephone number
is 212-859-7000.
4
OUR RELATIONSHIP WITH FORTIS
Fortis currently indirectly owns 100% of our
outstanding common stock. Upon completion of this offering,
Fortis will
own           %
of our outstanding common stock,
or           %
if the underwriters exercise their over-allotment option in
full. Fortis will have the right to nominate designees to our
board of directors and, subject to limited exceptions, our board
of directors will nominate those designees as follows:
(i) so long as Fortis owns at least 50% of our outstanding
common stock, five designees and (ii) so long as Fortis
owns less than 50% but at least 10% of our outstanding common
stock, two designees. In addition, as long as Fortis holds 50%
or more of our outstanding common stock, certain significant
corporate actions may only be taken with the approval of a
supermajority of our directors, which will require approval of
two or more Fortis directors. In addition, we may have conflicts
of interest with Fortis that may be resolved in a manner that is
unfavorable to us. See "Risk Factors— Risks Related to
Our Relationship with and Separation from Fortis,"
"Description of Share Capital— Anti-takeover Effects
of Certain Provisions of the Certificate of Incorporation,
By-Laws and Delaware General Corporation Law— Certificate
of Incorporation and By-Laws" and
"—Shareholders' Agreement" and "Certain
Relationships and Related Transactions— Shareholders'
Agreement" and "—Cooperation Agreement."
Fortis has advised us that it intends to divest
its ownership interest in our Company completely over a period
of time. However, Fortis is not subject to any contractual
obligation to sell any additional shares of our common stock and
may not sell or otherwise dispose of any shares for a period of
180 days after the date of this prospectus without the prior
written consent of Morgan Stanley & Co. Incorporated on
behalf of the underwriters. See "Certain Relationships and
Related Transactions," "Description of Share
Capital—Shareholders Agreement" and
"—Registration Rights," "Shares Eligible For
Future Sale" and "Underwriting."
5
THE OFFERING
Common stock offered by the selling
stockholder
shares
Common stock to be outstanding after this offering
shares
Over-allotment option
shares
    to be offered by the selling stockholder if the underwriters
    exercise the over-allotment option in full.
Use of proceeds
We will not receive any of the proceeds from the
    sale of shares by the selling stockholder. The selling
    stockholder will receive all net proceeds from the sale of the
    shares of our common stock in this offering.
Dividend policy
Our board of directors does not currently intend
    to authorize the payment of a dividend on our Common Stock. Any
    determination to pay dividends will be at the discretion of our
    board of directors and will be dependent upon our
    subsidiaries' payment of dividends and/or other statutorily
    permissible payments to us, our results of operations and cash
    flows, our financial position and capital requirements, general
    business conditions, any legal, tax, regulatory and contractual
    restrictions on the payment of dividends and any other factors
    our board of directors deems relevant.
Proposed New York Stock Exchange symbol
AIZ
The number of shares of common stock shown to be
outstanding after the offering is based upon
8,300,002 shares of common stock outstanding as of
June 30, 2003.
6
SUMMARY CONSOLIDATED FINANCIAL
INFORMATION
The following table sets forth our summary
historical consolidated financial information for the periods
ended and as of the dates indicated. Assurant, Inc. is a
Delaware corporation and is currently a wholly owned subsidiary
of Fortis, Inc. Assurant, Inc. has had no operations and nominal
financial activity and will be used solely for the purpose of
the reincorporation of Fortis, Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis N.V. and Fortis
SA/NV. Prior to the closing of this offering, we will effectuate
a merger of Fortis, Inc. with and into Assurant, Inc. for the
purpose of reincorporating Fortis, Inc. in Delaware. As a result
of the reorganization, Assurant, Inc. will be domiciled in
Delaware and will be the successor to the business, operations
and obligations of Fortis, Inc. In connection with the
reorganization, our Company will use the name Assurant, Inc. The
ongoing operations of Assurant, Inc. will effectively be
comprised of the existing operations of Fortis, Inc. and its
subsidiaries.
The summary consolidated statement of operations
data for each of the three years ended December 31, 2002
are derived from the audited consolidated financial statements
of Fortis, Inc. and its consolidated subsidiaries included
elsewhere in this prospectus, which have been prepared in
accordance with
generally accepted accounting principles
in the United States
(GAAP)
. The summary consolidated
statement of operations data for the six months ended
June 30, 2003 and June 30, 2002 and the summary
consolidated balance sheet data as of June 30, 2003 are
derived from the unaudited interim financial statements of
Fortis, Inc. and its consolidated subsidiaries included
elsewhere in this prospectus. The unaudited interim financial
statements have been prepared on the same basis as the audited
consolidated financial statements of Fortis, Inc. and in our
opinion, include all adjustments consisting only of normal
recurring adjustments, that we consider necessary for a fair
statement of our results of operations and financial condition
for these periods and as of such dates. These historical results
are not necessarily indicative of expected results for any
future period. The results for the six months ended
June 30, 2003 are not necessarily indicative of results to
be expected for the full year. You should read the following
summary consolidated financial information together with the
other information contained in this prospectus, including
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated
financial statements and related notes included elsewhere in
this prospectus.
7
For the
Six Months Ended
For the
June 30,
Year Ended December 31,
2003
2002
2002
2001
2000
(in thousands, except share amounts and per share data)
Summary Consolidated Statement of Operations
    Data:
Revenues
Net earned premiums and other considerations
$
2,987,029
$
2,787,519
$
5,681,596
$
5,242,185
$
5,144,375
Net investment income
305,885
310,539
631,828
711,782
690,732
Net realized gains (losses) on investments
7,474
(49,204
)
(118,372
)
(119,016
)
(44,977
)
Amortization of deferred gain on disposal of
    businesses
34,873
40,030
79,801
68,296
10,284
Gain on disposal of businesses
—
10,672
10,672
61,688
11,994
Fees and other income
119,881
125,435
246,675
221,939
399,571
Total revenues
3,455,142
3,224,991
6,532,200
6,186,874
6,211,979
Benefits, losses and expenses
Policyholder benefits
1,774,243
1,678,871
3,429,145
3,238,925
3,208,054
Amortization of deferred acquisition costs and
    value of businesses acquired
580,240
443,221
876,185
875,703
766,904
Underwriting, general and administrative expenses
794,120
842,390
1,738,077
1,620,931
1,801,196
Amortization of goodwill
—
—
—
113,300
106,773
Interest expense
—
—
—
14,001
24,726
Distributions on preferred securities of
    subsidiary trusts
58,566
58,716
118,396
118,370
110,142
Total benefits, losses and expenses
3,207,169
3,023,198
6,161,803
5,981,230
6,017,795
Income before income taxes
247,973
201,793
370,397
205,644
194,184
Income taxes
84,086
60,126
110,657
107,591
104,500
Net income before cumulative effect of change in
    accounting principle
$
163,887
$
141,667
$
259,740
$
98,053
$
89,684
Cumulative effect of change in accounting
    principle
—
(1,260,939
)
(1,260,939
)
—
—
Net income (loss)
$
163,887
$
(1,119,272
)
$
(1,001,199
)
$
98,053
$
89,684
Per Share Data:
Net income (loss) per share
$
19.75
$
(134.85
)
$
(120.63
)
$
11.81
$
10.93
Weighted average of basic and diluted shares of
    common stock outstanding
8,300,002
8,300,002
8,300,002
8,300,002
8,208,335
Dividends per share:
Class A Common Stock(1)
$
17.98
$
—
$
—
$
8.65
$
—
Class B Common Stock(2)
37.15
36.52
74.69
75.44
37.66
Class C Common Stock(3)
38.13
37.50
76.68
77.45
38.65
8
As of
June 30, 2003
(in thousands, except
share amounts and
per share data)
Summary Consolidated Balance Sheet
    Data:
Cash and cash equivalents and investments
$
11,138,227
Total assets
22,738,162
Policy liabilities(4)
12,632,311
Debt
—
Mandatorily redeemable preferred securities of
    subsidiary trusts(5)
1,446,074
Mandatorily redeemable preferred stock
24,160
Total stockholders' equity
$
2,778,890
Per Share Data:
Total stockholders' equity per share(6)
$
334.81
(1)
For each of the periods and dates presented,
    7,750,000 shares of our Class A Common Stock were
    issued and outstanding; these shares are held by Fortis
    Insurance N.V., Fortis (US) Funding Partners I LP and
    Fortis (US) Funding Partners II LP. Our existing
    Class A Common Stock will become Common Stock of Assurant,
    Inc. in connection with the merger of Fortis, Inc. with and into
    Assurant, Inc.
(2)
For each of the periods and dates presented,
    150,001 shares of our Class B Common Stock were issued
    and outstanding, which were issued as a stock dividend; these
    shares are held by Fortis (US) Funding Partners I LP. See
    "Description of Share Capital — Class B and
    Class C Common Stock" for information relating to the
    issuance and ownership of these shares.
(3)
For each of the periods and dates presented,
    400,001 shares of our Class C Common Stock were issued
    and outstanding, which were issued as a stock dividend; these
    shares are held by Fortis (US) Funding Partners II LP. See
    "Description of Share Capital — Class B and
    Class C Common Stock" for information relating to the
    issuance and ownership of these shares.
(4)
Policy liabilities include future policy benefits
    and expenses, unearned premiums and claims and benefits payable.
(5)
The proceeds from the sale of each of these
    securities were used by the applicable subsidiary trusts to
    purchase our subordinated debentures, which are eliminated upon
    consolidation. See "Description of Other Securities."
(6)
Based on total stockholders' equity divided
    by 8,300,002 shares issued and outstanding.
9
RISK FACTORS
An investment in our common stock involves a
number of risks. You should carefully consider the following
information about these risks, together with the other
information contained in this prospectus, before investing in
our common stock. The risks described below may not be the only
risks we face. Additional risks of which we are not yet aware or
that we currently think are immaterial may also impair our
business, results of operations or financial condition. Any of
the events or circumstances described as risks below could
result in a significant or material adverse effect on our
business, results of operations or financial condition and a
corresponding decline in the market price of our common
stock.
Risks Related to Our Company
Our profitability may decline if we are unable
to maintain our relationships with significant clients,
distribution partners and other parties important to the success
of our business.
Our relationships and contractual arrangements
with significant clients, distribution partners and other
parties with which we do business are important to the success
of our business segments. Many of these arrangements are
exclusive. For example, in Assurant Solutions, we have exclusive
relationships with several mortgage lenders and servicers,
retailers, credit card issuers and other financial institutions
through which we distribute our products. In Assurant Health, we
have exclusive distribution relationships for our individual
health insurance products with Insurance Placement Services,
Inc. (IPSI), a wholly owned subsidiary of State Farm Mutual
Automobile Insurance Company (State Farm), United Services
Automobile Association (USAA) and Mutual of Omaha, as well
as a relationship with Health Advocates Alliance, the
association
through which we provide many of our
individual health insurance products. We also maintain
contractual relationships with several separate networks of
health and dental care providers, each referred to as a PPO,
through which we obtain discounts. In Assurant PreNeed, we have
an exclusive distribution relationship with SCI. Many of these
arrangements have one to five-year terms. If these parties
decline to renew or seek to terminate these arrangements, our
results of operations and financial condition could be
materially adversely affected. In addition, we are subject to
the risk that these parties may face financial difficulties,
reputational issues or problems with respect to their own
products and services, which may lead to decreased sales of our
products and services. Moreover, if one or more of our clients
or distribution partners consolidate or partner with other
companies, we may lose business or suffer decreased revenues. A
loss of the discount arrangements with PPOs could also lead to
higher medical or dental costs and/or a loss of members to other
medical or dental plans.
Sales of our products and services may be
reduced if we are unable to attract and retain sales
representatives or develop and maintain distribution
sources.
We distribute our insurance products and services
through a variety of distribution channels, including our
employed sales representatives, independent employee benefits
specialists, brokers, managing general agents, independent life
agents, financial institutions, independent funeral directors,
association groups and other third-party marketing
organizations. Our relationships with these various distributors
are significant both for our revenues and profits. In Assurant
Solutions and Assurant PreNeed, we depend in large part on sales
representatives to develop and maintain client relationships. In
Assurant Health, we depend in large part on the services of
independent agents and brokers and on associations, including
Health Advocates Alliance, in the marketing of our products. In
Assurant Employee Benefits, we depend on our sales
representatives to form relationships with the independent
agents and brokers who act as advisors to our customers and
market and distribute our products with our sales
representatives. Independent agents and brokers are typically
not exclusively dedicated to our Company and usually also market
products of our competitors. Strong competition exists among
insurers to employ effective sales representatives and form
relationships with agents and brokers of demonstrated ability.
We compete with other insurers for sales representatives, agents
and brokers primarily on the basis of our financial position,
support services, compensation and product features. In
addition, where we rely on independent agents and brokers to
distribute products for us, we face continued competition from
our competitors' products. Moreover, our ability to market
our products and services depends on our ability to tailor our
channels of distribution to comply with changes in the regulatory
10
environment. Recently, the marketing of health
insurance through association groups has come under increased
scrutiny. An interruption in, or changes to, our relationships
with various third-party distributors or our inability to
respond to regulatory changes could impair our ability to
compete and market our insurance products and services and
materially adversely affect our results of operations and
financial condition.
General economic, financial market and
political conditions may adversely affect our results of
operations and financial condition.
Our results of operations and financial condition
may be materially adversely affected from time to time by
general economic, financial market and political conditions.
These conditions include economic cycles such as insurance
industry cycles, levels of employment, levels of consumer
lending, levels of inflation and movements of the financial
markets. Fluctuations in interest rates, monetary policy,
demographics, and legislative and competitive factors also
influence our performance. During periods of economic downturn:
•
individuals and businesses may choose not to
    purchase our insurance products and other related products and
    services, may terminate existing policies or contracts or permit
    them to lapse, may choose to reduce the amount of coverage
    purchased or, in Assurant Employee Benefits and in small group
    employer health insurance in Assurant Health, may have fewer
    employees requiring insurance coverage due to rising
    unemployment levels;
•
new
disability insurance
claims and claims
    on other specialized insurance products tend to rise;
•
there is a higher
loss ratio
on credit
    card and installment loan insurance due to rising unemployment
    levels; and
•
insureds tend to increase their utilization of
    health and dental benefits if they anticipate becoming
    unemployed or losing benefits.
In addition, general inflationary pressures may
affect the costs of medical and dental care, as well as repair
and replacement costs on our real and personal property lines,
increasing the costs of paying claims. Inflationary pressures
may also affect the costs associated with our pre-funded funeral
insurance policies, particularly those that are guaranteed to
grow with the
Consumer Price Index
.
Our actual claims losses may exceed our
reserves for claims, which may require us to establish
additional reserves that may materially reduce our earnings,
profitability and capital.
We maintain
reserves
to cover our
estimated ultimate exposure for claims and claim adjustment
expenses with respect to reported and unreported claims incurred
but not reported as of the end of each accounting period.
Reserves, whether calculated under GAAP or
statutory
accounting principles (SAP)
, do not represent an exact
calculation of exposure, but instead represent our best
estimates, generally involving actuarial projections at a given
time, of what we expect the ultimate settlement and
administration of a claim or group of claims will cost based on
our assessment of facts and circumstances then known. The
adequacy of reserves will be impacted by future trends in claims
severity, frequency, judicial theories of liability and other
factors. These variables are affected by both external and
internal events, such as changes in the economic cycle, changes
in the social perception of the value of work, emerging medical
perceptions regarding physiological or psychological causes of
disability, emerging health issues and new methods of treatment
or accommodation, inflation, judicial trends, legislative
changes and claims handling procedures. Many of these items are
not directly quantifiable, particularly on a prospective basis.
Reserve estimates are refined as experience develops.
Adjustments to reserves, both positive and negative, are
reflected in the statement of operations of the period in which
such estimates are updated. Because establishment of reserves is
an inherently uncertain process involving estimates of future
losses, there can be no certainty that ultimate losses will not
exceed existing claims reserves. Future loss development could
require reserves to be increased, which could have a material
adverse effect on our earnings in the periods in which such
increases are made.
11
We may be unable to accurately predict
benefits, claims and other costs or to manage such costs through
our loss limitation methods, which could have a material adverse
effect on our results of operations and financial
condition.
Our profitability depends in large part on
accurately predicting benefits, claims and other costs,
including medical and dental costs, and predictions regarding
the frequency and magnitude of claims on our disability and
property coverages. It also depends on our ability to manage
future benefit and other costs through product design,
underwriting criteria,
utilization review
or
claims
management
and, in health and dental insurance, negotiation
of favorable provider contracts. The aging of the population and
other demographic characteristics and advances in medical
technology continue to contribute to rising health care costs.
Changes in health and dental care practices, inflation, new
technologies, the cost of prescription drugs, clusters of high
cost cases, changes in the regulatory environment, economic
factors, the occurrence of catastrophes and numerous other
factors affecting the cost of health and dental care and the
frequency and severity of claims in all our business segments
may adversely affect our ability to predict and manage costs and
claims, as well as our business, results of operations and
financial condition. The judicial and regulatory environments,
changes in the composition of the kinds of work available in the
economy, market conditions and numerous other factors may also
materially adversely affect our ability to manage claim costs.
As a result of one or more of these factors or other factors,
claims could substantially exceed our expectations, which could
have a material adverse effect on our results of operations and
financial condition.
As industry practices and legal, judicial, social
and other environmental conditions change, unexpected and
unintended issues relating to claims and coverage may emerge.
These issues could materially adversely affect our results of
operations and financial condition by either extending coverage
beyond our underwriting intent or by increasing the number or
size of claims or both. We may be limited in our ability to
respond to such changes, by insurance regulations, existing
contract terms, contract filing requirements, market conditions
or other factors.
Our investment portfolio is subject to several
risks that may diminish the value of our invested assets and
affect our sales and profitability.
Our investment portfolio may suffer reduced
returns or losses that could reduce our profitability.
Investment returns are an important part of our
overall profitability and significant fluctuations in the fixed
income market could impair our profitability, financial
condition and/or cash flows. Our investments are subject to
market-wide risks and fluctuations, as well as to risks inherent
in particular securities. In particular, volatility of claims
may force us to liquidate securities prior to maturity, which
may cause us to incur capital losses. If we do not structure our
investment portfolio so that it is appropriately matched with
our insurance liabilities, we may be forced to liquidate
investments prior to maturity at a significant loss to cover
such liabilities. For the six month period ended June 30,
2003, our net investment income was $306 million and our
net realized gains on investments were $7 million, which
collectively accounted for approximately 9% of our total
revenues during such period. For the year ended
December 31, 2002, our net investment income was
$632 million and our net realized losses on investments
were $118 million, which collectively accounted for
approximately 8% of our total revenues during such period.
The performance of our investment portfolio is
subject to fluctuations due to changes in interest rates and
market conditions.
Changes in interest rates can negatively affect
the performance of some of our investments. Interest rate
volatility can reduce unrealized gains or create unrealized
losses in our portfolios. Interest rates are highly sensitive to
many factors, including governmental monetary policies, domestic
and international economic and political conditions and other
factors beyond our control. Fluctuations in interest rates
affect our returns on, and the market value of, fixed maturity
and short-term investments, which comprised $9,212 million,
or 86%, of the fair value of our total investments as of
June 30, 2003 and $8,719 million, or 87%, as of
December 31, 2002.
The fair market value of the fixed maturity
securities in our portfolio and the investment income from these
securities fluctuate depending on general economic and market
conditions. The fair market value
12
generally increases or decreases in an inverse
relationship with fluctuations in interest rates, while net
investment income realized by us from future investments in
fixed maturity securities will generally increase or decrease
with interest rates. In addition, actual net investment income
and/or cash flows from investments that carry prepayment risk,
such as mortgage-backed and other asset-backed securities, may
differ from those anticipated at the time of investment as a
result of interest rate fluctuations. In periods of declining
interest rates, mortgage prepayments generally increase and
mortgage-backed securities, commercial mortgage obligations and
bonds in our investment portfolio are more likely to be prepaid
or redeemed as borrowers seek to borrow at lower interest rates,
and we may be required to reinvest those funds in lower
interest-bearing investments. As of June 30, 2003,
mortgage-backed and other asset-backed securities represented
approximately $2,100 million, or 20%, of the fair value of
our total investments.
Because substantially all of our fixed maturity
securities are classified as available for sale, changes in the
market value of these securities are reflected in our balance
sheet. Similar treatment is not available for liabilities.
Therefore, interest rate fluctuations affect the value of our
investments and could materially adversely affect our results of
operations and financial condition.
We employ asset/ liability matching strategies to
reduce the adverse effects of interest rate volatility and to
ensure that cash flows are available to pay claims as they
become due. Our asset/ liability matching strategies include:
•
asset/liability duration management;
•
structuring our bond and commercial mortgage loan
    portfolios to limit the effects of prepayments; and
•
consistent monitoring of, and appropriate changes
    to, the pricing of our products.
However, these strategies may fail to eliminate
or reduce the adverse effects of interest rate volatility, and
no assurances can be given that significant fluctuations in the
level of interest rates will not have a material adverse effect
on our results of operations and financial condition.
In addition, Assurant PreNeed generally writes
whole life insurance policies with increasing death benefits and
obtains much of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. As of June 30, 2003,
approximately 70% of Assurant PreNeed's in force insurance
policy reserves related to policies that provide for death
benefit growth, some of which provide for minimum death benefit
growth pegged to changes in the Consumer Price Index. In
extended periods of declining interest rates or high inflation,
there may be compression in the spread between Assurant
PreNeed's death benefit growth rates and its investment
earnings. As a result, declining interest rates or high
inflation rates may have a material adverse effect on our
results of operations and our overall financial condition.
Assurant Employee Benefits calculates reserves
for long-term disability and life
waiver of premium
claims using net present value calculations based on current
interest rates at the time claims are funded and expectations
regarding future interest rates. If interest rates decline,
reserves for open and/or new claims would need to be calculated
using lower discount rates thereby increasing the net present
value of those claims and the required reserves. Depending on
the magnitude of the decline, this could have a material adverse
effect on our results of operations and financial condition. In
addition, investment income may be lower than that assumed in
setting premium rates.
Our investment portfolio is subject to credit
risk.
We are subject to credit risk in our investment
portfolio, primarily from our investments in corporate bonds and
preferred stocks. Defaults by third parties in the payment or
performance of their obligations could reduce our investment
income and realized investment gains or result in investment
losses. Further, the value of any particular fixed maturity
security is subject to impairment based on the creditworthiness
of a given issuer. As of June 30, 2003, we held
$8,766 million of fixed maturity securities, or 82% of the
fair value of our total invested assets at such date. Our fixed
maturity portfolio also includes below investment grade
securities, which comprised 6% of the fair value of our total
fixed maturity securities at June 30, 2003 and
December 31,
13
2002. These investments generally provide higher
expected returns but present greater risk and can be less liquid
than investment grade securities. A significant increase in
defaults and impairments on our fixed maturity securities
portfolio could materially adversely affect our results of
operations and financial condition. Other than temporary
impairment losses on our available for sale securities totaled
$13 million for the six months ended June 30, 2003 and
$85 million for the year ended December 31, 2002.
As of June 30, 2003, less than 1% of the
fair value of our total investments was invested in common
stock; however, we have had higher percentages in the past and
may make more such investments in the future. Investments in
common stock generally provide higher expected total returns,
but present greater risk to preservation of principal than our
fixed income investments.
In addition, while currently we do not utilize
derivative instruments to hedge or manage our interest rate or
equity risk, we may do so in the future. Derivative instruments
generally present greater risk than fixed income investments or
equity investments because of their greater sensitivity to
market fluctuations. Effective as of July 1, 2003, we
utilize derivative instruments in managing Assurant
PreNeed's exposure to inflation risk. While these
instruments seek to protect a portion of Assurant PreNeed's
existing business that is tied to the Consumer Price Index, a
sharp increase in inflation could have a material adverse effect
on our results of operations and financial condition.
Our commercial mortgage loans and real estate
investments subject us to liquidity risk.
As of June 30, 2003, commercial mortgage
loans on real estate investments represented approximately 8% of
the fair value of our total investments. These types of
investments are relatively illiquid, thus increasing our
liquidity risk. In addition, if we require extremely large
amounts of cash on short notice, we may have difficulty selling
these investments at attractive prices, in a timely manner, or
both.
The risk parameters of our investment
portfolio may not target an appropriate level of risk, thereby
reducing our profitability and diminishing our ability to
compete and grow.
We seek to earn returns on our investments to
enhance our ability to offer competitive rates and prices to our
customers. Accordingly, our investment decisions and objectives
are a function of the underlying risks and product profiles of
each of our business segments. However, we may not succeed in
targeting an appropriate overall risk level for our investment
portfolio. As a result, the return on our investments may be
insufficient to meet our profit targets over the long-term,
thereby reducing our profitability. If in response we choose to
increase our product prices to maintain profitability, we may
diminish our ability to compete and grow.
Catastrophe losses, including man-made
catastrophe losses, could materially reduce our profitability
and have a material adverse effect on our results of operations
and financial condition.
Our insurance operations expose us to claims
arising out of catastrophes, particularly in our homeowners,
life and other personal business lines. We have experienced, and
expect in the future to experience, catastrophe losses that may
materially reduce our profitability or have a material adverse
effect on our results of operations and financial condition.
Catastrophes can be caused by various natural events, including
hurricanes, windstorms, earthquakes, hailstorms, severe winter
weather, fires and epidemics, or can be man-made catastrophes,
including terrorist attacks or accidents such as airplane
crashes. The frequency and severity of catastrophes are
inherently unpredictable. Catastrophe losses can vary widely and
could significantly exceed our recent historic results. It is
possible that both the frequency and severity of man-made
catastrophes will increase and that we will not be able to
implement exclusions from coverage in our policies or obtain
reinsurance
for such catastrophes.
The extent of losses from a catastrophe is a
function of both the total amount of insured exposure in the
area affected by the event and the severity of the event. Most
of our catastrophe claims in the past have related to homeowners
and other personal lines coverages, which for the six months
ended June 30, 2003 represented approximately 23% of our
net earned premiums and other considerations
in our
Assurant Solutions segment. In addition, as of June 30,
2003, approximately 27% of the insurance in force in our
homeowners and other personal lines related to properties
located in California, Florida and Texas. As a result of our
creditor-placed homeowners insurance product, our concentration
in these areas may increase in the future. This is because in
14
our creditor-placed homeowners insurance line, we
agree to provide homeowners insurance coverage automatically. If
other insurers withdraw coverage in these or other states, this
may lead to
adverse selection
and increased utilization
of our creditor-placed homeowners insurance in these areas.
Claims resulting from natural or man-made
catastrophes could cause substantial volatility in our financial
results for any fiscal quarter or year and could materially
reduce our profitability or harm our financial condition. Our
ability to write new business also could be affected. Increases
in the value and geographic concentration of insured property
and the effects of inflation could increase the severity of
claims from catastrophes in the future.
In addition, our group life and health insurance
operations could be materially impacted by man-made catastrophes
such as terrorist attacks or by an epidemic that causes a
widespread increase in
mortality
,
morbidity
or
disability rates or that causes an increase in the need for
medical care. For example, the influenza epidemic of 1918 caused
several million deaths. Losses due to man-made catastrophes
would not generally be covered by reinsurance and could have a
material adverse effect on our results of operations and
financial condition. In addition, in Assurant PreNeed the
average age of policyholders is in excess of 70 years. This
group is more susceptible to epidemics than the overall
population, and an epidemic resulting in a higher incidence of
mortality could have a material adverse effect on our results of
operations and financial condition.
Our ability to manage these risks depends in part
on our successful utilization of catastrophic property and life
reinsurance to limit the size of property and life losses from a
single event or multiple events, and life and disability
reinsurance to limit the size of life or disability insurance
exposure on an individual insured life. It also depends in part
on state regulation that may prohibit us from excluding such
risks or from withdrawing from or increasing premium rates in
catastrophe-prone areas. As discussed further below, catastrophe
reinsurance for our
group insurance
lines is not
currently widely available. This means that the occurrence of a
significant catastrophe could materially reduce our
profitability and have a material adverse effect on our results
of operations and financial condition.
Reinsurance may not be available or adequate
to protect us against losses, and we are subject to the credit
risk of reinsurers.
As part of our overall risk and capacity
management strategy, we purchase reinsurance for certain risks
underwritten by our various business segments. Market conditions
beyond our control determine the availability and cost of the
reinsurance protection we purchase. For example, subsequent to
the terrorist assaults of September 11, 2001, reinsurance
for man-made catastrophes became generally unavailable due to
capacity constraints and, to the limited extent available, much
more expensive. The high cost of reinsurance or lack of
affordable coverage could adversely affect our results. If we
fail to obtain sufficient reinsurance, it could adversely affect
our ability to write future business.
As part of our business, we have reinsured
certain life, property and casualty and health risks to
reinsurers. Although the reinsurer is liable to us to the extent
of the
ceded
reinsurance, we remain liable as the direct
insurer on all risks reinsured. As a result, ceded reinsurance
arrangements do not eliminate our obligation to pay claims. We
are subject to credit risk with respect to our ability to
recover amounts due from reinsurers. Our reinsurers may not pay
the reinsurance recoverables that they owe to us or they may not
pay such recoverables on a timely basis. A reinsurer's
insolvency, underwriting results or investment returns may
affect its ability to fulfill reinsurance obligations.
Our reinsurance facilities are generally subject
to annual renewal. We may not be able to maintain our current
reinsurance facilities and, even where highly desirable or
necessary, we may not be able to obtain other reinsurance
facilities in adequate amounts and at favorable rates. If we are
unable to renew our expiring facilities or to obtain new
reinsurance facilities, either our net exposures would increase
or, if we are unwilling to bear an increase in net exposures, we
may have to reduce the level of our underwriting commitments.
Either of these potential developments could materially
adversely affect our results of operations and financial
condition.
15
We have sold businesses through reinsurance
that could again become our direct financial and administrative
responsibility if the purchasing companies were to become
insolvent.
We have sold businesses through reinsurance ceded
to third parties, such as our 2001 sale of the insurance
operations of our Fortis Financial Group (FFG) division to The
Hartford Financial Services Group Inc. (The Hartford). The
assets backing the liabilities on these businesses are held in a
trust, and the
separate accounts
relating to the FFG
business are still reflected on our balance sheet. However, we
would be responsible for administering this business in the
event of a default by the reinsurer. We do not have the
administrative systems and capabilities to process this business
today. Accordingly, we would need to obtain those capabilities
in the event of an insolvency of one or more of the reinsurers
of these businesses. We might be forced to obtain such
capabilities on unfavorable terms, with a resulting material
adverse effect on our results of operations and financial
condition. In addition, under the reinsurance agreement, The
Hartford is obligated to contribute funds to increase the value
of the separate accounts relating to the business sold if such
value declines. If The Hartford fails to fulfill these
obligations, we will be obligated to make these payments.
We are exposed to the credit risk of our
agents in Assurant PreNeed and our clients in Assurant
Solutions.
We advance agents' commissions as part of
our pre-funded funeral insurance product offerings. These
advances are a percentage of the total face amount of coverage
as opposed to a percentage of the first-year premium paid, a
formula that is more common in other life insurance markets.
There is a one-year payback provision against the agency if
death or lapse occurs within the first policy year. There is a
very large producer within Assurant PreNeed and if it were
unable to fulfill its payback obligations, it could have an
adverse effect on our results of operations and financial
condition. In addition, we are subject to the credit risk of the
parties with which we contract in Assurant Solutions. If these
parties fail to remit payments owed to us or pass on payments
they collect on our behalf, it could have an adverse effect on
our results of operations. For example, the affiliate of a
client with whom we do business has declared bankruptcy. In the
event that this client's reinsurer does not honor its
claims obligation, we would be liable for making payment, which
we estimate to be approximately $16 million, net of
offsetting collateral.
The financial strength of our insurance
company subsidiaries is rated by A.M. Best and Moody's, and
a decline in these ratings could affect our standing in the
insurance industry and cause our sales and earnings to
decrease.
Ratings have become an increasingly important
factor in establishing the competitive position of insurance
companies. All of our domestic operating subsidiaries are rated
by A.M. Best and two of our domestic operating subsidiaries,
Fortis Benefits Insurance Company (which entity's name will
be changed subsequent to the offering contemplated by this
prospectus) and John Alden Life Insurance Company (John Alden),
are rated by Moody's. The ratings reflect A.M. Best's
and Moody's opinions of our subsidiaries' financial
strength, operating performance, strategic position and ability
to meet their obligations to policyholders. The ratings are not
evaluations directed to investors and are not recommendations to
buy, sell or hold our securities. These ratings are subject to
periodic review by A.M. Best and Moody's, and we cannot
assure you that we will be able to retain these ratings.
As of September 25, 2003, most of our
domestic operating subsidiaries had A.M. Best financial strength
ratings of A ("Excellent"), which is the second
highest of ten ratings categories and the highest within the
category based on modifiers (i.e., A and A- are
"Excellent"). As of that same date, our other domestic
operating subsidiaries had A.M. Best financial strength ratings
of A-("Excellent"), which is the second highest of ten
ratings categories and the lowest within the category based on
modifiers.
The Moody's financial strength rating as of
September 25, 2003 was A2 ("Good") for Fortis
Benefits Insurance Company, which is the third highest of nine
ratings categories and mid-range within the category based on
modifiers (i.e., A1, A2 and A3 are "Good"), and A3
("Good") for John Alden, which is the third highest of
nine ratings categories and the lowest within the category based
on modifiers.
Rating agencies review their ratings periodically
and our current ratings may not be maintained in the future. If
our ratings are reduced from their current levels by A.M. Best
or Moody's, or placed under
16
surveillance or review with possible negative
implications, our competitive position in the respective
insurance industry segments could suffer and it could be more
difficult for us to market our products. Due to the competitive
environment in the insurance industry, which may adversely
affect our revenues, the inherent uncertainty in determining
reserves for future claims, which may cause us to increase our
reserves for claims, the outcome of pending litigation and
regulatory investigations, which may adversely affect our
financial position and reputation, and possible changes in the
methodology or criteria applied by the rating agencies, rating
agencies may take action to lower our ratings in the future. As
customers and their advisors place importance on our financial
strength ratings, we may lose customers and compete less
successfully if we are downgraded. In addition, ratings impact
our ability to attract investment capital on favorable terms. If
our financial strength ratings are reduced from their current
levels by A.M. Best or Moody's, our cost of borrowing would
likely increase, our sales and earnings could decrease and our
results of operations and financial condition could be
materially adversely affected.
The failure to effectively maintain and
modernize our information systems could adversely affect our
business.
Our business is dependent upon our ability to
keep up to date with technological advances. This is
particularly important in Assurant Solutions, where our systems,
including our ability to keep our systems fully integrated with
those of our distribution partners, are critical to the
operation of our business. Our failure to update our systems to
reflect technological advancements may adversely affect our
relationships and ability to do business with our client
partners.
In addition, our business depends significantly
on effective information systems, and we have many different
information systems for our various businesses. We must commit
significant resources to maintain and enhance our existing
information systems and develop new information systems in order
to keep pace with continuing changes in information processing
technology, evolving industry and regulatory standards and
changing customer preferences. As a result of our acquisition
activities, we have acquired additional information systems. Our
failure to maintain effective and efficient information systems,
or our failure to efficiently and effectively consolidate our
information systems to eliminate redundant or obsolete
applications, could have a material adverse effect on our
results of operations and financial condition. If we do not
maintain adequate systems we could experience adverse
consequences, including:
•
inadequate information on which to base pricing,
    underwriting and reserving decisions;
•
the loss of existing customers;
•
difficulty in attracting new customers;
•
customer, provider and agent disputes;
•
regulatory problems, such as failure to meet
    prompt payment obligations;
•
litigation exposure; or
•
increases in administrative expenses.
Our management information, internal control and
financial reporting systems may need further enhancements and
development to satisfy the financial and other reporting
requirements of being a public company.
Failure to properly maintain the integrity of
our proprietary information and information systems as well as
to protect our clients' confidential information and
privacy could result in the loss of customers, reduction to our
profitability and/ or subject us to fines and
penalties
.
Our business depends in part on our ability to
maintain, or access through outsourcing arrangements with third
parties, information systems and to ensure the continued
integrity of our proprietary information. A number of our
businesses are subject to privacy regulations and to
confidentiality obligations. For example, the collection and use
of patient data in our Assurant Health segment is the subject of
national and state legislation, including the Health Insurance
Portability and Accountability Act of 1996 (HIPAA), and
certain
17
of the activities conducted by our Assurant
Solutions segment are subject to the privacy regulations of the
Gramm-Leach-Bliley Act. We also have contractual obligations to
protect certain confidential information we obtain from our
existing vendors and clients. These obligations generally
include protecting such confidential information in the same
manner and to the same extent as we protect our own confidential
and proprietary information. In addition, we must develop,
implement and maintain a comprehensive written information
security program with appropriate administrative, technical and
physical safeguards to protect such confidential information. If
we do not properly comply with privacy regulations and protect
confidential information we could experience adverse
consequences, including regulatory problems, loss of reputation
and client litigation.
See "Risks Related to Our Industry—Cost
of compliance with privacy laws could adversely affect our
business and results of operations."
We may not find suitable acquisition
candidates or new insurance ventures and even if we do, we may
not successfully integrate any such acquired companies or
successfully invest in such ventures.
From time to time, we evaluate possible
acquisition transactions and the start-up of complementary
businesses, and at any given time, we may be engaged in
discussions with respect to possible acquisitions and new
ventures. We cannot assure you that we will be able to identify
suitable acquisition transactions or insurance ventures, that
such transactions will be financed and completed on acceptable
terms or that our future acquisitions or ventures will be
successful. The process of integrating any companies we do
acquire or investing in new ventures could have a material
adverse effect on our results of operations and financial
condition.
In addition, implementation of an acquisition
strategy entails a number of risks, including, among other
things, inaccurate assessment of undisclosed liabilities,
difficulties in realizing projected efficiencies, synergies and
cost savings, failure to achieve anticipated revenues, earnings
or cash flow, and increase in our indebtedness and a limitation
in our ability to access additional capital when needed. Our
failure to adequately address these acquisition risks could
materially adversely affect our results of operations and
financial condition.
The inability of our subsidiaries to pay
dividends to us in sufficient amounts could harm our ability to
meet our obligations and pay future stockholder
dividends.
As a holding company whose principal assets are
the capital stock of our subsidiaries, we rely primarily on
dividends and other statutorily permissible payments from our
subsidiaries to meet our obligations for payment of interest and
principal on outstanding debt obligations, dividends to
stockholders (including any dividends on our common stock) and
corporate expenses. The ability of our subsidiaries to pay
dividends and to make such other payments in the future will
depend on their
statutory surplus,
future
statutory
earnings
and regulatory restrictions. Except to the extent
that we are a creditor with recognized claims against our
subsidiaries, claims of the subsidiaries' creditors,
including policyholders, have priority with respect to the
assets and earnings of the subsidiaries over the claims of our
creditors. If any of our subsidiaries should become insolvent,
liquidate or otherwise reorganize, our creditors and
stockholders will have no right to proceed against the assets of
that subsidiary or to cause the liquidation, bankruptcy or
winding-up of the subsidiary under applicable liquidation,
bankruptcy or winding-up laws. The applicable insurance laws of
the jurisdiction where each of our insurance subsidiaries is
domiciled would govern any proceedings relating to that
subsidiary. The insurance authority of that jurisdiction would
act as a liquidator or rehabilitator for the subsidiary. Both
creditors and policyholders of the subsidiary would be entitled
to payment in full from the subsidiary's assets before we,
as a stockholder, would be entitled to receive any distribution
from the subsidiary.
The payment of dividends to us by any of our
operating subsidiaries in excess of a certain amount (i.e.,
extraordinary dividends) must be approved by the
subsidiary's domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which our subsidiaries are domiciled is the lesser
of (i) 10% of the statutory surplus as of the end of the
prior year or (ii) the prior year's
statutory net
income
. In some states, the formula is the greater amount of
clauses (i) and (ii). Some states, however, have an
additional stipulation that dividends may only be paid out of
earned surplus. In addition, we
18
have entered into an agreement with the Florida
Insurance Department pursuant to which, until August of 2004,
two of our subsidiaries have agreed to limit the amount of
ordinary dividends they would pay to us to an amount no greater
than 50% of the amount otherwise permitted under Florida law.
Likewise, one of our subsidiaries, First Fortis Life Insurance
Company (which entity's name will be changed subsequent to
the offering contemplated by this prospectus), has entered into
an agreement with the New York Insurance Department pursuant to
which it has agreed not to pay any ordinary dividends to us
until fiscal year 2004. See "Regulation—United
States—State Regulation—Insurance
Regulation Concerning Dividends." If insurance
regulators determine that payment of an ordinary dividend or any
other payments by our insurance subsidiaries to us (such as
payments under a tax sharing agreement or payments for employee
or other services) would be adverse to policyholders or
creditors, the regulators may block such payments that would
otherwise be permitted without prior approval. No assurance can
be given that there will not be further regulatory actions
restricting the ability of our insurance subsidiaries to pay
dividends. Based on the dividend restrictions under applicable
laws and regulations, the maximum amount of dividends that our
subsidiaries could pay to us in 2003 without regulatory approval
is approximately $290 million, of which approximately
$19 million had been paid as of June 30, 2003. We
expect that as a result of statutory accounting for our sold
businesses, the maximum amount of dividends our subsidiaries
will be able to pay to us will be significantly lower in 2004.
If the ability of insurance subsidiaries to pay dividends or
make other payments to us is materially restricted by regulatory
requirements, it could adversely affect our ability to pay any
dividends on our common stock and/ or service our debt and pay
our other corporate expenses.
Risks Related to Our Industry
We face significant competitive pressures in
our businesses, which may reduce premium rates and prevent us
from pricing our products at rates that will allow us to be
profitable.
In each of our lines of business, we compete with
other insurance companies or service providers, depending on the
line and product, although we have no single competitor who
competes against us in all of the business lines in which we
operate. Competition in our businesses is based on many factors,
including quality of service, product features, price, scope of
distribution, scale, financial strength ratings and name
recognition. We compete, and will continue to compete, for
customers and distributors with many insurance companies and
other financial services companies. We compete not only for
business and individual customers, employer and other group
customers, but also for agents and distribution partners. Some
of our competitors may offer a broader array of products than
our specific subsidiaries with which they compete in particular
markets, may have a greater diversity of distribution resources,
may have better brand recognition, may from time to time have
more competitive pricing, may have lower cost structures or,
with respect to insurers, may have higher financial strength or
claims paying ratings. Some may also have greater financial
resources with which to compete. As a result of judicial
developments and changes enacted by the Office of the
Comptroller of the Currency, financial institutions are now able
to offer a substitute product similar to credit insurance as
part of their basic loan agreement with customers without being
subject to insurance regulations. Also, as a result of the
Gramm-Leach-Bliley Act, which was enacted in November 1999,
financial institutions are now able to affiliate with other
insurance companies to offer services similar to our own. This
has resulted in new competitors with significant financial
resources entering some of our markets. Moreover, some of our
competitors may have a lower target for returns on capital
allocated to their business than we do, which may lead them to
price their products and services lower than we do. In addition,
from time to time, companies enter and exit the markets in which
we operate, thereby increasing competition at times when there
are new entrants. For example, several large insurance companies
have recently entered the market for individual health insurance
products. We may lose business to competitors offering
competitive products at lower prices, or for other reasons,
which could materially adversely affect our results of
operations and financial condition.
In certain markets, we compete with organizations
that have a substantial market share. In addition, with regard
to Assurant Health, organizations with sizable market share or
provider-owned plans may be able to obtain favorable financial
arrangements from health care providers that are not available
to us. Without our own similar arrangements, we may not be able
to compete effectively in such markets.
19
New competition could also cause the supply of
insurance to change, which could affect our ability to price our
products at attractive rates and thereby adversely affect our
underwriting results. Although there are some impediments facing
potential competitors who wish to enter the markets we serve,
the entry of new competitors into our markets can occur,
affording our customers significant flexibility in moving to
other insurance providers.
The insurance industry is cyclical, which may
impact our results.
The insurance industry is cyclical. The segments
of the insurance markets in which we operate tend not to be
correlated to each other, with each segment having its own
cyclicality. Periods of intense price competition due to
excessive underwriting capacity, periods when shortages of
underwriting capacity permit more favorable rate levels,
consequent fluctuations in underwriting results and the
occurrence of other losses characterize the conditions in these
markets. Historically, insurers have experienced significant
fluctuations in operating results due to volatile and sometimes
unpredictable developments, many of which are beyond the direct
control of the insurer, including competition, frequency of
occurrence or severity of catastrophic events, levels of
capacity, general economic conditions and other factors. This
may cause a decline in revenue at times in the cycle if we
choose not to reduce our product prices in order to maintain our
market position, because of the adverse effect on profitability
of such a price reduction. We can be expected therefore to
experience the effects of such cyclicality and changes in
customer expectations of appropriate premium levels, the
frequency or severity of claims or other loss events or other
factors affecting the insurance industry that generally could
have a material adverse effect on our results of operations and
financial condition.
The insurance and related businesses in which
we operate may be subject to periodic negative publicity, which
may negatively impact our financial results.
The nature of the market for the insurance and
related products and services we provide is that we interface
with and distribute our products and services ultimately to
individual consumers. There may be a perception that these
purchasers may be unsophisticated and in need of consumer
protection. Accordingly, from time to time, consumer advocate
groups or the media may focus attention on our products and
services, thereby subjecting our industries to periodic negative
publicity. We may also be negatively impacted if another company
in one of our industries engages in practices resulting in
increased public attention to our businesses. Negative publicity
may result in increased regulation and legislative scrutiny of
industry practices as well as increased litigation, which may
further increase our costs of doing business and adversely
affect our profitability by impeding our ability to market our
products and services, requiring us to change our products or
services or increasing the regulatory burdens under which we
operate.
Our business is subject to risks related to
litigation and regulatory actions.
In addition to the occasional employment-related
litigation to which all businesses are subject, we are a
defendant in actions arising out of, and are involved in various
regulatory investigations and examinations relating to, our
insurance and other related business operations. We may from
time to time be subject to a variety of legal and regulatory
actions relating to our current and past business operations,
including, but not limited to:
•
disputes over coverage or claims adjudication;
•
disputes regarding sales practices, disclosures,
    premium refunds, licensing, regulatory compliance and
    compensation arrangements;
•
disputes with our agents, producers or network
    providers over compensation and termination of contracts and
    related claims;
•
disputes concerning past premiums charged by
    companies acquired by us for coverage that may have been based
    on factors such as race;
•
disputes relating to customers regarding the
    ratio of premiums to benefits in our various business segments;
20
•
disputes alleging packaging of credit insurance
    products with other products provided by financial institutions;
•
disputes relating to certain
excess of
    loss
programs in the London market;
•
disputes with taxing authorities regarding our
    tax liabilities; and
•
disputes relating to certain businesses acquired
    or disposed of by us.
In addition, plaintiffs continue to bring new
types of legal claims against insurance and related companies.
Current and future court decisions and legislative activity may
increase our exposure to these types of claims. Multiparty or
class action claims may present additional exposure to
substantial economic, non-economic or punitive damage awards.
The loss of even one of these claims, if it resulted in a
significant damage award or a judicial ruling that was otherwise
detrimental, could have a material adverse effect on our results
of operations and financial condition. This risk of potential
liability may make reasonable settlements of claims more
difficult to obtain. We cannot determine with any certainty what
new theories of recovery may evolve or what their impact may be
on our businesses. We believe we have made adequate reserves in
our financial statements against all litigation known to us, but
we cannot be certain our estimates of probable outcomes of such
litigation will prove to be accurate.
There are various governmental and administrative
investigations and proceedings pending against us. For example,
an indictment has been issued in Minnesota alleging that one of
our subsidiaries and two corporate officers of Assurant
Solutions each violated the Minnesota Fair Campaign Practices
Act. The outcome of these investigations and proceedings cannot
be predicted, and no assurances can be given that such
investigations or proceedings or any litigation would not
materially adversely affect our results of operations and
financial condition. In addition, if we were to experience
difficulties with our relationship with a regulatory body in a
given jurisdiction, it could have a material adverse effect on
our ability to do business in that jurisdiction. See
"Business—Legal Proceedings."
We are subject to extensive governmental
regulation, which increases our costs and could restrict the
conduct of our business.
Our operating subsidiaries are subject to
extensive regulation and supervision in the jurisdictions in
which they do business. Such regulation is generally designed to
protect the interests of policyholders, as opposed to
stockholders and other investors. To that end, the laws of the
various states establish insurance departments with broad powers
with respect to such things as:
•
licensing companies to transact business;
•
authorizing lines of business;
•
mandating capital and surplus requirements;
•
regulating underwriting limitations;
•
imposing dividend limitations;
•
regulating changes in control;
•
licensing agents and distributors of insurance
    products;
•
placing limitations on the minimum and maximum
    size of life insurance contracts;
•
restricting companies' ability to enter and
    exit markets;
•
admitting
statutory assets
;
•
mandating certain insurance benefits;
•
restricting companies' ability to terminate
    or cancel coverage;
•
requiring companies to provide certain types of
    coverage;
21
•
regulating premium rates, including the ability
    to increase premium rates;
•
approving policy forms;
•
regulating trade and claims practices;
•
imposing privacy requirements;
•
establishing reserve requirements and solvency
    standards;
•
restricting certain transactions between
    affiliates;
•
regulating the content of disclosures to debtors
    in the credit insurance area;
•
regulating the type, amounts and valuation of
    investments;
•
mandating assessments or other surcharges for
guaranty funds
;
•
regulating market conduct and sales practices of
    insurers and agents; and
•
restricting contact with consumers, such as the
    recently created national "do not call" list, and
    imposing consumer protection measures.
Assurant Health is also required by some
jurisdictions to provide coverage to persons who would not
otherwise be considered eligible by insurers. Each of these
jurisdictions dictates the types of insurance and the level of
coverage that must be provided to such involuntary risks. Our
share of these involuntary risks is mandatory and generally a
function of our respective share of the voluntary market by line
of insurance in each jurisdiction. Assurant Health is exposed to
some risk of losses in connection with mandated participation in
such schemes in those jurisdictions in which they are still
effective. In addition, HIPAA imposed insurance reform
provisions as well as requirements relating to the privacy of
individuals. HIPAA requires certain guaranteed issuance and
renewability of health insurance coverage for individuals and
small groups (generally 50 or fewer employees) and limits
exclusions based on pre-existing conditions. Most of the
insurance reform provisions of HIPAA became effective for plan
years beginning July 1, 1997. See also "Risks Related
to Our Industry—Costs of compliance with privacy laws could
adversely affect our business and results of operations."
If regulatory requirements impede our ability to
raise premium rates, utilize new policy forms or terminate, deny
or cancel coverage in any of our businesses, our results of
operations and financial condition could be materially adversely
affected. The capacity for an insurance company's growth in
premiums is in part a function of its statutory surplus.
Maintaining appropriate levels of statutory surplus, as measured
by statutory accounting practices and procedures, is considered
important by insurance regulatory authorities and the private
agencies that rate insurers' claims-paying abilities and
financial strength. Failure to maintain certain levels of
statutory surplus could result in increased regulatory scrutiny
and enforcement, action by regulatory authorities or a downgrade
by rating agencies.
We may be unable to maintain all required
licenses and approvals and our business may not fully comply
with the wide variety of applicable laws and regulations or the
relevant authority's interpretation of the laws and
regulations. Also, some regulatory authorities have relatively
broad discretion to grant, renew or revoke licenses and
approvals. If we do not have the requisite licenses and
approvals or do not comply with applicable regulatory
requirements, the insurance regulatory authorities could
preclude or temporarily suspend us from carrying on some or all
of our activities or monetarily penalize us. That type of action
could materially adversely affect our results of operations and
financial condition. See "Regulation."
Changes in regulation may reduce our
profitability and limit our growth.
Legislation or other regulatory reform that
increases the regulatory requirements imposed on us or that
changes the way we are able to do business may significantly
harm our business or results of operations in the future. For
example, some states have imposed new time limits for the
payment of uncontested covered claims and require health care
and dental service plans to pay interest on uncontested claims
not paid promptly within the required time period. Some states
have also granted their insurance regulatory agencies additional
22
authority to impose monetary penalties and other
sanctions on health and dental plans engaging in certain
"unfair payment practices." If we were to be unable
for any reason to comply with these requirements, it could
result in substantial costs to us and may materially adversely
affect our results of operations and financial condition.
Legislative or regulatory changes that could
significantly harm us and our subsidiaries include, but are not
limited to:
•
legislation that holds insurance companies or
    managed care companies liable for adverse consequences of
    medical or dental decisions;
•
limitations on premium levels or the ability to
    raise premiums on existing policies;
•
increases in minimum capital, reserves and other
    financial viability requirements;
•
impositions of fines, taxes or other penalties
    for improper licensing, the failure to "promptly" pay
    claims, however defined, or other regulatory violations;
•
increased licensing requirements;
•
prohibitions or limitations on provider financial
    incentives and provider risk-sharing arrangements;
•
imposition of more stringent standards of review
    of our coverage determinations;
•
new benefit mandates;
•
increased regulation relating to the use of
    associations and trusts in the sale of individual health
    insurance;
•
limitations on our ability to build appropriate
    provider networks and, as a result, manage health care and
    utilization due to "any willing provider" legislation,
    which requires us to take any provider willing to accept our
    reimbursement;
•
limitations on the ability to manage health care
    and utilization due to direct access laws that allow insureds to
    seek services directly from specialty medical providers without
    referral by a primary care provider; and
•
restriction of solicitation of pre-funded funeral
    insurance consumers by funeral board laws.
State legislatures regularly enact laws that
alter and, in many cases, increase state authority to regulate
insurance companies and insurance holding companies. Further,
state insurance regulators regularly reinterpret existing laws
and regulations and the
National Association of Insurance
Commissioners (NAIC)
regularly undertakes regulatory
projects, all of which can affect our operations. In recent
years, the state insurance regulatory framework has come under
increased federal scrutiny and some state legislatures have
considered or enacted laws that may alter or increase state
authority to regulate insurance companies and insurance holding
companies. Further, the NAIC and state insurance regulators are
re-examining existing laws and regulations, specifically
focusing on modifications to holding company regulations,
interpretations of existing laws and the development of new laws.
Although the U.S. federal government does not
directly regulate the insurance business, changes in federal
legislation and administrative policies in several areas,
including changes in the Gramm-Leach-Bliley Act, financial
services regulation and federal taxation, could significantly
harm the insurance industry and us. Federal legislation and
administrative policies in areas such as employee benefit plan
regulation, financial services regulation and federal taxation
can reduce our profitability. In addition, state legislatures
and the U.S. Congress continue to focus on health care
issues. The U.S. Congress is considering Patients' Bill of
Rights legislation, which, if adopted, would permit health plans
to be sued in state court for coverage determinations and could
fundamentally alter the treatment of coverage decisions under
Employee Retirement Income Security Act of 1974, as amended
(ERISA). There recently have been legislative attempts to limit
ERISA's preemptive effect on state laws. For example, the
U.S. Congress has, from time to time, considered legislation
relating to changes in ERISA to permit application of state law
remedies, such as
23
consequential and punitive damages, in lawsuits
for wrongful denial of benefits, which, if adopted, could
increase our liability for damages in future litigation.
Additionally, new interpretations of existing laws and the
passage of new legislation may harm our ability to sell new
policies and increase our claims exposure on policies we issued
previously.
A number of legislative proposals have been made
at the federal level over the past several years that could
impose added burdens on Assurant Health. These proposals would,
among other things, mandate benefits with respect to certain
diseases or medical procedures, require plans to offer an
independent external review of certain coverage decisions and
establish a national health insurance program. Any of these
proposals, if implemented, could adversely affect our results of
operations or financial condition. Federal changes in Medicare
and Medicaid that reduce provider reimbursements could have
negative implications for the private sector due to cost
shifting. When the government reduces reimbursement rates for
Medicare and Medicaid, providers often try to recover shortfalls
by raising the prices charged to privately insured customers.
State small employer group and individual health insurance
market reforms to increase access and affordability could also
reduce profitability by precluding us from appropriately pricing
for risk in our individual and small employer group health
insurance policies.
In addition, the U.S. Congress and some
federal agencies from time to time investigate the current
condition of insurance regulation in the United States to
determine whether to impose federal regulation or to allow an
optional federal incorporation, similar to banks. Bills have
been introduced in the U.S. Congress from time to time that
would provide for a federal scheme of chartering insurance
companies or an optional federal charter for insurance
companies. Meanwhile, the federal government has granted
charters in years past to insurance-like organizations that are
not subject to state insurance regulations, such as risk
retention groups. See "Regulation—United
States—Federal Regulation—Legislative
Developments." Thus, it is hard to predict the likelihood
of a federal chartering scheme and its impact on the industry or
on us.
We cannot predict with certainty the effect any
proposed or future legislation, regulations or NAIC initiatives
may have on the conduct of our business. In addition, the
insurance laws or regulations adopted or amended from time to
time may be more restrictive or may result in materially higher
costs than current requirements. See "Regulation."
Costs of compliance with privacy laws could
adversely affect our business and results of
operations.
The privacy of individuals has been the subject
of recent state and federal legislation. State privacy laws,
particularly those with "opt-in" clauses, can affect
the pre-funded funeral insurance business. These laws make it
harder to share information for marketing purposes, such as
generating new sales leads. Similarly, the recently created
"do not call" list would restrict our ability to
contact customers and, in Assurant Solutions, has lowered our
expectations for growth in our direct-marketed consumer credit
insurance products in the United States.
HIPAA and the implementing regulations that have
thus far been adopted impose new obligations for issuers of
health and dental insurance coverage and health and dental
benefit plan sponsors. HIPAA also establishes new requirements
for maintaining the confidentiality and security of individually
identifiable health information and new standards for electronic
health care transactions. The Department of Health and Human
Services promulgated final HIPAA regulations in 2002. The
privacy regulations required compliance by April 2003, the
electronic transactions regulations by October 2003 and the
security regulations by April 2005. As have other entities in
the health care industry, we have incurred substantial costs in
meeting the requirements of these HIPAA regulations and expect
to continue to incur costs to achieve and to maintain
compliance. We have been working diligently to comply with these
regulations in the time periods required. However, there can be
no assurances that we will achieve such compliance with all of
the required transactions or that other entities with which we
interact will take appropriate action to meet the compliance
deadlines. Moreover, as a consequence of these new standards for
electronic transactions, we may see an increase in the number of
health care transactions that are submitted to us in paper
format, which could increase our costs to process medical claims.
24
HIPAA is far-reaching and complex and proper
interpretation and practice under the law continue to evolve.
Consequently, our efforts to measure, monitor and adjust our
business practices to comply with HIPAA are ongoing. Failure to
comply could result in regulatory fines and civil lawsuits.
Knowing and intentional violations of these rules may also
result in federal criminal penalties.
In addition, the Gramm-Leach-Bliley Act requires
that we deliver a notice regarding our privacy policy both at
the delivery of the insurance policy and annually thereafter.
Certain exceptions are allowed for sharing of information under
joint marketing agreements. However, certain state laws may
require individuals to opt in to information sharing instead of
being immediately included. This could significantly increase
costs of doing business. Additionally, when final
U.S. Treasury Department regulations are promulgated in
connection with the USA PATRIOT Act, we will likely have to
expend additional resources to tailor our existing anti-fraud
efforts to the new rules.
Risks Related to Our Relationship with and
Separation from Fortis
Fortis will continue to have representation on
our board of directors and influence our affairs for as long as
it remains a significant stockholder.
After the completion of this offering, Fortis,
through Fortis Insurance N.V., its wholly owned subsidiary, will
own in excess of      % of the voting
power of our outstanding common stock,
or      % if the underwriters exercise
their over-allotment option in full. As a result, for as long as
Fortis continues to own shares of common stock representing more
than 50% of the voting power of our outstanding common stock
and, in some cases more than one-third of our outstanding common
stock, it will be able to determine the outcome of corporate
actions requiring stockholder approval. Fortis may have
interests that differ from yours and may vote in a way with
which you disagree and which may be adverse to your interests.
Prior to the consummation of this offering, we
expect to enter into a shareholders' agreement with Fortis
pursuant to which Fortis will have the right to nominate
designees to our board of directors and, subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i) so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii) so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. In addition, the shareholders'
agreement is also expected to provide that as long as Fortis
owns at least 50% of our common stock, certain significant
corporate actions may only be taken with the approval of a
supermajority of our directors, which will require approval of
two or more Fortis directors. These actions include:
•
a recapitalization or reorganization;
•
voluntary bankruptcy or liquidation;
•
acquisitions and dispositions in excess of
    $500 million;
•
issuing debt to the extent all outstanding debt
    would exceed $1.5 billion; and
•
equity offerings representing more than 10% of
    our outstanding common stock or that would reduce Fortis'
    interest in our Company below 50%.
In addition, although Fortis has advised us that
it intends to divest all of its shares of our common stock over
a period of time, Fortis is under no obligation to do so.
Subject to the terms of the lock-up agreement, Fortis has the
sole discretion to determine the timing of any such divestiture.
See "Certain Relationships and Related Transactions,"
"Description of Share Capital—Shareholders
Agreement" and "—Registration Rights,"
"Shares Eligible for Future Sale" and
"Underwriting" for additional information on lock-up
agreements and related party transactions between our Company
and Fortis.
25
Because Fortis will control us, conflicts of
interest between Fortis and us could be resolved in a manner
unfavorable to us.
Various conflicts of interest between Fortis and
us could arise which may be resolved in a manner that is
unfavorable to us, including, but not limited to, the following
areas:
Cross-Directorships and Stock
Ownership.
Service as a director or
officer of both our Company and Fortis or ownership interests of
directors or officers of our Company in the stock of Fortis
could create or appear to create potential conflicts of interest
when directors and officers are faced with decisions that could
have different implications for the two companies. Our directors
who are also directors or officers of Fortis will have
obligations to both companies and may have conflicts of interest
with respect to matters potentially or actually involving or
affecting us. For example, these decisions could relate to:
•
disagreement over the desirability of a potential
    acquisition or disposition opportunity;
•
corporate finance decisions;
•
employee retention or recruiting; or
•
our dividend policy.
Allocation of Business Opportunities.
There may be business opportunities
that are suitable for both Fortis and us. So long as Fortis
controls us, it will be able to make decisions regarding the
allocation of such opportunities that may be unfavorable to us.
The loss of the Fortis name in Assurant
Health, Assurant Employee Benefits and Assurant PreNeed may
affect our profitability.
In connection with our separation from Fortis, we
will change our name and the names of our business units to
Assurant, Inc. and other Assurant names and launch a re-branding
initiative pursuant to which we will change our brand name and
most of the trademarks and trade names under which we conduct
our business. The transition to our new name in each of our
business segments and subsidiaries will occur rapidly in the
case of some products and business segments and over specified
periods in the case of other products and business segments.
Under the terms of a license from Fortis, we will have only a
limited amount of time to continue to use the Fortis name.
Assurant Health, Assurant Employee Benefits and Assurant PreNeed
have expended substantial resources to establish the Fortis name
and reputation in the health, employee benefits and pre-funded
funeral insurance marketplace, particularly among brokers and
consultants acting as advisors in the health and benefits market
and with funeral directors in the pre-funded funeral market. The
impact of the change in trademarks and trade names and other
changes (including, without limitation, the name change) on our
business and operations cannot be fully predicted, and the lack
of an established brand image for the Assurant name in the
health, benefits and pre-funded funeral insurance marketplace
may cause a disruption in sales and
persistency
and thus
affect profitability. Any such disruption could also cause
rating agencies to lower our financial strength and other
ratings in the future. In addition, the costs of effecting the
name change and branding initiative will be substantial and are
currently estimated to be approximately $10 million. In
certain states we may be required to notify policyholders of our
name change and in certain instances new certificates may need
to be issued. This might result in increased lapses of our
insurance policies.
Because Fortis operates U.S. branch offices,
we are subject to regulation and oversight by the Federal
Reserve Board under the U.S. Bank Holding Company Act
(BHCA).
Fortis Bank SA/ NV (Fortis Bank), which is a
subsidiary of Fortis, obtained approval in 2002 from state
banking authorities and the Federal Reserve Board to establish
branch offices in Connecticut and New York. By virtue of the
opening of these offices, the U.S. operations of Fortis,
including our operations, became subject to the nonbanking
prohibitions of Section 4 of the BHCA. In order to continue
to operate its U.S. nonbanking operations, including the
insurance activities conducted by our subsidiaries, Fortis
notified the Federal Reserve Board of its election to be a
financial holding company for purposes of the BHCA and the
Federal Reserve Board's implementing regulations in
Regulation Y. Pursuant to Fortis' status as a
financial holding company, Fortis and its subsidiaries,
including our subsidiaries, are permitted to engage in nonbanking
26
activities in the United States that are
"financial in nature" or "incidental to a
financial activity" as defined in Section 4(k) of the
BHCA and in Regulation Y. In particular, Fortis'
status as a financial holding company permits Fortis to engage
in the United States in both banking activities through the
U.S. branches of Fortis Bank and insurance activities
through our subsidiaries. Activities that are "financial in
nature" include, among other things, insuring, guaranteeing
or indemnifying against loss, harm, damage, illness, disability
or death, or providing and issuing annuities, and acting as
principal, agent or broker for purposes of the foregoing.
Fortis will continue to qualify as a financial
holding company so long as Fortis Bank remains "well
capitalized" and "well managed" as those terms
are defined in Regulation Y. Generally, Fortis Bank will be
considered "well capitalized" if it maintains tier 1
and total risk-based capital ratios of at least 6% and 10%,
respectively, and will be considered "well managed" if
it has received at least a satisfactory composite rating of its
U.S. branch operations at its most recent examination. As a
general matter, as long as Fortis owns more than 5% of any class
of our voting shares, the BHCA does not permit us to engage in
nonfinancial activities such as manufacturing, distribution of
goods and real estate development. If the Federal Reserve Board
were to determine that any of our existing activities were not
insurance activities or not otherwise financial in nature or not
incidental to such activities, or if Fortis lost and was unable
to regain its financial holding company status, we could be
required to restructure our operations or divest some of these
operations, which could result in increased costs and reduced
profitability.
Risks Related to Our Common Stock and This
Offering
Applicable laws and our certificate of
incorporation and by-laws may discourage takeovers and business
combinations that our stockholders might consider in their best
interests.
State laws and our certificate of incorporation
and by-laws may delay, defer, prevent or render more difficult a
takeover attempt that our stockholders might consider in their
best interests. For instance, they may prevent our stockholders
from receiving the benefit from any premium to the market price
of our common stock offered by a bidder in a takeover context.
Even in the absence of a takeover attempt, the existence of
these provisions may adversely affect the prevailing market
price of our common stock if they are viewed as discouraging
takeover attempts in the future.
State laws and our certificate of incorporation
and by-laws may also make it difficult for stockholders to
replace or remove our directors. These provisions may facilitate
directors entrenchment which may delay, defer or prevent a
change in our control, which may not be in the best interests of
our stockholders.
The following provisions that will be included in
our certificate of incorporation and by-laws have anti-takeover
effects and may delay, defer or prevent a takeover attempt that
our stockholders might consider in their best interests. In
particular, our certificate of incorporation and by-laws will:
•
permit our board of directors to issue one or
    more series of preferred stock;
•
divide our board of directors into three classes;
•
limit the ability of stockholders to remove
    directors;
•
except for Fortis, prohibit stockholders from
    filling vacancies on our board of directors;
•
prohibit stockholders from calling special
    meetings of stockholders;
•
impose advance notice requirements for
    stockholder proposals and nominations of directors to be
    considered at stockholder meetings;
•
require the approval of at least two-thirds of
    our outstanding common stock to approve mergers and
    consolidations or the sale of all or substantially all of our
    assets; and
27
•
require the approval by the holders of at least
    two-thirds of our outstanding common stock for the amendment of
    our by-laws and provisions of our certificate of incorporation
    governing:
•      the
classified board;
•      the
approval of mergers; and
•      the
liability of directors.
In addition, Section 203 of the General
Corporation Law of the State of Delaware may limit the ability
of an "interested stockholder" to engage in business
combinations with us. An interested stockholder is defined to
include persons owning 15% or more of our outstanding voting
stock. See "Description of Share Capital" for
additional information on the anti-takeover measures applicable
to us.
Applicable insurance laws may make it
difficult to effect a change of control of our
Company.
Before a person can acquire control of a U.S.
insurance company, prior written approval must be obtained from
the insurance commissioner of the state where the domestic
insurer is domiciled. Generally, state statutes provide that
control over a domestic insurer is presumed to exist if any
person, directly or indirectly, owns, controls, holds with the
power to vote, or holds proxies representing, 10% or more of the
voting securities of the domestic insurer. However, the State of
Florida, in which certain of our insurance subsidiaries are
domiciled, defines control as 5% or more. Because a person
acquiring 5% or more of shares of our common stock would
indirectly control the same percentage of the stock of our
Florida subsidiaries, the insurance change of control laws of
Florida would apply to such transaction and at 10%, the laws of
many other states would likely apply to such a transaction.
Prior to granting approval of an application to acquire control
of a domestic insurer, a state insurance commissioner will
typically consider such factors as the financial strength of the
applicant, the integrity of the applicant's board of
directors and executive officers, the applicant's plans for
the future operations of the domestic insurer and any
anti-competitive results that may arise from the consummation of
the acquisition of control.
We do not currently intend to pay dividends on
our Common Stock in the foreseeable future.
Our board of directors does not currently intend
to pay dividends to holders of our Common Stock. It is uncertain
when, if ever, we will declare dividends to our stockholders.
Our ability to pay dividends is limited by our Class B and
Class C Common Stock and our Series B and
Series C Preferred Stock, which restrict our ability to pay
dividends on our Common Stock if dividends on those shares are
not paid. In addition, the terms of certain of our securities
prohibit us from paying dividends on our Common Stock if we
elect to defer payments on such securities. See "Dividend
Policy," "Description of Share Capital" and
"Description of Other Securities." You should not rely
on an investment in our Company if you require dividend income.
In the foreseeable future, the only possible return on an
investment in us would come from the appreciation of our common
stock.
Our stock and the stocks of other companies in
the insurance industry are subject to stock price and trading
volume volatility.
From time to time, the stock price and the number
of shares traded of companies in the insurance industry
experience periods of significant volatility. Company-specific
issues and developments generally in the insurance industry and
in the regulatory environment may cause this volatility. Our
stock price may fluctuate in response to a number of events and
factors, including:
•
quarterly variations in operating results;
•
natural disasters and terrorist attacks;
•
changes in financial estimates and
    recommendations by securities analysts;
•
operating and stock price performance of other
    companies that investors may deem comparable;
•
press releases or publicity relating to us or our
    competitors or relating to trends in our markets;
•
regulatory changes;
28
•
sales of stock by insiders; and
•
changes in our financial strength ratings.
You may be unable to resell your shares of our
common stock at or above the initial public offering price.
In addition, broad market and industry
fluctuations may adversely affect the trading price of our
common stock, regardless of our actual operating performance.
There may not be an active trading market for
shares of our common stock, which may cause our common stock to
trade at a discount and make it difficult to sell the shares you
purchase.
Prior to this offering, there has been no public
trading market for shares of our common stock. It is possible
that, after this offering, an active trading market will not
develop or continue. The initial public offering price per share
of our common stock will be determined by agreement among us,
Fortis and the representative of the underwriters, and may not
be indicative of the price at which the shares of our common
stock will trade in the public market after this offering.
Sales of a substantial number of shares of our
common stock following this offering may adversely affect the
market price of our common stock and the issuance of additional
shares will dilute all other stockholdings.
Sales of a substantial number of shares of our
common stock in the public market or otherwise following this
offering, or the perception that such sales could occur, could
adversely affect the market price of our common stock. After
completion of this offering, Fortis, through Fortis Insurance
N.V., will
own            shares
of our common stock, assuming there is no exercise of the
underwriters' over-allotment option, and has advised us
that it intends to divest all of its shares of our common stock
over a period of time, subject to the lock-up agreement referred
to below. In addition, concurrently with the offering
contemplated by this prospectus, we will grant Fortis Insurance
N.V. and its affiliates certain demand and piggyback
registration rights with respect to all of the shares of our
common stock owned by them. Pursuant to this agreement, after
completion of this offering and subject to the lock-up
agreement, Fortis will have the right to require us to register
its shares of our common stock under the Securities Act of 1933,
as amended (Securities Act) for sale into the public markets.
After completion of this offering, there will
be            shares
of our common stock outstanding. Of our outstanding shares, the
shares of common stock sold in this offering will be freely
tradable in the public market, except for any shares sold to our
"affiliates," as that term is defined in Rule 144
under the Securities Act, and any other shares purchased through
the directed share program, which will also be subject to
180-day lock-up agreements and certain National Association of
Securities Dealers (NASD) restrictions. In addition, our
certificate of incorporation permits the issuance of up to
80 million shares of common stock. After this offering, we
will have an aggregate
of            shares
of our common stock authorized but unissued. Thus, we have the
ability to issue substantial amounts of common stock in the
future, which would dilute the percentage ownership held by the
investors who purchase our shares in this offering. See
"Shares Eligible for Future Sale" for further
information regarding circumstances under which additional
shares of our common stock may be sold.
We, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV and Fortis Insurance N.V. have
agreed, with limited exceptions, that we and they will not,
without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, during the period
ending 180 days after the date of this prospectus, directly
or indirectly, offer to sell, sell or otherwise dispose of any
of shares of our common stock or file a registration statement
with the Securities and Exchange Commission (SEC) relating to
the offering of any shares of our common stock.
Subject to the exercise of any future issued and
outstanding options, if any, shares registered under a
registration statement on Form S-8 to be filed by us will
be available for sale into the public markets after the
expiration of the lock-up agreements.
29
FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus
Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this
prospectus may contain forward-looking statements which reflect
our current views with respect to, among other things, future
events and financial performance. You can identify these
forward-looking statements by the use of forward-looking words
such as "outlook," "believes,"
"expects," "potential,"
"continues," "may," "will,"
"should," "seeks,"
"approximately," "predicts,"
"intends," "plans," "estimates,"
"anticipates" or the negative version of those words
or other comparable words. Any forward-looking statements
contained in this prospectus are based upon our historical
performance and on current plans, estimates and expectations.
The inclusion of this forward-looking information should not be
regarded as a representation by us, the underwriters or any
other person that the future plans, estimates or expectations
contemplated by us will be achieved. Such forward-looking
statements are subject to various risks and uncertainties.
Accordingly, there are or will be important factors that could
cause our actual results to differ materially from those
indicated in these statements. We believe that these factors
include but are not limited to those described under "Risk
Factors." These factors should not be construed as
exhaustive and should be read in conjunction with the other
cautionary statements that are included in this prospectus. We
undertake no obligation to publicly update or review any
forward-looking statement, whether as a result of new
information, future developments or otherwise.
If one or more of these or other risks or
uncertainties materialize, or if our underlying assumptions
prove to be incorrect, actual results may vary materially from
what we projected. Any forward-looking statements you read in
this prospectus reflect our current views with respect to future
events and are subject to these and other risks, uncertainties
and assumptions relating to our operations, results of
operations, financial condition, growth strategy and liquidity.
You should specifically consider the factors identified in this
prospectus that could cause actual results to differ before
making an investment decision.
30
USE OF PROCEEDS
We will not receive any of the proceeds from the
sale of shares of our common stock by the selling stockholder.
The selling stockholder will receive all net proceeds from the
sale of the shares of our common stock in this offering.
DIVIDEND POLICY
Our board of directors does not currently intend
to pay dividends to holders of our Common Stock. Any
determination to pay dividends will be at the discretion of our
board of directors and will be dependent upon our
subsidiaries' payment of dividends and/or other statutorily
permissible payments to us, our results of operations and cash
flows, our financial position and capital requirements, general
business conditions, any legal, tax, regulatory and contractual
restrictions on the payment of dividends and any other factors
our board of directors deems relevant.
We are a holding company and, therefore, our
ability to pay dividends, service our debt and meet our other
obligations depends primarily on the ability of our insurance
subsidiaries to pay dividends and make other statutorily
permissible payments to us. Our insurance subsidiaries are
subject to significant regulatory and contractual restrictions
limiting their ability to declare and pay dividends. See
"Risk Factors—Risks Relating to Our Company—The
inability of our subsidiaries to pay dividends to us in
sufficient amounts could harm our ability to meet our
obligations and pay future stockholder dividends" and
"Risk Factors — Risks Related to Our Common Stock
and This Offering — We do not currently intend to pay
dividends on our Common Stock in the foreseeable future."
For the calendar year 2003, the maximum amount of dividends that
our subsidiaries could pay to us under applicable laws and
regulations without prior regulatory approval is approximately
$290 million, of which approximately $19 million had
been paid as of June 30, 2003. We expect that as a result
of statutory accounting for our businesses sold, the maximum
amount of dividends our subsidiaries will be able to pay to us
will be significantly lower in 2004. In addition, we have
entered into an agreement with the Florida Insurance Department
pursuant to which two of our subsidiaries, American Bankers
Insurance Company and American Bankers Life Assurance Company,
have agreed to limit the amount of ordinary dividends they would
pay to us to an amount no greater than 50% of the amount
otherwise permitted under Florida law. This agreement expires in
August 2004. One of our subsidiaries, First Fortis Life
Insurance Company, has also entered into an agreement with the
New York Insurance Department pursuant to which First Fortis
Life Insurance Company has agreed not to pay any ordinary
dividends to us until fiscal year 2004. For more information
regarding restrictions on the payment of dividends by us and our
insurance subsidiaries, including pursuant to the terms of our
Series B and Series C Preferred Stock, our
Class B and Class C Common Stock and certain of our
other securities, see "Regulation— United States—
State Regulation— Insurance Regulation Concerning
Dividends" and "—Statutory Accounting Practices
(SAP)," "Description of Share Capital" and
"Description of Other Securities."
On May 27, 2003, we paid the holders of our
Class A Common Stock a cash dividend in the aggregate
amount of $139 million. Our Class A Common Stock will
become Common Stock of Assurant, Inc. in connection with the
closing of this offering. We also paid dividends on our
Class A Common Stock totaling $67 million in 2001.
On September 2, 2003 and March 3, 2003,
we paid the holders of our Class B Common Stock cash
dividends totaling $5.6 million on each such date. We also
paid dividends on our Class B Common Stock totaling
$11 million in each of 2002 and 2001. On September 2,
2003 and March 3, 2003, we paid the holders of our
Class C Common Stock cash dividends totaling
$15.4 million and $15.3 million, respectively. We also
paid dividends on our Class C Common Stock totaling
$31 million in each of 2002 and 2001.
31
CORPORATE STRUCTURE AND
REORGANIZATION
Assurant, Inc. is a Delaware corporation and
is currently a wholly owned subsidiary of Fortis, Inc.
Assurant, Inc. has had no operations and nominal financial
activity and will be used solely for the purpose of the
reincorporation of Fortis, Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis N.V. and
Fortis SA/NV. Prior to the closing of this offering, we
will effectuate a merger of Fortis, Inc. with and into
Assurant, Inc. for the purpose of reincorporating Fortis,
Inc. in Delaware. As a result of the reorganization,
Assurant, Inc. will be domiciled in Delaware and will be
the successor to the business, operations and obligations of
Fortis, Inc. In connection with the reorganization, our
Company will use the name Assurant, Inc. The ongoing
operations of Assurant, Inc. will effectively be comprised
of the existing operations of Fortis, Inc. and its
subsidiaries. Our Class A Common Stock will become Common
Stock of Assurant, Inc. in connection with the merger.
In connection with our separation from Fortis, we
will change our name and the names of our business segments and
operating subsidiaries to include the name "Assurant,"
and we will cease using the Fortis name after a transition
period. Under the terms of a license from Fortis, we will have
only a limited amount of time to continue to use the Fortis
name. We will launch a re-branding initiative pursuant to which
we will change our brand name and most of our trademarks and
trade names under which we conduct our business.
32
CAPITALIZATION
The following table sets forth our consolidated
capitalization as of June 30, 2003. We will not receive any
proceeds from the sale of shares in this offering by the selling
stockholder.
You should read this table in conjunction with
"Selected Consolidated Financial Information" and
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated
financial statements and related notes that are included
elsewhere in this prospectus. See also "Certain
Relationships and Related Transactions," "Description
of Share Capital" and "Description of Other
Securities."
As of June 30, 2003
(unaudited)
(in thousands,
except share numbers)
Debt Outstanding:
Long-term senior debt
$
—
Mandatorily redeemable preferred securities of
    subsidiary trusts(1)(2):
2000 trust capital securities
550,000
1999 trust capital securities
699,850
1997 capital securities
196,224
Total mandatorily redeemable preferred securities
    of subsidiary trusts
1,446,074
Mandatorily redeemable preferred stock, par
    value $1.00 per share(1)
(20,000,000 shares authorized;
    19,160 shares of Series B Preferred Stock and
    5,000 shares of Series C Preferred Stock issued and
    outstanding)
24,160
Stockholders' Equity:
Common stock, par value $.10 per share
    (80,000,000 shares of common stock authorized):
Class A (7,750,000 shares issued and
    outstanding)(3)
775
Class B (150,001 shares issued and
    outstanding)
15
Class C (400,001 shares issued and
    outstanding)
40
Additional paid-in capital
2,064,025
Retained earnings
248,456
Accumulated other comprehensive income
465,579
Total stockholders' equity
2,778,890
Total Capitalization
$
4,249,124
(1)
These securities will be reclassified as debt
    upon adoption by the Company in the third quarter of 2003 of
    Financial Accounting Standards No. 150,
Accounting for
    Certain Financial Instruments with Characteristics of Both
    Liabilities and Equity.
(2)
The proceeds from the sale of preferred
    securities by each of the subsidiary trusts were used by the
    applicable trusts to purchase our subordinated debentures, which
    are eliminated upon consolidation. See "Description of
    Other Securities."
(3)
Our Class A Common Stock will become Common
    Stock, par value $.01 per share, of Assurant, Inc. in connection
    with the merger.
33
SELECTED CONSOLIDATED FINANCIAL
INFORMATION
The following table sets forth our selected
historical consolidated financial information for the periods
ended and as of the dates indicated. Assurant, Inc. is a
Delaware corporation and is currently a wholly owned subsidiary
of Fortis, Inc. Assurant, Inc. has had no operations and nominal
financial activity and will be used solely for the purpose of
the reincorporation of Fortis, Inc., which is organized as a
Nevada corporation and of which 100% of the outstanding common
stock is currently indirectly owned by Fortis N.V. and Fortis
SA/NV. Prior to the closing of this offering, we will effectuate
a merger of Fortis, Inc. with and into Assurant, Inc. for the
purpose of reincorporating Fortis, Inc. in Delaware. As a result
of the reorganization, Assurant, Inc. will be domiciled in
Delaware and will be the successor to the business, operations
and obligations of Fortis, Inc. In connection with the
reorganization, our Company will use the name Assurant, Inc. The
ongoing operations of Assurant, Inc. will effectively be
comprised of the existing operations of Fortis, Inc. and its
subsidiaries.
The selected consolidated statement of operations
data for each of the five years ended December 31, 2002 and
the selected consolidated balance sheet data as of
December 31, 2002, 2001, 2000, 1999 and 1998 are derived
from the audited consolidated financial statements of Fortis,
Inc. and its subsidiaries, which have been prepared in
accordance with GAAP. The audited consolidated financial
statements of Fortis, Inc. and its subsidiaries for the three
years in the period ended December 31, 2002 and as of
December 31, 2002 and 2001 have been included elsewhere in
this prospectus. The selected consolidated statement of
operations data for the six months ended June 30, 2003 and
the selected consolidated balance sheet data as of June 30,
2003 are derived from the unaudited interim financial statements
of Fortis, Inc. and its subsidiaries included elsewhere in this
prospectus. The unaudited interim financial statements have been
prepared on the same basis as the audited consolidated financial
statements of Fortis, Inc. and in our opinion, include all
adjustments consisting only of normal recurring adjustments,
that we consider necessary for a fair statement of our results
of operations and financial condition for these periods and as
of such dates. These historical results are not necessarily
indicative of expected results for any future period. The
results for the six months ended June 30, 2003 are not
necessarily indicative of results to be expected for the full
year. You should read the following selected consolidated
financial information together with the other information
contained in this prospectus, including "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and
related notes included elsewhere in this prospectus.
34
For the
Six Months Ended
June 30,
For the Year Ended December 31,
2003
2002
2002
2001
2000
1999
1998
(in thousands, except share amounts and per share data)
Selected Consolidated Statement of Operations
    Data:
Revenues
Net earned premiums and other considerations
$
2,987,029
$
2,787,519
$
5,681,596
$
5,242,185
$
5,144,375
$
4,508,795
$
3,056,550
Net investment income
305,885
310,539
631,828
711,782
690,732
590,487
491,947
Net realized gains (losses) on investments
7,474
(49,204
)
(118,372
)
(119,016
)
(44,977
)
13,616
88,185
Amortization of deferred gain on disposal of
    businesses
34,873
40,030
79,801
68,296
10,284
—
—
Gain on disposal of businesses
—
10,672
10,672
61,688
11,994
—
—
Fees and other income
119,881
125,435
246,675
221,939
399,571
357,878
307,780
Total revenues
3,455,142
3,224,991
6,532,200
6,186,874
6,211,979
5,470,776
3,944,462
Benefits, losses and expenses
Policyholder benefits
1,774,243
1,678,871
3,429,145
3,238,925
3,208,054
3,061,488
2,223,113
Amortization of deferred acquisition costs and
    value of businesses acquired
580,240
443,221
876,185
875,703
766,904
494,000
213,817
Underwriting, general and administrative expenses
794,120
842,390
1,738,077
1,620,931
1,801,196
1,649,811
1,270,854
Amortization of goodwill
—
—
—
113,300
106,773
57,717
12,836
Interest expense
—
—
—
14,001
24,726
39,893
33,831
Distributions on preferred securities of
    subsidiary trusts
58,566
58,716
118,396
118,370
110,142
53,824
16,713
Total benefits, losses and expenses
3,207,169
3,023,198
6,161,803
5,981,230
6,017,795
5,356,733
3,771,164
Income before income taxes
247,973
201,793
370,397
205,644
194,184
114,043
173,298
Income taxes
84,086
60,126
110,657
107,591
104,500
57,657
63,939
Net income before cumulative effect of change in
    accounting
principle
$
163,887
$
141,667
$
259,740
$
98,053
$
89,684
$
56,386
$
109,359
Cumulative effect of change in accounting
    principle
—
(1,260,939
)
(1,260,939
)
—
—
—
—
Effect of discontinued operations
—
—
—
—
—
—
(13,979
)
Net income (loss)
$
163,887
$
(1,119,272
)
$
(1,001,199
)
$
98,053
$
89,684
$
56,386
$
95,380
Per Share Data:
Net income (loss) per share
$
19.75
$
(134.85
)
$
(120.63
)
$
11.81
$
10.93
$
9.17
$
19.08
Weighted average of basic and diluted shares of
    common stock outstanding
8,300,002
8,300,002
8,300,002
8,300,002
8,208,335
6,145,883
5,000,000
Dividends per share:
Class A Common Stock(1)
$
17.98
$
—
$
—
$
8.65
$
—
$
—
$
—
Class B Common Stock(2)
37.15
36.52
74.69
75.44
37.66
—
—
Class C Common Stock(3)
38.13
37.50
76.68
77.45
38.65
—
—
35
As of
As of December 31,
June 30,
2003
2002
2001
2000
1999
1998
(in thousands, except share amounts and per share data)
Selected Consolidated Balance Sheet
    Data:
Cash and cash equivalents and investments
$
11,138,227
$
10,578,415
$
10,159,809
$
10,750,554
$
10,110,136
$
8,027,307
Total assets
22,738,162
22,218,009
24,449,877
24,115,139
22,216,730
14,577,790
Policy liabilities(4)
12,632,311
12,388,623
12,064,643
11,534,891
10,336,265
7,316,949
Debt
—
—
—
238,983
1,007,243
650,000
Mandatorily redeemable preferred securities of
    subsidiary trusts(5)
1,446,074
1,446,074
1,446,074
1,449,738
899,850
200,000
Mandatorily redeemable preferred stock
24,160
24,660
25,160
25,160
22,160
32,160
Total stockholders' equity
2,778,890
2,555,059
3,452,405
3,367,713
3,164,297
1,765,568
Per Share Data:
Total stockholders' equity per share(6)
$
334.81
$
307.84
$
415.95
$
410.28
$
514.86
$
353.11
(1)
For each of the periods (other than the year
    ended December 31, 1998) and dates (other than
    December 31, 1998) presented, 7,750,000 shares of our
    Class A Common Stock were issued and outstanding; these
    shares are held by Fortis Insurance N.V., Fortis (US) Funding
    Partners I LP and Fortis (US) Funding Partners II LP.
    For the year ended December 31, 1998 and as of
    December 31, 1998, 5,000,000 shares of our
    Class A Common Stock were issued and outstanding. See
    "Description of Share Capital — Class B and
    Class C Common Stock." Our existing Class A
    Common Stock will become Common Stock of Assurant, Inc. in
    connection with the merger of Fortis, Inc. with and into
    Assurant, Inc.
(2)
For each of the periods (other than the years
    ended December 31, 1999 and December 31, 1998) and
    dates (other than December 31, 1999 and December 31,
    1998) presented, 150,001 shares of our Class B Common Stock
    were issued and outstanding; these shares are held by Fortis
    (US) Funding Partners I LP. No shares of our Class B
    Common Stock were issued and outstanding for the years ended
    December 31, 1999 and December 31, 1998 or as of
    December 31, 1999 and December 31, 1998. See
    "Description of Share Capital — Class B and
    Class C Common Stock."
(3)
For each of the periods (other than the years
    ended December 31, 1999 and December 31, 1998) and
    dates (other than December 31, 1999 and December 31,
    1998) presented, 400,001 shares of our Class C Common Stock
    were issued and outstanding; these shares are held by Fortis
    (US) Funding Partners II LP. No shares of our Class C
    Common Stock were issued and outstanding for the years ended
    December 31, 1999 and December 31, 1998 or as of
    December 31, 1999 and December 31, 1998.
(4)
Policy liabilities include future policy benefits
    and expenses, unearned premiums and claims and benefits payable.
(5)
The proceeds from the sale of each of these
    securities were used by the applicable subsidiary trusts to
    purchase our subordinated debentures, which are eliminated upon
    consolidation. See "Description of Other Securities."
(6)
Based on total stockholders' equity divided
    by basic shares issued and outstanding.
36
MANAGEMENT'S DISCUSSION AND
ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of our
financial condition and results of operations should be read in
conjunction with our consolidated financial statements and
accompanying notes which appear elsewhere in this prospectus. It
contains forward-looking statements that involve risks and
uncertainties. Please see "Forward-Looking Statements"
for more information. Our actual results could differ materially
from those anticipated in these forward-looking statements as a
result of various factors, including those discussed below and
elsewhere in this prospectus, particularly under the headings
"Risk Factors" and "Forward-Looking
Statements."
General
We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed homeowners insurance,
manufactured housing homeowners insurance, debt protection
administration, credit insurance, warranties and extended
service contracts, individual health and small employer group
health insurance, group dental insurance, group disability
insurance, group life insurance and pre-funded funeral
insurance. The markets we target are generally complex, have a
relatively limited number of competitors and, we believe, offer
attractive profit opportunities.
We report our results through five segments:
Assurant Solutions, Assurant Health, Assurant Employee Benefits,
Assurant PreNeed and Corporate and Other. The Corporate and
Other segment includes activities of the holding company,
financing expenses, realized gains (losses) on investments and
interest income not allocated to other segments. The Corporate
and Other segment also includes (i) the results of
operations of FFG, a business we sold on April 2, 2001, and
(ii) long-term care (LTC), a business we sold on
March 1, 2000, for the periods prior to their disposition,
and amortization of deferred gains associated with the portions
of the sales of FFG and LTC sold through reinsurance agreements
as described below.
Critical Factors Affecting Results
Our profitability depends on the adequacy of our
product pricing, underwriting and the accuracy of our
methodology for the establishment of reserves for future
policyholder benefits and claims, returns on invested assets and
our ability to manage our expenses. As such, factors affecting
these items may have a material adverse effect on our results of
operations or financial condition.
Revenues
We derive our revenues primarily from the sale of
our insurance policies and, to a lesser extent, fee income by
providing administrative services to certain clients. Sales of
insurance policies are recognized in revenue as earned premiums
while sales of administrative services are recognized as fee
income. In late 2000, the majority of our credit insurance
clients began a transition from the purchase of our credit
insurance products from which we earned premium revenue to debt
protection administration programs, from which we earn fee
income.
Our premium and fee income is supplemented by
income earned from our investment portfolio. We recognize
revenue from interest payments, dividends and sales of
investments. Our investment portfolio is currently primarily
invested in fixed maturity securities. Both investment income
and realized capital gains on these investments can be
significantly impacted by changes in interest rates.
Interest rate volatility can reduce unrealized
gains or create unrealized losses in our portfolios. Interest
rates are highly sensitive to many factors, including
governmental monetary policies, domestic and international
economic and political conditions and other factors beyond our
control. Fluctuations in interest rates affect our returns on,
and the market value of, fixed maturity and short-term
investments.
The fair market value of the fixed maturity
securities in our portfolio and the investment income from these
securities fluctuate depending on general economic and market
conditions. The fair market value
37
generally increases or decreases in an inverse
relationship with fluctuations in interest rates, while net
investment income realized by us from future investments in
fixed maturity securities will generally increase or decrease
with interest rates. In addition, actual net investment income
and/or cash flows from investments that carry prepayment risk,
such as mortgage-backed and other asset-backed securities, may
differ from those anticipated at the time of investment as a
result of interest rate fluctuations. In periods of declining
interest rates, mortgage prepayments generally increase and
mortgage-backed securities, commercial mortgage obligations and
bonds in our investment portfolio are more likely to be prepaid
or redeemed as borrowers seek to borrow at lower interest rates,
and we may be required to reinvest those funds in lower
interest-bearing investments.
In addition, Assurant PreNeed generally writes
whole life insurance policies with increasing death benefits and
obtains much of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. As of June 30, 2003,
approximately 70% of Assurant PreNeed's in force insurance
policy reserves related to policies that provide for death
benefit growth, some of which provide for minimum death benefit
growth pegged to changes in the Consumer Price Index. In
extended periods of declining interest rates or high inflation,
there may be compression in the spread between Assurant
PreNeed's death benefit growth rates and its investment
earnings. As a result, declining interest rates or high
inflation rates may have a material adverse effect on our
results of operations and our overall financial condition.
Expenses
Our expenses primarily consist of policyholder
benefits, underwriting, general and administrative expenses, and
distributions on preferred securities of subsidiary trusts.
Selling, underwriting and general expenses
consist primarily of commissions, premium taxes, licenses, fees,
amortization of deferred acquisition costs (DAC) and value of
businesses acquired (VOBA) and general operating expenses. For a
description of DAC and VOBA, see Notes 2, 17 and 18 of the
Notes to Consolidated Financial Statements included elsewhere in
this prospectus.
Our profitability depends in large part on
accurately predicting benefits, claims and other costs,
including medical and dental costs. It also depends on our
ability to manage future benefit and other costs through product
design, underwriting criteria, utilization review or claims
management and, in health and dental insurance, negotiation of
favorable provider contracts. Changes in the composition of the
kinds of work available in the economy, market conditions and
numerous other factors may also materially adversely affect our
ability to manage claim costs. As a result of one or more of
these factors or other factors, claims could substantially
exceed our expectations, which could have a material adverse
effect on our business, results of operations and financial
condition.
Regulation
Legislation or other regulatory reform that
increases the regulatory requirements imposed on us or that
changes the way we are able to do business may significantly
harm our business or results of operations in the future. For
example, some states have imposed new time limits for the
payment of uncontested covered claims and require health care
and dental service plans to pay interest on uncontested claims
not paid promptly within the required time period. Some states
have also granted their insurance regulatory agencies additional
authority to impose monetary penalties and other sanctions on
health and dental plans engaging in certain "unfair payment
practices." If we were to be unable for any reason to
comply with these requirements, it could result in substantial
costs to us and may materially adversely affect our results of
operations and financial condition.
For other factors affecting our results of
operations or financial condition, see "Risk Factors."
38
Acquisitions and Dispositions of
Businesses
Our results of operations were affected by the
following transactions:
On October 10, 2002, we sold the Peer Review
and Analysis division (PRA) of CORE, Inc. (CORE) to MCMC, LLC,
an independent provider of medical analysis services. No gain or
loss was recognized on the sale of PRA.
On June 28, 2002, we sold our 50% ownership
in Neighborhood Health Partnership (NHP) to NHP Holding LLC. We
recorded a pre-tax gain on sale of $11 million, which was
included in the Corporate and Other segment.
On December 31, 2001, we acquired Protective
Life Corporation's Dental Benefits Division (DBD),
including the acquisition through reinsurance of
Protective's
indemnity
dental, life and disability
business and its prepaid dental subsidiaries. Total revenues of
$305 million and income after tax of $15 million were
generated by the DBD operations for the year ended
December 31, 2002. DBD is included in the Assurant Employee
Benefits segment.
On July 12, 2001, we acquired CORE, a
national provider of employee absence management services. Total
revenues of $31 million and income after tax of
$0.7 million were generated by the CORE operations from
July 12, 2001 through December 31, 2001, as compared
to total revenues of $66 million and income after tax of
$3 million in 2002. CORE is included in the Assurant
Employee Benefits segment.
On April 2, 2001, we sold our FFG business
to The Hartford primarily through a reinsurance arrangement.
Total revenues of $146 million and income after tax of
$8 million were generated by the FFG operations for the
three months ended March 31, 2001, compared to total
revenues of $679 million and income after tax of
$75 million during 2000. FFG included certain individual
life insurance policies, annuities and mutual fund operations.
The sale of the mutual fund operations resulted in
$62 million of pre-tax gains. The sale via reinsurance of
the individual life insurance policies and annuities resulted in
$558 million of pre-tax gains, which were deferred upon
closing and are being amortized over the remaining life of the
contracts. All activities related to FFG are included in the
Corporate and Other segment. See "— Critical
Accounting Policies."
Prior to April 2, 2001, FFG had issued
variable insurance
products that are required to be
registered as securities under the Securities Act. These
registered insurance contracts, which are no longer being sold,
have been 100% reinsured with The Hartford through
modified
coinsurance
agreements. The Hartford administers this closed
block of business pursuant to a third party administration
agreement. Since this block of business was sold through
modified coinsurance agreements, separate account assets and
separate account liabilities associated with these products
continue to be reflected in our financial statements. See the
line items entitled "Assets held in separate accounts"
and "Liabilities related to separate accounts" in our
consolidated balance sheets. The liabilities created by these
variable insurance policies are tied to the performance of
underlying investments held in separate accounts of the
insurance company that originally issued such policies. While we
own the separate account assets, the laws governing separate
accounts provide that the income, gains and losses from assets
in the separate account are credited to or charged against the
separate account without regard to other income, gains or losses
of the insurer. Further, the laws provide that the separate
account will not be charged with liabilities arising out of any
other business the insurer may conduct. The result of this
structure is that the assets held in the separate account
correspond to and are equal to the liabilities created by the
variable insurance contracts. At June 30, 2003, we had
separate account assets and liabilities of $3,531 million
compared to $4,809 million on April 2, 2001, the date
of the FFG sale.
On October 1, 2000, we acquired American
Memorial Life Insurance Company (AMLIC), a provider of
pre-funded funeral insurance products, from SCI. Total revenues
of $76 million and income after tax of $6 million were
generated by AMLIC from October 1, 2000 through
December 31, 2000, as compared to total revenues of
$343 million and income after tax of $26 million in
2001. AMLIC is included in the Assurant PreNeed segment.
39
On May 11, 2000, we sold Associated
California State Insurance Agencies, Inc. and Ardiel Insurance
Services, Inc. (together, ACSIA), our wholly owned subsidiaries,
to Conseco Corporation. ACSIA is a distributor of long-term care
insurance. We recorded $12 million of pre-tax gains on the
sale. Total revenues of $7 million and a loss after tax of
$1 million were generated by ACSIA from January 1,
2000 through May 11, 2000. All activities related to ACSIA
are included in the Corporate and Other segment.
On March 1, 2000, we sold our LTC insurance
business to John Hancock. The business was sold via a 100%
coinsurance
agreement whereby we ceded to John Hancock
substantially all assets and liabilities related to our LTC
business. The transaction resulted in an after-tax deferred gain
of approximately $34 million, which is being amortized over
the remaining lives of the related contracts. Total revenues of
$26 million and income after tax of $0 were generated by
our LTC business from January 1, 2000 through March 1,
2000. All activities related to LTC are included in the
Corporate and Other segment. See "— Critical
Factors Affecting Results — Acquisitions and
Dispositions of Businesses."
Comparing our results from period to period
requires taking into account these acquisitions and
dispositions. For a more detailed description of these
acquisitions and dispositions, see Notes 3 and 4 of the
Notes to Consolidated Financial Statements included elsewhere in
this prospectus.
Critical Accounting Policies
There are certain accounting policies that we
consider to be critical due to the amount of judgment and
uncertainty inherent in the application of those policies. In
calculating financial statement estimates, the use of different
assumptions could produce materially different estimates. In
addition, if factors such as those described above or in
"Risk Factors" cause actual events to differ from the
assumptions used in applying the accounting policies and
calculating financial estimates, there could be a material
adverse effect on our results of operations, financial condition
and liquidity.
We believe the following critical accounting
policies require significant estimates which, if such estimates
are not materially correct, could affect the preparation of our
consolidated financial statements.
Premiums
Short Duration Contracts
Our short duration contracts are those on which
we recognize revenue on a pro rata basis over the contract term.
Our short duration contracts primarily include group term life,
group disability, medical and dental, property, credit
insurance, warranties and extended service contracts.
Long Duration Contracts
Currently, our long duration contracts being sold
are pre-funded life insurance and annuities. Revenue is
recognized on the life insurance contracts when due over the
premium paying period. For annuity contracts, revenues consist
of charges assessed against policy balances.
For universal life insurance and annuity
contracts, no longer offered, revenues also consist of charges
assessed against policy balances.
For the FFG and LTC businesses previously sold,
all revenue is ceded to The Hartford and John Hancock,
respectively.
Reinsurance Assumed
Reinsurance premiums assumed are estimated based
on information received from ceding companies and any subsequent
differences arising on such estimates are recorded in the period
in which they are determined.
40
Fee Income
We derive income from fees received from
providing administration services. Fee income is earned when
services are performed.
Reserves
Reserves are established according to generally
accepted actuarial principles and are based on a number of
factors. These factors include experience derived from
historical claim payments and actuarial assumptions to arrive at
loss development factors. Such assumptions and other factors
include trends, the incidence of incurred claims, the extent to
which all claims have been reported and internal claims
processing charges. The process used in computing reserves
cannot be exact, particularly for liability coverages, since
actual claim costs are dependent upon such complex factors as
inflation, changes in doctrines of legal liability and damage
awards. The methods of making such estimates and establishing
the related liabilities are periodically reviewed and updated.
Reserves, whether calculated under GAAP or
statutory accounting principles, do not represent an exact
calculation of exposure, but instead represent our best
estimates, generally involving actuarial projections at a given
time, of what we expect the ultimate settlement and
administration of a claim or group of claims will cost based on
our assessment of facts and circumstances then known. The
adequacy of reserves will be impacted by future trends in claims
severity, frequency, judicial theories of liability and other
factors. These variables are affected by both external and
internal events, such as changes in the economic cycle, changes
in the social perception of the value of work, emerging medical
perceptions regarding physiological or psychological causes of
disability, emerging health issues and new methods of treatment
or accommodation, inflation, judicial trends, legislative
changes and claims handling procedures. Many of these items are
not directly quantifiable, particularly on a prospective basis.
Reserve estimates are refined as experience develops.
Adjustments to reserves, both positive and negative, are
reflected in the statement of operations of the period in which
such estimates are updated. Because establishment of reserves is
an inherently uncertain process involving estimates of future
losses, there can be no certainty that ultimate losses will not
exceed existing claims reserves. Future loss development could
require reserves to be increased, which could have a material
adverse effect on our earnings in the periods in which such
increases are made.
Short Duration Contracts
For short duration contracts, claims and benefits
payable reserves are recorded when insured events occur. The
liability is based on the expected ultimate cost of settling the
claims. The claims and benefits payable reserves include
(1) case base reserves for known but unpaid claims as of
the balance sheet date; (2)
incurred but not reported
(IBNR) reserves
for claims where the insured event has
occurred but has not been reported to us as of the balance sheet
date; and (3) loss adjustment expense reserves for the
expected handling costs of settling the claims.
For group disability, the case base reserves and
the IBNR are recorded at an amount equal to the net present
value of the expected claims future payments. Group long-term
disability reserves are discounted to the valuation date at the
valuation interest rate. The valuation interest rate is
determined by taking into consideration actual and expected
earned rates on our asset portfolio, with adjustments for
investment expenses and provisions for adverse deviation.
Unearned premium reserves are maintained for the
portion of the premiums on short duration contracts that is
related to the unexpired period of the policy.
We have exposure to asbestos, environmental and
other general liability claims arising from our participation in
various reinsurance pools from 1971 through 1983. This exposure
arose from a short duration contract that we discontinued
writing many years ago. We carried case reserves for these
liabilities as recommended by the various pool managers and bulk
reserves for IBNR of $40 million (before reinsurance) and
$39 million (after reinsurance) in the aggregate at
December 31, 2002. It is not possible to make a reasonable
actuarial estimate of the ultimate liabilities due to the
general lack of sufficiently detailed data, reporting delays,
and absence of a generally accepted actuarial methodology for
those exposures. There are
41
significant unresolved industry legal issues,
including such items as whether coverage exists and what
constitutes an occurrence. In addition, the determination of
ultimate damages and the final allocation of losses to
financially responsible parties are highly uncertain.
Accordingly, any estimation of these liabilities is subject to
greater than normal variation and uncertainty.
Long Duration Contracts
Future policy benefits and expense reserves on
LTC, life insurance policies and annuity contracts that are no
longer offered, individual medical and the traditional life
insurance contracts within FFG are recorded at the present value
of future benefits to be paid to policyholders and related
expenses less the present value of the future net premiums.
These amounts are estimated and include assumptions as to the
expected investment yield, inflation, mortality, morbidity and
withdrawal rates as well as other assumptions that are based on
our experience. These assumptions reflect anticipated trends and
include provisions for possible unfavorable deviations.
Future policy benefits and expense reserves for
pre-funded funeral annuities, universal life insurance policies
and annuity contracts that are no longer offered, and the
variable life insurance and annuity contracts in FFG consist of
policy account balances before applicable
surrender charges
and certain deferred policy initiation fees that are being
recognized in income over the terms of the policies. Policy
benefits charged to expense during the period include amounts
paid in excess of policy account balances and interest credited
to policy account balances.
The benefit liability for pre-funded funeral life
insurance contracts includes the amount of gross premium that is
received in excess of the net premium and accounted for as
unearned premium revenue.
See "— Reserves" below.
Deferred Acquisition Costs
(DAC)
The costs of acquiring new business that vary
with and are primarily related to the production of new business
have been deferred to the extent that such costs are deemed
recoverable from future premiums or gross profits. Acquisition
costs primarily consist of commissions, policy issuance
expenses, premium tax and certain direct marketing expenses.
A premium deficiency is recognized immediately by
a charge to the statement of operations as a reduction of DAC to
the extent that future policy premiums, including anticipation
of interest income, are not adequate to recover all DAC and
related claims, benefits and expenses.
Short Duration Contracts
DAC relating to property contracts, warranty and
extended service contracts and single premium credit insurance
contracts are amortized over the term of the contracts in
relation to premiums earned.
Acquisition costs relating to monthly pay credit
insurance business consist mainly of direct marketing costs and
are deferred and amortized over the estimated average terms of
the underlying contracts.
Acquisition costs on small group medical, group
term life and group disability consist primarily of commissions
to agents and brokers, which are level, and compensation to
representatives, which is spread out and is not front-end
loaded. These costs do not vary with the production of new
business. As a result, these costs are not deferred but rather
are recorded in the statement of operations in the period in
which they are incurred.
Long Duration Contracts
Acquisition costs for pre-funded funeral life
insurance policies and life insurance policies no longer offered
are deferred and amortized in proportion to anticipated premiums
over the premium-paying period.
42
For pre-funded funeral annuity contracts and
universal life insurance policies and annuity contracts that are
no longer offered, DAC is amortized in proportion to the present
value of estimated gross margins or profits from investment,
mortality, expense margins and surrender charges over the
estimated life of the policy or contract. The assumptions used
for the estimates are consistent with those used in computing
the policy or contract liabilities.
Acquisition costs relating to individual medical
contracts are deferred and amortized over the estimated average
terms of the underlying contracts.
Acquisition costs on the FFG and LTC disposed
businesses were written off when the businesses were sold.
Investments
We regularly monitor our investment portfolio to
ensure that investments that may be other than temporarily
impaired are identified in a timely fashion and properly valued
and that any impairments are charged against earnings in the
proper period. Our methodology to identify potential impairments
requires professional judgment.
Pursuant to our impairment process, each month
the portfolio holdings are screened for securities whose market
price is equal to 85% or less of their original purchase price.
Management then makes their assessment as to which of these
securities are other than temporarily impaired. Assessment
factors include, but are not limited to, the financial condition
and rating of the issuer, any collateral held and the length of
time the market value of the security has been below cost. Each
month the watchlist is discussed at a meeting attended by
members of our investment, accounting and finance departments.
Each quarter any security whose price decrease is deemed to have
been other than temporarily impaired is written down to its then
current market level, with the amount of the writedown reflected
in our statement of operations for that quarter. Previously
impaired issues are also monitored monthly, with additional
writedowns taken quarterly if necessary.
Inherently, there are risks and uncertainties
involved in making these judgments. Changes in circumstances and
critical assumptions such as a continued weak economy, a more
pronounced economic downturn or unforeseen events which affect
one or more companies, industry sectors or countries could
result in additional writedowns in future periods for
impairments that are deemed to be other than temporary. See also
"Investments" in Note 2 of the Notes to
Consolidated Financial Statements included elsewhere in this
prospectus.
Reinsurance
Reinsurance recoverables include amounts related
to paid benefits and estimated amounts related to unpaid policy
and contract claims, future policyholder benefits and
policyholder contract deposits. The cost of reinsurance is
accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account
for the policies. Amounts recoverable from reinsurers are
estimated in a manner consistent with claim and claim adjustment
expense reserves or future policy benefits reserves and are
reported in our consolidated balance sheets. The cost of
reinsurance related to long duration contracts is accounted for
over the life of the underlying reinsured policies. The ceding
of insurance does not discharge our primary liability to our
insureds. An estimated allowance for doubtful accounts is
recorded on the basis of periodic evaluations of balances due
from reinsurers, reinsurer solvency, management's
experience and current economic conditions.
Other Accounting Policies
For a description of other accounting policies
applicable to the periods covered by this prospectus, see
Note 2 of the Notes to Consolidated Financial Statements
included elsewhere in this prospectus.
43
New Accounting Standard
On January 1, 2002, we adopted Statement of
Financial Accounting Standards No. 142,
Goodwill and
Other Intangible Assets
(FAS 142). As of our adoption
of FAS 142, we ceased amortizing goodwill. In addition, we
were required to subject our goodwill to an initial impairment
test. As a result of FAS 142, we are required to conduct
impairment testing on an annual basis and between annual tests
if an event occurs or circumstances change indicating a possible
goodwill impairment. In the absence of an impairment event, our
net income will be higher as a result of not having to amortize
goodwill.
As a result of this initial impairment test, we
recognized a non-cash goodwill impairment charge of
$1,261 million. The impairment charge was recorded as a
cumulative effect of a change in accounting principle as of
January 1, 2002. The impairment charge had no impact on
cash flows or the statutory-basis capital and surplus of our
insurance subsidiaries. We also performed a January 1, 2003
impairment test during the six months ended June 30, 2003
and concluded that goodwill was not further impaired.
See "New Accounting Pronouncements" in
Note 2 of the Notes to Consolidated Financial Statements
included elsewhere in this prospectus for a description of
additional new accounting standards that are applicable to us.
44
Results of Operations
Consolidated Overview
The table below presents information regarding
our consolidated results of operations:
For the
Six Months
For the
Ended June 30,
Year Ended December 31,
2003
2002
2002
2001
2000
(in millions)
Revenues:
Net earned premiums and other considerations
$
2,987
$
2,788
$
5,681
$
5,242
$
5,144
Net investment income
306
310
632
712
691
Net realized gains (losses) on investments
7
(49
)
(118
)
(119
)
(45
)
Amortization of deferred gain on disposal of
    businesses
35
40
80
68
10
Gain on disposal of businesses
—
11
11
62
12
Fees and other income
120
125
246
222
400
Total revenues
3,455
3,225
6,532
6,187
6,212
Benefits, losses and expenses:
Policyholder benefits
(1,774
)
(1,679
)
(3,429
)
(3,239
)
(3,208
)
Selling, underwriting and general expenses(1)
(1,374
)
(1,285
)
(2,615
)
(2,497
)
(2,568
)
Amortization of goodwill
—
—
—
(113
)
(107
)
Interest expense
—
—
—
(14
)
(25
)
Distributions on preferred securities of
    subsidiary trusts
(59
)
(59
)
(118
)
(118
)
(110
)
Total benefits, losses and expenses
(3,207
)
(3,023
)
(6,162
)
(5,981
)
(6,018
)
Income before income taxes
248
202
370
206
194
Income taxes
(84
)
(60
)
(110
)
(108
)
(104
)
Net income before cumulative effect of change
    in accounting principle
164
142
260
98
90
Cumulative effect of change in accounting
    principle
—
(1,261
)
(1,261
)
—
—
Net income (loss)
$
164
$
(1,119
)
$
(1,001
)
$
98
$
90
(1)
Includes amortization of DAC and VOBA and
    underwriting, general and administrative expenses.
Note:
The table above includes amortization of goodwill
    in 2001 and 2000 and the cumulative effect of change in
    accounting principle in 2002 and for the six months ended
    June 30, 2002. These items are only included in this
    Consolidated Overview. As a result, the tables presented under
    the segment discussions do not total to the same amounts shown
    on this consolidated overview table. See Note 19 of the
    Notes to Consolidated Financial Statements included elsewhere in
    this prospectus.
Six Months Ended June 30, 2003 Compared
    to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $230 million, or
7%, from $3,225 million for the six month period ended
June 30, 2002, to $3,455 million for the six months
ended June 30, 2003.
Net earned premiums and other considerations
increased by $199 million, or 7%, from $2,788 million
for the six month period ended June 30, 2002, to
$2,987 million for the six month period ended June 30,
2003, largely as a result of increases in net earned premiums
from Assurant Solutions and Assurant Health. Net
45
earned premiums and other considerations
increased by $129 million, or 13%, in Assurant Solutions
and net earned premiums and other considerations also increased
by $65 million, or 7%, in Assurant Health.
Net investment income decreased by
$4 million, or 1%, from $310 million for the six
months ended June 30, 2002, to $306 million for the
six months ended June 30, 2003. The decrease was primarily
due to a decrease in achieved investment yields, driven by the
lower interest rate environment. The yield on average invested
assets was 5.94% (annualized) for the six months ended
June 30, 2003, as compared to 6.31% (annualized) for
the six months ended June 30, 2002.
Net realized gains on investments increased by
$56 million from net realized losses on investments of
$49 million for the six months ended June 30, 2002, to
net realized gains of $7 million for the six months ended
June 30, 2003. Net realized losses on investments are
comprised of both other-than-temporary impairments and realized
capital gains/losses on sales of securities. For the six months
ended June 30, 2003, we had other-than-temporary
impairments of $16 million, as compared to $38 million
for the six months ended June 30, 2002. There were no
individual impairments in excess of $10 million for the six
months ended June 30, 2003. Impairments of available for
sale securities in excess of $10 million during the six
months ended June 30, 2002 consisted of a $12 million
writedown of fixed maturity investments in AT&T Canada Inc.
(AT&T Canada) and an $11 million writedown of fixed
maturity investments in MCI WorldCom Inc. (MCI WorldCom).
Excluding the effect of other than temporary impairments, we
recorded an increase in net realized gains of $31 million
in the Corporate and Other segment.
Amortization of deferred gain on disposal of
businesses decreased by $5 million, or 13%, from
$40 million for the six months ended June 30, 2002, to
$35 million for the six months ended June 30, 2003.
The decrease was consistent with the run-off of the business
ceded to The Hartford and John Hancock.
Gain on disposal of businesses decreased by
$11 million, or 100%, from $11 million for the six
months ended June 30, 2002 to $0 for the six months ended
June 30, 2003. On June 28, 2002, we sold our
investment in NHP, which resulted in pre-tax gains of
$11 million for the six months ended June 30, 2002.
Fees and other income decreased by
$5 million, or 4%, from $125 million for the six
months ended June 30, 2002 to $120 million for the six
months ended June 30, 2003.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$184 million, or 6%, from $3,023 million for the six
months ended June 30, 2002 to $3,207 million for the
six months ended June 30, 2003.
Policyholder benefits increased by
$95 million, or 6%, from $1,679 million for the six
months ended June 30, 2002, to $1,774 million for the
six months ended June 30, 2003. The increase was primarily
due to a $64 million increase in the Assurant Solutions
segment and a $28 million increase in Assurant Health.
Selling, underwriting and general expenses
primarily consist of commissions, premium taxes, licenses, fees,
amortization of DAC and VOBA and general operating expenses.
These expenses increased by $89 million, or 7%, from
$1,285 million for the six months ended June 30, 2002,
to $1,374 million for the six months ended June 30,
2003. The Assurant Solutions and Assurant Health segments
together contributed $84 million of this increase primarily
due to additional commission costs as a result of growth in
their businesses, partially offset by a $3 million decrease
at Assurant Employee Benefit's CORE line of business.
Distributions on preferred securities of
subsidiary trusts during the six months ended June 30, 2003
remained unchanged from the six months ended June 30, 2002
at $59 million.
Net Income
Net income increased $1,283 million from a
loss of $1,119 million for the six months ended
June 30, 2002, to a profit of $164 million for the six
months ended June 30, 2003.
Income taxes increased by $24 million, or
40%, from $60 million for the six months ended
June 30, 2002, to $84 million for the six months ended
June 30, 2003. The effective tax rate for the six months
ended June 30,
46
2002 was 29.7% compared to 33.9% for the six
months ended June 30, 2003. The change in the effective
rate is principally due to the release of approximately
$6 million in the six months ended June 30, 2002 of
previously provided tax accruals which were no longer considered
necessary based on the resolution of certain domestic tax
matters.
A cumulative effect (expense) of changes in
accounting principles of $1,261 million was recognized for
the six months ended June 30, 2002, as compared to $0
recognized for the six months ended June 30, 2003.
Effective January 1, 2002, we adopted FAS 142, pursuant to
which we ceased amortization of goodwill. See "—New
Accounting Standard" and Note 2 of the Notes to
Consolidated Financial Statements included elsewhere in this
prospectus for a discussion of this new accounting standard.
Year Ended December 31, 2002 Compared to
    December 31, 2001
Total Revenues
Total revenues increased by $345 million, or
6%, from $6,187 million in 2001 to $6,532 million in
2002.
Net earned premiums and other considerations
increased by $439 million, or 8%, from $5,242 million
in 2001 to $5,681 million in 2002. Excluding the effect of
the various acquisitions and dispositions described above, net
earned premiums and other considerations increased mainly due to
strong growth in Assurant Solutions primarily as a result of
growth in new business and in Assurant PreNeed primarily due to
an increase in the average size of policies sold by the AMLIC
division.
Net investment income decreased by
$80 million, or 11%, from $712 million in 2001 to
$632 million in 2002. The decrease was primarily due to a
decrease in achieved investment yields, driven by the lower
interest rate environment and a decrease in average invested
assets of $290 million. The yield on average invested
assets was 6.27% for the year ended December 31, 2002 as
compared to 6.86% for the year ended December 31, 2001.
This reflected lower yields on fixed maturity securities and
commercial mortgages.
Net realized losses on investments decreased by
$1 million, or 1%, from $119 million in 2001 to
$118 million in 2002. In 2002, we had other-than-temporary
impairments of $85 million, as compared to $78 million
in 2001. Impairments of available for sale securities in excess
of $10 million in 2002 consisted of an $18 million
writedown of fixed maturity investments in NRG Energy Inc. (NRG
Energy), a $12 million writedown of fixed maturity
investments in AT&T Canada and an $11 million writedown
of fixed maturity investments in MCI WorldCom. Impairments of
available for sale securities in excess of $10 million in
2001 consisted of a $22 million writedown of fixed maturity
investments in Enron Corp. (Enron).
Amortization of deferred gain on disposal of
businesses increased by $12 million, or 18%, from
$68 million in 2001 to $80 million in 2002. The
increase was primarily due to a full year of amortization of the
deferred gain on the sale of FFG as compared to nine months in
2001. This deferred gain on sale is discussed in more detail
under "—Corporate and Other" below.
Gain on disposal of businesses decreased by
$51 million, or 82%, from $62 million in 2001 to
$11 million in 2002. The $62 million reflects the gain
on the sale of FFG's mutual fund operations. The
$11 million reflected the pre-tax gain on the sale of NHP.
Fees and other income increased by
$24 million, or 11%, from $222 million in 2001 to
$246 million in 2002. The increase was primarily due to a
full year of fee income from CORE and an increase in fee income
from the Assurant Solutions segment, mainly from their credit
insurance business transitioning to debt protection
administration. In late 2000, the majority of Assurant
Solutions' credit insurance clients began a transition from
use of our credit insurance products to debt protection
administration programs, from which we earn fee income rather
than net earned premiums and where margins are lower than in the
traditional credit insurance programs. However, because debt
protection administration is not an insurance product, certain
costs such as regulatory costs and cost of capital are expected
to be eliminated as the transition from credit insurance to debt
protection administration services continues. The fees from debt
protection administration did not fully compensate for the
decrease in credit insurance premiums. See
"Business—Operating Business Segments—Assurant
Solutions—Consumer Protection Solutions." The increases
47
were partially offset by a $42 million, or
63%, decrease from the Corporate and Other segment due to the
sale of FFG (partially through reinsurance), which had
$65 million of fee income (generated from mutual fund
operations included in such sale) in the first quarter of 2001.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$181 million, or 3%, from $5,981 million in 2001 to
$6,162 million in 2002.
Policyholder benefits increased by
$190 million, or 6%, from $3,239 million in 2001 to
$3,429 million in 2002. The increase was primarily due to
the effects of the acquisitions and dispositions described
above. The increases were also partially offset by a
$84 million, or 6%, decrease from the Assurant Health
segment, primarily due to higher mix of individual health
insurance business, which generally has a lower expected loss
ratio relative to small employer group business, disciplined
pricing and product design changes.
Selling, underwriting and general expenses
increased by $118 million, or 5%, from $2,497 million
in 2001 to $2,615 million in 2002. The Assurant Employee
Benefits segment contributed $106 million of this increase,
primarily due to the DBD and CORE acquisitions. This increase
was offset by a $65 million decrease in the Corporate and
Other segment due to the sale of FFG. The Assurant Health
segment increased by $50 million, primarily due to an
increase in the amortization of DAC and due to costs associated
with higher employee compensation and investments in technology.
Also, the Assurant PreNeed segment increased by
$22 million, primarily due to increase in amortization of
DAC and VOBA as a result of an increase in sales of single pay
policies and increases in general expenses.
Amortization of goodwill was $0 in 2002 compared
to $113 million in 2001, as a result of our adoption of
FAS 142 as described above.
Interest expense decreased from $14 million
in 2001 to $0 in 2002. In April 2001, we used a portion of the
FFG sale proceeds to repay $225 million of outstanding debt
owed to Fortis Finance N.V. (Fortis Finance), a wholly owned
subsidiary of Fortis.
Distributions on preferred securities of
subsidiary trusts in 2002 remained unchanged from 2001 at
$118 million.
Net Income
Net income decreased by $1,099 million from
a profit of $98 million in 2001 to a loss of
$1,001 million in 2002.
Income taxes increased by $2 million, or 2%,
from $108 million in 2001 to $110 million in 2002. The
effective tax rate for 2002 was 29.7% compared to 52.4% in 2001.
The change in the effective tax rate primarily related to the
elimination of amortization of goodwill in 2002.
When we adopted FAS 142 in 2002, we
recognized a cumulative effect (expense) of change in accounting
principle of $1,261 million in 2002 as compared to $0
recognized in 2001.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues decreased by $25 million, or
0.4%, from $6,212 million in 2000 to $6,187 million in
2001.
Net earned premiums and other considerations
increased by $98 million, or 2%, from $5,144 million
in 2000 to $5,242 million in 2001. Excluding the
$71 million increase as a result of the acquisitions and
dispositions described above, net earned premiums and other
considerations increased by $27 million due to a
$126 million increase at Assurant Solutions and a
$23 million increase in 2001 in dental products issued by
Assurant Employee Benefits. Offsetting these increases was a
$129 million decrease in 2001 in net earned premiums and
other considerations in Assurant Health due to declining
membership in its small employer group health insurance product
line.
48
Net investment income increased by
$21 million, or 3%, from $691 million in 2000 to
$712 million in 2001. The increase was primarily due to an
increase in investment yields in 2001. The yield on average
invested assets and cash was 6.86% for the year ended
December 31, 2001, compared to 6.55% for the year ended
December 31, 2000. This reflected higher yields on fixed
maturity securities and commercial mortgage loans due in part to
a higher interest rate environment.
Net realized losses on investments increased by
$74 million, or 164%, from $45 million in 2000 to
$119 million in 2001. In 2001, we had other-than-temporary
impairments on fixed maturity securities of $78 million, as
compared to $5 million in 2000. Impairments of available
for sale securities in excess of $10 million in 2001
consisted of a $22 million writedown of fixed maturity
investments in Enron.
Amortization of deferred gains on disposal of
businesses increased by $58 million, from $10 million
in 2000 to $68 million in 2001, mainly due to the
recognition of nine months of amortization of the FFG deferred
gain compared to $0 in 2000.
Gain on disposal of business increased by
$50 million from $12 million in 2000 to
$62 million in 2001. The increase was due to
$62 million of gains recognized on the sale of FFG's
mutual fund management operations in 2001, as compared to
$12 million of gains recognized on the sale of ACSIA in
2000.
Fees and other income decreased by
$178 million, or 45%, from $400 million in 2000 to
$222 million in 2001. Excluding the $211 million
decrease as a result of the acquisitions and dispositions
described above, fees and other income increased by
$36 million largely as a result of increased fees generated
by our mortgage servicing business and fees from administering
debt protection programs in Assurant Solutions.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$37 million, or 1.6%, from $6,018 million in 2000 to
$5,981 million in 2001.
Policyholder benefits increased by
$31 million, or 1%, from $3,208 million in 2000 to
$3,239 million in 2001. Excluding the $10 million
decrease as a result of the acquisitions and dispositions
described above, policyholder benefits increased by
$41 million due to a $115 million increase at Assurant
Solutions as a result of growth in its business. Assurant
Employee Benefits contributed an additional increase of
$36 million due to corresponding growth in its dental and
disability product businesses. Offsetting these increases was a
$192 million decrease in Assurant Health as a result of
improved loss experience and decreases in its small employer
group health insurance business.
Selling, underwriting and general expenses
decreased by $71 million, or 3%, from $2,568 million
in 2000 to $2,497 million in 2001. Excluding the
$159 million decrease as a result of the acquisitions and
dispositions described above, selling, underwriting and general
expenses increased by $88 million, mainly due to a
$140 million increase at Assurant Solutions attributable to
additional commission expenses associated with growth in sales
of its warranty and extended service contract products. The
Corporate and Other segment offset the increase by $43 million,
primarily due to two months of selling, underwriting and general
expenses in 2000 associated with our LTC operations which were
sold to John Hancock on March 1, 2000.
Amortization of goodwill increased by
$6 million, or 6%, from $107 million in 2000 to
$113 million in 2001.
Interest expense decreased by $11 million,
or 44%, from $25 million in 2000 to $14 million in
2001 mainly due to less debt outstanding during 2001 compared to
2000. In April 2001, we used a portion of the FFG sale proceeds
to repay $225 million of debt owed to Fortis Finance.
Distributions on preferred securities of
subsidiary trusts increased by $8 million, or 7%, from
$110 million in 2000 to $118 million in 2001, mainly
due to twelve months of interest related to trust originated
preferred securities, which were issued in March 2000.
49
Net Income
Net income increased by $8 million, or 9%,
from $90 million in 2000 to $98 million in 2001.
Income taxes increased by $4 million, or 4%,
from $104 million in 2000 to $108 million in 2001. The
increase was consistent with the 6% increase in income before
income taxes.
Assurant Solutions
Overview
The table below presents information regarding
Assurant Solutions' results of operations:
For the
Six Months
Ended
For the
June 30,
Year Ended December 31,
2003
2002
2002
2001
2000
(in millions)
Revenues:
Net earned premiums and other considerations
$
1,124
$
995
$
2,077
$
1,906
$
1,780
Net investment income
96
101
205
218
212
Fees and other income
68
57
119
98
68
Total revenues
1,288
1,153
2,401
2,222
2,060
Benefits, losses and expenses:
Policyholder benefits
(410
)
(346
)
(755
)
(640
)
(525
)
Selling, underwriting and general expenses
(776
)
(710
)
(1,449
)
(1,444
)
(1,304
)
Total benefits, losses and expenses
(1,186
)
(1,056
)
(2,204
)
(2,084
)
(1,829
)
Segment income before income tax
102
97
197
138
231
Income taxes
(33
)
(32
)
(65
)
(40
)
(76
)
Segment income after tax
$
69
$
65
$
132
$
98
$
155
Net earned premiums and other considerations
    by major product groupings:
Specialty Property Solutions(1)
342
255
552
452
413
Consumer Protection Solutions(2)
782
740
1,525
1,454
1,367
Total
$
1,124
$
995
$
2,077
$
1,906
$
1,780
(1)
"Specialty Property Solutions" includes
    a variety of specialized property insurance programs that are
    coupled with unique administrative capabilities.
(2)
"Consumer Protection Solutions"
    includes an array of debt protection administration services,
    credit insurance programs and warranties and extended service
    contracts.
Six Months Ended June 30, 2003 Compared
    to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $135 million, or
12%, from $1,153 million for the six months ended
June 30, 2002, to $1,288 million for the
six months ended June 30, 2003.
Net earned premiums and other considerations
increased by $129 million, or 13%, from $995 million
for the six months ended June 30, 2002, to
$1,124 million for the six months ended June 30, 2003.
This increase was primarily due to $87 million of
additional net earned premiums and other considerations
attributable to our specialty property solutions products,
including approximately $60 million from our
creditor-placed and voluntary homeowners insurance and
manufactured housing homeowners insurance lines from new clients
and
50
increased sales through growth in existing
clients. Consumer protection solutions also contributed
$42 million in net earned premiums and other considerations
primarily from growth in our warranty and extended service
contracts business.
Net investment income decreased by
$5 million, or 5%, from $101 million for the six
months ended June 30, 2002, to $96 million for the six
months ended June 30, 2003. The average portfolio yield
dropped 32 basis points from 6.04% (annualized) for the six
months ended June 30, 2002, to 5.72% (annualized) for the
six months ended June 30, 2003 due to the lower interest
rate environment. The average invested assets remained
relatively flat.
Fees and other income increased by
$11 million, or 19%, from $57 million for the six
months ended June 30, 2002, to $68 million for the six
months ended June 30, 2003, mainly from the continuing
transition of our credit insurance business to our debt
protection administration business.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$130 million, or 12%, from $1,056 million for the six
months ended June 30, 2002 to $1,186 million for the
six months ended June 30, 2003.
Policyholder benefits increased by
$64 million, or 19%, from $346 million for the six
months ended June 30, 2002, to $410 million for the
six months ended June 30, 2003. This increase was due in
part to $41 million in growth in our creditor-placed and
voluntary homeowners insurance and our manufactured housing
homeowners insurance lines. Our consumer protection solutions
products also contributed $19 million, primarily related to
the increase in business in our extended service and warranty
products business.
Selling, underwriting and general expenses
increased by $66 million, or 9%, from $710 million for
the six months ended June 30, 2002, to $776 million
for the six months ended June 30, 2003. Commissions, taxes,
licenses and fees increased by $52 million primarily due to
$38 million of growth in our extended service and warranty
products and $11 million in growth in our manufactured
housing homeowners insurance and creditor-placed and voluntary
homeowners insurance lines. General expenses increased by
$14 million, primarily from start up costs related to new
clients in the creditor-placed homeowners insurance area.
Segment Income After Tax
Segment income after tax increased by
$4 million, or 6%, from $65 million for the six months
ended June 30, 2002, to $69 million for the six months
ended June 30, 2003. Excluding the decrease in investment
income of $3 million after-tax, the segment income after
tax increased by $7 million, or 11%.
Income taxes increased by $1 million, or 3%,
from $32 million for the six months ended June 30,
2002, to $33 million for the six months ended June 30,
2003. This increase was due primarily to the increase in segment
income before income tax of $5 million.
Year Ended December 31, 2002 Compared to
    December 31, 2001
Total Revenues
Total revenues increased by $179 million, or
8%, from $2,222 million in 2001 to $2,401 million in
2002.
Net earned premiums and other considerations
increased by $171 million, or 9%, from $1,906 million
in 2001 to $2,077 million in 2002. The increase was
primarily due to approximately $100 million of additional
net earned premiums from our specialty property solutions
products, including approximately $86 million from the
growth of our creditor-placed and voluntary homeowners
insurance,
flood insurance
and manufactured housing
related property coverages. Consumer protection solutions
contributed an additional $71 million to the increase in
net earned premiums due to the growth of $56 million
attributable to our warranty and extended service contracts
business and $58 million from an
accidental death and
dismemberment
product, which we started selling in 2001 and
stopped selling in 2002. These increases were partly offset by
the decrease in credit insurance products of approximately
$60 million as the transition from credit insurance
products to debt protection administration programs continued
and fees from debt protection administration programs did not
51
fully compensate for the decrease in credit
insurance premiums. See "Business—Operating Business
Segments— Assurant Solutions—Consumer Protection
Solutions".
Net investment income decreased by
$13 million, or 6%, from $218 million in 2001 to
$205 million in 2002. The average portfolio yield dropped
39 basis points from 6.51% in 2001 to 6.12% in 2002 due to
the lower interest rate environment. This decrease was partially
offset by the reinvestment of tax advantaged investments, such
as preferred stock, low-income housing tax credit investments
and tax-exempt municipal bonds, into higher yield taxable
investments. Average invested assets remained relatively flat.
Fees and other income increased by
$21 million, or 21%, from $98 million in 2001 to
$119 million in 2002, including $13 million in
additional fee income resulting from our credit insurance
business transitioning to debt protection administration
services.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$120 million, or 6%, from $2,084 million in 2001 to
$2,204 million in 2002.
Policyholder benefits increased by
$115 million, or 18%, from $640 million in 2001 to
$755 million in 2002. Consumer protection solutions
benefits contributed $98 million of this increase due to
approximately $52 million from the warranty and extended
service contracts business and $58 million from an
accidental death and disability product. The increase was partly
offset by the decrease in benefits in credit insurance products
of approximately $14 million, which related to the decrease
in premiums resulting from the transition to debt protection
administration products. The growth of our specialty property
solutions product lines also contributed a further
$17 million to the increase in policyholder benefits in
2002, including approximately $10 million of losses related
to Hurricane Lili and Arizona wildfires.
Selling, underwriting and general expenses
increased by $5 million, or less than 1%, from
$1,444 million in 2001 to $1,449 million in 2002.
Commissions, taxes, licenses and fees contributed
$22 million to the increase. The increase was primarily in
our specialty property solutions business from the growth in the
creditor-placed homeowners and manufactured housing homeowners
insurance products. This increase was offset by a decrease in
general expenses of $16 million in the six months ended
June 30, 2003, primarily due to a non-recurring cost
incurred in 2001.
Segment Income After Tax
As a result of the foregoing, segment income
after tax increased by $34 million, or 35%, from
$98 million in 2001 to $132 million in 2002.
Income taxes increased $25 million, or 62%,
from $40 million in 2001 to $65 million in 2002. The
increase was primarily due to a 43% increase in segment income
before income tax. The majority of the remaining increase was
due to an increase in our effective tax rate primarily due to
our decision to reduce our ownership of tax-advantaged
investments.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues increased by $162 million, or
8%, from $2,060 million in 2000 to $2,222 million in
2001.
Net earned premiums and other considerations
increased by $126 million, or 7%, from $1,780 million
in 2000 to $1,906 million in 2001. The increase was
primarily due to $87 million of additional earned premiums
in our consumer protection solutions products, including
approximately $120 million from our extended service and
warranty contract products mainly resulting from the addition of
a new client in late 2000. This increase was largely offset by a
$68 million decrease in our credit insurance products as
result of the transition from use of our credit insurance
products to debt protection administration programs.
52
Net earned premiums in our specialty property
solutions business increased by $39 million from 2000 to
2001, primarily from new business growth in our creditor-placed
homeowners insurance and manufactured housing homeowners
insurance product lines.
Net investment income increased by
$6 million, or 3%, from $212 million in 2000 to
$218 million in 2001. The average portfolio yield dropped
18 basis points from 6.69% in 2000 to 6.51% in 2001 due to
the lower interest rate environment. Average invested assets
increased by approximately 6% in 2001.
Fees and other income increased by
$30 million, or 44%, from $68 million in 2000 to
$98 million in 2001. The increase was primarily due to an
increase of $6 million in administrative services fees in
the mortgage services area and $9 million due to growth in
the warranty and extended service contracts business. An
additional $8 million increase was recorded as a result of
customers transitioning to our debt protection administration
services.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$255 million, or 14%, from $1,829 million in 2000 to
$2,084 million in 2001.
Policyholder benefits increased by
$115 million, or 22%, from $525 million in 2000 to
$640 million in 2001. Consumer protection solutions
benefits increased by $87 million primarily related to the
growth in our extended service and warranty contract products.
Specialty property solutions benefits increased by
$27 million in 2001 primarily due to new clients and growth
in business at existing clients in the creditor-placed
homeowners insurance and manufactured housing homeowners
insurance product lines.
Selling, underwriting and general expenses
increased by $140 million, or 11%, from $1,304 million
in 2000 to $1,444 million in 2001. Commissions, taxes,
licenses and fees increased by $67 million, or 8%. The
increase was attributable to $59 million of commissions
from growth in the warranty and extended service contracts
business, offset by a decrease of approximately $14 million
in commissions payable on distribution of credit insurance
products due to the decrease in net earned premiums in this
product line. General expenses increased $72 million, or
15%, from 2000 to 2001. In 2001, we made a strategic decision to
exit certain lines of business that were determined not to be
core products. Additionally, we decided to close two separate
sites to eliminate duplicate costs and consolidate them in our
home office with existing staff. We incurred non-recurring
expenses of $37 million in 2001, including $14 million
in employee separation costs related to these decisions.
Furthermore, our expenses increased by $22 million in 2001
due to additional costs related to growth in our creditor-placed
homeowners insurance business.
Segment Income After Tax
Segment income after tax decreased by
$57 million, or 37%, from $155 million in 2000 to
$98 million in 2001. Assurant Solutions overall results in
2001 were affected by our decision to exit certain lines of
business and close separate sites and also by the increase in
expenses related to the growth in the creditor-placed homeowners
insurance product. The majority of the remaining decrease was
attributable to the transition from credit insurance to debt
protection administration services.
Income taxes decreased by $36 million, or
47%, from $76 million in 2000 to $40 million in 2001.
The decrease was due primarily to the decrease in segment income
before income tax of $93 million in 2001.
53
Assurant Health
Overview
The table below presents information regarding
Assurant Health's results of operations:
For the
Six Months
Ended
For the
June 30,
Year Ended December 31,
2003
2002
2002
2001
2000
(in millions except membership data)
Revenues:
Net earned premiums and other considerations
$
969
$
904
$
1,834
$
1,838
$
1,967
Net investment income
25
28
55
58
58
Fees and other income
15
10
23
14
11
Total revenues
1,009
942
1,912
1,910
2,036
Benefits, losses and expenses:
Policyholder benefits
(630
)
(602
)
(1,222
)
(1,306
)
(1,498
)
Selling, underwriting and general expenses
(283
)
(265
)
(546
)
(496
)
(471
)
Total benefits, losses and expenses
(913
)
(867
)
(1,768
)
(1,802
)
(1,969
)
Segment income before income tax
96
75
144
108
67
Income taxes
(34
)
(26
)
(49
)
(37
)
(23
)
Segment income after tax
$
62
$
49
$
95
$
71
$
44
Loss ratio(1)
65.0
%
66.6
%
66.6
%
71.1
%
76.2
%
Expense ratio(2)
28.8
%
29.0
%
29.4
%
26.8
%
23.8
%
Combined ratio(3)
92.8
%
94.9
%
95.2
%
97.3
%
99.5
%
Membership by product line (in
    thousands):
Individual
715
650
670
600
500
Small employer group
360
375
355
420
585
Total
1,075
1,025
1,025
1,020
1,085
(1)
The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
(2)
The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
(3)
The combined ratio is equal to total benefits,
    losses and expenses divided by net earned premiums and other
    considerations and fees and other income.
Six Months Ended June 30, 2003 Compared
    to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $67 million, or
7%, from $942 million for the six months ended
June 30, 2002 to $1,009 million for the six months
ended June 30, 2003.
Net earned premiums and other considerations
increased by $65 million, or 7%, from $904 million for
the six months ended June 30, 2002, to $969 million
for the six months ended June 30, 2003. An increase of
$74 million in the net earned premiums attributable to our
individual health insurance products in the six months ended
June 30, 2003 was offset by a decrease of $9 million
attributable to our small employer group health insurance
products in the six months ended June 30, 2003. Net earned
premiums attributable to our individual health insurance
business increased due to membership growth, premium rate
increases and favorable lapse experience on renewal business.
Net earned premiums attributable to our small employer group
health insurance business decreased due to declining membership
largely, we believe, as employers reduced the number of their
employees. We instituted premium rate increases in selected
markets to
54
sufficiently price for the underlying medical
costs of existing business and for anticipated future medical
trends.
Net investment income decreased by
$3 million, or 11%, from $28 million for the six
months ended June 30, 2002, to $25 million for the six
months ended June 30, 2003. There was a 70 basis point
decrease in yield on the investment portfolio from 6.60%
(annualized) for the six months ended June 30, 2002,
to 5.90% (annualized) for the six months ended
June 30, 2003, due to the lower interest rate environment.
Offsetting the decrease in yield was a 3% increase in average
invested assets for the six months ended June 30, 2003,
over the comparable period in 2002.
Fees and other income increased by
$5 million, or 50%, from $10 million for the six
months ended June 30, 2002, to $15 million for the six
months ended June 30, 2003, due to additional insurance
policy fees and higher fee-based product sales in our individual
health insurance business, such as sales of our non-insurance
health access discount cards.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$46 million, or 5%, from $867 million for the six
months ended June 30, 2002, to $913 million for the
six months ended June 30, 2003.
Policyholder benefits increased by
$28 million, or 5%, from $602 million for the six
months ended June 30, 2002 to $630 million for the six
months ended June 30, 2003. This increase was consistent
with the increase in earned premiums. The loss ratio improved
160 basis points from 66.6% for the six months ended
June 30, 2002, to 65.0% for the six months ended
June 30, 2003, due to our risk management activities.
Selling, underwriting and general expenses
increased by $18 million, or 7%, from $265 million for
the six months ended June 30, 2002, to $283 million
for the six months ended June 30, 2003. Commissions
decreased by $8 million reflecting a higher mix of first
year individual health insurance business, for which policy
acquisition costs are deferred and amortized in subsequent
years. Amortization of DAC increased by $14 million in the
six months ended June 30, 2003, due to higher sales of
individual health insurance products beginning in 2000. General
expenses increased by $12 million due to higher employee
compensation and additional spending to improve claims
experience. The expense ratio improved 20 basis points from
29.0% for the six months ended June 30, 2002, to 28.8% for
the six months ended June 30, 2003.
Segment Income After Tax
Segment income after tax increased by
$13 million, or 27%, from $49 million for the six
months ended June 30, 2002, to $62 million for the six
months ended June 30, 2003.
Income taxes increased by $8 million, or
31%, from $26 million for the six months ended
June 30, 2002, to $34 million for the six months ended
June 30, 2003. The increase was consistent with the 28%
increase in segment income before income tax during the six
months ended June 30, 2003.
Year Ended December 31, 2002 Compared to
    December 31, 2001
Total Revenues
Total revenues remained virtually unchanged from
2001 to 2002, at $1,910 million in 2001 as compared to
$1,912 million in 2002.
Net earned premiums and other considerations also
remained stable from 2001 to 2002, at $1,838 million in
2001 as compared to $1,834 in 2002, with an increase of
$142 million in 2002 in the net earned premiums
attributable to our individual health insurance products being
offset by a decrease of $146 million during such year in
net earned premiums attributable to our small employer group
health insurance products. Net earned premiums attributable to
our individual health insurance business increased due to
membership growth, premium rate increases and favorable lapse
experience on renewal business. Net earned premiums attributable
to our small employer group health insurance business decreased
due to declining membership, partially offset by small employer
group premium rate increases that we instituted in selected
markets to adequately price for the underlying medical costs of
existing business and for anticipated future medical trends.
55
Net investment income decreased by
$3 million, or 5%, from $58 million in 2001 to
$55 million in 2002. There was a 90 basis point decrease in
yield on the investment portfolio from 7.4% in 2001 to 6.5% in
2002 mainly due to the lower interest rate environment.
Partially offset by the decrease in yield was a 7% increase in
average invested assets in 2002.
Fees and other income increased by
$9 million, or 64%, from $14 million in 2001 to
$23 million in 2002 due to additional insurance policy fees
and higher fee-based product sales in our individual health
insurance business.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$34 million, or 2%, from $1,802 million in 2001 to
$1,768 million in 2002.
Policyholder benefits decreased by
$84 million, or 6%, from $1,306 million in 2001 to
$1,222 million in 2002. This decrease was principally due
to a higher mix of individual health insurance business which
had a lower loss ratio relative to small employer group health
insurance business, primarily due to disciplined pricing and
product design changes. The loss ratio improved 450 basis points
from 71.1% in 2001 to 66.6% in 2002 due to the higher mix of
individual health insurance business, increased premium rates
and product design changes.
Selling, underwriting and general expenses
increased by $50 million, or 10%, from $496 million in
2001 to $546 million in 2002. Taxes, licenses and fees
increased by $5 million in 2002, or 13%, due to a change in
the mix of business by state and legal entity, and the loss of
favorable consolidated premium tax return benefits triggered by
the disposition of FFG. The amortization of DAC increased by $21
million in 2002, or 49%, due to higher sales of individual
health insurance products beginning in 2000. General expenses
increased by $34 million in 2002, or 13%, due to
investments in technology, higher employee compensation and
additional spending to achieve loss ratio improvements.
Partially offsetting these increases was a $10 million, or
7%, decrease in commissions due to a higher mix of first year
individual health insurance business. Individual health
insurance policy acquisition costs are deferred and amortized in
subsequent years.
The expense ratio increased by 260 basis points
from 26.8% in 2001 to 29.4% in 2002. This increase was primarily
attributable to the higher commissions on the mix of business in
individual health insurance, investments in technology, higher
employee compensation and additional spending to achieve loss
ratio improvements.
Segment Income After Tax
Segment income after tax increased by
$24 million, or 34%, from $71 million in 2001 to
$95 million in 2002.
Income taxes increased by $12 million, or
32%, from $37 million in 2001 to $49 million in 2002.
The increase was consistent with the 33% increase in segment
income before income tax in 2002.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues decreased by $126 million, or
6%, from $2,036 million in 2000 to $1,910 million in
2001.
Net earned premiums and other considerations
decreased by $129 million, or 7%, from $1,967 million
in 2000 to $1,838 million in 2001. A decrease of
$248 million in 2001 in the net earned premiums
attributable to our small employer group health insurance
products was partially offset by an increase of
$119 million in net earned premiums attributable to our
individual health insurance products in 2001. Net earned
premiums for small employer group health insurance products
decreased due to declining membership that resulted primarily
from premium increases required to restore profitability to the
block of business. Net earned premiums attributable to our
individual health insurance business increased due to premium
rate increases and membership growth.
56
Net investment income remained unchanged at
$58 million in 2001. A 40 basis point increase in yield on
the investment portfolio from 7.00% in 2000 to 7.40% in 2001
offset a 5% decrease in average invested assets in 2001.
Fees and other income increased by
$3 million, or 27%, from $11 million in 2000 to
$14 million in 2001.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$167 million, or 8%, from $1,969 million in 2000 to
$1,802 million in 2001.
Policyholder benefits decreased by
$192 million, or 13%, from $1,498 million in 2000 to
$1,306 million in 2001. This decrease was due to a
reduction in persons insured, an increasing mix of individual
health insurance business and improved small employer group
health insurance loss experience. The loss ratio improved 510
basis points from 76.2% in 2000 to 71.1% in 2001 due to
increased premium rates, product design changes and the
increased mix of individual health insurance business.
Selling, underwriting and general expenses
increased by $25 million, or 5%, from $471 million in
2000 to $496 million in 2001. The increase was driven by an
increase in general expenses of $35 million, primarily due
to additional spending to achieve loss ratio improvements,
investments in technology and higher employee compensation.
Offsetting this increase was a decrease in commissions, taxes,
licenses and fees of $15 million in 2001, principally due
to the decrease in small employer group health insurance
products sold.
The expense ratio increased 290 basis points from
23.8% in 2000 to 26.8% in 2001 due to investments in technology
and additional spending to achieve loss ratio improvements.
Segment Income After Tax
Segment income after tax increased by
$27 million, or 61%, from $44 million in 2000 to
$71 million in 2001.
Income taxes increased by $14 million, or
61%, from $23 million in 2000 to $37 million in 2001.
The increase was consistent with the 61% increase in segment
income before income tax in 2001.
57
Assurant Employee Benefits
Overview
The table below presents information regarding
Assurant Employee Benefits' results of operations:
For the
Six Months
Ended
For the
June 30,
Year Ended December 31,
2003
2002
2002
2001
2000
(in millions)
Revenues:
Net earned premiums and other considerations
$
623
$
621
$
1,233
$
934
$
903
Net investment income
70
72
148
144
136
Fees and other income
33
37
74
39
8
Total revenues
726
730
1,455
1,117
1,047
Benefits, losses and expenses:
Policyholder benefits
(471
)
(481
)
(945
)
(738
)
(702
)
Selling, underwriting and general expenses
(214
)
(217
)
(422
)
(316
)
(280
)
Total benefits, losses and expenses
(685
)
(698
)
(1,367
)
(1,054
)
(982
)
Segment income before income tax
41
32
88
63
65
Income taxes
(14
)
(11
)
(31
)
(22
)
(23
)
Segment income after tax
$
27
$
21
$
57
$
41
$
42
Loss ratio(1)
75.6
%
77.5
%
76.6
%
79.0
%
77.7
%
Expense ratio(2)
32.6
%
33.0
%
32.3
%
32.5
%
30.7
%
Premium persistency ratio(3)
88.5
%
89.6
%
79.9
%
84.3
%
88.5
%
Net earned premiums and other considerations
    by major product groupings:
Group dental
$
273
$
280
$
553
$
257
$
234
Group disability
218
199
400
398
387
Group life
132
142
280
279
282
Total
$
623
$
621
$
1,233
$
934
$
903
(1)
The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
(2)
The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
(3)
The premium persistency ratio is equal to the
    year-to-date (not annualized) rate at which existing business
    for all issue years at the beginning of the period remains in
    force at the end of the period. Persistency is typically higher
    mid-year than at year-end. The calculations for the year ended
    December 31, 2002 and the six months ended June 30,
    2002 exclude DBD.
We acquired DBD on December 31, 2001 and
CORE on July 12, 2001; therefore, the results of DBD and
CORE are included in our Assurant Employee Benefits segment
financial results beginning in 2002 and July 2001, respectively.
Six Months Ended June 30, 2003 Compared
    to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $6 million, or
0.8%, from $730 million for the six months ended
June 30, 2002, to $726 million for the six months
ended June 30, 2003.
58
Net earned premiums and other considerations
increased by $2 million, or 0.3%, from $621 million
for the six months ended June 30, 2002, to
$623 million for the six months ended June 30, 2003.
The increase was primarily due to $19 million of growth in
the six months ended June 30, 2003 in group disability
premiums driven by reinsurance assumed in our Disability
Reinsurance Management Services, Inc. (DRMS) pool as described
in "Business — Operating Business
Segments — Assurant Employee Benefits". This was
partially offset by a decline in group life premiums of
$10 million in the six months ended June 30, 2003, due
to our non-renewal of certain unprofitable business and less new
business due to continued pricing discipline. In addition, group
dental premiums declined by $7 million in the six months
ended June 30, 2003 due to the non-renewal of a large
account. This resulted in an aggregate premium persistency of
88.5% for the six months ended June 30, 2003, compared to
89.6% for the six months ended June 30, 2002. Premium
persistency measures the proportionate premium levels remaining
after year-to-date lapse activity. The premium persistency ratio
encompasses the effects of rate increases, plan design changes
and benefit volume changes.
Net investment income decreased by
$2 million, or 3%, from $72 million for the six months
ended June 30, 2002, to $70 million for the six months
ended June 30, 2003. Investment yields decreased from 6.94%
(annualized) for the six months ended June 30, 2002, to
6.44% (annualized) for the six months ended June 30, 2003,
due to declining yields on new investments. Average invested
assets increased by 7% between reporting periods, driven by the
increase in disability revenues.
Fees and other income decreased by
$4 million, or 11%, from $37 million for the six
months ended June 30, 2002, to $33 million for the six
months ended June 30, 2003. The decrease was primarily due
to lower fee revenue from CORE. The fee revenues for CORE were
$32 million for the six months ended June 30, 2002
versus $28 million for the same period in 2003.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$13 million, or 2%, from $698 million for the six
months ended June 30, 2002 to $685 million for the six
months ended June 30, 2003.
Policyholder benefits decreased by
$10 million, or 2%, from $481 million for the six
months ended June 30, 2002, to $471 million for the
six months ended June 30, 2003. This was driven by
favorable development in group disability claims and lower
claims activity due to a reduction in group life and dental
earned premiums.
The loss ratio improved by 190 basis points from
77.5% for the six months ended June 30, 2002 to 75.6% for
the six months ended June 30, 2003. This was driven by
favorable group disability experience.
Selling, underwriting and general expenses
decreased by $3 million, or 1%, from $217 million for
the six months ended June 30, 2002, to $214 million
for the six months ended June 30, 2003. General expenses
decreased by $2 million in the six months ended
June 30, 2003, from the six months ended June 30,
2002, due to decreased spending in the CORE line of business.
The expense ratio decreased by 40 basis points
from 33.0% for the six months ended June 30, 2002 to 32.6%
for the six months ended June 30, 2003. This was driven by
decreased spending at CORE, as well as a slight reduction in
commissions.
Segment Income After Tax
Segment income after tax increased by
$6 million, or 29%, from $21 million for the six
months ended June 30, 2002, to $27 million for the six
months ended June 30, 2003.
Income taxes increased by $3 million, or
27%, from $11 million for the six months ended
June 30, 2002, to $14 million for the six months ended
June 30, 2003. The increase was consistent with the 28%
increase in segment income before income tax.
59
Year Ended December 31, 2002 Compared to
    Year Ended December 31, 2001
Total Revenues
Total revenues increased by $338 million, or
30%, from $1,117 million in 2001 to $1,455 million in 2002,
substantially all of which was attributable to the acquisition
of DBD.
Net earned premiums and other considerations
increased by $299 million, or 32%, from $934 million
in 2001 to $1,233 million in 2002. Excluding the
$299 million increase in net earned premiums due to the
acquisition of DBD, net earned premiums were unchanged at
$934 million from 2001 to 2002, primarily because new
business was offset by non-renewal of certain unprofitable
business. An additional contributing factor was increased
pressure on ancillary employee benefits provided by employer
groups due to increased medical costs. Premium persistency
(excluding the DBD acquisition) decreased by 440 basis points
from 84.3% for 2001 to 79.9% for 2002 because of disciplined
underwriting and reduced employment in renewed groups.
Net investment income increased by
$4 million from $144 million in 2001 to
$148 million in 2002. The DBD acquisition contributed an
increase of $4 million to investment income in 2002. This
increase was offset in part by a decrease of $1 million as
a result of a decrease in investment yields by 54 basis points
from 7.53% in 2001 to 6.99% in 2002 due to the lower interest
rate environment.
Fees and other income increased by
$35 million, or 90%, from $39 million in 2001 to
$74 million in 2002 primarily due to a full year of fee
revenue from CORE, which was acquired on July 12, 2001.
CORE fee revenue was $66 million in 2002, as compared to
the half-year of revenue recorded in 2001 of $31 million.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$313 million, or 30%, from $1,054 million in 2001 to
$1,367 million in 2002.
Policyholder benefits increased by
$207 million, or 28%, from $738 million in 2001 to
$945 million in 2002. Excluding the $197 million
increase related to the acquisition of DBD, policyholder
benefits increased by $10 million, or 1%, driven by growth
in group dental premiums. Our loss ratio improved 240 basis
points from 79.0% in 2001 to 76.6% in 2002. Excluding the effect
of the DBD acquisition, the loss ratio in 2002 was 80.1%, which
was higher than in 2001 due to slight deterioration in group
dental and group life experience.
Selling, underwriting and general expenses
increased by $106 million, or 34%, from $316 million
in 2001 to $422 million in 2002 primarily due to the DBD
and CORE acquisitions. The expense ratio was virtually unchanged
between 2001 and 2002.
Segment Income After Tax
Segment income after tax increased by
$16 million, or 39%, from $41 million in 2001 to
$57 million in 2002.
Income taxes increased by $9 million, or
41%, from $22 million in 2001 to $31 million in 2002.
The increase was consistent with the 40% increase in segment
income before income tax.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues increased by $70 million, or
6%, from $1,047 million in 2000 to $1,117 million in
2001.
Net earned premiums and other considerations
increased by $31 million, or 3%, from $903 million in
2000 to $934 million in 2001. Net earned premiums
attributable to dental products increased $23 million in
2001 primarily due to increased sales of recently developed
products with PPOs and lower-cost plan options. Group disability
products contributed a further $11 million increase in 2001
to net earned premiums while net earned premiums attributable to
our group life products decreased by $3 million in 2001.
The stable premium
60
level from 2000 to 2001 was primarily due to
non-renewal of certain unprofitable business. This led to an
aggregate premium persistency of 84.3% for 2001, which was 420
basis points below the prior year.
Net investment income increased by
$8 million, or 6%, from $136 million in 2000 to
$144 million in 2001. Invested assets increased by 6% and
investment yields increased by eight basis points from 7.45% in
2000 to 7.53% in 2001.
Fees and other income increased by
$31 million from $8 million in 2000 to
$39 million in 2001 mainly due to fee income earned by CORE
in 2001.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$72 million, or 7%, from $982 million in 2000 to
$1,054 million in 2001.
Policyholder benefits increased by
$36 million, or 5%, from $702 million in 2000 to
$738 million in 2001. The increase resulted from revenue
growth in the dental and disability product lines, as well as
unfavorable group life mortality experience compared to 2000,
when we experienced positive mortality results. The loss ratio
increased 130 basis points from 77.7% in 2000 to 79.0% in 2001.
The increased loss ratio was primarily due to unfavorable group
life mortality experience as compared to 2000, as explained
above.
Selling, underwriting and general expenses
increased by $36 million, or 13%, from $280 million in
2000 to $316 million in 2001. The increase was primarily
due to the acquisition of CORE, which contributed
$31 million to such expenses.
The expense ratio increased 180 basis points from
30.7% in 2000 to 32.5% in 2001. Excluding the effect of the CORE
acquisition, the expense ratio was virtually unchanged between
2000 and 2001.
Segment Income After Tax
Segment income after tax decreased by
$1 million, or 2%, from $42 million in 2000 to
$41 million in 2001.
Income taxes also decreased by $1 million or
4%, from $23 million in 2000 to $22 million in 2001,
which was consistent with the decrease in segment income before
income tax in 2001.
61
Assurant PreNeed
Overview
The table below presents information regarding
Assurant PreNeed's results of operations:
For the
Six Months
For the
Ended
Year Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions)
Revenues:
Net earned premiums and other considerations
$
271
$
268
$
538
$
507
$
277
Net investment income
93
93
184
179
128
Fees and other income
3
3
5
3
2
Total revenues
367
364
727
689
407
Benefits, losses and expenses:
Policyholder benefits
(263
)
(250
)
(507
)
(485
)
(279
)
Selling, underwriting and general expenses
(75
)
(73
)
(143
)
(121
)
(76
)
Total benefits, losses and expenses
(338
)
(323
)
(650
)
(606
)
(355
)
Segment income before income tax
29
41
77
83
52
Income taxes
(10
)
(15
)
(27
)
(29
)
(18
)
Segment income after tax
$
19
$
26
$
50
$
54
$
34
Net earned premiums and other considerations
    by channel:
AMLIC
$
147
$
152
$
306
$
278
$
60
Independent
124
116
232
229
217
Total
$
271
$
268
$
538
$
507
$
277
We acquired AMLIC on October 1, 2000, and
therefore the results of AMLIC are included in our Assurant
PreNeed segment financial results beginning October 1, 2000.
Six Months Ended June 30, 2003 Compared
    to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $3 million, or
0.8%, from $364 million for the six months ended
June 30, 2002, to $367 million for the six months
ended June 30, 2003.
Net earned premiums and other considerations
increased by $3 million, or 1%, from $268 million for
the six months ended June 30, 2002, to
$271 million for the six months ended June 30,
2003. Net earned premiums in our independent channel increased
by $8 million in the six months ended June 30, 2003
due to the shift towards more single premium business. This
increase was partially offset by a decrease in the six months
ended June 30, 2003 of $5 million of net earned
premiums in our AMLIC channel due to a decline of 26% in new
sales from SCI, AMLIC's principal customer.
Net investment income of $93 million
remained the same for the six months ended June 30,
2003, compared to the six months ended June 30, 2002.
A 9% increase in average invested assets was offset by a 50
basis point decrease in the annualized investment yield of 7.14%
at June 30, 2002, to 6.64% at June 30, 2003. This rate
decline reduced net investment income by $7 million for the
six months ended June 30, 2003, over 2002 levels. This
decline in yields was due to the lower interest rate environment
and the restructuring of the portfolio in 2002 to improve credit
quality.
62
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$15 million, or 5%, from $323 million for the
six months ended June 30, 2002, to $338 million
for the six months ended June 30, 2003.
Policyholder benefits increased by
$13 million, or 5%, from $250 million for the
six months ended June 30, 2002, to $263 million
for the six months ended June 30, 2003. This was due
to the normal growth in the inforce block of business.
Selling, underwriting and general expenses
increased by $2 million, or 3%, from $73 million for
the six months ended June 30, 2002, to
$75 million for the six months ended June 30,
2003. Amortization of DAC and VOBA increased by $6 million
in the six months ended June 30, 2003, principally due to a
larger in force block of business and the increased sales of
single pay policies versus plans paid over a three-, five- or
ten-year period. The acquisition costs on single pay plans are
amortized in the year of issue, causing the increase in expense
levels in the six months ended June 30, 2003 over the
comparable period in 2002. Offsetting this increase was a
decrease of $6 million in commission, taxes, licenses and
fees during the six months ended June 30, 2003, due to
the drop in new sales. General expenses increased by
$3 million during the six months ended June 30,
2003, from the comparable period in 2002.
Segment Income After Tax
Segment income after tax decreased by
$7 million, or 27%, from $26 million for the
six months ended June 30, 2002, to $19 million
for the six months ended June 30, 2003. This was
caused primarily by smaller spreads between our investment
yields and rates we credited on pre-funded funeral insurance
policies. In extended periods of declining interest rates or
high inflation, the profits on pre-funded funeral insurance
policies are reduced as a result of the lower spread between
investment income earned and the fixed benefits credited to our
policyholders. As of June 30, 2003, approximately 70% of
Assurant PreNeed's in force insurance policy reserves
related to policies that provide for death benefit growth, some
of which provide for minimum death benefit growth pegged to
changes in the Consumer Price Index.
Income taxes decreased by $5 million, or
33%, from $15 million for the six months ended
June 30, 2002 to $10 million for the six months ended
June 30, 2003, largely consistent with the 29% decrease in
segment income before income tax.
Year Ended December 31, 2002 Compared to
    December 31, 2001
Total Revenues
Total revenues increased by $38 million, or
6%, from $689 million in 2001 to $727 million in 2002.
Net earned premiums and other considerations
increased by $31 million, or 6%, from $507 million in
2001 to $538 million in 2002. The increase was primarily
driven by a $28 million increase in net earned premiums in
2002 in our AMLIC channel due to an increase in the average size
of the policies sold. Policy size increased due to a change in
packaging of funerals sold by SCI.
Net investment income increased by
$5 million, or 3%, from $179 million in 2001 to
$184 million in 2002. An 8% increase in average invested
assets in 2002 resulting from the growth in inforce policies
resulted in $14 million of additional investment income in
2002. Offsetting the increase in invested assets was a 36 basis
point decrease in yield on the investment portfolio from 7.29%
in 2001 to 6.93% in 2002 due to the lower interest rate
environment and restructuring of the investment portfolio to
enhance credit quality. The decline in yields reduced investment
income by $9 million in 2002.
Fees and other income increased by
$2 million, or 66%, from $3 million in 2001 to
$5 million in 2002.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$44 million, or 7%, from $606 million in 2001 to
$650 million in 2002.
63
Policyholder benefits increased by
$22 million, or 5%, from $485 million in 2001 to
$507 million in 2002. The increase in policyholder benefits
was consistent with the increase in business written, partially
offset by other factors. A portion of our pre-funded funeral
insurance policies uses a Consumer Price Index rate as a growth
rate credited on policies. The Consumer Price Index rate
decreased from 3.36% in 2001 to 1.97% in 2002. This reduced
policyholder benefits by $6 million in 2002. In addition,
benefit expense increased by $3 million from 2001 to 2002
related to higher customer utilization of an early pay off
feature that allows conversion from limited pay policies to
single pay policies.
Selling, underwriting and general expenses
increased by $22 million or 18% from $121 million in
2001 to $143 million in 2002. The primary reason for the
increase was an increase in amortization of DAC and VOBA of
$13 million in 2002, as a result of the increased sales of
single pay policies versus plans paid over a three-, five- and
ten-year period. The acquisition costs on single pay policies
are amortized in the year of issue, thus causing the increase in
expense levels in 2002 over 2001. All other expenses increased
by $6 million in 2002 from 2001 due primarily to the
increase in premiums.
Segment Income After Tax
Segment income after tax decreased
$4 million, or 7%, from $54 million in 2001 to
$50 million in 2002. This was caused primarily by smaller
spreads between our investment yields and rates we credited to
our policyholders. Also, profits were lower due to higher
utilization of the early pay off feature described above and
higher mortality, offset by the lower Consumer Price Index
credited growth.
Income taxes decreased by $2 million, or 7%,
from $29 million in 2001 to $27 million in 2002 which
was largely consistent with the 7% decrease in segment income
before income tax in 2002.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues increased by $282 million, or
69%, from $407 million in 2000 to $689 million in 2001.
Net earned premiums and other considerations
increased by $230 million, or 83%, from $277 million
in 2000 to $507 million. Excluding the increase to net
earned premiums of $218 million due to the acquisition of
AMLIC, net earned premiums increased by $13 million
primarily due to growth in our independent channel's
inforce block of business and to increased sales from the
signing of new large third-party marketing distributors. In late
2000, we began pursuing large third-party marketers as an
additional source of distribution, diversifying our traditional
channels of captive field representatives and independent agents
specializing in pre-funded funeral insurance products.
Investment income increased by $51 million,
or 40%, from $128 million in 2000 to $179 million in
2001. Excluding the net increase to investment income of
$47 million due to the acquisition of AMLIC, investment
income increased by $4 million. This was primarily due to
an increase in yield on the investment portfolio from 7.27% in
2000 to 7.36% in 2001 with the balance of the increase due to
growth in assets.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$251 million, or 71%, from $355 million in 2000 to
$606 million in 2001.
Policyholder benefits increased by
$206 million, or 74%, from $279 million in 2000 to
$485 million in 2001. Excluding the increase to
policyholder benefits of $196 million as a result of the
acquisition of AMLIC, the policyholder benefits in our
independent channel increased by $10 million in 2001, or
4%, consistent with the 6% increase in net earned premiums in
2001.
Selling, underwriting and general expenses
increased by $45 million, or 59%, from $76 million in
2000 to $121 million in 2001. The increase was primarily
due to the acquisition of AMLIC.
64
Segment Income After Tax
Segment income after tax increased by
$20 million, or 59%, from $34 million in 2000 to
$54 million in 2001. Increases of $20 million after
tax contribution was due to the AMLIC acquisition.
Income taxes increased by $11 million, or
61%, from $18 million in 2000 to $29 million in 2001.
The increase in income tax expense was consistent with the 62%
increase in segment income before income tax in 2001.
Corporate and Other
Overview
The Corporate and Other segment includes
activities of the holding company, financing expenses, realized
gains (losses) on investments and interest income not allocated
to other segments. The Corporate and Other segment also includes
(i) the results of operations of FFG (a business we sold on
April 2, 2001) and (ii) LTC (a business we sold on
March 1, 2000), for the periods prior to their disposition,
and amortization of deferred gains associated with the portions
of the sales of FFG and LTC sold through reinsurance agreements
as described above. The table below presents information
regarding our Corporate and Other segment's results of
operations:
For the
Six Months
For the
Ended
Year Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions)
Revenues:
Net earned premiums and other considerations
$
—
$
—
$
—
$
58
$
217
Net investment income
22
16
40
112
157
Net realized gains (losses) on investments
7
(49
)
(118
)
(119
)
(45
)
Amortization of deferred gain on disposal of
    businesses
35
40
80
68
10
Gain on disposal of businesses
—
11
11
62
12
Fees and other income
1
19
25
67
311
Total revenues
65
37
38
248
662
Benefits, losses and expenses:
Policyholder benefits
—
—
—
(70
)
(204
)
Selling, underwriting and general expenses
(25
)
(21
)
(55
)
(120
)
(437
)
Interest expense
—
—
—
(14
)
(25
)
Distributions on preferred securities of
    subsidiary trusts
(59
)
(59
)
(118
)
(118
)
(110
)
Total benefits, losses and expenses
(84
)
(80
)
(173
)
(322
)
(776
)
Segment income before income tax
(19
)
(43
)
(135
)
(74
)
(114
)
Income taxes
7
23
61
21
36
Segment income after tax
$
(12
)
$
(20
)
$
(74
)
$
(53
)
$
(78
)
As of June 30, 2003, we had approximately
$434 million (pre-tax) of deferred gains that had not yet
been amortized. We expect that we will be amortizing deferred
gains from dispositions through 2031. The deferred gains are
being amortized in a pattern consistent with the expected future
reduction of the inforce blocks of business ceded to The
Hartford and John Hancock. This reduction is expected to be more
rapid in the first few years after sale and to be slower as the
liabilities in the block decrease.
65
The Corporate and Other segment's financial
results were most affected by the April 2, 2001 sale of
FFG. Below are the results of FFG that have been included in the
Corporate and Other segment from January 1, 2001 through
March 31, 2001, and for 2000:
For the Year
Ended
December 31,
2001
2000
(in millions)
Revenues:
Net earned premiums
$
49
$
196
Net investment income
32
179
Fees and other income
65
304
Total revenues
146
679
Benefits, losses and expenses:
Policyholder benefits
(48
)
(211
)
Selling, underwriting and general expenses
(86
)
(360
)
Total benefits, losses and expenses
(134
)
(571
)
Reportable income results before income
    tax
12
108
Income taxes
(4
)
(33
)
Reportable income results after tax
$
8
$
75
Six Months Ended June 30, 2003 Compared
to Six Months Ended June 30, 2002
Total Revenues
Total revenues increased by $28 million, or
76%, from $37 million for the six months ended
June 30, 2002, to $65 million for the six months ended
June 30, 2003.
Net investment income increased by
$6 million, or 38%, from $16 million for the six
months ended June 30, 2002, to $22 million for the six
months ended June 30, 2003.
Net realized gains on investments improved by
$56 million from net realized losses on investments of
$49 million for the six months ended June 30, 2002, to
net realized gains on investments of $7 million for the six
months ended June 30, 2003. Net realized losses on
investments are comprised of both other-than-temporary
impairments and sales of securities. For the six months ended
June 30, 2003, we had other-than-temporary impairments of
$16 million, as compared to $38 million for the six
months ended June 30, 2002. There were no individual
impairments in excess of $10 million for the six months
ended June 30, 2003. Impairments of available for sale
securities in excess of $10 million for the six months
ended June 30, 2002 consisted of a $12 million
writedown of fixed maturity investments in AT&T Canada and
an $11 million writedown of fixed maturity investments in
MCI WorldCom.
Amortization of deferred gain on disposal of
businesses decreased by $5 million, or 13%, from
$40 million for the six months ended June 30, 2002, to
$35 million for the six months ended June 30, 2003. This
decrease was consistent with the run-off of the business ceded
to The Hartford and John Hancock.
Gains on disposal of businesses decreased by
$11 million, or 100%, from $11 million for the six months
ended June 30, 2002, to $0 for the six months ended
June 30, 2003. On June 28, 2002, we sold our
investment in NHP, which resulted in pre-tax gains of
$11 million in the six months ended June 30, 2002.
Fees and other income decreased by
$18 million, or 95%, from $19 million for the six
months ended June 30, 2002 to $1 million for the six
months ended June 30, 2003. Fees and other income for the
six months ended June 30, 2002 included approximately
$14 million of income associated with a settlement true-up
of a
66
1999 sale of a small block of business to a third
party and reversal of bad debt allowances due to successful
collection of receivables that had been previously written off.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses increased by
$4 million, or 5%, from $80 million for the six months
ended June 30, 2002, to $84 million for the six months
ended June 30, 2003.
Selling, underwriting and general expenses
increased by $4 million, or 19%, from $21 million for
the six months ended June 30, 2002, to $25 million for
the six months ended June 30, 2003 mainly due to higher
corporate expenses.
Distributions on preferred securities of
subsidiary trusts during the six months ended June 30, 2003
remained unchanged from the comparable period in 2002 at
$59 million.
Segment Loss After Tax
Segment loss after tax improved by
$8 million, or 40%, from a loss of $20 million for the
six months ended June 30, 2002, to a loss of $12 million
for the six months ended June 30, 2003.
Income taxes decreased by $16 million from
an income tax benefit of $23 million for the six months
ended June 30, 2002, to an income tax benefit of
$7 million for the six months ended June 30, 2003.
During the six months ended June 30, 2002, we recognized
the release of approximately $6 million of previously
provided tax accruals which were no longer considered necessary
based on the resolution of certain domestic tax matters.
Year Ended December 31, 2002 Compared to
December 31, 2001
Total Revenues
Total revenues decreased by $210 million, or
85%, from $248 million in 2001 to $38 million in 2002.
Net earned premiums and other considerations
decreased by $58 million, or 100%, from $58 million in
2001 to $0 million in 2002 due to the sale of FFG.
Net investment income decreased by
$72 million, or 64%, from $112 million in 2001 to
$40 million in 2002. Excluding the $32 million
reduction in investment income from the sale of FFG, net
investment income decreased in 2002 as a result of a decrease in
invested assets because we paid down debt and acquired CORE and
DBD.
Net realized losses on investments decreased by
$1 million from $119 million from 2001 to
$118 million in 2002. In 2002, we had other-than-temporary
impairments of $85 million, as compared to $78 million
in 2001. Impairments of available for sale securities in excess
of $10 million in 2002 consisted of an $18 million
writedown of fixed maturity investments in NRG Energy, a
$12 million writedown of fixed maturity investments in
AT&T Canada and an $11 million writedown of fixed maturity
investments in MCI WorldCom. Impairments of available for sale
securities in excess of $10 million in 2001 consisted of a
$22 million writedown of fixed maturity investments in
Enron.
Amortization of deferred gain on disposal of
businesses increased by $12 million, or 18%, from
$68 million in 2001 to $80 million in 2002, mainly due
a to full year of amortization of the deferred gain on the sale
of FFG as compared to nine months in 2001.
Gains on disposal of businesses decreased by
$51 million, or 82%, from $62 million in 2001 to
$11 million in 2002. This decrease was due to the sale of
FFG's mutual fund operations. Also, on June 28, 2002,
we sold our investment in NHP, which resulted in pre-tax gains
of $11 million in 2002.
Fees and other income decreased by
$42 million, or 63%, from $67 million in 2001 to
$25 million in 2002. Excluding the $65 million
reduction in other income due to the sale of FFG, fees and other
income increased by $23 million in 2002 mainly due to
approximately $15 million of income associated with a
settlement true-
67
up of a 1999 sale of a small block of business to
a third party and reversal of bad debt allowances due to
successful collection of receivables that had been previously
written off.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$149 million, or 46%, from $322 million in 2001 to
$173 million in 2002.
Policyholder benefits decreased by
$70 million, or 100%, from $70 million in 2001 to $0
in 2002. The decrease was entirely due to the sale of FFG.
Interest expense decreased from $14 million
in 2001 to $0 in 2002. We used a portion of the FFG sale
proceeds to repay $225 million of debt owed to Fortis
Finance.
Selling, underwriting and general expenses
decreased by $65 million, or 54%, from $120 million in
2001 to $55 million in 2002. Excluding the $67 million
reduction in selling, underwriting and general expenses due to
the sale of FFG, these expenses increased by $2 million
from 2001 to 2002 due to increased corporate overhead costs.
Distributions on preferred securities of
subsidiary trusts in 2002 remained unchanged from 2001 at
$118 million.
Segment Loss After Tax
Segment loss after tax increased by
$21 million, or 40%, from a $53 million loss in 2001
to a $74 million loss in 2002, primarily due to the sale of
FFG.
Income taxes increased by $40 million, or
190%, from $21 million in 2001 to $61 million in 2002.
Excluding the $4 million reduction in income tax expenses
due to the sale of FFG, income tax benefit increased by
$44 million in 2002. The change in the income tax benefit
was largely consistent with the increase in segment losses
before income tax. In 2002, we also recognized the release of
approximately $13 million of previously provided tax
accruals, which were no longer considered necessary based on the
resolution of certain domestic tax matters.
Year Ended December 31, 2001 Compared to
    December 31, 2000
Total Revenues
Total revenues decreased by $414 million, or
63%, from $662 million in 2000 to $248 million in 2001.
Net earned premiums and other considerations
decreased by $159 million, or 73%, from $217 million
in 2000 to $58 million in 2001. The decrease was primarily
due to the sale of FFG.
Net investment income decreased by
$45 million, or 29%, from $157 million in 2000 to
$112 million in 2001. Excluding the net decrease to
investment income of $147 million due to the sale of FFG,
net investment income increased by $102 million.
Net realized losses on investments increased by
$74 million, or 164%, from $45 million in 2000 to
$119 million in 2001. In 2001, we had other-than-temporary
impairments on fixed maturity securities of $78 million, as
compared to $5 million in 2000. There were no impairments in
excess of $10 million in 2000. Impairments of available for
sale securities in excess of $10 million in 2001 consisted of a
$22 million writedown of fixed maturity investments in
Enron.
Amortization of deferred gain on disposal of
businesses increased by $58 million from $10 million in
2000 to $68 million in 2001, due primarily to the
recognition of nine months of amortization of the FFG deferred
gain as compared to $0 in 2000.
Gains on disposal of businesses increased by
$50 million from $12 million in 2000 to
$62 million in 2001. The increase was due to
$62 million of gains recognized on the sale of FFG's
mutual fund management operations in 2001, as compared to
$12 million of gains recognized on the sale of ACSIA in
2000.
68
Fees and other income decreased by
$244 million, or 78%, from $311 million in 2000 to
$67 million in 2001. Excluding the net decrease in fees and
other income of $239 million in 2001 due to the sale of
FFG, fees and other income decreased by $5 million in 2001.
Total Benefits, Losses and Expenses
Total benefits, losses and expenses decreased by
$454 million, or 59%, from $776 million in 2000 to
$322 million in 2001.
Policyholder benefits decreased by
$134 million, or 66%, from $204 million in 2000 to
$70 million in 2001. The decrease was primarily due to the
sale of FFG.
Selling, underwriting and general expenses
decreased by $317 million, or 73%, from $437 million
in 2000 to $120 million in 2001. Excluding the net decrease
of $274 million in 2001 due to the sale of FFG, these
expenses decreased by $43 million primarily due to two
months of selling, underwriting and general expenses in 2000
associated with LTC operations sold to John Hancock on
March 1, 2000.
Interest expense decreased by $11 million,
or 44%, from $25 million in 2000 to $14 million in
2001. This decrease was mainly due to the repayment of
$225 million of debt in April 2000 owed to Fortis Finance.
Distributions on preferred securities of
subsidiary trusts increased by $8 million, or 7%, from
$110 million in 2000 to $118 million in 2001. The
increase was primarily due to the reflection of twelve months of
distributions related to the trust capital securities.
Segment Loss After Tax
Segment loss after tax improved by
$25 million from a $78 million loss in 2000 to a
$53 million loss in 2001.
Income taxes decreased $15 million from a
benefit of $36 million in 2000 to a benefit of
$21 million in 2001. Excluding the net $29 million
reduction in income tax expense due to the sale of FFG, income
tax increased by $20 million. This increase was largely
consistent with the increase in pre-tax gains on disposal of
businesses in 2001.
Investments
The following table shows the carrying value of
our investments by type of security as of the dates indicated:
As of
As of
As of
June 30,
December 31,
December 31,
2003
2002
2001
(in millions)
Fixed maturities
$
8,766
82
%
$
8,036
80
%
$
7,630
79
%
Equity securities
446
4
272
3
247
3
Commercial mortgage loans on real estate
870
8
842
8
869
9
Policy loans
70
1
69
1
68
1
Short-term investments
447
4
684
7
627
7
Other investments
136
1
126
1
159
1
Total investments
$
10,735
100
%
$
10,029
100
%
$
9,601
100
%
Of our fixed maturity securities shown above, 71%
and 75% were invested in securities rated "A" or
better, as of June 30, 2003 and December 31, 2002,
respectively. As interest rates decrease, the market value of
fixed maturity securities increases.
69
The following table provides the cumulative net
unrealized gains (pre-tax) on fixed maturity securities and
equity securities as of the dates indicated:
As of
As of
As of
June 30, 2003
December 31, 2002
December 31, 2001
(in millions)
Fixed maturities:
Amortized cost
$
8,066
$
7,631
$
7,471
Net unrealized gains
700
405
159
Fair value
$
8,766
$
8,036
$
7,630
Equities:
Cost
$
422
$
265
$
243
Net unrealized gains
24
7
4
Fair value
$
446
$
272
$
247
Net unrealized gains on fixed maturity securities
increased by $295 million, or 73%, from December 31,
2002 to June 30, 2003. The increase in net unrealized gains
was primarily due to decreases in market interest rates. Yields
on 10-year U.S. Treasury bonds decreased by 31 basis
points from 3.82% at December 31, 2002 to 3.51% at
June 30, 2003.
Net unrealized gains on fixed maturity securities
increased by $246 million, or 155%, from December 31,
2001 to December 31, 2002. Again, this reflected the impact
of decreasing market interest rates. Yields on 10-year U.S.
Treasury bonds decreased by 121 basis points from 5.03% at
December 31, 2001 to 3.82% at December 31, 2002.
Net unrealized gains on equity securities
increased by $17 million, or 237%, from December 31,
2002 to June 30, 2003 and by $3 million, or 75%, from
December 31, 2001 to December 31, 2002.
Reserves
The following table presents reserve information
as of the dates indicated:
As of
As of
As of
June 30,
December 31,
December 31,
2003
2002
2001
(in millions)
Future policy benefits and expenses
$
5,850
$
5,637
$
5,392
Unearned premiums
3,141
3,208
3,267
Claims and benefits payable
3,641
3,544
3,405
Total policy liabilities
$
12,632
$
12,389
$
12,064
Future policy benefits and expenses increased by
$213 million, or 4%, from December 31, 2002 to
June 30, 2003 and by $245 million, or 5%, from
December 31, 2001 to December 31, 2002. The main
contributing factor to these increases was growth in underlying
business.
Unearned premiums decreased by $67 million,
or 2%, from December 31, 2002 to June 30, 2003 and by
$59 million, or 2%, from December 31, 2001 to
December 31, 2002.
Claims and benefits payable increased by
$97 million, or 3%, from December 31, 2002 to
June 30, 2003 and increased by $139 million, or 4%,
from December 31, 2001 to December 31, 2002. The main
contributing factor to these increases was growth in underlying
business.
70
The following table provides reserve information
by our major lines of business for the years ended
December 31, 2002 and 2001 as of:
December 31, 2002
December 31, 2001
Future
Future
policy
Claims and
policy
Claims and
benefits and
Unearned
benefits
benefits and
Unearned
benefits
expenses
premiums
payable
expenses
premiums
payable
(in millions)
Long Duration Contracts:
Pre-funded funeral life insurance policies and
    annuity contracts
$
1,991
$
3
$
15
$
1,764
$
2
$
12
Life insurance no longer offered
693
1
5
704
1
5
Universal life and annuities no longer offered
334
10
12
359
1
20
FFG and LTC disposed businesses
2,619
48
139
2,565
46
120
Short Duration Contracts:
Group term life
—
11
457
—
15
438
Group disability
—
4
1,299
—
4
1,204
Medical and dental
—
126
583
—
108
559
Property
—
739
232
—
603
332
Credit
—
1,387
414
—
1,708
432
Warranties and extended service contracts
—
830
30
—
722
27
All other
—
49
358
—
57
256
Total policy liabilities
$
5,637
$
3,208
$
3,544
$
5,392
$
3,267
$
3,405
For a description of our reserving methodology,
see Note 14 of the Notes to Consolidated Financial
Statements included elsewhere in this prospectus.
Reinsurance
The following table sets forth our reinsurance
recoverables as of the dates indicated:
As of
As of
As of
June 30,
December 31,
December 31,
2003
2002
2001
(in millions)
Reinsurance recoverables
$
4,578
$
4,650
$
4,752
Reinsurance recoverables decreased by
$72 million, or 2%, from December 31, 2002 to
June 30, 2003 and by $102 million, or 2%, from
December 31, 2001 to December 31, 2002. We have used
reinsurance to exit certain businesses, such as the dispositions
of FFG and LTC. The reinsurance recoverables relating to these
dispositions amounted to $2,378 million at
December 31, 2002 and $2,294 million at
December 31, 2001.
71
In the ordinary course of business, we are
involved in both the assumption and cession of reinsurance with
non-affiliated companies. The following table provides details
of the reinsurance recoverables balance for the years ended
December 31:
2002
2001
(in millions)
Ceded future policyholder benefits and expense
$
2,452
$
2,348
Ceded unearned premium
1,247
1,496
Ceded claims and benefits payable
757
738
Ceded paid losses
194
170
Total
$
4,650
$
4,752
We utilize ceded reinsurance for loss protection
and capital management, business dispositions and, in the
Assurant Solutions segment, for client risk and profit sharing.
Loss Protection and Capital
Management
As part of our overall risk and capacity
management strategy, we purchase reinsurance for certain risks
underwritten by our various business segments, including
significant individual or catastrophic claims, and to free up
capital to enable us to write additional business.
For those product lines where there is exposure
to catastrophes, we closely monitor and manage the aggregate
risk exposure by geographic area, and we have entered into
reinsurance treaties to manage exposure to these types of events.
Under indemnity reinsurance transactions in which
we are the ceding insurer, we remain liable for policy claims if
the assuming company fails to meet its obligations. To limit
this risk, we have control procedures to evaluate the financial
condition of reinsurers and to monitor the concentration of
credit risk to minimize this exposure. The selection of
reinsurance companies is based on criteria related to solvency
and reliability and, to a lesser degree, diversification as well
as developing strong relationships with our reinsurance partners
for the sharing of risks.
Business Dispositions
We have used reinsurance to exit certain
businesses, such as the dispositions of FFG and LTC. Reinsurance
was used in these cases to facilitate the transactions because
the businesses shared legal entities with business segments that
we retained. Assets backing liabilities ceded relating to these
businesses are held in trusts, and the separate accounts
relating to FFG are still reflected in our balance sheet.
The reinsurance recoverable from The Hartford was
$1,680 million and $1,748 million as of
December 31, 2002 and 2001, respectively. The reinsurance
recoverable from John Hancock was $693 million and
$546 million as of December 31, 2002 and 2001,
respectively. We would be responsible to administer this
business in the event of a default by reinsurers. In addition,
under the reinsurance agreement, The Hartford is obligated to
contribute funds to increase the value of the separate accounts
relating to the business sold if such value declines. If The
Hartford fails to fulfill these obligations, we will be
obligated to make these payments.
Assurant Solutions Segment Client Risk and
Profit Sharing
The Assurant Solutions segment writes business
produced by its clients, such as mortgage lenders and servicers
and financial institutions, and reinsures all or a portion of
such business to insurance subsidiaries of the clients. Such
arrangements allow significant flexibility in structuring the
sharing of risks and profits on the underlying business.
A substantial portion of Assurant Solutions'
reinsurance activities are related to agreements to reinsure
premiums and risk related to business generated by certain
clients to the clients'
captive insurance companies
or to reinsurance subsidiaries in which the clients have an
ownership interest. Through these arrangements,
72
our insurance subsidiaries share some of the
premiums and risk related to client-generated business with
these clients. When the reinsurance companies are not authorized
to do business in our insurance subsidiary's domiciliary
state, our insurance subsidiary obtains collateral, such as a
trust or a letter of credit, from the reinsurance company or its
affiliate in an amount equal to the outstanding reserves to
obtain full financial credit in the domiciliary state for the
reinsurance. Our reinsurance agreements do not relieve us from
our direct obligation to our insured. Thus, a credit exposure
exists to the extent that any reinsurer is unable to meet the
obligations assumed in the reinsurance agreements. To minimize
our exposure to reinsurance insolvencies, we evaluate the
financial condition of our reinsurers and hold substantial
collateral (in the form of funds, trusts and letters of credit)
as security under the reinsurance agreements. See
"—Quantitative and Qualitative Disclosures about
Market Risk—Credit Risk."
Liquidity and Capital Resources
Assurant, Inc. is a holding company, and as such,
has limited direct operations of its own. Our holding company
assets consist primarily of the capital stock of our
subsidiaries. Accordingly, our future cash flows depend upon the
availability of dividends and other statutorily permissible
payments from our subsidiaries, such as payments under our tax
allocation agreement and under management agreements with our
subsidiaries. The ability to pay such dividends and to make such
other payments will be limited by applicable laws and
regulations of the states in which our subsidiaries are
domiciled, which subject our subsidiaries to significant
regulatory restrictions. The dividend requirements and
regulations vary from state to state and by type of insurance
provided by the applicable subsidiary. These laws and
regulations require, among other things, our insurance
subsidiaries to maintain minimum solvency requirements and limit
the amount of dividends these subsidiaries can pay to the
holding company. Solvency regulations, capital requirements and
rating agencies are some of the factors used in determining the
amount of capital used for dividends. For 2003, the maximum
amount of distributions our subsidiaries could pay under
applicable laws and regulations without prior regulatory
approval is $290 million. As a result of statutory
accounting for our sales of businesses, we believe that our
maximum will be significantly lower for 2004. For a discussion
of the various restrictions on our ability and the ability of
our subsidiaries to pay dividends, please see
"Regulation" and "Description of Share
Capital."
Dividends and other interest income paid by our
subsidiaries totaled $18.5 million for the six months ended
June 30, 2003, $15 million for the six months ended
June 30, 2002, $186.5 million for the year ended
December 31, 2002 and $615.4 million for the year
ended December 31, 2001. Figures for 2001 were higher due
to a gain on the sale of FFG. We used these cash inflows
primarily to pay expenses, to make interest payments on
indebtedness and, historically, to make dividend payments to our
stockholders.
The primary sources of funds for our subsidiaries
consist of premiums and fees collected, the proceeds from the
sales and maturity of investments and investment income. Cash is
primarily used to pay insurance claims, agent commissions,
operating expenses and taxes. We generally invest our
subsidiaries' excess funds in order to generate income.
Historically, Fortis has maintained a
$1 billion commercial paper facility that we have been able
to access for up to $750 million. We use commercial paper
to cover any cash shortfalls, which may occur from time to time.
We had no commercial paper borrowings during the first six
months of 2003 or during the year ended December 31, 2002.
In 2001, $235 million in commercial paper was issued and
redeemed. There was no outstanding commercial paper at year-end
2001. In connection with our separation from Fortis, we will no
longer have access to this facility. Our subsidiaries do not
maintain commercial paper or other borrowing facilities at the
subsidiary level.
Our qualified pension plan was under-funded by
$95 million at December 31, 2002. In 2003, we made
contributions to the pension fund of $19 million in April
and $39.6 million in September. In accordance with ERISA,
there is no expected minimum funding requirement for 2004 or
2005. Our nonqualified plans, which are unfunded, had a
projected benefit obligation of $64 million at
December 31, 2002. The expected company payments to
retirees under these plans are approximately $4 million per
year in 2004 and 2005. Also, our post-retirement plans (other
than pension), which are unfunded, had an accumulated
post-retirement benefit
73
obligation of $46 million at
December 31, 2002. In September 2003, we contributed
$5.9 million towards pre-funding these benefits. In
addition, the expected company payments to retirees and
dependents under the postretirement plan are approximately
$1.5 million per year in 2004 and 2005. See Note 16 of
the Notes to Consolidated Financial Statements included
elsewhere in this prospectus.
We estimate that our capital expenditures in
connection with our name change and rebranding initiative will
be approximately $10 million, which we will expense in
2004. We are not currently planning to make any other
significant capital expenditures in 2004 or 2005.
We anticipate that we will pay to participants in
the Fortis Appreciation Incentive Rights Plan (to be renamed the
Assurant Appreciation Incentive Rights Plan) an aggregate of
approximately $22 million in connection with the cash-out
of all outstanding Fortis, Inc. incentive rights. Approximately
$11 million of this cash-out was accrued at June 30,
2003. The balance, or approximately $11 million, will be
accrued in the fourth quarter of 2003. See
"Management — Management Compensation and
Incentive Plans — Assurant Appreciation Incentive
Rights Plan."
In management's opinion, our
subsidiaries' cash flow from operations together with our
income and gains from our investment portfolio will provide
sufficient liquidity to meet our needs in the ordinary course of
business.
Cash Flows
We monitor cash flows at both the consolidated
and subsidiary levels. Cash flow forecasts at the consolidated
and subsidiary levels are provided on a monthly basis, and we
use trend and variance analyses to project future cash needs
making adjustments to the forecasts when needed.
The table below shows our recent net cash flows:
For the
Six Months
For the
Ended
Year Ended
June 30,
December 31,
Net cash provided by (used in):
2003
2002
2002
2001
2000
(in millions)
Operating activities
$
402
$
(197
)
$
395
$
536
$
533
Investing activities
(387
)
(22
)
(361
)
(175
)
(28
)
Financing activities
(161
)
(21
)
(43
)
(380
)
(429
)
Net change in cash
$
(146
)
$
(240
)
$
(9
)
$
(19
)
$
76
Cash Flows for the Six Months Ended
June 30, 2003 and June 30,
2002.
The key changes of the net cash
outflow of $146 million for the six months ended
June 30, 2003 were net purchases of fixed maturity
securities of $1,021 million and dividends paid of
$160 million, as compared to net purchases of fixed
maturity securities of $565 million and dividends paid of
$20 million for the six months ended June 30, 2002.
Cash Flows for the Years Ended
December 31, 2002, 2001 and 2000.
The key changes of the net cash outflow of $9 million for
the year ended December 31, 2002 were net purchases of
fixed maturity securities of $1,153 million and maturities
of these securities of $861 million. Key changes of the net
cash outflow of $19 million for the year ended
December 31, 2001 were the sale of FFG for
$396 million in cash and changes in our revenues and
expenses from operating activities as described above. Key
changes of the net cash inflow of $76 million for the year
ended December 31, 2000 were $550 million of proceeds
received from the issuance of the 2000 trust capital securities
and changes in our revenues and expenses from operating
activities as described above.
At June 30, 2003, we had total debt
outstanding of $1,470 million, as compared to
$1,471 million at December 31, 2002,
$1,471 million at December 31, 2001 and
$1,475 million at December 31, 2000. This debt
consists of trust capital securities, which we classify as
mandatorily redeemable preferred securities of
74
subsidiary trusts, and a small amount of
mandatorily redeemable preferred stock. See "Description of
Share Capital" and "Description of Other
Securities" for a description of the terms of these
securities.
The table below shows our cash outflows for
distributions and dividends for the periods indicated:
For the
Six Months
For the Year Ended
Ended
December 31,
June 30,
Security
2003
2002
2001
2000
(in thousands)
Mandatorily redeemable preferred securities of
    subsidiary trusts and interest paid
$
58,430
$117,114
$133,667
$112,816
Mandatorily redeemable preferred stock dividends
516
1,052
1,053
947
Class A common stock dividends
139,000
—
67,000
—
Class B & C common stock dividends
21,134
41,876
42,298
21,111
Total
$
219,080
$160,042
$244,018
$134,874
See "Capitalization."
Commitments and Contingencies
We have obligations and commitments to third
parties as a result of our operations. These obligations and
commitments are detailed in the table below by maturity date as
of the dates indicated:
As of December 31,
2003
2004
2005
2006
2007
Thereafter
(in millions)
Contractual obligations:
Mandatorily redeemable preferred securities of
    subsidiary trusts
$
—
$
—
$
150
$
—
$
—
$
1,296
Mandatorily redeemable preferred stock
—
—
—
—
—
24
Operating leases
40
35
32
27
23
53
Commitments:
Investment purchases
Outstanding:
—unsettled trades
24
—
—
—
—
—
—commercial mortgage loans on real estate
29
—
—
—
—
—
—other investments
4
—
—
2
30
—
Total obligations and commitments
$
97
$
35
$
182
$
29
$
53
$
1,373
Letters of Credit
In the normal course of business, letters of
credit are issued primarily to support reinsurance arrangements.
These letters of credit are supported by commitments with
financial institutions. We had approximately $120 million
and $109 million of letters of credit outstanding as of
June 30, 2003 and December 31, 2002, respectively.
75
Additionally, as of June 30, 2003, we had an
unused $50 million letter of credit facility.
Quantitative and Qualitative Disclosures about
Market Risk
As a provider of insurance products, effective
risk management is fundamental to our ability to protect both
our customers' and stockholders' interests. We are
exposed to potential loss from various market risks, in
particular interest rate risk and credit risk. Additionally we
are exposed to inflation risk and to a small extent to foreign
currency risk.
Interest rate risk is the possibility the fair
value of liabilities will change more or less than the market
value of investments in response to changes in interest rates,
including changes in the slope or shape of the yield curve and
changes in spreads due to credit risks and other factors.
Credit risk is the possibility that
counterparties may not be able to meet payment obligations when
they become due. We assume counterparty credit risk in many
forms. A counterparty is any person or entity from which cash or
other forms of consideration are expected to extinguish a
liability or obligation to us. Primarily, our credit risk
exposure is concentrated in our fixed income investment
portfolio and, to a lesser extent, in our reinsurance
recoverables.
Inflation risk is the possibility that a change
in domestic price levels produces an adverse effect on earnings.
This typically happens when only one of invested assets or
liabilities is indexed to inflation.
Foreign exchange risk is the possibility that
changes in exchange rates produce an adverse effect on earnings
and equity when measured in domestic currency. This risk is
largest when assets backing liabilities payable in one currency
are invested in financial instruments of another currency. Our
general principle is to invest in assets that match the currency
in which we expect the liabilities to be paid.
Interest Rate Risk
Interest rate risk arises as we invest
substantial funds in interest-sensitive fixed income assets,
such as fixed maturity investments, mortgage-backed and
asset-backed securities and commercial mortgage loans, primarily
in the United States and Canada. There are two forms of interest
rate risk—price risk and reinvestment risk. Price risk
occurs when fluctuations in interest rates have a direct impact
on the market valuation of these investments. As interest rates
rise, the market value of these investments falls, and
conversely, as interest rates fall, the market value of these
investments rises. Reinvestment risk occurs when fluctuations in
interest rates have a direct impact on expected cash flows from
mortgage-backed and asset-backed securities. As interest rates
fall, an increase in prepayments on these assets results in
earlier than expected receipt of cash flows forcing us to
reinvest the proceeds in an unfavorable lower interest rate
environment, and conversely as interest rates rise, a decrease
in prepayments on these assets results in later than expected
receipt of cash flows forcing us to forgo reinvesting in a
favorable higher interest rate environment. As of June 30,
2003, we held $9,771 million at fair market value, or
89.6%, of our total invested assets, in fixed maturity
securities, including mortgage-backed and asset-backed
securities, and commercial mortgage loans as compared to
$9,005 million at fair market value, or 88.3%, at
December 31, 2002.
We expect to manage interest rate risk by
selecting investments with characteristics such as duration,
yield, currency and liquidity tailored to the anticipated cash
outflow characteristics of our insurance and reinsurance
liabilities.
Our group long-term disability reserves are also
sensitive to interest rates. Group long-term disability reserves
are discounted to the valuation date at the valuation interest
rate. The valuation interest rate is determined by taking into
consideration actual and expected earned rates on our asset
portfolio, with adjustments for investment expenses and
provisions for adverse deviation.
The interest rate sensitivity of our fixed income
assets is assessed using hypothetical test scenarios that assume
several positive and negative parallel shifts of the underlying
yield curves. We have assumed that both the United States and
Canadian yield curves have a 100% correlation and, therefore,
move together. The individual securities are repriced under each
scenario using a valuation model. For investments such as
76
mortgage-backed and asset-backed securities, a
prepayment model was used in conjunction with a valuation model.
The following table summarizes the results of this analysis for
fixed income assets such as fixed maturity, mortgage-backed and
asset-backed securities and commercial mortgage loans held in
our investment portfolio:
Interest Rate Movement Analysis
of Market Value of Fixed Income Investment
Portfolio
As of December 31, 2002
-100
-50
0
50
100
(in millions)
Total market value
$
9,692
$
9,433
$
9,185
$
8,939
$
8,699
% Change in market value from base case
5.5
%
2.7
%
0.0
%
(2.7
)%
(5.3
)%
$ Change in market value from base case
$
507
$
248
$
—
$
(246
)
$
(486
)
Credit Risk
We have exposure to credit risk primarily as a
holder of fixed income securities and by entering into
reinsurance cessions.
Our risk management strategy and investment
policy is to invest in debt instruments of high credit quality
issuers and to limit the amount of credit exposure with respect
to any one issuer. We attempt to limit our credit exposure by
imposing fixed maturity portfolio limits on individual issuers
based upon credit quality. Currently our portfolio limits are
1.5% for issuers rated AA-and above, 1% for issuers rated A- to
A+, 0.75% for issuers rated BBB- to BBB+ and 0.375% for issuers
rated BB- to BB+. These portfolio limits are further reduced for
certain issuers with whom we have credit exposure on reinsurance
agreements. We use the lower of Moody's or Standard
& Poor's ratings to determine an issuer's
rating. See "Business—Investments."
The following table presents our fixed maturity
investment portfolio by ratings of the nationally recognized
securities rating organizations as of December 31, 2002:
Percentage of
Rating
Fair Value
Total
(in millions)
Aaa/Aa/ A
$
6,013
75
%
Baa
$
1,526
19
%
Ba
$
338
4
%
B and lower
$
159
2
%
Total
$
8,036
100
%
We are also exposed to the credit risk of our
reinsurers. When we reinsure, we are still liable to our
insureds regardless of whether we get reimbursed by our
reinsurer. As part of our overall risk and capacity management
strategy, we purchase reinsurance for certain risks underwritten
by our various business segments as described above under
"— Reinsurance."
For the vast majority of our reinsurance
recoverables, we are protected from the credit risk by using
some type of risk mitigation mechanism such as a trust, letter
of credit, or by withholding the assets in a modified
coinsurance or co-funds-withheld arrangement. For example,
reserves of $1,679 million and $693 million as of
December 31, 2002 relating to two large coinsurance
arrangements with The Hartford and John Hancock, respectively,
related to sales of businesses. If the value of the assets in
these trusts decreases, The Hartford and John Hancock, as the
case may be, will be required to put more assets in the trusts.
We may be dependent on the financial condition of The Hartford
and John Hancock, whose A.M. Best ratings are currently A+ and
A++, respectively. For recoverables totaling approximately
$860 million on a statutory basis as of December 31,
2002, these mechanisms are not present; thus, we are dependent
solely on the credit of the reinsurer.
77
Occasionally, the credit worthiness of the
reinsurer becomes questionable. See "Risk Factors—
Risks Related to Our Company— Reinsurance may not be
available or adequate to protect us against losses, and we are
subject to the credit risk of reinsurers." The exposure
group by A.M. Best rating of these reinsurers is as follows:
Pre-Tax Exposure
A.M. Best Classifications
A.M. Best Ratings of Reinsurer
(Statutory Basis)
(in millions)
Superior
A++ or A+
$
510
Excellent
A or A-
117
Very Good
B++ or B+
146
Fair
B or B-
1
Weak and Poor
C and lower
—
Not Rated
86
Total
$
860
Inflation Risk
Inflation risk arises as we invest substantial
funds in nominal assets, which are not indexed to the level of
inflation, whereas the underlying liabilities are indexed to the
level of inflation. Approximately 15% of our pre-funded funeral
insurance policies with reserves of approximately
$409 million as of June 30, 2003 have death benefits
that are guaranteed to grow with the Consumer Price Index. In
times of rapidly rising inflation the credited death benefit
growth on these liabilities increases relative to the investment
income earned on the nominal assets resulting in an adverse
impact on earnings. We have partially mitigated this risk by
purchasing a contract with payments tied to the Consumer Price
Index. See "— Derivatives."
In addition, we have inflation risk in our
individual and small employer group health insurance businesses
to the extent that medical costs increase with inflation and we
have not been able to increase premiums to keep pace with
inflation.
Foreign Exchange Risk
We are exposed to some foreign exchange risk
arising from our international operations mainly in Canada. We
also have limited foreign exchange risk exposure to currencies
other than the Canadian dollar, primarily British pounds and
Danish krone. Total invested assets denominated in these other
currencies were less than 1% of our total invested assets at
December 31, 2002.
Foreign exchange risk is mitigated by matching
our liabilities under insurance policies that are payable in
foreign currencies with investments that are denominated in such
currency. We have not established any hedge to our
foreign-currency exchange rate exposure.
We assess our foreign exchange risk by examining
the foreign exchange rate exposure of the excess of invested
assets over the statutory reserve liabilities denominated in
foreign currency. Two stress scenarios are examined.
The first scenario assumes a hypothetical 10%
immediate change in the foreign exchange rate.
The second scenario assumes a more severe 2.33
standard deviation event (comparable to a one in 100 probability
under a normal distribution).
The modelling techniques we use to calculate our
exposure does not take into account correlation among foreign
currency exchange rates or correlation among various markets.
Our actual experience may differ from
78
the results noted below due to correlation
assumptions utilized or if events occur that were not included
in the methodology, such as significant illiquidity or other
market events.
The following table summarizes the results of
this analysis:
Adverse impact on the excess of investment assets over the statutory reserve
liabilities denominated in foreign currency
As of December 31, 2002
Excess of invested
assets over
Adverse impact for
Total invested
Statutory reserve
statutory reserve
Adverse impact for
a 2.33 standard
assets
liabilities
liabilities
a 10% change in
deviation change in
(in foreign
(in foreign
(in foreign
exchange rate
exchange rate
Country
currency)
currency)
currency)
(in $)*
(in $)
(in millions)
Canada
CAD 495.4
CAD 339.9
CAD 155.5
$
(8.9
)
$
(10.4
)
*
10% depreciation of CAD would cause a
    $8.9 million loss in the excess of investment assets over
    the statutory reserve liabilities.
Derivatives
Derivatives are financial instruments whose
values are derived from interest rates, foreign exchange rates,
financial indices or the prices of securities or commodities.
Derivative financial instruments may be exchange-traded or
contracted in the over-the-counter market and include swaps,
futures, options and forward contracts.
Under insurance statutes, our insurance companies
may use derivative financial instruments to hedge actual or
anticipated changes in their assets or liabilities, to replicate
cash market instruments or for certain income-generating
activities. These statutes generally prohibit the use of
derivatives for speculative purposes. We generally do not use
derivative financial instruments.
On July 1, 2003, we purchased a contract to
partially hedge the inflation risk exposure inherent in some of
our pre-funded funeral insurance policies.
79
BUSINESS
Overview
We pursue a differentiated strategy of building
leading positions in specialized market segments for insurance
products and related services in North America and selected
other markets. We provide creditor-placed homeowners insurance,
manufactured housing homeowners insurance, debt protection
administration, credit insurance, warranties and extended
service contracts, individual health and small employer group
health insurance, group dental insurance, group disability
insurance, group life insurance and pre-funded funeral
insurance. The markets we target are generally complex, have a
relatively limited number of competitors and, we believe, offer
attractive profit opportunities. In these markets, we leverage
the experience of our management team and apply our expertise in
risk management, underwriting and business-to-business
management, as well as our technological capabilities in complex
administration and systems. Through these activities, we seek to
generate above-average returns by building on specialized market
knowledge, well-established distribution relationships and
economies of scale.
As a result of our strategy, we are a leader in
many of our chosen markets and products. In our Assurant
Solutions business, we have leadership positions or are
partnered with clients who are leaders in creditor-placed
homeowners insurance, manufactured housing homeowners insurance
and debt protection administration. In our Assurant Employee
Benefits business, we are a leading writer of group dental plans
measured by the number of master contracts in force. In our
Assurant PreNeed business, we are the largest writer of
pre-funded funeral insurance measured by face amount of new
policies sold. We believe that our leadership positions give us
a sustainable competitive advantage in our chosen markets.
We currently have four decentralized operating
business segments to ensure focus on critical activities close
to our target markets and customers, while simultaneously
providing centralized support in key functions. Each operating
business segment has its own experienced management team with
the autonomy to make decisions on key operating matters. These
managers are eligible to receive incentive-based compensation
based in part on operating business segment performance and in
part on company-wide performance, thereby encouraging strong
business performance and cooperation across all our businesses.
At the operating business segment level, we stress disciplined
underwriting, careful analysis and constant improvement and
product redesign. At the corporate level, we provide support
services, including investment, asset/liability matching and
capital management, leadership development, information
technology support and other administrative and finance
functions, enabling the operating business segments to focus on
their target markets and distribution relationships while
enjoying the economies of scale realized by operating these
businesses together. Also, our overall strategy and financial
objectives are set and continuously monitored at the corporate
level to ensure that our capital resources are being properly
allocated.
80
We organize and manage our specialized businesses
through four operating business segments:
Operating Business
Principal Products and
Principal Distribution
For the Year Ended
Segment
Services
Channels
December 31, 2002
Assurant Solutions
•
Total revenues:
    $2,401 million
Specialty
Property
•   Creditor-placed homeowners
    insurance (including tracking services)
•   Mortgage lenders and servicers
•   Segment income before
    income
    tax:
$197 million
•   Manufactured housing
    homeowners insurance
•   Manufactured housing lenders,
    dealers and vertically integrated builders
Consumer
Protection
•   Debt protection
    administration
•   Credit insurance
•   Warranties and extended service
    contracts
-Appliances
-Automobiles
    and
recreational
    vehicles
-Consumer
    electronics
-Wireless devices
•   Financial institutions
    (including credit card issuers) and retailers
•   Consumer electronics and appliance
    retailers
•   Vehicle dealerships
Assurant Health
•
Total
    revenues:
$1,912 million
Individual Health
•   PPO
•   Short-term
    medical
insurance
•   Student medical insurance
•   Independent agents
•   National accounts
•   Internet
•
Segment income before
    income
    tax:
$144 million
Small Employer Group Health
•   PPO
•   Independent agents
Assurant Employee Benefits
•   Group dental
    insurance
-Employer-paid
-Employee-paid
•   Group
    disability
insurance
•   Group term life insurance
•   Employee benefit advisors
•   Brokers
•   DRMS(1)
•
Total revenues:
    $1,455 million
•   Segment income before income
    tax:
$88 million
Assurant PreNeed
•   Pre-funded
    funeral
insurance
•   SCI
•   Independent funeral homes
•
Total revenues:
    $727 million
•   Segment income before income
    tax:
$77 million
(1)
DRMS refers to Disability Reinsurance Management
    Services, Inc., one of our wholly owned subsidiaries that
    provides a turnkey facility to other insurers to write
    principally group disability insurance.
81
We also have a corporate and other segment, which
includes activities of the holding company, financing expenses,
realized gains (losses) on investments and interest income not
allocated to other segments. The Corporate and Other segment
also includes (i) the results of operations of FFG (a
business we sold on April 2, 2001) and (ii) LTC (a
business we sold on March 1, 2000), for the periods prior
to their disposition, and amortization of deferred gains
associated with the portions of the sales of FFG and LTC sold
through reinsurance agreements as described above. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations—Corporate and
Other."
For the six months ended June 30, 2003, we
generated total revenues of $3,455 million and net income
of $164 million. For the year ended December 31, 2002,
we generated total revenues of $6,532 million and net
income before cumulative effect of change in accounting
principle of $260 million. As of June 30, 2003, we had
total assets of approximately $22,738 million, including
separate accounts. Our A.M. Best financial strength ratings, as
of September 25, 2003, were either A
("Excellent") or A- ("Excellent") for all of
our domestic operating subsidiaries. A rating of "A"
is the second highest of ten ratings categories and the highest
within the category based on modifiers (i.e., A and A- are
"Excellent") and a rating of "A-" is the
second highest of ten ratings categories and the lowest within
the category based on modifiers. We view the A.M. Best ratings
as most relevant for the purpose of managing our businesses
because these ratings relate to capital management at our
insurance subsidiaries. These ratings reflect A.M. Best's
opinions of our ability to pay policyholder claims, are not
applicable to the securities offered in this prospectus and are
not a recommendation to buy, sell or hold any security,
including our common stock.
Competitive Strengths
We believe our competitive strengths include:
•
Leadership Positions in Specialized Markets;
•
Strong Relationships with Key Clients and
    Distributors;
•
History of Product Innovation and Ability to
    Adapt to Changing Market Conditions;
•
Disciplined Approach to Underwriting and Risk
    Management;
•
Prudent Capital Management;
•
Diverse Business Mix and Superior Financial
    Strength; and
•
Experienced Management Team with Proven Track
    Record and Entrepreneurial Culture.
Leadership Positions in Specialized Markets.
We are a market leader in many of our
chosen markets. We hold a leading position or are partnered with
clients who are leaders in creditor-placed homeowners insurance,
manufactured housing homeowners insurance, credit insurance and
debt protection administration. In addition, we are market
leaders in group dental plans and pre-funded funeral insurance.
We seek to participate in markets in which there are a limited
number of competitors and that allow us to achieve a market
leading position by capitalizing on our market expertise and
capabilities in complex administration and systems, as well as
on our established distribution relationships. We believe that
our leadership positions provide us with the opportunity to
generate high returns in these niche markets.
Strong Relationships with Key Clients and
Distributors.
As a result of our
expertise in business-to-business management, we have created
strong relationships with our distributors and clients in each
of the niche markets we serve. In our Assurant Solutions
segment, we have strong long-term relationships in the United
States with six out of the ten largest mortgage lenders and
servicers, including JPMorgan Chase Bank, Washington Mutual and
Wells Fargo Bank, four out of the seven largest manufactured
housing builders, including Clayton Homes, four out of the six
largest general purpose credit card issuers, including Bank One,
Discover, JPMorgan Chase Bank and MBNA, and six out of the ten
largest consumer electronics and appliances retailers, including
CompUSA, RadioShack and Staples. In our Assurant Health segment,
we have exclusive distribution relationships with leading
insurance companies, as well as relationships with independent
brokers. Through exclusive distribution relationships with
companies such as Mutual of Omaha, IPSI, a
82
wholly owned subsidiary of State Farm, and USAA,
we gain access to a broad distribution network and a significant
number of potential customers. In our Assurant PreNeed segment,
we have an exclusive distribution relationship with SCI, the
largest funeral provider in North America, as well as
relationships with approximately 2,000 funeral homes. We believe
that the strength of our distribution relationships enables us
to market our products and services to our customers in an
effective and efficient manner that would be difficult for our
competitors to replicate.
History of Product Innovation and Ability to
Adapt to Changing Market Conditions.
We are able to adapt quickly to
changing market conditions by tailoring our product and service
offerings to the specific needs of our clients. This flexibility
has developed, in part, as a result of our entrepreneurial focus
and the encouragement of management autonomy at each business
segment. By understanding the dynamics of our core markets, we
design innovative products and services to seek to sustain
profitable growth and market leading positions. For instance, we
were one of the first providers of credit insurance to migrate
towards fee-based debt protection solutions for our financial
institution clients. This has allowed us to meet the evolving
needs of our clients. It also has allowed us to continue
generating profitable business despite a significant regulatory
change that permitted financial institutions to offer debt
protection products similar to credit insurance as part of their
basic loan agreements with customers without being subject to
insurance regulations. Other examples of our innovative products
include: warranty products in our property business designed
specifically for vertically integrated manufacturers of
manufactured homes; specialty products, such as short-term
health insurance, to address specific developments in the health
insurance market and
Medical Savings Account (MSA)
features in our individual health products, which we were one of
the first companies to offer. In addition, we developed our
creditor-placed homeowners insurance business when we perceived
a niche market opportunity.
Disciplined Approach to Underwriting and Risk
Management.
Our businesses share best
practices of disciplined underwriting and risk management. We
focus on generating profitability through careful analysis of
risks and draw on our experience in core specialized markets.
Examples of tools we use to manage our risk include our
tele-underwriting program, which enables our trained
underwriters to interview individual health insurance applicants
over the telephone, as well as our electronic billing service in
Assurant Employee Benefits, which enables us to collect more
accurate data regarding eligibility of insureds. Also, at
Assurant Solutions, in order to align our clients'
interests with ours and to help us to better manage risk
exposure, a significant portion of Assurant Solutions'
consumer protection solutions contracts are written on a
retrospective commission basis, which permits Assurant Solutions
to adjust commissions based on claims experience. Under this
contingent commission arrangement, compensation to the financial
institutions and other agents distributing our products is
predicated upon the actual losses incurred compared to premiums
earned after a specific net allowance to Assurant Solutions. We
also continually seek to improve and redesign our product
offerings based on our underwriting experience. In addition, we
closely monitor regulatory and market developments and adapt our
approach as we deem necessary to achieve our underwriting and
risk management goals. In Assurant Health, for example, we have
exited states in which we were not achieving acceptable
profitability and have re-entered states where the insurance
environments have become more favorable. We are focused on loss
containment, and we purchase reinsurance as a risk management
tool to diversify risk and protect against unexpected events,
such as catastrophes. We believe that our disciplined
underwriting and risk management philosophy have enabled us to
realize above average financial returns while focusing on our
strategic objectives.
Prudent Capital Management.
We focus on generating above-average
returns on a risk-adjusted basis from our operating activities.
We invest capital in our operating business segments when we
identify attractive profit opportunities in our target markets.
To the extent that we believe we can achieve, maintain or
improve on leadership positions in these markets by deploying
our capital and leveraging our expertise and other competitive
advantages, we have done so with the expectation of generating
high returns. When expected returns have justified continued
investment, we have reinvested cash from operations into
enhancing and growing our operating business segments through
the development of new products and services, additional
distribution relationships and other operational improvements.
In addition, when we have identified external opportunities that
are consistent with these objectives, we have acquired
businesses, portfolios, distribution
83
relationships, personnel or other resources. For
example, we acquired Protective Life Corporation's Dental
Benefits Division in December 2001. Finally, our management has
consistently taken a disciplined approach towards withdrawing
capital when businesses are no longer anticipated to meet our
expectations. For example, we have exited or divested a number
of operations including our LTC division, which was sold to John
Hancock in 2000 and our FFG division, which was sold to The
Hartford in 2001. We believe we have benefited from having the
discipline and flexibility to deploy capital opportunistically
and prudently to maximize returns to our stockholders.
Diverse Business Mix and Superior Financial
Strength.
We have four operating
business segments across distinct areas of the insurance market.
These businesses are generally not affected in the same way by
economic and operating trends, which we believe allows us to
maintain a greater level of financial stability than many of our
competitors across business and economic cycles. In addition, as
of June 30, 2003, we had $22,738 million of total
assets, including separate accounts, and $2,779 million of
stockholders' equity. Our domestic operating subsidiaries
have financial strength ratings of A ("Excellent") or
A- ("Excellent") from A.M. Best, and two of our
domestic operating subsidiaries have financial strength ratings
of A2 ("Good") and A3 ("Good"),
respectively, from Moody's. We employ a conservative
investment policy and our portfolio primarily consists of high
grade fixed income securities. As of June 30, 2003, we had
$10,735 million of investments, consisting primarily of
investment grade bonds with an average rating of "A".
We believe our solid capital base and overall financial strength
allow us to distinguish ourselves from our competitors and
continue to enable us to attract clients that are seeking
long-term financial stability.
Experienced Management Team with Proven Track
Record and Entrepreneurial Culture.
We
have a talented and experienced management team both at the
corporate level and at each of our business segments. Our
management team is led by our President and Chief Executive
Officer, J. Kerry Clayton, who has been with our Company or
its predecessors for 33 years. Our senior officers have an
average tenure of approximately 16 years with our Company
and close to 24 years in the insurance and related risk
management business. Our management team has successfully
managed our business and executed on our specialized niche
strategy through numerous business cycles and political and
regulatory challenges. Our management team also shares a set of
corporate values and promotes a common corporate culture that we
believe enables us to leverage business ideas, risk management
expertise and focus on regulatory compliance across our
businesses. At the same time, we reward and encourage
entrepreneurship at each business segment, accomplished in part
by our long history of utilizing performance-based compensation
systems.
Growth Strategy
Our objective is to achieve superior financial
performance by enhancing our leading positions in our
specialized niche insurance and related businesses. We intend to
achieve this objective by continuing to execute the following
strategies in pursuit of profitable growth:
•
Enhance Market Position in Our Business Lines;
•
Develop New Distribution Channels and Strategic
    Alliances;
•
Deploy Capital and Resources to Maintain
    Flexibility and Establish or Enhance Market Leading Positions;
•
Maintain Disciplined Pricing Approach; and
•
Continue to Manage Capital Prudently.
Enhance Market Position in Our Business Lines.
We have leading market positions in
several of our business lines. We have been selective in
developing our product and service offerings and will continue
to focus on providing products and services to those markets
that we believe offer attractive growth opportunities. We will
also seek to continue penetrating our target markets and expand
our market positions by developing and introducing new products
and services that are tailored to the specific needs of our
clients. For example, we are developing products that are
targeted to purchasers of recreational vehicles, cell phones and
other consumer products. In addition, we will continue to market
our products to our existing client base and seek to
84
identify clients in new target markets such as
Brazil, Mexico, Argentina and other countries with emerging
middle class populations.
Develop New Distribution Channels and
Strategic Alliances.
We have a strong,
multi-channel distribution network already in place with leading
market participants. These relationships have been critical to
our market penetration and growth. We will continue to be
selective in developing new distribution channels as we seek to
expand our market share, enter new geographic markets and
develop new niche businesses. For example, we recently entered
into a strategic alliance with GE Consumer Products, which
will enable us to sell and administer extended service contracts
for consumer electronics, major appliances and other consumer
goods to General Electric's customers.
Deploy Capital and Resources to Maintain
Flexibility and Establish or Enhance Market Leading
Positions.
We seek to deploy our
capital and resources in a manner that provides us with the
flexibility to grow internally through product development, new
distribution relationships and investments in technology, as
well as to pursue acquisitions. As we expand through internal
growth and acquisitions, we intend to leverage our expertise in
risk management, underwriting and business-to-business
management, as well as our technological capabilities in running
complex administration systems and support services.
Maintain Disciplined Pricing
Approach.
We intend to maintain our
disciplined pricing approach by seeking to focus on profitable
products and markets and by pursuing a flexible approach to
product design. We continuously evaluate the profitability of
our products, and we will continue to pursue pricing strategies
and adjust our mix of businesses by geography and by product so
that we can maintain attractive pricing and margins. We seek to
price our products at levels in order to achieve our target
profit objectives.
Continue to Manage Capital
Prudently.
We intend to manage our
capital prudently relative to our risk exposure to maximize
profitability and long-term growth in stockholder value. Our
capital management strategy is to maintain financial strength
through conservative and disciplined risk management practices.
We do this through product design, strong underwriting and risk
selection and prudent claims management and pricing. In
addition, we will maintain our conservative investment portfolio
management philosophy and properly manage our invested assets in
order to match the duration of our insurance product
liabilities. We will continue to manage our business segments
with the appropriate level of capital required to obtain the
ratings necessary to operate in their markets and to satisfy
various regulatory requirements. We will also continue to
evaluate ways to reduce costs in each of our business lines,
including by streamlining the number of legal entities through
which we operate.
85
Operating Business Segments
Our business is comprised of four operating
business segments: Assurant Solutions; Assurant Health; Assurant
Employee Benefits; and Assurant PreNeed. We also have a
Corporate and Other segment. Our business segments and the
related net earned premiums and other considerations and fees
and other income and segment income before income tax generated
by those segments are as follows for the periods indicated:
Net Earned Premiums and Other
Considerations and Fees and Other Income by Business
Segment
For the Six Months
For the Year
Ended
Ended
June 30, 2003
December 31, 2002
Percentage
Percentage
$ (in millions)
of Total
$ (in millions)
of Total
Assurant Solutions:
Specialty Property
$
358
12
%
$
583
10
%
Consumer Protection
834
27
1,613
27
Total Assurant Solutions
1,192
39
2,196
37
Assurant Health:
Individual
504
16
894
15
Small Employer Group
480
15
963
16
Total Assurant Health
984
31
1,857
31
Assurant Employee Benefits
656
21
1,307
22
Assurant PreNeed
274
9
543
9
Corporate and Other
1
—
25
1
Total Business Segments
$
3,107
100
%
$
5,927
100
%
Segment Income (Loss) Before Income Tax by
Business Segment
For the Six Months
For the Year
Ended
Ended
June 30, 2003
December 31, 2002
Percentage
Percentage
$ (in millions)
of Total
$ (in millions)
of Total
Assurant Solutions
$
102
41
%
$
197
53
%
Assurant Health
96
39
143
39
Assurant Employee Benefits
41
16
88
24
Assurant PreNeed
29
12
77
21
Corporate and Other
(19
)
(8
)
(135
)
(37
)
Total Business Segments
$
248
100
%
$
370
100
%
The amount of our total revenues, segment income
before and after income tax and total assets by segment and the
amount of our revenues and long-lived assets by geographic
region is set forth in Note 19 to our consolidated
financial statements.
86
Assurant Solutions
Assurant Solutions has leadership positions or is
partnered with clients who are leaders in creditor-placed
homeowners insurance and related mortgage tracking services,
manufactured housing homeowners insurance and debt protection
administration. We develop, underwrite and market our specialty
insurance products and services through partnerships with our
clients (financial institutions, retailers, manufactured housing
and automobile dealers, utilities and other entities) to their
customers. We serve our client partners throughout North
America, the Caribbean and selected countries in South America
and Europe.
Our principal business lines within our Assurant
Solutions segment have experienced growth in varying degrees.
Growth in premiums in the homeowners market has been driven by
increased home purchase activity due to the low interest rate
environment, appreciation in home values and an increasing
percentage of the population purchasing homes generally. The
manufactured housing market has been more challenging because of
a more restrictive lending environment with fewer lenders
extending credit and increasingly strict underwriting standards
being applied since the late 1990's. Finally, the domestic
consumer credit insurance market has been contracting due to an
adverse regulatory environment; however, this decline has been
offset somewhat by accelerating growth in the debt protection
market. At a recent industry conference, a study was presented
that projected growth in the U.S. debt protection market from
$500 million in 2000 to $5 billion in 2005. In
addition, as the global economy and consumer discretionary
spending grows, the international market for consumer insurance
is expected to grow. We believe that we are well positioned to
benefit from the growth in our key business lines with our broad
product and service offerings.
In Assurant Solutions, we provide specialty
property and consumer protection products and services. In our
specialty property solutions division, our strategy is to
further develop our creditor-placed homeowners and manufactured
housing homeowners insurance products and related services in
order to maintain our leadership position or partnerships with
clients who are leaders and to gain market share in the mortgage
and manufactured housing industries, as well as to develop our
renters' insurance
product line. In our consumer
protection solutions division, we intend to continue to focus on
being a low-cost provider of debt protection administration
services, to leverage our administrative infrastructure with our
large customer base clients and to manage the switch from credit
insurance programs to debt protection programs in the United
States.
The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Solutions for the periods indicated:
For the Six
For the Year
Months Ended
Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions)
Net earned premiums and other considerations:
Specialty Property
$
342
$
255
$
552
$
452
$
413
Consumer Protection
782
740
1,525
1,454
1,367
Total
1,124
995
2,077
1,906
1,780
Fees and other income
68
57
119
98
68
Total
$
1,192
$
1,052
$
2,196
$
2,004
$
1,848
Products and Services
Specialty Property
Solutions.
We underwrite a variety of
creditor-placed and voluntary homeowners insurance as well as
property coverages on manufactured housing, specialty
automobiles, including antique automobiles, recreational
vehicles, including motorcycles and watercraft, and leased and
financed equipment. We also offer complementary programs such as
flood insurance, renters' insurance and various other
property coverages. We are a leading provider of creditor-placed
and other collateral protection insurance programs, which
protect a lender's interest in homes, manufactured homes
and automobiles. We also offer administra-
87
tion services for some of the largest mortgage
lenders and servicers, manufactured housing lenders, dealers and
vertically integrated builders and equipment leasing
institutions in the United States. Many of our products and
services are sold in conjunction with the sale or lease of the
underlying property, vehicle or equipment by our clients. Our
market strategy is to partner with institutions who are leaders
in their chosen markets and therefore can effectively and
efficiently distribute our products and services to large
customer bases. By partnering with these leaders, we benefit not
only from their internally generated growth, but also from the
growth they experience as acquirers of other companies or books
of business in their respective markets.
The homeowners insurance product line is our
largest line in our specialty property solutions division. The
primary program within this line is our creditor-placed
homeowners insurance. Creditor-placed homeowners insurance
generally consists of
fire and dwelling insurance
that we
provide to ensure collateral protection to a mortgage lender in
the event that a homeowner fails to purchase or renew homeowners
insurance on a mortgaged dwelling. In our typical arrangements
with our mortgage lender and servicer clients, we agree that we
will monitor the client's mortgage loan portfolio over time
to verify the existence of homeowners insurance protecting the
lender's interest in the underlying properties. We have
developed a proprietary insurance tracking and administration
process to verify the existence of insurance on a mortgaged
property. In situations where such mortgaged property does not
have appropriate insurance and after notification to the
mortgageholder of the failure to have such insurance, we issue
creditor-placed insurance policies to ensure the mortgaged
property is protected. We believe our technology and insurance
processing expertise enable us to provide efficient and high
quality tracking and administration services.
We also provide fee-based services to our
mortgage lender and servicer clients in the creditor-placed
homeowners insurance administration area, which services are
complementary to our insurance products. Our ability to offer
these services is a critical factor in establishing
relationships with our client partners. The vast majority of our
mortgage lender and servicer clients outsource their insurance
processing to us. These fee-based services include receipt of
the insurance-related mail, matching of insurance information to
specific loans, payment of insurance premiums on
escrowed
accounts,
insurance-related customer service,
loss draft
administration and other related services. Our extensive use
of technology includes specialized optical character recognition
software, automated workflow processes and electronic data
interchange processes. We believe that we are a leader in
insurance and mortgage tracking services based on the number of
mortgage loans tracked.
The second largest specialty property line in our
specialty property solutions division is homeowners insurance
for owners of manufactured homes. We primarily distribute our
manufactured housing insurance programs utilizing three
marketing channels. Our primary channel is our partnerships with
the nation's leading manufactured housing retailers.
Through our proprietary premium rating technology, which is
integrated with our client partners' sales process, we are
able to offer our property coverages at the time the home is
being sold, thus enhancing our ability to penetrate the new home
point-of-sale market place. We also offer our programs to
independent specialty agents who distribute our products to
individuals subsequent to new home purchases. Finally, we
perform the collateral tracking and administration services for
the nation's leading manufactured housing lending
organizations. Through these partnerships with lending
organizations, we place our homeowners coverage on the
manufactured home in the event that the homeowner fails to
obtain or renew homeowners coverage on the home. In a typical
arrangement with a manufactured housing lending organization, we
agree to monitor the organization's portfolio of loans over
time to verify the existence of homeowners insurance protecting
the organization's interest in the underlying manufactured
homes. We perform collateral tracking and homeowners insurance
placement for some of the largest manufactured housing lenders
in the country.
We also provide voluntary homeowners insurance
and voluntary manufactured housing homeowners insurance, which
generally provide comprehensive coverage for the structure,
contents and liability, as well as coverage for floods.
Consumer Protection
Solutions.
We offer a broad array of
credit insurance programs, debt protection services and product
warranties and extended service contracts, all of which are
consumer-related, both domestically and in selected
international markets. Credit insurance and debt protection
programs generally
88
offer a consumer a convenient option to protect a
credit card or installment loan in the event of a disability,
unemployment or death so that the amount of coverage purchased
equals the amount of outstanding debt. Under the credit
insurance program, the loan or credit card balance is paid off
in the case of death and, in the case of unemployment or
disability, payments are made on the loan until the covered
holder is employed again or medically able to return to work.
Under the terms and conditions of a debt protection agreement,
the monthly interest due from a customer may be waived or the
monthly payments may be paid for a covered life event, such as
disability, unemployment or family leave. Most often in the case
of the death of a covered account holder, the debt is
extinguished under the debt protection program. Coverage is
generally available to all consumers without the underwriting
restrictions that apply to
term life insurance,
such as
medical examinations and medical history reports. We are the
exclusive provider of debt protection administration services
and credit insurance for four of the six largest general purpose
credit card issuers in the United States.
Almost all of the largest credit card issuing
institutions in the United States have switched from offering
credit insurance to their credit card customers to offering
their own banking-approved debt protection programs. Assurant
Solutions has been able to maintain all of its major credit card
clients as they switched from our credit insurance programs to
their debt protection programs. We earn fee income rather than
net earned premiums from our debt protection administration
services. In addition, margins are lower in debt protection
administration than in traditional credit insurance programs.
However, because debt protection is not an insurance product,
certain costs, such as regulatory costs and costs of capital,
are expected to be eliminated as the transition from credit
insurance to debt protection administration services continues.
The fees from debt protection administration do not fully
compensate for the decrease in credit insurance premiums. In
addition, we continue to provide credit insurance programs for
many of the leading retailers, consumer finance companies and
other institutions who are involved in consumer lending
transactions.
We also underwrite, and provide administration
services on, extended service and warranty contracts on
appliances, consumer electronics, including personal computers,
cellular phones and other wireless devices, and vehicles,
including automobiles, recreational vehicles and boats. Our
strategy is to provide our clients with all aspects of the
extended service contract or warranty, including program design,
marketing strategy, technologically advanced administration,
claims handling and customer service. We believe that we
maintain a unique differentiated position in the market place as
a provider of both the required administrative infrastructure
and insurance underwriting capabilities.
Marketing and Distribution
Assurant Solutions markets its insurance programs
and administration services directly to large financial
institutions, mortgage lenders and servicers, credit card
issuers, finance companies, automobile retailers, consumer
electronics retailers, manufactured housing lenders, dealers and
vertically integrated builders and other institutions. Assurant
Solutions enters into exclusive and other distribution
agreements, typically with terms of one to five years, and
develops interdependent systems with its client partners.
Through our long-standing relationships, Assurant Solutions has
access to numerous potential policyholders and, in partnership
with its clients, can tailor its products to suit various market
segments. Assurant Solutions maintains a dedicated sales force
that establishes and maintains relationships with our clients.
We have a disciplined and proven multiple step business
development process that is employed by our direct sales force.
We maintain a specialized consumer acquisition marketing
services group that manages our direct marketing efforts on
behalf of our clients.
In the United States, we have strong distribution
relationships with six out of the ten largest mortgage lenders
and servicers, four out of the seven largest manufactured
housing builders, four out of the six largest general purpose
credit card issuers and six out of the ten largest consumer
electronics and appliances retailers, with an average
relationship of at least 10 years.
Underwriting and Risk Management
We, along with Assurant Solutions'
predecessors, have over 50 years of experience in providing
specialty insurance programs and therefore maintain extensive
proprietary actuarial databases and catastrophe models.
89
This database enables us to better identify and
quantify the expected loss experience of particular products and
is employed in the design of our products and the establishment
of rates.
We have a disciplined approach to the management
of our property product lines. We vigilantly monitor pricing
adequacy on a product by region, state, risk and producer.
Subject to regulatory considerations, we seek to make timely
commission, premium and coverage modifications where we
determine them to be appropriate. In addition, we maintain a
segregated risk management area for property exposures whose
emphasis includes catastrophic exposure management, reinsurance
purchasing and analytical review of profitability based on
various catastrophe models. We do not underwrite in our
creditor-placed homeowners insurance line, as our contracts with
our client partners require that we automatically issue these
policies, after notice, when a policyholder's homeowners
policy lapses or is terminated.
A distinct characteristic of our credit insurance
programs is that the majority of these products have relatively
low exposures. This is because policy size is equal to the size
of the installment loan or credit card balance. Thus, loss
severity for most of this business is low relative to other
insurance companies writing more traditional lines of insurance.
For those product lines where there is exposure to catastrophes
(for example, our homeowners policies), we closely monitor and
manage our aggregate risk exposure by geographic area and have
entered into reinsurance treaties to manage our exposure to
these types of events.
Also, a significant portion of Assurant
Solutions' consumer protection solutions contracts with our
client partners are written on a retrospective commission basis,
which permits Assurant Solutions to adjust commissions based on
claims experience. Under this contingent commission arrangement,
compensation to the financial institutions and other clients is
predicated upon the actual losses incurred compared to premiums
earned after a specific net allowance to Assurant Solutions,
which we believe aligns our clients' interests with ours
and helps us to better manage risk exposure.
In Assurant Solutions, our claims processing is
highly automated and combines the efficiency of centralized
claims handling, customer service centers and the flexibility of
field representatives. This flexibility adds significant savings
and efficiencies to the claims-handling process. Our claims
department also provides automated feedback to help with risk
assessment and pricing. In our specialty property solutions
division, we complement our automated claims processing with
field representatives who manage the claims process on the
ground where and when needed.
Assurant Health
Assurant Health is a writer of individual and
short-term major medical health insurance. We also provide small
employer group health insurance to employer groups primarily of
two to 50 employees in size, and health insurance plans to
full-time college students. Our predecessor company first issued
medical insurance coverage to individuals in 1912. We serve
approximately 1.1 million people throughout the United
States. We were one of the first companies to offer an MSA
feature as part of our individual health products and we
continue to be a provider of MSA-linked individual health
policies. MSAs are tax-sheltered savings accounts earmarked for
medical expenses and are established in conjunction with one of
our PPO or indemnity products.
We expect growth in our Assurant Health segment
to be driven principally by inflation and increases in the cost
of providing medical care. We believe that the number of persons
covered by individually purchased health insurance in the United
States will remain stable at 14.2 million people based upon
existing levels of unemployment and job turnover. Similarly, we
believe that the number of small employer groups in the United
States will continue to remain steady at 5.8 million firms.
We generally expect medical cost inflation to be
the principal driver of growth in this segment; however, reduced
funding of health insurance by employers and the increasing
attractiveness and flexibility of MSAs could create
opportunities for the individual medical insurance market to
expand.
In Assurant Health, we intend to continue to
concentrate on developing our product capabilities in the
individual health insurance market. From 2000 through June 2003,
we have increased the relative percentage of individual health
insurance products to our total health insurance products from
approximately 30% of premium dollars to approximately 50% of
premium dollars. We have pursued a variety of distribution
90
relationships focused on the individual health
insurance market. We seek to maintain the lowest combined
expense ratio of any of our major competitors serving the health
care financing needs of individuals, families and small employer
groups.
The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Health for the periods and as of the
dates indicated:
For the
Six Months
For the Year
Ended
Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions, except membership data)
Net earned premiums and other considerations:
Individual
$
494
$
420
$
880
$
738
$
619
Small employer group
475
484
954
1,100
1,348
Total
969
904
1,834
1,838
1,967
Fees and other income
15
10
23
14
11
Total
$
984
$
914
$
1,857
$
1,852
$
1,978
Operating statistics:
Loss ratio(1)
65.0
%
66.6
%
66.6
%
71.1
%
76.2
%
Expense ratio(2)
28.8
%
29.0
%
29.4
%
26.8
%
23.8
%
Combined ratio(3)
92.8
%
94.9
%
95.2
%
97.3
%
99.5
%
Membership by product line (in thousands):
Individual
715
650
670
600
500
Small employer group
360
375
355
420
585
Total membership
1,075
1,025
1,025
1,020
1,085
(1)
The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
(2)
The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
(3)
The combined ratio is equal to total benefits,
    losses and expenses divided by net earned premiums and other
    considerations and fees and other income.
Products and Services
Individual Health Insurance
Products.
Assurant Health's
individual health insurance products are sold to individuals,
primarily between the ages of 18 and 64 years, and their
families who do not have employer-sponsored coverage. Due to
increasingly stringent federal and state restrictions relating
to insurance policies sold directly to individuals, we emphasize
the sale of individual products through associations and trusts
that act as the master policyholder for such products. Our
association and trust products offer greater flexibility in
pricing, underwriting and product design compared to products
sold directly to individuals on a true individual policy basis.
Substantially all of the individual health
insurance products we sell are PPO plans, which offer the member
the ability to select any health care provider, with benefits
reimbursed at a higher level when care is received from a
participating network provider. Coverage is typically subject to
co-payments
or
deductibles
and coinsurance, with
member cost sharing for covered services limited by lifetime
policy maximums of $2 million or $3 million, with
options to purchase between $6 million and $8 million.
Product features often included in these plans are inpatient
pre-certification and benefits for preventative services. These
products are individually underwritten taking into account the
member's medical history and other factors, and consist
primarily of major medical insurance that renews on an annual
basis. The remaining products we sell are
91
indemnity, or fee-for-service, plans. Indemnity
plans offer the member the ability to select any health care
provider for covered services.
At June 30, 2003 and December 31, 2002,
we had total in force medical policies of 281,300 and 264,100,
respectively, covering approximately 560,000 and 520,000
individuals, respectively. Approximately 14% and 16% of the
individual health insurance products we sold in 2002 and the six
months ended June 30, 2003, respectively, included an MSA.
Assurant Health markets additional products to
the individual market: short-term medical insurance and student
health coverage plans. The short-term medical insurance product
is ideal for individuals who are between jobs or seeking interim
coverage before their major medical coverage becomes effective.
Short-term medical insurance products are generally sold to
individuals with gaps in coverage for six months or less.
Student health coverage plans are medical insurance plans sold
to full-time college students who are not covered by their
parents' health insurance, are no longer eligible for
dependant coverage or are seeking a more comprehensive
alternative to a college-sponsored plan.
Small Employer Health Insurance Products.
Our small employer market primarily
includes companies with two to 50 employees, although
larger employer coverage is available. Our average group size,
as of June 30, 2003, was approximately five employees. In
the case of our small employer group medical insurance, we
underwrite the entire group and examine the medical risk factors
of the individuals in the group for forecasting and reserving
purposes.
Substantially all of the small employer health
insurance products that we sold in 2002 and the first six months
of 2003 were PPO products. At June 30, 2003 and
December 31, 2002, we had total in force medical policies
for small employer groups of 38,000 and 38,500, respectively,
covering approximately 360,000 and 355,000 individuals,
respectively.
We recently introduced
Health Reimbursement
Accounts (HRAs)
, which are employer-funded accounts provided
to employees for reimbursement of qualifying medical expenses.
We also offer certain ancillary products to meet the demands of
small employers for life insurance, short-term disability
insurance and dental insurance.
Marketing and Distribution
Our health insurance products are principally
marketed to an extensive network of independent agents by
Assurant Health distributors. Approximately 150,000 agents
had access to Assurant Health products during the 2002 calendar
year. We also market our products to individuals through a
variety of exclusive and non-exclusive national account
partnerships and direct distribution channels. In addition, we
market our products through NorthStar Marketing, a wholly owned
affiliate that proactively seeks business directly from
independent agents. Since 2000, Assurant Health has had an
exclusive national marketing agreement with IPSI, a wholly-owned
subsidiary of State Farm, pursuant to which IPSI
captive
agents
market Assurant Health's individual health
products. In addition, Assurant Health has exclusive
distribution relationships with USAA and Mutual of Omaha to
market Assurant Health's individual health products. All of
these arrangements have four-year terms from their commencement
dates and are generally terminable upon our bankruptcy or
similar proceeding or a breach of a material provision by us.
Additionally, some of these arrangements permit termination
after a specified notice period. We also have had a
long-standing relationship with Health Advocates Alliance, the
association through which we provide many of our individual
health insurance products. Assurant Health also has had a
long-term relationship with Rogers Benefit Group, a national
marketing organization with 70 offices. Short-term medical
insurance and student health coverage plans are also sold
through the Internet by Assurant Health and numerous direct
writing agents.
Underwriting and Risk Management
Assurant Health's underwriting and risk
management capabilities include pricing discipline, policy
underwriting, renewal optimization, development and retention of
provider networks and claims processing.
92
In establishing premium rates for our health care
plans, we use underwriting criteria based upon our accumulated
actuarial data, with adjustments for factors such as claims
experience and member demographics to evaluate anticipated
health care costs. Our pricing considers the expected frequency
and severity of claims and the costs of providing the necessary
coverage, including the cost of administering policy benefits,
sales and other administrative costs. State rate regulation
significantly affects pricing. Our health insurance operations
are subject to a variety of legislative and regulatory
requirements and restrictions covering a range of trade and
claim settlement practices. State insurance regulatory
authorities have broad discretion in approving a health
insurer's proposed rates. In addition, HIPAA requires
certain guaranteed issuance and renewability of health insurance
coverage for individuals and small employer groups and limits
exclusions based on existing conditions.
In our individual health insurance business, we
medically underwrite our applicants and have implemented new
programs to improve our underwriting process. These include our
tele-underwriting program, which enables individual insurance
applicants to be interviewed over the telephone by trained
underwriters. Gathering information directly from prospective
clients over the telephone greatly reduces the need for costly
and time-consuming medical exams and physician reports. We
believe this approach leads to lower costs, improved
productivity, faster application processing times and improved
underwriting information. Our individual underwriting considers
not only an applicant's medical history, but also lifestyle
factors such as avocations and alcohol and drug and tobacco use.
Our individual health insurance products generally permit us to
rescind coverage if an insured has falsified his or her
application.
In our small employer group health insurance
business, we underwrite the group on the basis of demographic
factors such as age, gender, occupation and geographic location
and concentration of the group. In addition, we examine
individual-level medical risk factors for forecasting and
reserving purposes.
Assurant Health offers a broad choice of PPO
network options in each of its markets and enrolls members in
the network that Assurant Health believes reduces our price paid
for health care services while providing high quality care.
Assurant Health enrolls indemnity customers in selected PPO
networks to obtain discounts on provider services that would
otherwise not be available. In situations where a customer does
not obtain services from a contracted provider, Assurant Health
applies various usual and customary fees, which limit the amount
paid to providers within specific geographic areas.
Provider network contracts are a critical
dimension in controlling medical costs since there is often a
significant difference between a network negotiated rate and the
non-discounted rate. To this end, we retain provider networks
through a variety of relationships, which include leased
networks that contract directly with individual health care
providers, proprietary contracts and Private Health Care
Systems, Inc. (PHCS). PHCS is a national private company that
owned a provider network of approximately 3,600 hospitals
and approximately 400,000 physicians as of September 30,
2003. Assurant Health was a co-founder of PHCS, and we currently
own 29% of the company. PHCS has a staff solely dedicated to
provider relations.
We seek to manage claim costs in our PPO plans by
selecting provider networks that have negotiated favorable
arrangements with physicians, hospitals and other health care
professionals and requiring participation in our various medical
management programs. In addition, we manage costs through
extensive underwriting, pricing and product design decisions
intended to influence the behavior of our insureds. We provide
case management
programs and have doctors, nurses and
pharmacists on staff who endeavor to manage risks related to
medical claims and prescription costs.
We utilize a broad range of focused traditional
cost containment and care management processes across our
various product lines to manage risk and to lower costs. These
include case management,
disease management
and pharmacy
benefits management programs. Our case management philosophy is
built on helping our insureds confront a complex care system to
find the appropriate care in a timely and cost effective manner.
We believe this approach builds positive relationships with our
providers and insureds and helps us achieve cost savings.
Effective July 1, 2003, Assurant Health
transitioned its pharmacy benefits management function to Medco
Health Solutions, formerly known as Merck-Medco. Medco Health
Solutions has established itself as
93
a leader in its industry with more than 57,000
participating pharmacies nationwide. Through Medco Health
Solutions' advanced technology platforms, Assurant Health
is able to access information about customer utilization
patterns on a more timely basis to improve its risk management
capabilities. In addition to the technology-based advantages,
Medco Health Solutions allows us to purchase our pharmacy
benefits at competitive prices. Our agreement with Medco Health
Solutions expires June 30, 2007. Assurant Health also
utilizes copays and deductibles to reduce prescription drug
costs.
We employ approximately 525 claims employees
in locations throughout the United States dedicated to Assurant
Health. We have an appeals process pursuant to which
policyholders can appeal claims decisions made.
Assurant Employee Benefits
Assurant Employee Benefits is a market leader in
group dental benefit plans sponsored by employers and funded
through payroll deduction. We are also a leading provider of
employer-paid or
true group
dental, disability and term
life insurance products and related services to small and
medium-sized employers.
In our core benefits business, we focus on
employer-sponsored programs for employers with typically between
20 and 1,000 employees. We are willing to write programs for
employers with more than 1,000 covered employees when they meet
our risk profile. At June 30, 2003, substantially all of
our coverages in force and 76% of our annualized premiums in
force were for employers with less than 1,000 employees. We have
a particularly strong emphasis on employers with under 250
employees, which represented approximately 97% and 59% of our in
force coverages and premiums, respectively, as of June 30,
2003. Our average in force case size was 57 enrolled employees
as of June 30, 2003.
Growth in our Assurant Employee Benefits segment
will be principally driven by increases in the numbers of
employees enrolled in our plans, inflation and increases in the
cost of providing dental care and, for our group disability and
term life business, increases in salaries. We believe that
increased penetration of our target employer base could generate
growth for this segment. According to the 2003 National
Compensation Survey conducted by the Bureau of Labor Statistics,
U.S. Department of Labor, in March 2003, 41% of full-time
non-agricultural private industry employees lack employer
provided or sponsored life insurance coverage, 55% lack
short-term disability coverage, 64% lack long-term disability
coverage and 60% lack dental coverage. During 2002, according to
National Association of Dental Plans and Life Insurance
Marketing Research Association studies, approximately
$7.2 billion in annualized premiums of group dental,
disability and life insurance was sold in the United States.
Exclusive of group dental, for which historical data from these
sources is not available, the average annual growth rate in
sales of the remaining group products for 2000 through 2002 was
5.4% per year. We believe that our broad product and
distribution coverage and our expertise in small case
underwriting will position us favorably as these markets
continue to grow.
In Assurant Employee Benefits, we intend to build
upon a leading position in the employee-paid dental lines in
order to expand and grow our portfolio of other employee-paid
product offerings and service capabilities, where we have seen
higher profits than in the employer-paid lines. We are also
focusing our efforts on achieving greater bottom line
profitability for our disability product offerings.
Trends in the U.S. employment market and, in
particular, in the cost of the medical benefits component of
total compensation, are leading an increasing number of
employers to offer new benefits on a voluntary basis. That is,
after originally vetting the insurer and typically selecting the
particular plan features to be offered, the employer offers the
new benefits to employees at their election and at their cost,
administered through payroll deduction. Because these products
can be economically distributed on this group basis and are
convenient to purchase and maintain, they are appealing to
employees who might have little opportunity or inclination to
purchase similar coverage on an individual basis.
We believe that voluntary products represent a
sizeable growth opportunity. In addition, the specialized skills
involved in soliciting employees to enroll and in administering
and managing these employer-sponsored group products, provide
prospects for differentiation to companies that focus on this
opportunity. We have reorganized our home office and sales
operations to reflect the strategic importance of this area. Our
group
94
sales representatives generally specialize in
either voluntary or true group sales. Voluntary and true group
representatives collaborate with each other in developing
relationships with and providing service to the intermediaries
selected by our targeted customers, many of whom are not
specialists in either voluntary or true group coverages. In
addition, we are investing substantial resources in enhanced
enrollment and specialized administrative capabilities for the
voluntary market.
The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant Employee Benefits for the periods
and as of the dates indicated:
For the Six
Months
For the Year
Ended
Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions, except master contract data)
Net earned premiums and other considerations:
Group dental
$
273
$
280
$
553
$
257
$
234
Group disability
218
199
400
398
387
Group life
132
142
280
279
282
Total
623
621
1,233
934
903
Fees and other income
33
37
74
39
8
Total
$
656
$
658
$
1,307
$
973
$
911
Operating statistics:
Loss ratio(1)
75.6
%
77.5
%
76.6
%
79.0
%
77.7
%
Expense ratio(2)
32.6
%
33.0
%
32.3
%
32.5
%
30.7
%
Premium persistency ratio(3)
88.5
%
89.6
%
79.9
%
84.3
%
88.5
%
Number of direct master contracts (rounded to the
    nearest 100):
Group dental
29,800
(4
)
30,300
12,500
12,500
Group disability
26,200
(4
)
27,300
28,700
30,100
Group life
25,200
(4
)
25,600
25,500
25,500
Total
81,200
(4
)
83,200
66,700
68,100
(1)
The loss ratio is equal to policyholder benefits
    divided by net earned premiums and other considerations.
(2)
The expense ratio is equal to selling,
    underwriting and general expenses divided by net earned premiums
    and other considerations and fees and other income.
(3)
The premium persistency ratio is equal to the
    year-to-date (not annualized) rate at which existing business
    for all issue years at the beginning of the period remains in
    force at the end of the period. Persistency is typically higher
    mid-year than at year-end. The calculations for the year ended
    December 31, 2002 and the six months ended June 30,
    2002 exclude DBD.
(4)
Information not readily available.
The results of DBD, which we acquired on
December 31, 2001, and the results of CORE, which we
acquired on July 12, 2001, are included in the financial
results of the Assurant Employee Benefits segment beginning in
2002 and July 2001, respectively. DBD at the time of acquisition
was a leading provider of voluntary (employee-paid) indemnity
dental and prepaid dental coverage for employee groups. CORE at
the time of acquisition was a leading national provider of
employee absence management services and a major provider of
disability reinsurance management services to middle-market
insurance carriers.
95
Products and Services
Group Dental.
Dental
benefit plans provide for the funding of necessary or elective
dental care. We provide both employee-paid and employer-paid
plans. Plans may involve a traditional indemnity, or
fee-for-service, arrangement, a PPO, a managed care, or
"prepaid," arrangement, or some combination of these
programs with employee choice. In a PPO plan, insureds may
select any dental provider, but benefits are reimbursed at a
higher level when they visit a provider who participates in the
PPO. Coverage is subject to deductibles, coinsurance and annual
or lifetime maximums. In a prepaid plan, members must go to
participating dentists in order to receive benefits. Depending
upon the procedure, dental benefits are provided by
participating dentists at either no cost or a nominal co-payment.
Success in the group dental business requires
strong provider network development and management skills, a
focus on expense management and a claim system capable of
efficiently and accurately adjudicating high volumes of
transactions. We own and operate a PPO, Dental Health Alliance,
L.L.C., which as of October 1, 2003 had approximately
26,700
referable locations
and approximately 18,500
participating dentists nationwide. In addition, we have a
marketing arrangement with an independent PPO that adds another
approximately 1,700 referable locations and approximately 1,400
participating dentists nationwide. We have also developed local
managed care networks in 24 states, which collectively involve
approximately 13,400 referable locations and approximately 8,700
participating dentists. The number of referable locations in our
dental PPO and managed care networks have grown by approximately
35% and 10%, respectively, from January 1, 2000 to
October 1, 2003.
In addition to fully insured dental benefits, we
also offer
administrative services only (ASO)
for
self-funded dental plans. Under this arrangement, the employer
or plan sponsor pays Assurant Employee Benefits a fee for
providing these services. The self-funded plan is responsible
for the claim liability. ASO dental is a viable product option
for employers with 100 or more employees. As of October 1,
2003, our block of this business consisted of approximately 200
groups and approximately 96,000 covered employees and, for the
nine months ended September 30, 2003, generated
$4.5 million of fee revenue.
As of June 30, 2003 and December 31,
2002, we had approximately 29,800 and 30,300 group dental plans
insured or administered through this segment, respectively,
covering or involving in each case approximately
1.4 million members.
Group Disability Insurance.
Group disability insurance provides
partial replacement of lost earnings for insured employees who
become disabled and otherwise qualify for benefits. Our group
disability products include both short-term and long-term
disability insurance. Group long-term disability insurance
provides employees with insurance coverage for loss of income in
the event of extended work absences due to sickness or injury.
Most policies begin providing benefits following 90 or
180 day waiting periods, and benefits are limited to
specified maximums as a percentage of income. Group short-term
disability insurance provides coverage for temporary loss of
income due to injury or sickness, often effective immediately
for accidents and after one week of sickness, for up to
26 weeks, also limited to specified maximums as a
percentage of income. As a reflection of both the breadth of our
disability product lines and our desire to diversify our risks,
we market our disability products across all major industry
segments.
Disability Reinsurance Management Services, Inc.,
our wholly owned subsidiary, provides insurance carriers that
wish to supplement their core product offerings a
turnkey
facility with which to write group disability insurance.
Services we provide to the insurers for a fee include product
development, state insurance regulatory filings, underwriting,
claims management or any of the other functions typically
performed by an insurer's back office. The risks written by
DRMS' various clients are reinsured into a pool, with the
clients generally retaining shares ranging from 0% to 50% of the
risks they write. At times, the ceding insurer may also be a
reinsurer of one or more of the pools. DRMS administers various
aspects of the pools. As the largest reinsurer in the pools, our
licensed insurance subsidiary reinsures a substantial majority
of the insurance risk that is ceded by the client. Since DRMS
clients operate in niches not often reached through our
traditional distribution, our participation in the pools enables
us, through a form of alternate distribution, to reach customers
to whom we would not otherwise have access. In this reinsurance
arrangement, we manage through
96
DRMS both underwriting and the claims
adjudication process; therefore, we have more control of
critical risk management processes than is normally available in
reinsurance arrangements.
As of June 30, 2003 and December 31,
2002, we had approximately 38,300 and 39,100 group disability
plans in force, reinsured or administered on an ASO basis,
covering approximately 2.8 million and 3.0 million
enrolled employees, respectively.
Group Term Life Insurance.
Group term life insurance is one of
the principal means by which working people in the United States
provide for their families against the risk of premature death
and often the means whereby they obtain lesser amounts of
coverage for their spouses, children or domestic partners. Group
term life insurance provides coverage to employees, with limited
coverage also available to their dependents, for a specified
period. Our policies are generally the standard or basic term
life insurance offered by employers. Group term life insurance
consists primarily of
renewable term life insurance
with
the amount of coverage frequently linked to employees'
earnings, flat amounts or a combination of the two. Employers
generally provide a base or foundation level of coverage for
their employees and offer the opportunity for employees to
increase their coverage to meet specific needs. Also, basic term
life insurance is often supplemented with an accidental death or
dismemberment policy or rider, which provides additional
benefits in the indicated events. Because there are few ways to
differentiate an insurer in the area of traditional group term
life insurance, we often sell this product line as a complement
to our other core employee benefit insurance products.
As of June 30, 2003 and December 31,
2002, we had approximately 25,200 and 25,600 group life plans in
force, covering approximately 1.9 million and
2 million enrolled employees, respectively.
Marketing and Distribution
We distribute the products of Assurant Employee
Benefits primarily through approximately 160 group sales
representatives, located in 40 offices in or near major U.S.
metropolitan areas. These representatives work through
independent employee benefits advisors, including brokers and
other intermediaries, to reach our customers, who are primarily
small to medium-sized employers. DRMS employs an independent
distribution arm tailored to its needs.
Our marketing efforts concentrate on:
(i) the identification of the employee benefit needs of our
targeted customers; (ii) the development of tailored
products and services designed to meet those needs;
(iii) the alignment of our Company with select brokers and
other intermediaries who value our approach to the market; and
(iv) the promotion of our Company's brand.
To operate successfully in the small to
medium-sized employer marketplace requires a large and broadly
distributed sales force with relationships with the brokers and
other intermediaries who act as advisors to those employers in
connection with their benefits programs. In many cases, these
employers and their advisors rely on us for expertise in
matching their needs to the collection of solutions available
through group benefit programs. Success also requires systems
and work practices suited to a high transaction volume business
and the ability to provide a high level of customer service to a
large number of clients operating in almost all industries found
in the U.S. economy.
Underwriting and Risk Management
True group products are normally offered to
employees on a
guaranteed issue
basis, meaning that if
the group is an acceptable risk, the insurer generally foregoes
individual medical underwriting and agrees in advance to accept
all applications for insurance from members of the eligible
class up to a formula-determined limit. Individual medical
underwriting is required on applications for amounts in excess
of this limit, or in connection with untimely applications. Our
sales representatives and underwriters evaluate the risk
characteristics of each prospective insured group and design
appropriate plans of insurance. They utilize various techniques
such as deductibles, co-payments, guarantee issue limits and
waiting periods to control the risk we assume. Voluntary
products introduce additional risks due to the fact that
employees have some awareness of the risk of loss they
personally face, and those employees who believe themselves to
be more at risk will be more likely to elect coverage. In order
to control these risks, we customize our plan designs to
mitigate adverse
97
selection problems. We also require that a
minimum percentage of eligible employees elect a voluntary
coverage.
We base the pricing of our products on the
expected pay-out of benefits that we calculate using assumptions
for mortality, morbidity, interest, expenses and persistency,
depending upon the specific product features. Group underwriting
takes into account demographic factors such as age, gender and
occupation of members of the group as well as the geographic
location and concentration of the group. Our disability policies
often limit the payment of benefits for certain kinds of
conditions, such as pre-existing conditions or disabilities
arising from specifically listed medical conditions, in each
case as defined in the policies.
Generally, we are not obligated to accept any
risk or group of risks from, or to issue a policy or group of
policies to, any employer or intermediary. Requests for coverage
are reviewed on their merits and generally a policy is not
issued unless the particular risk or group has been examined and
approved by our underwriters. Group products are typically
written with an initial rate guarantee of two years for
disability and life insurance and one year for other group
products. They are also written on a
guaranteed renewable
basis with the right, upon expiration of the guarantee, to
re-price to reflect the aggregate experience of our block of
business and, where credible, the experience of the group.
Reflecting both our ability to satisfy a broad
range of customers and our desire to prudently diversify our
risk, the business underwritten by our Assurant Employee
Benefits segment is widely dispersed across geographic areas as
well as the industries insured. At June 30, 2003, our top
ten states measured by percentage of in force annual premiums
contributed approximately 54.4% of our total annualized premiums
in force, as detailed below:
Percentage of
Total
Annualized
Premiums in
State
Force
California
11.3
%
Texas
7.1
Minnesota
6.3
New York
5.4
Michigan
4.8
Ohio
4.5
Illinois
4.4
Florida
4.0
Alabama
3.3
Wisconsin
3.3
Total
54.4
%
98
Similarly, at June 30, 2003, our top ten
industry segments measured by percentage of in force annual
premiums, as aggregated by the first two digits of their
standard industry code (SIC)
, contributed approximately
49.3% of our total annualized premiums in force, as detailed
below:
Percentage of
Total
Annualized
Premiums in
SIC Code
Force
80 (Health Services)
9.0
%
82 (Educational Services)
8.3
87 (Engineering, Accounting, Management, etc.)
6.2
73 (Business Services)
5.3
50 (Wholesale Trade-Durable)
4.4
81 (Legal Services)
4.2
91 (Government Services)
3.9
86 (Membership Organizations)
2.8
83 (Social Services)
2.7
60 (Finance, Insurance, Real Estate)
2.5
Total
49.3
%
Profitability in all of our product lines is
affected by deviations of actual claims experience from expected
claims experience, investment returns, persistency and our
ability to control our administrative expenses. Also important
is the general state of the economy; for example, during a
recession the incidence of disability claims tends to increase.
Our efforts are focused on facilitating
claimants' return to work through a variety of means,
including physical therapy, vocational rehabilitation and
retraining and workplace accommodation to support the insured.
We believe that we were the first U.S. insurance company to
develop and market disability insurance contracts aimed
explicitly at facilitating recovery of functionality and
vocational rehabilitation when disabilities occur. In support of
this effort, we also employ or contract with a staff of doctors,
nurses and vocational rehabilitation specialists. We also
utilize a broad range of outside medical and vocational experts
for independent evaluations and local vocational services.
Finally, we have an investigations unit focused on individuals
who have or may be capable of returning to work but continue to
claim benefits. Our dental business utilizes a highly automated
claims system focused on rapid handling of claims, with 66% of
claims adjudicated within seven calendar days for claims
received from January 1, 2003 to and including
August 30, 2003.
We employ approximately 800 claims employees in
locations throughout the United States dedicated to the Assurant
Employee Benefits segment. We have a comprehensive claims review
process, including an appeals process pursuant to which
policyholders can appeal claims decisions made.
Assurant PreNeed
Assurant PreNeed is the market leader in the
United States in pre-funded funeral insurance, which provides
whole life insurance death benefits or annuity benefits used to
fund costs incurred in connection with pre-arranged funerals. We
distribute our pre-funded funeral insurance products through two
separate channels, our independent channel and our AMLIC
channel. Our pre-funded funeral insurance products provide
benefits to cover the costs incurred in connection with
pre-arranged funeral contracts
and are distributed
primarily through funeral homes and sold mainly to consumers
over the age of 65, with an average issue age of 72. Our
pre-funded funeral insurance products are typically structured
as whole life insurance policies in the United States and as
annuity products in Canada. Our independent channel's
target market is comprised of the 23,000 funeral firms in the
United States and Canada, of which 2,000 are active customers.
99
With our acquisition of AMLIC in 2000, we have
become the market leader in the area of pre-funded funeral
insurance based on face amount of policies sold. Through our
AMLIC channel, we provide the insurance products and support
services for the
pre-need
activities of SCI, the largest
operator of cemeteries and funeral homes in North America. As of
June 30, 2003, SCI operated approximately 1,300 funeral
service locations in North America. This commission-based
arrangement is anchored by an exclusive ten-year marketing
agreement, which commenced on October 1, 2000.
According to public filings, published statistics
and our own internal estimates, we believe the U.S. market for
insurance funded pre-need policies in 2002 was approximately
$2.0 billion based on the face amount of policies sold.
According to Conning's Industry Insight, an industry
publication, the pre-funded funeral insurance industry grew by
approximately 2.9% annually from 1992 to 2000. We believe the
pre-need market will continue to grow at approximately this
level in the future. Growth in pre-need sales has been
traditionally driven by distribution with a high correlation
between new sales of pre-funded funeral insurance and the number
of pre-need counselors marketing the product. In addition, as
alternative distribution channels are identified, such as
targeting affinity groups and employers, we believe growth in
this market could accelerate above projected rates.
In Assurant PreNeed, our strategy in our
independent channel is to increase sales potential by
strengthening our distribution relationships. We do this by
offering marketing support and programs to our funeral firm
clients to increase their local market share, providing training
for their sales counselors and assisting them in developing
direct-to-consumer marketing programs and lead generation and
management tools. Through our AMLIC channel our strategy is to
reduce SCI's cost to sell and manage its pre-need
operation. We do this by integrating our processes for managing
SCI's insurance production into its process for managing
its pre-need business. Additionally, in keeping with our goal of
aligning SCI's interest with ours, our arrangement with SCI
is commission-based; however, we compensate SCI with an
escalating production-based commission, with a defined maximum.
The following table provides net earned premiums
and other considerations, fees and other income and other
operating data for Assurant PreNeed for the periods and as of
the dates indicated:
For the Six
Months
For the Year
Ended
Ended
June 30,
December 31,
2003
2002
2002
2001
2000
(in millions)
Net earned premiums and other considerations:
AMLIC
$
147
$
152
$
306
$
278
$
60
Independent
124
116
232
229
217
Total
$
271
$
268
$
538
$
507
$
277
Fees and other income
$
3
$
3
$
5
$
3
$
2
Total
$
274
$
271
$
543
$
510
$
279
New face sales (life and annuity) net of
    reinsurance:
AMLIC
$
157
$
205
$
392
$
372
$
76
Independent and other
157
159
319
258
233
Total
$
314
$
364
$
711
$
630
$
309
Policies in force
1.70
1.68
1.69
1.67
1.61
Policyholder liabilities
$
2,790
$
2,580
$
2,670
$
2,500
$
2,330
We acquired AMLIC on October 1, 2000, and
therefore the results of AMLIC are included in our Assurant
PreNeed segment financial results beginning in October 2000.
100
Products
Pre-Funded Funeral Insurance
Policies.
Pre-funded funeral insurance
provides whole life insurance death benefits or annuity benefits
to fund the costs incurred in connection with pre-arranged
funeral contracts, or, in a minority of situations, pre-arranged
funerals without a pre-arranged funeral contract, which costs
typically include funeral firm merchandise and services. Our
pre-funded funeral insurance products are typically structured
as whole life insurance policies in the United States. In
Canada, for regulatory reasons, our pre-funded funeral insurance
products are typically structured as annuity contracts for newly
issued business. A pre-arranged funeral contract is an
arrangement between a funeral firm and an individual whereby the
funeral firm agrees to perform the selected funeral upon the
individual's death. The consumer then purchases an
insurance policy intended to cover the cost of the pre-arranged
funeral, and the funeral home generally becomes the irrevocable
assignee, or, in certain cases, the beneficiary, of the
insurance policy proceeds. However, the insured may name a
beneficiary other than the funeral home. The funeral home agrees
to provide the selected funeral at death in exchange for the
policy proceeds. Because the death benefit under many of our
policies is designed to grow over time, the funeral firm that is
the assignee of such a policy has managed some or all of its
funeral inflation risk. Consumers have the choice of making
their policy payments as a single lump-sum payment or through
multi-payment plans that spread payments out over a period of
one to ten years. We do not provide any funeral goods and
services in connection with our pre-funded funeral insurance
policies; these policies pay death benefits in cash only.
Marketing and Distribution
We distribute our pre-funded funeral insurance
products through two distribution channels: the independent
channel, which distributes through approximately 2,000 funeral
homes and selected third-party general agencies, and our AMLIC
channel, which distributes through a partnership with
approximately 1,300 SCI-owned locations in North America. Our
policies are sold by licensed insurance agents or enrollers who
in some cases may also be a funeral director. As of
June 30, 2003 and December 31, 2002, the face amount
of our contracts sold through our AMLIC channel represented
approximately 50% and 55%, respectively, of our total new life
and annuity face sales in Assurant PreNeed.
Risk Management
Assurant PreNeed generally writes whole life
insurance policies with increasing death benefits and obtains
the majority of its profits through interest rate spreads.
Interest rate spreads refer to the difference between the death
benefit growth rates on pre-funded funeral insurance policies
and the investment returns generated on the assets we hold
related to those policies. To manage these spreads, we monitor
weekly the movement in new money yields and monthly evaluate our
actual net new achievable yields. This information is used by
our business segment crediting committee to evaluate rates to be
credited on applicable new and in force pre-funded funeral
insurance policies and annuities. In addition, our business
segment investment committee, including members of the crediting
committee, review asset benchmarks and perform asset/ liability
matching studies to develop the optimum portfolio to maximize
yield and reduce risk.
In Assurant PreNeed, we utilize prudent
underwriting to select and price insurance risks. We regularly
monitor mortality assumptions to determine if experience remains
consistent with these assumptions and to ensure that our product
pricing remains appropriate. We continually review our
underwriting, agent and policy contract provisions and pricing
guidelines so that our policies remain competitive and
supportive of our marketing strategies and profitability goals.
Our underwriting policies rely on review procedures with
actuarial personnel, in which actual loss experience is
examined. Decisions are based on established actuarial pricing
and risk selection principles to ensure that our underwriting
and pricing guidelines are appropriate.
Many of our pre-funded whole-life funeral
insurance policies have increasing death benefits. As of
June 30, 2003, approximately 70% of Assurant PreNeed's
in force insurance policy reserves related to policies that have
guaranteed crediting rates or require us to credit rates with
changes in the Consumer Price Index. Policies that have rates
guaranteed to change with the Consumer Price Index represented
approximately 15%
101
of Assurant PreNeed's reserves as of
June 30, 2003. We have employed risk mitigation strategies
to seek to minimize our exposure to a rapid increase in
inflation.
Ceded Reinsurance
Our operating business segments utilize ceded
reinsurance for three major business purposes:
•
Loss Protection and Capital
    Management.
As part of our overall
    risk and capacity management strategy, we purchase reinsurance
    for certain risks underwritten by our various operating business
    segments, including significant individual or catastrophic
    claims, and to free up capital to enable us to write additional
    business.
•
Business
    Dispositions.
We have used reinsurance
    to exit certain businesses, such as our FFG division in 2001 and
    our LTC business in 2000. Reinsurance was used in these cases to
    facilitate the transactions because the businesses shared legal
    entities with business units that we retained.
•
Assurant Solutions' Client Risk and
    Profit Sharing.
Assurant Solutions
    writes business produced by its clients, such as mortgage
    lenders and servicers and financial institutions, and reinsures
    all or a portion of such business to insurance subsidiaries of
    the clients. Such arrangements allow significant flexibility in
    structuring the sharing of risks and profits on the underlying
    business.
Loss Protection and Capital
    Management
In a traditional indemnity reinsurance
transaction, a reinsurer agrees to indemnify another insurer for
part or all of its liability under a policy or policies it has
issued for an agreed upon premium. These agreements provide for
recovery of a portion of
losses and
associated
loss
expenses
from reinsurers. The terms of these agreements,
which are typical for agreements of this type, generally
provide, among other things, for the automatic acceptance by the
reinsurer of ceded risks in excess of our
retention
limits (i.e. the amount of loss per individual risk that we
are willing to absorb). For excess of loss coverage, we pay
premiums to the reinsurers based on rates negotiated and stated
in the treaties. For
pro rata reinsurance,
we pay
premiums to the reinsurers based upon percentages of premiums
received by us on the business reinsured. These agreements are
generally terminable as to new risks by us or by the reinsurer
on appropriate notice; however, termination does not affect
risks ceded during the term of the agreement, which generally
remain with the reinsurer.
We work with our operating subsidiaries to
develop effective reinsurance arrangements that are consistent
with the pricing and operational goals of each operating
business segment. For example, Assurant Employee Benefits cedes
100% of monthly disability claims in excess of $10,000 per
individual insured. For our group term life business, the
maximum amount retained on any one life is $800,000 of life
insurance including accidental death, limited to $500,000 in
life insurance and $300,000 in accidental death and
dismemberment insurance. Amounts in excess of these figures are
reinsured with other life insurance companies on a yearly
renewable term basis. Assurant Solutions purchases property
reinsurance for flood risk, with per property limits of $925,000
in excess of $75,000 per individual loss. This treaty has a per
occurrence cap of $2,775,000.
For those product lines where there is exposure
to catastrophes (for example, homeowners' policies written
by Assurant Solutions), we closely monitor and manage our
aggregate risk exposure by geographic area and have entered into
reinsurance treaties to manage our exposure to these types of
events. We purchase catastrophe reinsurance to manage our risk
exposure ranging from a one in 250-year to a one in 500-year
storm. We maintain $118 million of catastrophic excess of
loss coverage for fire, flood and personal liability risks, with
a per occurrence retention of the first $20 million. In
addition, 90% of Florida hurricane losses in excess of
$34 million are covered by the Florida Hurricane
Catastrophe Fund (FHCF), with coverage capped at
$85 million. This coverage has been in place as of
June 1, 2003 and will continue through May 31, 2004.
Future FHCF coverage will be determined by the FHCF in
accordance with Florida statutes and will depend upon Assurant
Solutions' in force Florida risks and the FHCF claims
paying capacity. Also, in Assurant Employee Benefits, we have
purchased catastrophic reinsurance coverage in the group term
life product line of $30 million in excess of our retention
of the first $20 million.
102
A significant portion of Assurant Health's
business has been reinsured under non-proportional reinsurance
agreements that provide for the reinsurers to indemnify us for
losses in a calendar year on combined ratios up to but not
exceeding 110%. Such losses, with interest, are offset against
any future profits. For calendar years where the combined ratio
does not exceed 98%, Assurant Health keeps all the profits on
the reinsured business net of the reinsurance fee. For years
where the reinsured business is profitable but the combined
ratio exceeds 98%, Assurant Health keeps 50% of the profits on
the business net of the fee.
With the exception of a small block of older
policy forms, all of the LTC business of John Alden, one of our
subsidiaries, has been reinsured with ERC Life Reinsurance
Corporation (ERC). All risks and profits generated by the
reinsured business have been transferred to ERC. The reserves
and premium transferred are in excess of 95% of the direct
long-term care amounts generated by John Alden. The remaining
small block of long-term care policies in John Alden has been
reinsured with John Hancock as part of the sale of that
division. See "— Business Dispositions"
below.
Under indemnity reinsurance transactions in which
we are the ceding insurer, we remain liable for policy claims if
the assuming company fails to meet its obligations. To limit
this risk, we have control procedures in place to evaluate the
financial condition of reinsurers and to monitor the
concentration of credit risk to minimize this exposure. The
selection of reinsurance companies is based on criteria related
to solvency and reliability and, to a lesser degree,
diversification as well as on developing strong relationships
with our reinsurance partners for the sharing of risks. At
December 31, 2002, 68% of our primary reinsurers (excluding
The Hartford and John Hancock) were rated "A" or
better by A.M. Best, while 10% of our reinsurers did not have
A.M. Best ratings at such date.
In addition, we also purchase reinsurance when
capital requirements and the economic terms of the reinsurance
make it appropriate to do so.
Business Dispositions
We have exited businesses through reinsurance
ceded to third parties, such as our 2001 sale of the insurance
operations of FFG to The Hartford. The assets backing the
liabilities on these businesses are held in a trust. All
separate account business and John Alden general account
business relating to FFG were transferred through modified
coinsurance, a form of proportional reinsurance in which the
underlying assets and liabilities are still reflected on the
ceding company's balance sheet. Under this arrangement, The
Hartford receives all premiums, pays all claims and funds all
reserve increases net of investment income on reserves held. All
other FFG business was reinsured by 100% coinsurance, which
transfers all affected assets and liabilities as well as all
premiums and claims to the assuming company. We would be
responsible for administering this business in the event of a
default by The Hartford. In addition, under the reinsurance
agreement, The Hartford is obligated to contribute funds to
increase the value of the separate accounts relating to the
business sold if such value declines. If The Hartford fails to
fulfill these obligations, we will be obligated to make these
payments.
In 1997, John Alden sold substantially all of its
annuity operations to SunAmerica Life Insurance Company
(SunAmerica), now a subsidiary of American International Group,
Inc. In connection with the sale, John Alden reinsured its
existing block of annuity policies to SunAmerica on a
coinsurance basis. This coinsurance was initially on an
indemnity basis and the parties agreed to transition the
business to an
assumption basis
as soon as practical. In
certain states, the transition to an assumption basis is subject
to policyholder approval. To the extent that such transition
does not take place with respect to any particular policy, the
policy will remain reinsured on an indemnity basis. As of
June 30, 2003, more than 95% of the ceded annuity reserves
had either transitioned to an assumption basis or had lapsed.
In 2000, we sold all of our LTC operations to
John Hancock. In connection with the sale, we reinsured our
existing block of long-term care policies to John Hancock on a
coinsurance basis. Under the coinsurance agreement, we
transferred 100% of the policy reserves and related assets on
this block of business to John Hancock, and John Hancock agreed
to be responsible for 100% of the policy benefits. The assets
backing the liabilities on this business are held in a trust and
John Hancock is obligated to fund the trust if the value of the
103
assets is deemed insufficient to fund the
liabilities. If John Hancock fails to fulfill these obligations,
we will be obligated to make these payments.
Assurant Solutions' Client Risk and
Profit Sharing
Historically, our insurance subsidiaries in
Assurant Solutions have ceded a portion of the premiums and risk
related to business generated by certain clients to the
client's captive insurance companies or to reinsurance
companies in which the clients have an ownership interest. In
some cases, our insurance subsidiaries have assumed a portion of
these ceded premiums and risk from the captive insurance
companies and reinsurance companies. Through these arrangements,
our insurance subsidiaries share some of the premiums and risk
related to client-generated business with these clients. When
the reinsurance companies are not authorized to do business in
our insurance subsidiary's domiciliary state, our insurance
subsidiary obtains collateral, such as a trust or a letter of
credit, from the reinsurance company or its affiliate in an
amount equal to the outstanding reserves to obtain full
financial credit in the domiciliary state for the third-party
reinsurance. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations —
Quantitative and Qualitative Disclosures about Market
Risk — Credit Risk."
Gross Annualized Premium in Force, Ceded
Portion and Net Amount Retained
The following table details our gross annualized
premium in force, the portion that was ceded to reinsurers and
the net amount that was retained as of December 31, 2002.
As of December 31, 2002
Percentage
Gross(1)
Ceded
Net
Retained
(in millions)
Life insurance
$
1,893
$
796
$
1,097
57.9
%
Accident and health
4,334
1,046
3,288
75.9
Property and casualty
2,102
805
1,297
61.7
Total consolidated
$
8,329
$
2,647
$
5,682
68.2
%
(1)
Gross includes direct plus assumed premiums.
Claims Provisions/ Reserves
In accordance with industry and accounting
practices and applicable insurance laws and regulatory
requirements, we establish reserves for payment of claims and
claims expenses
for claims that arise from our insurance
policies. We maintain reserves for future policy benefits and
unpaid claims expenses. Policy reserves represent the
accumulation of the premiums received that are set aside to
provide for future benefits and expenses on claims not yet
incurred. Claim reserves are established for future payments and
associated expenses not yet due on claims that have already been
incurred, whether reported to us or not. Reserves, whether
calculated under GAAP or SAP, do not represent an exact
calculation of future policy benefits and expenses but are
instead estimates made by us using actuarial and statistical
procedures. There can be no assurance that any such reserves
would be sufficient to fund our future liabilities in all
circumstances. Future loss development could require reserves to
be increased, which would adversely affect earnings in current
and/or future periods. Adjustments to reserve amounts may be
required in the event of changes from the assumptions regarding
future morbidity, the incidence of disability claims and the
rate of recovery, including the effects thereon of inflation and
other societal and economic factors, persistency, mortality,
property claim frequency and severity and the interest rates
used in calculating the reserve amounts. The reserves reflected
in our consolidated financial statements are calculated in
accordance with GAAP.
See "Management's Discussion and
Analysis of Financial Condition and Results of
Operations — Critical Accounting Policies —
Reserves."
104
Reserves are regularly reviewed and updated,
using the most current information. Any adjustments are
reflected in current results of operations. However, because the
establishment of reserves is an inherently uncertain process,
there can be no assurance that ultimate losses will not exceed
existing reserves.
Reserves are reviewed at least quarterly by our
business segment management.
Investments
The investment portfolio is a critical part of
our business activities and important to our overall
profitability. The fundamental investment philosophy is to
manage assets, within our stated risk parameters, to generate
consistent and high levels of investment income, before gains
and losses, while providing a total return that is competitive
over the long-term. Our investment team is charged with
maintaining safety of principal and sufficient liquidity,
managing credit, interest rate, prepayment and market risks,
maintaining adequate diversification among asset classes,
industry concentrations and individual issuers and adhering to
all applicable regulatory requirements.
We have individual business segments with
different needs and characteristics. Hence, our investment
approach for each business segment is tailored to that business
segment's needs in terms of asset allocation, liquidity
needs and duration of assets and liabilities.
Organization
The general account is managed by our asset
management department, Assurant Asset Management, or AAM. In
this capacity, AAM acts as both our investment advisor and our
asset manager. As investment advisor, the AAM organization
oversees the design and implementation of overall investment
policy. As asset manager, AAM is responsible for
(i) directly investing those general account assets for
which the department has in-house expertise and
(ii) selecting and monitoring outside managers for those
assets for which AAM has limited expertise. AAM fulfills these
roles through its involvement in the establishment of risk
management techniques, business segment investment policy and
asset benchmark construction and through leadership and
participation in our two investment oversight entities: the
Company's risk management committee and the individual
business segment investment committees.
Our risk management committee consists of the
Chief Executive Officer, Chief Financial Officer, Chief
Investment Officer, Corporate Actuary and Head of Strategic
Analysis. It meets quarterly and is responsible for setting
overall corporate risk tolerance for the general account. As
such, it approves all investment risk limits including those
affecting overall portfolio quality, liquidity, duration and
asset class concentration. Additionally, it approves the use of
new asset classes when appropriate and business segment asset
allocation and investment policy.
The business segment investment committees meet
quarterly and are co-chaired by the business segment Chief
Financial Officer and either the Head of Fixed Income
Investments or the Head of Mortgage and Real Estate Investments.
These committees are responsible for setting appropriate asset
allocation and investment policy for our specific business
segments. Additionally, they monitor investment strategy,
performance, pricing and liability cash flows and research and
recommend the use of new asset classes.
These committees, together with AAM, manage the
overall risk parameters of our investment portfolios and seek to
employ investment policies and strategies that are appropriate
for and supportive of the needs of the individual businesses.
The portfolio and investment performance results
are reviewed quarterly with our board of directors.
Investment Process
Our investment process is initiated by the
strategic analysis group within AAM. This group designs an
appropriate asset allocation benchmark for each portfolio that
is tailored to the associated liabilities and is designed to
generate the highest level of investment income available given
each business segment's overall risk tolerance. Although
income is the primary objective, total return is a significant
secondary objective.
105
Multiple portfolios are maintained as a result of
the legal entity structure within our Company. The maturities of
the assets are selected so as to satisfy a
duration corridor
for each portfolio that is appropriate to its underlying
liabilities. Duration is the sensitivity of the portfolio to
movements of interest rates. The actual duration is dynamic and
will change with time and interest rate movement, as will the
liability duration. The duration corridor is chosen by analyzing
various risk/reward measures from appropriate asset/liability
studies. The duration of our portfolio as of June 30, 2003
and December 31, 2002 was 5.71 and 5.46 years,
respectively. This represents the amalgamated duration of our
four operating business segments that is directly tied to their
liabilities, much of which are short-tail. The average duration
of such liabilities is 5.8 years. It is our intent to manage the
portfolios such that their duration closely matches the
liabilities that they support.
In addition, the asset allocation benchmark will
reflect multiple constraints, such as all risk tolerances
established by our risk management committee, appropriate credit
structure, prepayment risk tolerance, liquidity requirements,
capital efficiency, tax considerations and regulatory and rating
agency requirements. The individual benchmarks are then
aggregated together to give a total asset profile. Asset
management is conducted at the portfolio level; however, risk
constraints are also in place for the aggregate portfolio. Each
benchmark is reviewed at least annually for appropriateness.
Our investment portfolios are invested in the
following key asset classes: fixed income securities, including
mortgage-backed and other asset-backed securities, preferred
stocks, commercial mortgage loans and real estate. We intend to
begin investing in private placement loans in the fourth quarter
of 2003 and ultimately over the next several years to have
private placement loans represent 5% of our total invested
assets. We do not currently invest new money in equity
securities; however, we may do so in the future. As of
June 30, 2003, less than 1% of the fair value of our total
invested assets was invested in common stock.
Each month the portfolio holdings are screened
for securities whose market price is equal to 85% or less of
their original purchase price. Management then makes their
assessment as to which of these securities are other than
temporarily impaired. Assessment factors include, but are not
limited to, the financial condition of the issuer, any
collateral held and the length of time the market value of the
security has been below cost. Each month the watchlist is
discussed at a meeting attended by members of our investment,
accounting and finance departments. Each quarter, any security
whose price decrease is deemed to have been other than
temporarily impaired is written down to its then current market
level, with the amount of the writedown reflected in our
statement of operations for that quarter. Previously impaired
issues are also monitored monthly, with additional writedowns
taken quarterly if necessary.
Fixed Income Portfolio Process
AAM controls the credit risk in the fixed income
portfolio through a combination of issuer level credit research
and portfolio level credit risk management. At the issuer level,
we maintain a credit database that contains both qualitative and
quantitative assessments of over 190 issuers and 35 industries.
This database is updated regularly by our credit research team
and is an integral part of the credit investment process. At the
portfolio level, we control credit risk primarily through
quality and industry diversification, individual issuer limits
based upon credit rating and a sell discipline designed to
reduce quickly exposure to deteriorating credits. In addition,
we monitor changes in individual security values on a
semi-monthly basis in order to identify potential problem
credits. This process is also incorporated into our impairment
watchlist process.
The risks in the fixed income portfolio are
carefully controlled and monitored. First, AAM customizes the
asset allocation benchmark to reflect the risk tolerance for
each of our operating business segments. Second, our risk
management committee imposes issuer portfolio limits on
individual issuers based upon credit quality, which limits are
currently 1.5% for issuers rated AA- and above, 1% for issuers
rated A- to A+, 0.75% for issuers rated BBB- to BBB+ and 0.375%
for issuers rated BB- to BB+. We use the lower of Moody's
or Standard & Poor's ratings to determine an
issuer's rating. Third, our fixed income investment team
sub-divides the portfolio's BBB-rated holdings by rating
notch (i.e., BBB+, BBB, BBB-) and typically imposes lower limits
for the lower rated BBB issuers. Our policy is not to purchase
non-rated fixed income securities. However, as of June 30,
2003, less than 2% of our fixed maturity securities portfolio
was invested in fixed maturity securities that were not rated by
Moody's or Standard & Poor's. Finally, we
give our high yield
106
managers the option to accept investment grade
holdings if they are downgraded to below investment grade. If
our high yield managers reject such holdings, we will liquidate
any such holdings; if the high yield managers accept only a
portion of such holdings, we will liquidate the remaining
portion of such holdings. The effect of these and other risk
controls, some of which are described below, is a highly
diversified credit portfolio and a sell discipline designed to
reduce exposure to issuers whose credit profile is deteriorating.
In order to invest in a wide variety of asset
classes in our portfolio and to appropriately manage the
accompanying risks, we have outsourced the management of almost
15% of our portfolio's market value. We have engaged
Alliance Capital Management Corp. and Wellington Management Co.
for high yield investments, Spectrum Asset Management, Inc. and
Flaherty & Crumrine Inc. for preferred stock investments and
Lancaster Investment Counsel and Phillips Hager & North
Investment Management Ltd. for our Canadian investment
portfolios. We retain custody control over assets under
management by outside managers and have oversight procedures in
place for all managers. These procedures include formal
investment guidelines, daily transaction updates and periodic
portfolio reviews. The outside managers are required to provide
research updates for any issuer on the impairment watchlist for
which they are responsible. Our agreements with these investment
managers are generally terminable by us upon 30 days'
written notice. Additionally, we have recently entered into an
agreement to outsource our new private placement loan investment
program to Prudential Private Placement Investors, LP.
Commercial Mortgage Loans Investment
    Process
We originate fixed rate, first commercial
mortgage loans through a nationwide group of exclusive, regional
mortgage correspondents. We have a mortgage loan committee
within AAM that is responsible for the approval of our mortgage
loan related investments. Generally the mortgage correspondents
service the loans they originate and we regularly meet with them
to help foster a strong working relationship. Every property
securing a loan application is inspected and underwritten by our
mortgage loan staff prior to approval by our mortgage loan
committee, which is comprised of the heads of our commercial
mortgage and real estate departments and the vice president of
our legal department. Most of the loans are non-recourse and
virtually all loans include a "yield maintenance"
provision, which compensates us in the event of loan prepayment.
We are a portfolio lender and generally hold our commercial
mortgage loans to maturity. We typically do not securitize or
otherwise sell our commercial mortgage loans.
Our investment process requires an in-depth
review of the loan terms, security and the borrower prior to
commitment. We seek geographic and property-type diversification
and concentrate on the four following major property types for
collateral: office, retail, warehouse and multi-family
properties. Our policy is that mortgage loans may not exceed 75%
of the market value of the property securing the loan; however,
the loans we originate typically are below 70% of the market
value. Loan terms generally range from five to 20 years,
with amortization of five to 25 years.
Our commercial mortgage loan portfolio is
reviewed monthly for potential problems. All servicers provide
monthly delinquencies reports. Problem loans, including
delinquencies, foreclosures and loans on the "watch
list," are reviewed monthly. Inspection reports relating to
financial, market and physical conditions, among other items,
are obtained and reviewed on all loans annually. A potential
loss reserve
based on historical data adjusted for
current expectations is maintained and is typically between
1.25% and 2.25% of commercial mortgage loans on real estate. As
of June 30, 2003, the reserve was approximately 2.1% of the
unpaid principal of our commercial mortgage loans, or
$19 million.
Investment Real Estate Process
We invest in income-producing commercial
properties to generate attractive risk-adjusted returns as well
as to generate operating investment income with the potential
for capital gains upon sale of the property. We invest with
regional operating partners who generally invest capital in the
property with us and provide management and leasing services.
Our portfolio is diversified by location, property type,
operating partner and lease term. Property types include office
buildings, warehouse/industrial buildings and multi-family
housing.
107
Our investment process relies upon thorough
market research and extensive due diligence. We maintain
regional market information to target potentially attractive
real estate markets. Physical, financial and market due
diligence is conducted on all potential acquisitions prior to
investing. Financial scenarios and resulting income and capital
gains for various holding periods are modeled. Modest levels of
non-recourse debt are employed to enable us to diversify the
portfolio while limiting our equity exposure to this asset
class. These investments are made through limited liability
companies or limited partnerships.
Our portfolio is monitored through numerous
reports and regular property inspections. Monthly operating
statements and quarterly GAAP statements are produced on every
property and the results reported quarterly to the business
segment investment committee. Internal annual appraisals are
performed and every property is appraised by an independent
appraiser at least once every three years on a rolling basis.
Internal appraisals are updated quarterly to reflect major
changes in market conditions or property or leasing conditions.
Values are reported on our financial statements on the
"equity method." Market values are reported at the
lesser of our internal valuation or the independent appraised
value.
All portfolios are reviewed monthly to insure
that they are in compliance with guidelines established by our
risk management committee or the established asset allocation
for all asset classes. Exceptions are reviewed by our Chief
Investment Officer and are corrected by the appropriate asset
manager. State and regulatory compliance is reviewed by
portfolio and by legal entity at least annually to insure
compliance with regulations.
Portfolio Composition
Our total invested assets were
$10,735 million and $10,029 million, or 47% and 45%,
of our total assets, as of June 30, 2003 and
December 31, 2002, respectively. Our net investment income
for the six months ended June 30, 2003 and the year ended
December 31, 2002 was 9% and 10%, respectively, of our
total revenue, excluding realized investment losses and gains.
We had a net realized gain on investments of $7 million for
the six months ended June 30, 2003 and a net realized loss
on investments of $118 million for the year ended
December 31, 2002. Our investment portfolio consists
primarily of fixed income securities, including mortgage-backed
and other asset-backed securities, preferred stocks, commercial
mortgage loans and commercial real estate. As of June 30,
2003 and December 31, 2002, fixed maturity securities
accounted for 82% and 80%, respectively, of our total invested
assets. The corporate bond portfolio is well diversified across
industry classes.
The following table sets forth the carrying value
of the securities held in our investment portfolio at the dates
indicated:
At December 31,
At June 30,
2003
2002
2001
2000
(in thousands)
Fixed maturities
$
8,765,857
$
8,035,530
$
7,630,432
$
8,096,779
Equity securities
446,016
271,700
247,139
204,406
Commercial mortgage loans on real estate at
    amortized cost
869,557
841,940
868,754
1,047,912
Policy loans
69,966
69,377
68,236
213,156
Short-term investments
446,995
684,350
626,727
439,387
Other investments(1)
136,232
125,870
159,217
170,810
Total
$
10,734,623
$
10,028,767
$
9,600,505
$
10,172,450
(1)
Includes primarily commercial real estate and
    limited partnerships.
108
Investment Results
The overall income yield on our investments after
investment expenses, excluding realized investment gains
(losses), was 5.94% on an annualized basis for the six months
ended June 30, 2003 and 6.27% for the year ended
December 31, 2002. The overall income yield on our
investments after investment expenses, including realized gains
(losses), was 6.09% on an annualized basis for the six months
ended June 30, 2003 and 5.09% for the year ended
December 31, 2002.
The following table sets forth the income yield
and net investment income, excluding realized investment
gains/(losses), for each major investment category for the
periods indicated.
For the Six Months
For the Year Ended
Ended June 30, 2003
December 31, 2002
Yield(1)
Amount
Yield(1)
Amount
(in thousands)
Fixed maturities
6.19
%
$
243,075
6.76
%
$
510,121
Equity securities
6.93
%
11,905
8.93
%
22,674
Commercial mortgage loans on real estate
8.31
%
35,559
9.11
%
77,913
Policy loans
5.33
%
1,856
5.10
%
3,511
Short-term investments
1.42
%
4,008
1.30
%
8,510
Cash and cash equivalents
0.78
%
1,857
1.64
%
9,079
Other investments(2)
27.54
%
18,044
13.71
%
19,546
Investment income before investment expenses
6.15
%
316,304
6.46
%
651,354
Investment expenses
(10,419
)
(19,526
)
Net investment income
5.94
%
$
305,885
6.27
%
$
631,828
(1)
The yield is calculated by dividing income by
    average assets. The yield calculation for the six months ended
    June 30, 2003 is presented on an annualized basis and
    includes the average of asset positions as of December 31,
    2002 and June 30, 2003. The yield calculation for the year
    ended December 31, 2002 includes the average of asset
    positions as of December 31, 2001 and December 31,
    2002.
(2)
Includes primarily commercial real estate and
    limited partnerships.
109
Fixed Maturity Securities
The amortized cost and fair value of fixed
maturity securities at June 30, 2003 and December 31,
2002, by type of issuer, were as follows:
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
(in millions)
At June 30, 2003
U.S. government and government agencies and
    authorities
$
1,710
$
70
$
—
$
1,780
States, municipalities and political subdivisions
193
19
—
212
Foreign governments
272
20
(1
)
291
Public utilities
881
106
—
986
All other corporate bonds
5,010
492
(6
)
5,496
Total
$
8,066
$
707
$
(7
)
$
8,765
At December 31, 2002
U.S. government and government agencies and
    authorities
1,576
71
—
1,647
States, municipalities and political subdivisions
196
15
—
212
Foreign governments
202
19
(17
)
204
Public utilities
834
55
(10
)
879
All other corporate bonds
4,822
299
(27
)
5,094
Total
$
7,630
$
459
$
(54
)
$
8,036
For similar information regarding our equity
securities, see Note 5 of the Notes to Consolidated
Financial Statements included elsewhere in this prospectus.
The following table presents our fixed maturity
securities portfolio by NAIC designation and the equivalent
ratings of the nationally recognized securities rating
organizations as of June 30, 2003 and December 31,
2002, as well as the percentage based on fair value, that each
designation comprises:
At June 30, 2003
At December 31, 2002
Percentage
Percentage
NAIC
Rating Agency
Amortized
Fair
of Total
Amortized
Fair
of Total
Rating
Equivalent
Cost
Value
Fair Value
Cost
Value
Fair Value
(in millions)
1
Aaa/Aa/A
$
5,821
$
6,291
71
%
$
5,672
$
6,013
75
%
2
Baa
1,736
1,923
22
%
1,454
1,526
19
%
3
Ba
328
355
4
%
333
338
4
%
4
B
135
141
2
%
108
105
1
%
5
Caa and lower
39
46
1
%
59
50
1
%
6
In or near default
7
10
—
4
4
—
Total
$
8,066
$
8,766
100
%
$
7,630
$
8,036
100
%
110
The amortized cost and fair value of fixed
maturity securities at June 30, 2003 and December 31,
2002, by contractual maturity are shown below:
At June 30, 2003
At December 31, 2002
Amortized
Fair
Amortized
Cost
Value
Cost
Fair Value
(in millions)
Due in one year or less
$
280
$
285
$
271
$
274
Due after one year through five years
1,483
1,597
1,990
2,085
Due after five years through ten years
2,081
2,273
1,647
1,732
Due after ten years
2,195
2,510
2,313
2,483
Total
6,039
6,665
6,221
6,574
Mortgage and asset backed securities
2,027
2,101
1,409
1,462
Total
$
8,066
$
8,766
$
7,630
$
8,036
Virtually all of our fixed maturity securities
portfolio is publicly traded. We have recently initiated a
private placement program and plan to invest approximately
$500 million in privately placed securities over the next
two years. As of June 30, 2003, over 94% of the fair market
value of our fixed maturity securities were dollar denominated.
As of June 30, 2003, we had approximately
C$500 million invested in Canadian fixed maturity
securities; however, these assets directly support Canadian
liabilities.
Commercial Mortgage Loans
We have made commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the United States. At December 31, 2002,
approximately 47% of the outstanding principal balance of
commercial mortgage loans was concentrated in the states of
California, New York, Connecticut, Pennsylvania and Florida.
Although we have a diversified loan portfolio, an economic
downturn could have an adverse impact on the ability of our
debtors to repay their loans. At December 31, 2002, the
outstanding balances of commercial mortgage loans ranged in size
from $1 to $10 million with an average outstanding balance
of $2 million. Loan commitments outstanding at
June 30, 2003 and December 31, 2002 totaled
$29 million and $61 million, respectively.
As of June 30, 2003, approximately
$449 million of principal, or 50%, of our commercial
mortgage loans before valuation allowance had balloon
maturities. A balloon maturity is a loan with larger dollar
amounts of payments becoming due in the later years of the loan.
The default rate on commercial mortgage loans with balloon
payment maturities has historically been higher than the default
rate on commercial mortgage loans with standard repayment
schedules. Since most of the principal is being repaid at
maturity, the amount of loss on a default is generally greater
than on other commercial mortgage loans. An increase in defaults
on such loans as a result of the foregoing factors could
materially adversely affect our financial condition and reduce
our profitability.
We may have liability under environmental
protection laws resulting from our commercial mortgage loan
portfolio and real estate investments. Under the laws of several
states, contamination of a property may give rise to a lien on
the property to secure recovery of the costs of cleanup. In some
states, this kind of lien has priority over the lien of an
existing mortgage against the property, which would impair our
ability to foreclose on that property should the related loan be
in default. In addition, under the laws of some states and under
the federal Comprehensive Environmental Response, Compensation
and Liability Act of 1980, we may be liable for costs of
addressing releases or threatened releases of hazardous
substances that require remedy at a property securing a mortgage
loan held by us.
Investment Real Estate
We also hold commercial equity real estate as
part of our investment portfolio. As of June 30, 2003 and
December 31, 2002, we had equity real estate investments
with a carrying amount in the range of $60 million
111
to $70 million. We own real estate through
real estate joint ventures and partnerships. The main property
types within our portfolio are office, industrial/warehouse and
multi-family housing.
Competition
We face competition in each of our businesses;
however, we believe that no single competitor competes against
us in all of our business lines and the business lines in which
we operate are generally characterized by a limited number of
competitors. Competition in our operating business segments is
based on a number of factors, including quality of service,
product features, price, scope of distribution, financial
strength ratings and name recognition. The relative importance
of these factors depends on the particular product and market.
We compete for customers and distributors with insurance
companies and other financial services companies in our various
businesses.
Assurant Solutions has numerous competitors in
its product lines, but we believe no other company participates
in all of the same lines. Competitors include insurance
companies and financial institutions. In Assurant Health, our
main competitors include health insurance companies and the Blue
Cross/ Blue Shield plans in the states in which we write
business. In Assurant Employee Benefits, commercial competitors
include benefits and life insurance companies as well as
not-for-profit Delta Dental plans. In Assurant PreNeed, our main
competitors are two pre-need life insurance companies with
nationwide representation, Forethought Financial Services and
Homesteaders Life Company, and several small regional insurers.
While we are among the largest competitors in terms of market
share in many of our business lines, in some cases there are one
or more major market players in a particular line of business.
Some of these companies may offer more
competitive pricing, greater diversity of distribution, better
brand recognition or higher financial strength ratings than we
have. Some may also have greater financial resources with which
to compete. In addition, many of our insurance products,
particularly our group benefits and health insurance policies,
are underwritten annually and, accordingly, there is a risk that
group purchasers may be able to obtain more favorable terms from
competitors rather than renewing coverage with us. The effect of
competition may, as a result, adversely affect the persistency
of these and other products, as well as our ability to sell
products in the future.
Ratings
Rating organizations continually review the
financial positions of insurers, including our insurance
subsidiaries. Insurance companies are assigned financial
strength ratings by independent rating agencies based upon
factors relevant to policyholders. Ratings provide both industry
participants and insurance consumers meaningful information on
specific insurance companies and are an important factor in
establishing the competitive position of insurance companies.
All of our active domestic insurance subsidiaries are rated by
A.M. Best. A.M. Best maintains a letter scale rating
system ranging from "A++" (Superior) to "F"
(in liquidation). Two of our insurance subsidiaries, Fortis
Benefits Insurance Company and John Alden, are also rated by
Moody's.
As of September 25, 2003, most of our
domestic insurance subsidiaries had A.M. Best financial
strength ratings of A ("Excellent"), which is the
second highest of ten ratings categories and the highest within
the category based on modifiers (i.e., A and A- are
"Excellent"). Our other domestic insurance
subsidiaries had A.M. Best financial strength ratings of A-
("Excellent"), which is the second highest of ten
ratings categories and the lowest within the category based on
modifiers.
Our subsidiaries' Moody's financial
strength ratings, as of September 25, 2003, were A2
("Good"), which is the third highest of nine ratings
categories and mid-range within the category based on modifiers
(i.e., A1, A2 and A3 are "Good"), for Fortis Benefits
Insurance Company and A3 ("Good"), which is the third
highest of nine ratings categories and the lowest within the
category based on modifiers, for John Alden.
The objective of A.M. Best's and
Moody's ratings systems is to assist policyholders and to
provide an opinion of an insurer's financial strength,
operating performance, strategic position and ability to meet
ongoing obligations to its policyholders. These ratings reflect
opinions of A.M. Best and Moody's of our ability to pay
112
policyholder claims, are not applicable to the
securities offered in this prospectus and are not a
recommendation to buy, sell or hold any security, including our
common stock. These ratings are subject to periodic review by
and may be revised upward, downward or revoked at the sole
discretion of A.M. Best and Moody's.
Properties
We own seven properties, including our five
buildings that serve as headquarters locations for our operating
business segments in Miami, Florida, Atlanta, Georgia, Kansas
City, Missouri, Milwaukee, Wisconsin and Rapid City, South
Dakota. We lease office space for various offices and service
centers located throughout the United States and
internationally, including our New York corporate office and
Assurant PreNeed's Atlanta operations. Our leases have
terms ranging from month-to-month to ten years. We believe that
our owned and leased properties are adequate for our current
business operations.
Employees
As of June 30, 2003, we had approximately
12,200 employees. None of our employees are subject to
collective bargaining agreements governing employment with us or
represented by labor unions. We believe that we have an
excellent relationship with our employees.
Legal Proceedings
We are regularly involved in litigation in the
ordinary course of business, both as a defendant and as a
plaintiff. We may from time to time be subject to a variety of
legal and regulatory actions relating to our current and past
business operations. While we cannot predict the outcome of any
pending or future litigation, examination or investigation, we
do not believe that any pending matter will have a material
adverse effect on our financial condition or results of
operations.
In Assurant Solutions, we are subject to a number
of pending actions, primarily in the State of Mississippi, many
of which allege that our credit insurance products were packaged
and sold with lenders' products without buyer consent. The
judicial climate in Mississippi is such that the outcome of
these cases is extremely unpredictable. We have been advised by
legal counsel that we have meritorious defenses to all claims
being asserted against us. We believe, based on information
currently available, that any liabilities that could result are
not expected to have a material adverse effect on our financial
condition or results of operations.
American Bankers Insurance Group (ABIG), part of
Assurant Solutions, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company (ABIC) and American
Bankers Life Assurance Company (ABLAC), previously entered into
a Consent Order and a comprehensive Compliance Plan with 43
participating states relating to compliance with the often
disparate state insurance laws, regulations and administrative
interpretations which have been difficult to apply to the
marketing of ABIG's credit insurance products through
financial institutions, retailers and other entities offering
consumer financing as a regular part of their business. In
addition to an initial settlement of $12 million, ABIG
agreed to a multi-state market conduct examination commencing
November 23, 1999, for review of ABIG's implementation
of the Compliance Plan. A final report was issued on
December 19, 2001, and ABIG paid a final settlement of
$3 million to participating states.
In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, in
connection with certain alleged regulatory violations.
Thereafter, ABIC and ABLAC filed suit in Minnesota state court
seeking to enjoin the enforcement action because the alleged
regulatory matters included within the enforcement action were
resolved as a part of the above-described Consent Order and
Compliance Plan to which Minnesota was a party. In February
2003, the State of Minnesota, ABIC and ABLAC reached a final
settlement of all matters included within the enforcement action
and the separate state court action filed by ABIC and ABLAC.
Pursuant to the settlement, ABIC and ABLAC each agreed to pay
$100,000 to the State of Minnesota and agreed to compensate the
state for its investigative costs, which totaled
$1.8 million. In addition, ABIC and ABLAC agreed to stop
selling insurance in Minnesota for five years, though they could
apply for reinstatement in 20 months. Other member
companies of Assurant Solutions with product lines that
113
overlap those offered by ABIC and ABLAC currently
remain authorized to do business in the State of Minnesota. We
do not believe that the effect of the settlement during the next
five years will have a material impact on our financial
condition or results of operations.
On October 1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of Assurant Solutions. The indictment alleges that ABIC
and its two named corporate officers each violated the Minnesota
Fair Campaign Practices Act in connection with two contributions
by ABIC to the Republican National State Election Committee
totaling $15,000. The maximum penalty for ABIC is a $40,000 fine
for each alleged violation and/or forfeiture of ABIC's
license to conduct business in Minnesota. Other member companies
of Assurant Solutions with product lines that overlap those
offered by ABIC remain authorized to conduct business in the
State of Minnesota. ABIC believes that it has meritorious
defenses to the claims being asserted against it, and we
believe, based on information currently available, that any
liabilities that could result are not expected to have a
material effect on our financial condition or results of
operations.
In addition, one of our subsidiaries, American
Reliable Insurance Company (ARIC), participated in certain
excess of loss reinsurance programs in the London market and, as
a result, reinsured certain personal accident, ransom and kidnap
insurance risks from 1995 to 1997. ARIC and a foreign affiliate
ceded a portion of these risks to other reinsurers
(
retrocessionaires
). ARIC ceased reinsuring such business
in 1997. However, certain risks continued beyond 1997 due to the
nature of the reinsurance contracts written. ARIC and some of
the other reinsurers involved in the programs are seeking to
avoid certain treaties on various grounds, including material
misrepresentation and non-disclosure by the ceding companies and
intermediaries involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of certain treaties with
ARIC and the other reinsurers. The disputes generally involve
multiple layers of reinsurance, and allegations that the
reinsurance programs involved interrelated claims
"spirals" devised to disproportionately pass claims
losses to higher-level reinsurance layers. Many of the companies
involved in these programs, including ARIC, are currently
involved in negotiations, arbitration and/or litigation between
multiple layers of retrocessionaires, reinsurers, ceding
companies and intermediaries, including brokers, in an effort to
resolve these disputes. Based on information currently available
to us, and after consideration of the reserves reflected in our
financial statements, we believe that it is not likely that any
liabilities we experience in connection with these programs
would have a material adverse effect on our financial condition
or results of operations. However, the inherent uncertainty of
arbitrations and lawsuits, including the uncertainty of
estimating whether any settlements we may enter into in the
future would be on favorable terms, makes it difficult to
predict the outcomes with certainty.
As a result of regulatory scrutiny of our
industry practices or our businesses, such as examinations of
race-based premiums charged in the past by two of our acquired
subsidiaries, it is possible that we may be subject to legal
proceedings in the future relating to those practices and
businesses. See "Regulation."
See "Risk Factors— Risks Related to Our
Industry— Our business is subject to risks related to
litigation and regulatory actions."
114
REGULATION
United States
State Regulation
General
Our insurance subsidiaries are subject to
regulation in the various states and jurisdictions in which they
transact business. The extent of regulation varies, but
generally derives from statutes that delegate regulatory,
supervisory and administrative authority to a department of
insurance in each state. The regulation, supervision and
administration relate, among other things, to standards of
solvency that must be met and maintained, the payment of
dividends, changes of control of insurance companies, the
licensing of insurers and their agents, the types of insurance
that may be written, guaranty funds, privacy practices, the
ability to enter and exit certain insurance markets, the nature
of and limitations on investments, premium rates, restrictions
on the size of risks that may be insured under a single policy,
reserves and provisions for unearned premiums, losses and other
obligations, deposits of securities for the benefit of
policyholders, payment of sales compensation to third parties,
approval of policy forms and the regulation of market conduct,
including underwriting and claims practices. State insurance
departments also conduct periodic examinations of the affairs of
insurance companies and require the filing of annual and other
reports, prepared under SAP, relating to the financial condition
of companies and other matters. Financial examinations completed
during the past three years with respect to our operating
subsidiaries have not resulted in material negative adjustments
to statutory surplus and pending financial and market conduct
examinations with respect to these subsidiaries have not
identified any material findings to date. Two of our
subsidiaries have responded affirmatively to an NAIC survey
regarding race-based premiums, resulting in examinations by
two state insurance departments. This relates to actions of
the subsidiaries or predecessor companies before acquisition by
us. One examination has been concluded and one is still in
progress and, to date, no penalties have been imposed as a
result of these examinations. The amount of in force business as
to which these subsidiaries charged race-based premiums is very
small, representing less than 1% of the in force block of
business of the Company at June 30, 2003. While we do not
expect that these examinations will have a material adverse
effect on us, there can be no assurance that further
examinations or litigation will not occur with respect to
race-based premiums.
In February 2003, two of our subsidiaries, ABIC
and ABLAC, reached a final settlement with the State of
Minnesota in connection with certain alleged regulatory
violations. Pursuant to the settlement, ABIC and ABLAC have
agreed to stop selling insurance in Minnesota for five years,
though they could apply for reinstatement in 20 months. In
addition, ABIC may lose its license to conduct business in the
State of Minnesota as a result of alleged violations of the
Minnesota Fair Campaign Practices Act. However, other member
companies of Assurant Solutions with product lines that overlap
those offered by ABIC and ABLAC currently remain authorized to
conduct business in the State of Minnesota. See
"Business—Legal Proceedings."
At the present time, our insurance subsidiaries
are collectively licensed to transact business in all 50 states
and the District of Columbia, although several of our insurance
subsidiaries individually are licensed in only one or a few
states. We have insurance subsidiaries domiciled in the states
of Alabama, Arizona, Arkansas, Colorado, Delaware, Florida,
Georgia, Indiana, Kentucky, Michigan, Minnesota, Mississippi,
Missouri, Nebraska, New Mexico, New York, Ohio, Oklahoma,
Pennsylvania, South Carolina, South Dakota, Texas, Utah,
Wisconsin, and in Puerto Rico.
Regulation of Credit Insurance
    Products
Most states and other jurisdictions in which our
insurance subsidiaries do business have enacted laws and
regulations that apply specifically to consumer credit
insurance. The methods of regulation vary but generally relate
to, among other things, the amount and term of coverage, the
content of required disclosures to debtors, the filing and
approval of policy forms and rates, the ability to provide
creditor-placed insurance and limitations on the amount of
premiums that may be charged and on the amount of compensation
that may be
115
paid as a percentage of premiums. In addition,
some jurisdictions have enacted or are considering regulations
that may limit profitability arising from credit insurance based
on underwriting experience.
The regulation of credit insurance is also
affected by judicial activity. For example, recent federal court
decisions have enhanced the ability of national banks to engage
in activities that effectively compete with our consumer credit
insurance business without being subject to various aspects of
state insurance regulation.
Regulation of Service Contracts and
    Warranties
The extent of regulation over the sale of service
contracts and warranties varies considerably from state to
state. In the states that do regulate the sales of these
products, the regulations generally are less stringent than
those applicable to the sale of insurance. For example, most
states do not require the filing and approval of contract forms
and rates for service contracts and warranties. States that do
regulate such contract forms typically require specific wording
regarding cancellation rights and regarding the consumer's
rights in the event of a claim. Most states do not require that
individual salespersons of service contracts and warranties be
licensed as insurance agents. In the states that do require such
a license, salespersons may qualify for a limited license to
sell service contracts and warranties without meeting the
education and examination requirements applicable to insurance
agents. In addition, the compensation paid to salespersons of
service contracts and warranties is generally not regulated.
Regulation of Health Insurance
    Products
State regulation of health insurance products
varies from state to state, although all states regulate premium
rates, policy forms and underwriting and claims practices to one
degree or another. Most states have special rules for health
insurance sold to individuals and small groups. For example, a
number of states have passed or are considering legislation that
would limit the differentials in rates that insurers could
charge for health care coverages between new business and
renewal business for small groups with similar demographics.
Every state has also adopted legislation that would make health
insurance available to all small employer groups by requiring
coverage of all employees and their dependents, by limiting the
applicability of pre-existing conditions exclusions, by
requiring insurers to offer a basic plan exempt from certain
benefits as well as a standard plan, or by establishing a
mechanism to spread the risk of high risk employees to all small
group insurers. The U.S. Congress and various state
legislators have from time to time proposed changes to the
health care system that could affect the relationship between
health insurers and their customers, including external review.
In addition, various states are considering the adoption of
"play or pay" laws requiring that employers either
offer health insurance or pay a tax to cover the costs of public
health care insurance. We cannot predict with certainty the
effect that any proposals, if adopted, or legislative
developments could have on our insurance businesses and
operations.
A number of states have enacted new health
insurance legislation over the past several years. These laws,
among other things, mandate benefits with respect to certain
diseases or medical procedures, require health insurers to offer
an independent external review of certain coverage decisions and
establish health insurer liability. There has also been an
increase in legislation regarding, among other things, prompt
payment of claims, privacy of personal health information,
health insurer liability and relationships between health
insurers and providers. We expect that this trend of increased
legislation will continue. These laws may have the effect of
increasing our costs and expenses.
In most states in which we operate, we provide
our individual health insurance products through an association.
The use of associations offers greater flexibility on pricing,
underwriting and product design compared to products sold
directly to individuals on a true individual policy basis due to
the greater regulatory scrutiny of true individual policies. The
marketing of health insurance through association groups has
recently come under increased scrutiny. An interruption in, or
changes to, our relationships with various third-party
distributors or our inability to respond to regulatory changes
could impair our ability to compete and market our insurance
products and services and materially adversely affect our
results of operations and financial condition.
116
Regulation of Employee Benefits
    Products
State regulation of non-medical group products,
including group term life insurance, group disability and group
dental products, also varies from state to state. As with
individual insurance products, the regulation of these products
generally also includes oversight over premium rates and policy
forms, but often to a lesser degree. The regulatory environment
for group term life insurance is relatively established, with
few significant changes from year to year.
Group PPO dental insurance policies are generally
regulated in the same manner as non-PPO dental policies, except
to the extent that a small number of states have chosen to
restrict the difference in benefits allowable between in-network
and out-of-network services. Also, some states directly regulate
the operation of the PPO network by requiring separate licensing
or registration for the organization that contracts with the
providers of dental care. In those states, PPOs also must comply
with varying levels of regulatory oversight concerning the
content of PPO contracts and provider practice standards. Most
of the states in which prepaid dental plans are written
recognize prepaid dental plans as an activity separate from
traditional insurance, because providers are compensated through
capitation arrangements. In most of these states, prepaid dental
plans are written by a single-purpose, single-state affiliate
that holds a license distinct from the life and health insurance
license required for group dental insurance policies. Entities
providing prepaid plans are variously licensed as health
maintenance organizations (HMOs), prepaid dental plans, limited
service health plans, life and health insurers or risk-bearing
PPOs, where such licenses are required. Each state has different
rules regarding organization, capitalization and reporting for
the separate entities, with additional variations relating to
provider contracting, oversight, plan management and plan
operations.
Providers of group disability and dental
insurance, like providers of group health insurance, are subject
to state privacy laws, claims processing rules and "prompt
pay" requirements in various states.
As an extension of past legislative activities in
the medical insurance arena, legislative and regulatory
consideration, at both the federal at state levels, are being
directed toward an effort to mandate what its proponents call
"mental health parity" in the policy provisions of
group disability insurance plans. This would require providers
of group disability insurance to extend the same benefits for
disabilities related to mental illness as are provided for other
disabilities.
Group benefit plans and the claims thereunder are
also largely subject to federal regulation under ERISA, a
complex set of laws and regulations subject to interpretation
and enforcement by the Internal Revenue Service and the
Department of Labor. ERISA regulates certain aspects of the
relationships between us and employers who maintain employee
benefit plans subject to ERISA. Some of our administrative
services and other activities may also be subject to regulation
under ERISA.
Regulation of Pre-Funded Funeral Insurance
    Products
State regulation of the pre-funded funeral
insurance products business varies considerably from state to
state. Our pre-funded funeral insurance products are typically
structured as small whole life insurance policies, usually under
$10,000 face amount, and are regulated as such by the states.
State laws also restrict who may sell a pre-funded funeral. For
example, in certain states a pre-funded funeral may only be
offered through licensed funeral directors. In New York, the
payment of commissions to a funeral director for the sale of
insurance is prohibited.
State privacy laws, particularly those with
"opt-in" clauses, can also affect the pre-funded
funeral insurance business. These laws make it harder to share
information for marketing purposes, such as generating new sales
leads. Similarly, state "do not call" lists, as well
as the recently created national "do not call" list,
also make it more difficult for our pre-funded funeral insurance
agents to solicit new customers, particularly on a cold call
basis.
In certain states, insurance companies offering
pre-funded funeral insurance products must offer a
"free-look period" of typically 30 days, during
which the purchaser of the product may cancel and receive a full
refund. Furthermore, in certain states, death benefits under
pre-funded funeral insurance products must grow with the
Consumer Price Index.
117
Insurance Holding Company
    Statutes
Although as a holding company, Assurant, Inc. is
not regulated as an insurance company, we own capital stock in
insurance subsidiaries and therefore are subject to state
insurance holding company statutes, as well as certain other
laws, of each of the states of domicile of our insurance
subsidiaries. All holding company statutes, as well as other
laws, require disclosure and, in some instances, prior approval
of material transactions between an insurance company and an
affiliate. The holding company statutes as well as other laws
also require, among other things, prior approval of an
acquisition of control of a domestic insurer, some transactions
between affiliates and the payment of extraordinary dividends or
distributions.
Insurance Regulation Concerning
    Dividends
The payment of dividends to us by any of our
insurance subsidiaries in excess of a certain amount (i.e.,
extraordinary dividends) must be approved by the
subsidiary's domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which our subsidiaries are domiciled is the lesser
of (i) 10% of the statutory surplus as of the end of the
prior year or (ii) the prior year's statutory net
income. In some states, the formula is the greater amount of
clauses (i) and (ii). Some states, however, have an
additional stipulation that dividends may only be paid out of
earned surplus. If insurance regulators determine that payment
of an ordinary dividend or any other payments by our insurance
subsidiaries to us (such as payments under a tax sharing
agreement or payments for employee or other services) would be
adverse to policyholders or creditors, the regulators may block
such payments that would otherwise be permitted without prior
approval. In connection with the acquisition of ABIG in 1999, we
entered into an agreement with the Florida Insurance Department
pursuant to which ABIC and ABLAC have agreed to limit the amount
of ordinary dividends they would pay to us to an amount no
greater than 50% of the amount otherwise permitted under Florida
law. This agreement expires in August 2004. In addition, we
entered into an agreement with the New York Insurance Department
in connection with the merger of Bankers Atlantic Life Assurance
Company, one of our New York-domiciled insurance subsidiaries,
into First Fortis Life Insurance Company in 2001, pursuant to
which First Fortis Life Insurance Company agreed not to pay any
dividends to us until fiscal year 2004. No assurance can be
given that there will not be further regulatory actions
restricting the ability of our insurance subsidiaries to pay
dividends. Based on the dividend restrictions under applicable
laws and regulations, the maximum amount of dividends that our
subsidiaries could pay to us in 2003 without regulatory approval
is approximately $290 million, of which approximately
$19 million had been paid as of June 30, 2003. We
expect that as a result of statutory accounting for our sold
businesses, the maximum amount of dividends our subsidiaries
will be able to pay to us will be significantly lower in 2004.
Statutory Accounting Practices
    (SAP)
SAP is a basis of accounting developed to assist
insurance regulators in monitoring and regulating the solvency
of insurance companies. It is primarily concerned with measuring
an insurer's statutory surplus. Accordingly, statutory
accounting focuses on valuing assets and liabilities of insurers
at financial reporting dates in accordance with appropriate
insurance law and regulatory provisions applicable in each
insurer's domiciliary state.
GAAP is concerned with a company's solvency,
but it is also concerned with other financial measurements, such
as income and cash flows. Accordingly, GAAP gives more
consideration to appropriate matching of revenue and expenses
and accounting for management's stewardship of assets than
does SAP. As a direct result, different assets and liabilities
and different amounts of assets and liabilities will be
reflected in financial statements prepared in accordance with
GAAP as opposed to SAP.
Statutory accounting practices established by the
NAIC and adopted, for the most part, by the various state
insurance regulators determine, among other things, the amount
of statutory surplus and statutory net income of our insurance
subsidiaries and thus determine, in part, the amount of funds
they have available to pay as dividends to us.
118
Assessments for Guaranty
    Funds
Virtually all states require insurers licensed to
do business in their state to bear a portion of the loss
suffered by some insureds as a result of the insolvency of other
insurers. Depending upon state law, insurers can be assessed an
amount that is generally equal to between 1% and 3% of premiums
written for the relevant lines of insurance in that state each
year to pay the claims of an insolvent insurer. A portion of
these payments is recoverable through premium rates, premium tax
credits or policy surcharges. Significant increases in
assessments could limit the ability of our insurance
subsidiaries to recover such assessments through tax credits or
other means. In addition, there have been some legislative
efforts to limit or repeal the tax offset provisions, which
efforts, to date, have been generally unsuccessful. These
assessments are expected to increase in the future as a result
of recent insolvencies.
Insurance Regulations Concerning Change of
    Control
Many state insurance regulatory laws intended
primarily for the protection of policyholders contain provisions
that require advance approval by the state insurance
commissioner of any change in control of an insurance company
that is domiciled, or, in some cases, having such substantial
business that it is deemed to be commercially domiciled, in that
state. Prior to granting such approval, the state insurance
commissioner will consider such factors as the financial
strength of the applicant, the integrity of the applicant's
board of directors and executive officers, the applicant's
plans for the future operations of the domestic insurer and any
anti-competitive results that may arise from the consummation of
the acquisition of control. We own, directly or indirectly, all
of the shares of stock of insurance companies domiciled in the
states listed in the "General" section above.
"Control" is generally presumed to exist through the
ownership of 10% (5% in the case of Florida, in which certain of
our insurance subsidiaries are domiciled) or more of the voting
securities of a domestic insurance company or of any company
that controls a domestic insurance company. Any purchaser of
shares of common stock representing 10% (5% in the case of
Florida) or more of the voting power of our capital stock will
be presumed to have acquired control of our domestic insurance
subsidiaries unless, following application by that purchaser in
each insurance subsidiary's state of domicile, the relevant
insurance commissioner determines otherwise.
In addition to these filings, the laws of many
states contain provisions requiring pre-notification to state
agencies prior to any change in control of a non-domestic
insurance company admitted to transact business in that state.
While these pre-notification statutes do not authorize the state
agency to disapprove the change of control, they do authorize
issuance of cease and desist orders with respect to the
non-domestic insurer if it is determined that some conditions,
such as undue market concentration, would result from the
acquisition.
Any future transactions that would constitute a
change in control of any of our insurance subsidiaries would
generally require prior approval by the insurance departments of
the states in which our insurance subsidiaries are domiciled or
commercially domiciled and may require pre-acquisition
notification in those states that have adopted pre-acquisition
notification provisions and in which such insurance subsidiaries
are admitted to transact business. Regulatory approval for a
change of control may also be required in one or more of the
foreign jurisdictions in which we have insurance subsidiaries.
These requirements may deter, delay or prevent
transactions affecting the control of our common stock,
including transactions that could be advantageous to our
stockholders.
Insurance Regulatory Information
    System
The NAIC Insurance Regulatory Information System
(IRIS) was developed to help state regulators identify
companies that may require special attention. The IRIS system
consists of a statistical phase and an analytical phase whereby
financial examiners review annual statements and financial
ratios. The statistical phase consists of 12 key financial
ratios based on year-end data that are generated from the NAIC
database annually; each ratio has an established "usual
range" of results. These ratios assist state insurance
departments in executing their statutory mandate to oversee the
financial condition of insurance companies.
119
A ratio result falling outside the usual range of
IRIS ratios is not considered a failing result; rather, unusual
values are viewed as part of the regulatory early monitoring
system. Furthermore, in some years, it may not be unusual for
financially sound companies to have several ratios with results
outside the usual ranges. Generally, an insurance company will
become subject to regulatory scrutiny if it falls outside the
usual ranges of four or more of the ratios. In the past,
variances in certain ratios of our insurance subsidiaries have
resulted in inquiries from insurance departments, to which we
have responded. These inquiries have not led to any restrictions
affecting our operations.
Risk-Based Capital
    (RBC) Requirements
In order to enhance the regulation of insurer
solvency, the NAIC has adopted formulas and model laws to
implement
RBC requirements
for life and health insurers,
for property and casualty insurers, and, most recently, for
health organizations. These formulas and model laws are designed
to determine minimum capital requirements and to raise the level
of protection that statutory surplus provides for policyholder
obligations.
Under laws adopted by individual states, insurers
having less total adjusted capital (generally, as defined by the
NAIC), than that required by the relevant RBC formula will be
subject to varying degrees of regulatory action, depending on
the level of capital inadequacy. The RBC laws provide for four
levels of regulatory action. The extent of regulatory
intervention and action increases as the ratio of total adjusted
capital to RBC falls. The first level, the company action level,
requires an insurer to submit a plan of corrective actions to
the regulator if total adjusted capital falls below 200% of the
RBC amount (or below 250%, when the insurer has a "negative
trend" as defined under the RBC laws). The second level,
the regulatory action level, requires an insurer to submit a
plan containing corrective actions and requires the relevant
insurance commissioner to perform an examination or other
analysis and issue a corrective order if total adjusted capital
falls below 150% of the RBC amount. The third level, the
authorized control level, authorizes the relevant insurance
commissioner to take whatever regulatory actions considered
necessary to protect the best interests of the policyholders and
creditors of the insurer, which may include the actions
necessary to cause the insurer to be placed under regulatory
control, i.e., rehabilitation or liquidation, if total adjusted
capital falls below 100% of the RBC amount. The fourth action
level is the mandatory control level, which requires the
relevant insurance commissioner to place the insurer under
regulatory control if total adjusted capital falls below 70% of
the RBC amount.
The formulas have not been designed to
differentiate among adequately capitalized companies that
operate with higher levels of capital. Therefore, it is
inappropriate and ineffective to use the formulas to rate or to
rank these companies. At December 31, 2002, all of our
insurance subsidiaries had total adjusted capital in excess of
amounts requiring company or regulatory action at any prescribed
RBC action level.
Federal Regulation
General
In 1945, the U.S. Congress enacted the
McCarran-Ferguson Act which declared the regulation of insurance
to be primarily the responsibility of the individual states.
Although repeal of McCarran-Ferguson is debated in the
U.S. Congress from time to time, the federal government
generally does not directly regulate the insurance business.
However, federal legislation and administrative policies in
several areas, including healthcare, pension regulation, age and
sex discrimination, financial services regulation, securities
regulation, privacy laws, terrorism and federal taxation, do
affect the insurance business.
Federal Securities Regulation of Fortis
    Variable Insurance Product Business
Two of our subsidiaries, Fortis Benefits
Insurance Company and First Fortis Life Insurance Company, are
subject to various federal securities regulations because they
have been involved in the issuance of variable insurance
products that are required to be registered as securities under
the Securities Act. These registered insurance contracts, which
are no longer being sold, have been 100% reinsured with The
Hartford through modified coinsurance agreements. The Hartford
now administers this closed block of business pursuant to a
third-party administration agreement. Nevertheless, because
these two subsidiaries are still considered the
120
issuers of the products, they are subject to
regulation by the SEC. As a result, they must file periodic
reports under the Securities Exchange Act of 1934, as amended
(Exchange Act) and are periodically examined for compliance with
applicable federal securities laws by the SEC. The SEC is
currently conducting a routine examination of this variable
product business. As of June 30, 2003, there had been no
adverse findings reported by the SEC. See also
"Management's Discussion and Analysis of Financial
Condition and Results of Operations — Acquisitions and
Dispositions of Businesses."
The Health Insurance Portability and
    Accountability Act of 1996 (HIPAA)
As with other lines of insurance, the regulation
of health insurance historically has been within the domain of
the states. However, HIPAA and the implementing regulations
promulgated thereunder by the Department of Health and Human
Services impose new obligations for issuers of health and dental
insurance coverage and health and dental benefit plan sponsors.
HIPAA requires certain guaranteed issuance and renewability of
health insurance coverage for individuals and small employer
groups (generally 50 or fewer employees) and limits exclusions
based on pre-existing conditions. Most of the insurance reform
provisions of HIPAA became effective for plan years beginning on
or after July 1, 1997.
HIPAA also establishes new requirements for
maintaining the confidentiality and security of individually
identifiable health information and new standards for electronic
health care transactions. The Department of Health and Human
Services promulgated final HIPAA regulations in 2002. The
privacy regulations required compliance by April 2003, the
electronic transactions regulations by October 2003 and the
security regulations by April 2005. As have other entities in
the health care industry, we have incurred substantial costs in
meeting the requirements of these HIPAA regulations and expect
to continue to incur costs to achieve and to maintain
compliance. We have been working diligently to comply with these
regulations in the time periods required. However, there can be
no assurances that we will achieve such compliance with all of
the required transactions or that other entities with which we
interact will take appropriate action to meet the compliance
deadlines. Moreover, as a consequence of these new standards for
electronic transactions, we may see an increase in the number of
health care transactions that are submitted to us in paper
format, which could increase our costs to process medical claims.
HIPAA is far-reaching and complex and proper
interpretation and practice under the law continue to evolve.
Consequently, our efforts to measure, monitor and adjust our
business practices to comply with HIPAA are ongoing. Failure to
comply could result in regulatory fines and civil lawsuits.
Knowing and intentional violations of these rules may also
result in federal criminal penalties.
The Terrorism Risk Insurance
    Act
On November 26, 2002, the Terrorism Risk
Insurance Act was enacted to ensure the availability of
insurance coverage for terrorist acts in the United States. This
law requires insurers writing certain lines of property and
casualty insurance
to offer coverage against certain acts
of terrorism causing damage within the United States or to
U.S. flagged vessels or aircraft. In return, the law
requires the federal government to indemnify such insurers for
90% of insured losses resulting from covered acts of terrorism,
subject to a premium-based deductible. Any existing policy
exclusions for such coverage were immediately nullified by the
law, although such exclusions may be reinstated if either the
insured consents to reinstatement or fails to pay any applicable
increase in premium resulting from the additional coverage
within 30 days of being notified of such an increase. It
should be noted that an "act of terrorism" as defined
by the law excludes purely domestic terrorism. For an act of
terrorism to have occurred, the U.S. Secretary of the
Treasury must make several findings, including that the act was
committed on behalf of a foreign person or foreign interest. The
law expires automatically at the end of 2005.
The Terrorism Risk Insurance Act required the
U.S. Secretary of the Treasury to conduct an expedited
study as to whether or not group life insurance should be
covered under the law. Based on the study, the Secretary
concluded that inclusion of group life insurance was not
appropriate.
121
We have a geographically diverse block of group
life business and have secured limited reinsurance protection
against catastrophic losses in our group life product line.
Nevertheless, we are exposed to the risk of substantial group
life losses from a catastrophe, including a terrorist act.
Given that our property and casualty insurance
products primarily cover personal residences and personal
property, we do not believe our property and casualty exposure
to terrorist acts to be significant.
USA PATRIOT Act
On October 26, 2001, the International Money
Laundering Abatement and Anti-Terrorist Financing Act of 2001
was enacted into law as part of the USA PATRIOT Act. Among its
many provisions the law requires that financial institutions
adopt anti-money laundering programs that include policies,
procedures and controls to detect and prevent money laundering,
designate a compliance officer to oversee the program and
provide for employee training, and periodic audits in accordance
with regulations proposed by the U.S. Treasury Department.
Proposed Treasury regulations governing portions of our life
insurance business would require us to develop and implement
procedures designed to detect and prevent money laundering and
terrorist financing. We remain subject to U.S. regulations
that prohibit business dealings with entities identified as
threats to national security. We have licensed software to
enable us to detect and prevent such activities in compliance
with existing regulations and we are developing policies and
procedures designed to comply with the proposed regulations
should they come into effect.
There are significant criminal and civil
penalties that can be imposed for violation of Treasury
regulations. We believe that the steps we are taking to comply
with the current regulations and to prepare for compliance with
the proposed regulations should be sufficient to minimize the
risks of such penalties.
Gramm-Leach-Bliley Act
On November 12, 1999, the Gramm-Leach-Bliley
Act of 1999 became law, implementing fundamental changes in the
regulation of the financial services industry in the United
States. The act permits the transformation of the already
converging banking, insurance and securities industries by
permitting mergers that combine commercial banks, insurers and
securities firms under one holding company. Under the Act,
national banks retain their existing ability to sell insurance
products in some circumstances. In addition, bank holding
companies that qualify and elect to be treated as
"financial holding companies" may engage in
activities, and acquire companies engaged in activities, that
are "financial" in nature or "incidental" or
"complementary" to such financial activities,
including acting as principal, agent or broker in selling life,
property and casualty and other forms of insurance, including
annuities. A financial holding company can own any kind of
insurance company or insurance broker or agent, but its bank
subsidiary cannot own the insurance company. Under state law,
the financial holding company would need to apply to the
insurance commissioner in the insurer's state of domicile
for prior approval of the acquisition of the insurer, and the
act provides that the commissioner, in considering the
application, may not discriminate against the financial holding
company because it is affiliated with a bank. Under the Act, no
state may prevent or interfere with affiliations between banks
and insurers, insurance agents or brokers, or the licensing of a
bank or affiliate as an insurer or agent or broker. Privacy
provisions of the Act became fully effective in 2001. These
provisions established consumer protections regarding the
security and confidentiality of nonpublic personal information
and require us to make full disclosure of our privacy policies
to our customers.
Regulation by the Federal Reserve
    Board
Fortis Bank, which is a subsidiary of Fortis,
obtained approval in 2002 from state banking authorities and the
Federal Reserve Board to establish branch offices in Connecticut
and New York. By virtue of the opening of these offices, the
U.S. operations of Fortis, including our operations, became
subject to the nonbanking prohibitions of Section 4 of the
BHCA. In order to continue to operate its U.S. nonbanking
operations, including the insurance activities conducted by our
subsidiaries, Fortis notified the Federal Reserve Board of its
election to be a financial holding company for purposes of the
BHCA and the Federal Reserve Board's implementing
regulations in Regulation Y. Pursuant to Fortis'
status as a financial holding company, Fortis
122
and its subsidiaries, including our subsidiaries,
are permitted to engage in nonbanking activities in the United
States that are "financial in nature" or
"incidental to a financial activity" as defined in
Section 4(k) of the BHCA and in Regulation Y. In
particular, Fortis' status as a financial holding company
permits Fortis to engage in the United States in both banking
activities through the U.S. branches of Fortis Bank and
insurance activities through our subsidiaries. Activities that
are "financial in nature" include, among other things,
insuring, guaranteeing or indemnifying against loss, harm,
damage, illness, disability, or death, or providing and issuing
annuities, and acting as principal, agent or broker for purposes
of the foregoing.
Fortis will continue to qualify as a financial
holding company so long as Fortis Bank remains "well
capitalized" and "well managed" as those terms
are defined in Regulation Y. Generally, Fortis Bank will be
considered "well capitalized" if it maintains
tier 1 and total risk-based capital ratios of at least 6%
and 10%, respectively, and will be considered "well
managed" if it has received at least a satisfactory
composite rating of its U.S. branch operations at its most
recent examination. As a general matter, as long as Fortis owns
more than 5% of any class of our voting shares, the BHCA does
not permit us to engage in nonfinancial activities such as
manufacturing, distribution of goods and real estate
development. If the Federal Reserve Board were to determine that
any of our existing activities were not insurance activities or
not otherwise financial in nature or not incidental to such
activities, or if Fortis lost and was unable to regain its
financial holding company status, we could be required to
restructure our operations or divest some of these operations,
which could result in increased costs and reduced profitability.
The Federal Reserve Board oversees all of
Fortis' direct and indirect U.S. subsidiaries for
compliance with the BHCA, including our Company. The requirement
that we comply with the nonbanking activities restrictions of
the BHCA and Regulation Y would cease if Fortis owned less than
5% of any class of our voting shares and did not otherwise
control us within the meaning of the BHCA, or if another BHCA
exemption, such as the merchant banking exemption, became
available.
Legislative Developments
Legislation has been introduced in the
U.S. Congress that would allow state-chartered and
regulated insurance companies, such as our insurance
subsidiaries, to choose instead to be regulated exclusively by a
federal insurance regulator. We do not believe that such
legislation will be enacted during the current Congressional
term.
Numerous proposals to reform the current health
care system have been introduced in the U.S. Congress and
in various state legislatures. Proposals have included, among
other things, modifications to the existing employer-based
insurance system, a quasi-regulated system of "managed
competition" among health insurers, and a single-payer,
public program. Changes in health care policy could
significantly affect our business. For example, federally
mandated, comprehensive major medical insurance, if proposed and
implemented, could partially or fully replace some of our
current products. Furthermore, legislation has been introduced
from time to time in the U.S. Congress that could result in
the federal government assuming a more direct role in regulating
insurance companies.
In addition, the U.S. Congress is
considering the expansion of risk retention groups, which were
originally established in 1986 to address the lack of available
product liability insurance. Risk retention groups may be
chartered in a state with favorable regulations and then proceed
to do business in any state, even though insurance companies
competing in the other states may be subject to more stringent
regulations. This is a continuing risk to the extended service
contract business at Assurant Solutions.
There is also legislation pending in the
U.S. Congress and in various states designed to provide
additional privacy protections to consumer customers of
financial institutions. These statutes, including the Fair
Credit Reporting Act, and similar legislation and regulations in
the United States or other jurisdictions could affect our
ability to market our products or otherwise limit the nature or
scope of our insurance operations.
The NAIC and individual states have been studying
small face amount life insurance for the past two years. Some
initiatives that have been raised at the NAIC include further
disclosure for small face amount policies and restrictions on
premium to benefit ratios. The NAIC is also studying other
issues such as
123
"suitability" of insurance products for
certain customers. This may have an effect on our pre-funded
funeral insurance business. Suitability requirements such as a
customer assets and needs worksheet could extend and complicate
the sale of pre-funded funeral insurance products.
Medical Savings Accounts were created by
U.S. Congress as a trial program in 1996. MSAs allow
self-employed individuals, as well as employees of small
employers (i.e., employers with 50 or fewer employees), to set
aside funds on a tax-free basis for the purpose of paying
eligible medical expenses, so long as such persons are covered
under a high-deductible health insurance policy. MSA health
insurance policies have become an important and growing product
line for Assurant Health. The trial program is scheduled to
expire at the end of 2003. If the program is not extended, the
present MSA policies issued by Assurant Health would continue in
force, but Assurant Health would not be able to issue new plans.
U.S. Congress is considering various proposals to extend
the MSA program. Under one such proposal, MSAs would become
Health Savings Accounts and would be available to greater
numbers of individuals, including those employed by large
employers.
We are unable to evaluate new legislation that
may be proposed and when or whether any such legislation will be
enacted and implemented. However, many of the proposals, if
adopted, could have a material adverse effect on our financial
condition, cash flows or results of operations, while others, if
adopted, could potentially benefit our business.
Foreign Jurisdictions
A portion of our business is carried on in
foreign countries. We have insurance subsidiaries domiciled in
Argentina, Brazil, the Dominican Republic, the Turks and Caicos
Islands and the United Kingdom. Certain subsidiaries operate in
Canada under the branch system. The degree of regulation and
supervision in foreign jurisdictions varies from minimal in some
to stringent in others. Generally, our insurance subsidiaries
operating in such jurisdictions must satisfy local regulatory
requirements. Licenses issued by foreign authorities to our
insurance subsidiaries are subject to modification or revocation
by such authorities, and these subsidiaries could be prevented
from conducting business in certain of the jurisdictions where
they currently operate. In the past, we have been allowed to
modify our operations to conform with new licensing requirements
in most jurisdictions.
In addition to licensing requirements, our
foreign operations are also regulated in various jurisdictions
with respect to currency, policy language and terms, amount and
type of security deposits, amount and type of reserves, amount
and type of local investment and the share of profits to be
returned to policyholders on participating policies. Some
foreign countries regulate rates on various types of policies.
Certain countries have established reinsurance institutions,
wholly or partially owned by the state, to which admitted
insurers are obligated to cede a portion of their business on
terms which do not always allow foreign insurers full
compensation. In some countries, regulations governing
constitution of technical reserves and remittance balances may
hinder remittance of profits and repatriation of assets.
124
MANAGEMENT
Directors
The table below sets forth the names, ages and
positions of our directors:
Name
Age
Positions
John Michael Palms
68
Chairman of the Board
Anton van Rossum
58
Director and Immediate Past Chairman of the Board
J. Kerry Clayton
57
Director, President and Chief Executive Officer
Michel Baise
54
Director
Robert J. Blendon
60
Director
Beth L. Bronner
52
Director
Howard L. Carver
59
Director
Arie A. Fakkert
59
Director
Allen R. Freedman
63
Director
H. Carroll Mackin
62
Director
Gilbert Mittler
54
Director
Georges Valckenaere
61
Director
(1)
Denotes Class I Director with term to expire
    in 2005.
(2)
Denotes Class II Director with term to
    expire in 2006.
(3)
Denotes Class III Director with term to
    expire in 2007.
While our board of directors is not currently
classified, pursuant to our by-laws, our board of directors will
be classified effective upon the consummation of the offering.
These classifications will be denoted above.
John Michael Palms, Ph.D., D.Sc., Chairman of
the Board.
Dr. Palms has been a
member of our board of directors since March 1990 and became
Chairman in October 2003 as a result of Mr. van
Rossum's decision to resign the position and allow it to be
filled by an outside director in line with emerging best
practices for public companies in the United States.
Dr. Palms is a Distinguished University Professor at the
University of South Carolina and was the President of the
University of South Carolina from 1991 until his retirement in
2002. Earlier in his career, Dr. Palms served as President
of Georgia State University and as a professor and administrator
at Emory University. Dr. Palms currently serves on the
boards of the Computer Task Group and Simcom International and
is the Chair of the Exelon Corporation's audit committee.
He is also Chairman of the Board of the Institute for Defense
Analyses. In the past, Dr. Palms has been a member of
various additional company committees and boards including the
University of South Carolina's Educational and Development
Foundation Boards, NationsBank of the Carolinas' audit
committee, the audit committee of the Board of Directors of
Carolina First Bank, the Mynd Corporation's compensation
committee and Chair of PECO Energy's nuclear committee.
Anton van Rossum, Director and Immediate Past
Chairman of the Board.
Mr. van
Rossum is the Chief Executive Officer of Fortis, has been a
member of our board of directors since September 2000 and was
Chairman of our board of directors from September 2000 until
October 2003. Mr. van Rossum stepped down as Chairman in
order to allow Dr. Palms to fill the Chairman's
position, in line with emerging best practices for public
companies in the United States. Prior to joining Fortis,
Mr. van Rossum spent 28 years with McKinsey &
Company in a variety of roles, including Principal and Director,
in The Netherlands, Scandinavia and Belgium. In addition to
serving as Chief Executive Officer of Fortis since 2000, he is a
member of the board of directors of Fortis SA/NV, Fortis N.V.,
Fortis Brussels, Fortis Utrecht and Caifor, a Fortis joint
venture based in Spain. He is also Chairman of the boards of
directors of Fortis Insurance N.V., Fortis Bank, Fortis AG, and
of Fortis ASR N.V.'s "Raad van Commissarissen"
(Supervisory Board).
J. Kerry Clayton, President, Chief Executive
Officer and Director.
Mr. Clayton
has been President and Chief Executive Officer of the Company
since May 2000 and has been a member of our board of directors
125
since March 1999. From 1993 to 1999,
Mr Clayton served as Executive Vice President of the
Company with a variety of responsibilities. From 1985 to 1993,
Mr. Clayton served as President of Fortis Benefits
Insurance Company, which acquired and combined the operations of
Western Life Insurance Company, St. Paul Life Insurance
Company and the Group Division of Mutual Benefit Life. He also
served as Senior Vice President, Finance of the Company from
1981 to 1985. From 1970 to 1980, Mr. Clayton held various
positions with American Security Group (now Assurant Solutions),
which was acquired by the Company in 1980.
Michel Baise, Director.
Mr. Baise has been a member of
our board of directors since October 2003. Mr. Baise is
currently General Manager, Finance of Fortis and has held this
position since 1994. From 1989 to 1994, Mr. Baise worked
for Société Générale de Belgique, as Advisor
in the Industrial Subsidiaries and Strategy Division. Between
1982 and 1989, Mr. Baise served in various management
positions and as a member of the Executive Committee of the
Belgian Bank in Hong Kong and Belgium. This was preceded by
assignments at the European Asian Bank as Credit Manager in
Hamburg, Germany from 1981 to mid-1982, and Operations Manager
in Singapore from 1977 to 1980. Mr. Baise began his career
in 1972 as a management trainee at Generale Bank, later named
Fortis Bank, and held various positions there including Deputy
Manager of the Bills Department until 1977. Mr. Baise is
Director and Chairman of Fortis Finance, a subsidiary of Fortis
Insurance N.V. He is also Director and Chairman of various
financing vehicles in Luxemburg: Fortfinlux SA, FGF Lux SA,
Fortinvestlux SA and in Jersey: Fortis Capital Company, Ltd. He
was recently appointed to be a member of the Supervisory Board
of a mortgage bank to be set up in The Netherlands as a
subsidiary of Fortis Bank Nederland before the end of 2003.
Dr. Robert J. Blendon, Sc.D.,
Director.
Dr. Blendon has been a
member of our board of directors since March 1993.
Dr. Blendon has been a professor of Health Policy at
Harvard University's School of Public Health and a
professor of Political Analysis at Harvard University's
Kennedy School of Government since 1987. Previously, he served
as Vice President of The Robert Wood Johnson Foundation.
Beth L. Bronner, Director.
Ms. Bronner has been a member of
our board of directors since January 1994. Ms. Bronner is
currently Senior Vice President and Chief Marketing Officer of
Jim Beam Brands, a division of Fortune Brands. Prior to joining
Jim Beam in 2003, Ms. Bronner was a Partner at LERA
Consulting in Chicago, Illinois. Prior to joining LERA
Consulting in 2002, Ms. Bronner was the President and Chief
Operating Officer of ADVO, Inc., the nation's largest
full-service targeted direct mail marketing company. Before
joining ADVO, Inc. in 2000, Ms. Bronner was President of
the Health Division at Sunbeam Corporation. She was also a
Senior Vice President and Director of Marketing of North
American Consumer Banking at Citibank, N.A. and Vice-President
of Emerging Markets for AT&T Company. Since 1993, she has
been a member of the board of directors of The Hain-Celestial
Group Inc., and has chaired its compensation committee. She also
served as a member of Oak Industries, Inc.'s audit
committee from 1996 until its 2000 merger with Corning
Incorporated. Ms. Bronner also serves on the boards of
several charitable organizations; she is currently serving as a
board member of the Cradle Foundation and is on the board of
trustees of the Goodman Theater in Chicago, Illinois. She is a
former trustee of the New School in New York City.
Howard L. Carver, Director.
Mr. Carver has been a member of
our board of directors since June 2002. Mr. Carver is
retired as an Office Managing Partner of Ernst & Young.
Mr. Carver's career at Ernst & Young spanned
five decades, beginning as an auditor and a financial
consultant. He later became the director of insurance operations
in several Ernst & Young offices, and served as
Regional Director of insurance operations, Associate National
Director of insurance operations, Co-Chairman of
Ernst & Young's International insurance committee
and was a member of the Ernst & Young National Insurance
Steering Committee. He retired from Ernst & Young in
June of 2002. He currently chairs the audit committees of the
Company and the Phoenix National Trust Company, a wholly owned
subsidiary of the Phoenix Group. Mr. Carver is a Certified
Public Accountant and is a member of both the American Institute
of Certified Public Accountants, and the Connecticut Society of
CPAs. Mr. Carver also serves on the boards and/or finance
committees of several civic/charitable organizations.
Arie A. Fakkert, Director.
Mr. Fakkert has been a member of
our board of directors since January 1987. From 1986 until his
retirement in October 2003, Mr. Fakkert was General Manager
of Fortis Insurance International N.V. and acted as General
Liaison between the Company in the United States and Fortis in
126
Europe. Prior to assuming that position, he
served as the General Manager at AMEV Praktijkvoorziening N.V.
He began his career at Royal Dutch Shell Group, serving in both
the United States and the United Kingdom.
Allen R. Freedman, Director.
Mr. Freedman has been a member of
our board of directors since its inception in 1979.
Mr. Freedman is currently the owner and principal of
A.R. Freedman & Co., a corporate strategy
development firm and is the former Chairman and Chief Executive
Officer of the Company, where he served as Chief Executive
Officer until May 2000 and Chairman until his retirement in July
2000. In 1979, Mr. Freedman became the Company's
president and first employee, initiating the Company's
initial strategy and orchestrating its growth over the next
21 years. He began his career in 1964 as a tax lawyer, and
a year later, he joined the Internal Revenue Service's
Office of the Chief Counsel. Mr. Freedman served as Vice
President of D.H. Magid & Co. from 1967 to 1970.
From there, he served as Vice President of Irving Trust Company
(now Bank of New York). In 1975, Mr. Freedman became
Executive Vice President and Treasurer of Lewis R.
Eisner & Co., where he managed the creation of what is
now Assurant in the United States, along with several other
investments made by predecessors of Assurant. Beginning in 1978,
he initiated and supervised most aspects of Assurant's
U.S. operations. Since his retirement as Chairman and Chief
Executive Officer of the Company, he has served as a Director of
Cornerstone Family Services, Chairman of its audit committee and
a member of its investment committee. Since 1984,
Mr. Freedman has also served as Chairman of the audit
committee of Systems & Computer Technologies
Corporation (SCTC). In January 2002, he became the Chairman of
the Board of SCTC. Most recently, he has become a member of the
board of directors of the newly formed Association of Audit
Committee Members, Inc.
H.     Carroll
Mackin, Director.
Mr. Mackin is
the former Executive Vice President and Treasurer of the
Company, where he served from 1980 until his retirement in 1997.
Mr. Mackin has been a member of our board of directors
since October 1996. Mr. Mackin served as a consultant to
the Company in 1979. He was the Company's fourth employee
and initiated many of the Company's early activities,
including consolidating its investment departments and its first
treasury function. Before joining the Company, he was Director
for Investments at Forstmann, Leff. He is currently principal
owner of Great Northern Manufacturing, LLC, a Louisville,
Kentucky-based manufacturer of specialty nails.
Gilbert Mittler, Director.
Mr. Mittler is the Chief
Financial Officer of Fortis, and has been a member of our board
of directors since March 2003. Mr. Mittler joined AG Group,
one of the founding companies of Fortis, in 1988 and became at
the inception of Fortis in 1990 Director of Fortis Group
Finance & Development and Secretary of the Executive
and Supervisory Boards of Fortis. He began his career as an
accountant at Arthur Andersen in 1974, and subsequently worked
for Belgian holding company Sofina as Senior Officer from 1976
to 1988. In 1988, he was recruited to serve as Head of Corporate
Development of the AG Group (now Fortis AG), and in 1993 became
Managing Director of ASLK Bank (now Fortis Bank) and a member of
its Executive Committee, responsible for Finance &
Control and foreign operations. In 1998, he became a member of
the executive committee of Fortis, and a year later, he was
named Managing Director of Fortis (B) and Fortis (NL),
maintaining various responsibilities at group level. Since
September 2000, he has served as Chief Financial Officer of
Fortis and since 2001 also as Managing Director and Chief
Financial Officer of Fortis Bank. Mr. Mittler is a member
of the board of directors of Caifor, Fortis AG, Fortis Bank and
Fortis Insurance N.V. He is also Vice-Chairman of the board of
directors of the Banque Générale du Luxembourg and a
member of Fortis ASR N.V.'s "Raad van
Commissarissen" (Supervisory Board).
Georges A. Valckenaere, Director.
Mr. Valckenaere is the retired
Advisor to the Chief Executive Officer of Fortis and has been a
member of our board of directors since March 1995. Before
retiring from Fortis in January 2002, Mr. Valckenaere was
Chief Executive Officer of Fortis International N.V. Prior to
joining Fortis International N.V., Mr. Valckenaere was
Director and General Manager of Fortis AG. In addition to
serving on the Company's and Fortis International
N.V.'s board of directors, Mr. Valckenaere also served
on the boards of Fortis Bank, Fortis Assurances, Fortis
Australia, Fortis Luxembourg Assurances, Fortis Insurance in the
United Kingdom, Keppel Insurance and Caifor.
Pursuant to the shareholders' agreement that
we will enter into with Fortis Insurance N.V., Fortis will have
the right to nominate designees to our board of directors and
subject to limited exceptions, our board of
127
directors will nominate those designees as
follows: (i) so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii) so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Fortis has designated Messrs. van
Rossum, Baise, Fakkert, Mittler and Valckenaere as its
designees. Messrs. Fakkert, Valckenaere and van Rossum have
each expressed their intention to resign from our board of
directors when Fortis' ownership interest in the Company
decreases to below 50%.
Composition of Board of Directors
Our by-laws provide that our board of directors
shall consist of such number as from time to time fixed
exclusively by resolution of the board of directors. The current
board of directors consists of 12 persons and will be
divided into three classes. In addition, each director will
serve a three year term, with termination staggered according to
class. The classification and current term of office of each of
our directors will be noted in the table listing our board of
directors under "—Directors."
Committees of the Board of Directors
Executive Committee.
The Executive Committee is composed of
Messrs. Clayton, Fakkert, Freedman and Palms and is chaired by
Mr. Clayton. This committee acts for the board of directors
when a meeting of the full board is not practical.
Compensation Committee.
The Compensation Committee is composed
of Ms. Bronner and Messrs. Freedman, Mittler and van
Rossum and is chaired by Mr. Freedman. This committee
approves, administers and interprets our compensation and
benefit policies, including our executive incentive programs. It
reviews and makes recommendations to our board of directors to
ensure that our compensation and benefit policies are consistent
with our compensation philosophy and corporate governance
guidelines. This committee is also responsible for establishing
our CEO's compensation.
Audit Committee.
The
Audit Committee is composed of Messrs. Palms, Carver and
Mackin and is chaired by Mr. Carver. This committee has
general responsibility for the oversight and surveillance of our
accounting, reporting and financial control practices. Among
other functions, the committee retains our independent public
accountants. Each member of the Audit Committee is a
non-management director. Mr. Carver is a "financial
expert" within the definition of that term under the
regulations under the Securities Act.
Nominating and Corporate Governance
Committee.
The Nominating and
Corporate Governance Committee is composed of
Messrs. Blendon, Mittler, Palms and van Rossum and is
chaired by Dr. Palms. This committee oversees our
governance policies, nominates directors for election by
stockholders, nominates committee chairpersons and, in
consultation with the committee chairpersons, nominates
directors for membership on the committees of the board.
Compensation Committee Interlocks and Insider
Participation
The Compensation Committee is composed of
Ms. Bronner and Messrs. Freedman, Mittler and van
Rossum. There are no "interlocks," as defined by the
SEC, with respect to any member of the Compensation Committee.
Director Compensation
Our board of directors adopted and our sole
stockholder approved the Assurant Directors Compensation Plan on
October 15, 2003, to be effective as of the closing of the
offering contemplated by this prospectus. The purpose of the
plan is to attract, retain and compensate highly qualified
individuals for service as members of the board of directors by
providing them with competitive compensation and an ownership
interest in our common stock. Directors who are employees of the
Company or any of its subsidiaries or affiliates, or of Fortis
or any of its subsidiaries or affiliates, are not eligible to
participate in the plan or to receive payment for service as a
director.
128
The plan provides for payment of an annual
retainer to our non-employee directors of $35,000, payable
quarterly. Additional annual retainers will be paid to the
Chairman of the Board and committee members and chairpersons as
follows: Chairman of the Board: $7,500; Audit Committee: member
$3,750, chairperson $7,500; Compensation Committee: member
$2,500, chairperson $5,000; Corporate Governance and Nominating
Committee: member $2,500, chairperson $5,000; Executive
Committee: none. Annual service for this purpose relates to the
approximate 12-month periods between annual meetings of our
stockholders. A prorated retainer will be paid to any person who
becomes a non-employee director other than by election at an
annual meeting. The plan also provides for the payment of
participation fees of $2,000 for each board or committee meeting
and $500 for each board or committee conference call (but not
more than one fee for meetings or conference calls held on the
same day). The Chairman of the Board or chairperson of a
committee may authorize the full meeting fee to be payable with
respect to any extended conference call or any other special
off-site meeting required as part of a director's service.
The plan provides for reasonable reimbursement of travel
expenses in connection with attending meetings of our board and
its committees, and other company functions where the
director's attendance is requested by our chief executive
officer. A participant may elect to have any cash amounts
payable under the Directors Compensation Plan transferred to the
Assurant Investment Plan, described under "—Management
Compensation and Incentive Plans."
In addition to cash compensation, the plan
provides that each non-employee director will receive, on the
later of the effective date of the plan or the first date he or
she becomes a non-employee director, an initial award of
(1) shares of our common stock having a grant date value
equal to the normal (non-prorated) annual cash retainer amount
for such year, excluding any retainer related to a committee
member or chairperson assignment, and (2) stock
appreciation rights with respect to an equal number of shares of
common stock. On the day following each annual meeting of our
stockholders, beginning in 2005, each non-employee director then
in office (other than a director who first became a non-employee
director at the stockholders meeting held on the previous day)
will receive (1) an award of stock having a grant date
value equal to the director's annual cash retainer for such
year, excluding any retainer earned by the director as a
committee member or chair, and (2) an award of stock
appreciation rights with respect to an equal number of shares of
common stock. In no event will a director receive both an
initial award and an annual award of shares and stock
appreciation rights for the same year of service. The stock
appreciation rights granted under the plan will have a base
value equal to the fair market value of our common stock on the
date of grant. Upon exercise of a stock appreciation right, a
director will receive a cash payment equal to the excess, if
any, of the fair market value of one share of our common stock
on the date of exercise over the base value of the right. Stock
appreciation rights granted under the plan will be fully vested
on the date of grant, but may not be exercised until the fifth
anniversary of the date of grant. To the extent not previously
exercised, such rights will be automatically exercised on the
earlier of the first anniversary of the grantee's
termination as a director of the Company for any reason or the
tenth anniversary of the date of grant.
Subject to adjustment for recapitalization
events, the maximum number of shares of our common stock that
may be issued under the Directors Compensation Plan is 500,000.
The plan will remain in effect until the day following the 2013
annual meeting of our stockholders, unless terminated earlier by
our board of directors. The board of directors may at any time
terminate or amend the plan, but any such amendment would be
subject to stockholder approval if, in the reasonable judgment
of the board, the amendment would constitute a material change
requiring stockholder approval under applicable laws or the
applicable requirements of a stock exchange on which our stock
is listed.
Consulting Agreement
Effective July 31, 2000, Mr. Freedman
retired as the Chief Executive Officer of the Company. In
connection with his retirement, Mr. Freedman entered into a
Consulting, Non-Compete and Payments Agreement with us and
Fortis Insurance N.V. pursuant to which he agreed to
(1) perform consulting services for the Company for a
period of three years from and after July 31, 2000, and
(2) refrain from certain activities that would be in
competition with the Company, which includes refraining from
encouraging, soliciting or inducing any officer or employee of
the Company or its subsidiaries to enter into an employment
relationship with any entity whose business activities are in
competition with those of the Company for a
129
period of five years ending July 31, 2005.
Pursuant to the terms of this agreement, Mr. Freedman has
received total payments of $2,491,000 and is entitled to one
additional payment of $607,000 on August 1, 2004, and
reimbursement of any reasonable out-of-pocket expenses incurred
in providing his consulting services.
Reimbursement of Fortis Liaison
Office
During 2003, 2002, 2001 and 2000, we paid
$427,000, $749,000, $516,000 and $0, respectively, to Fortis for
costs representing salary, benefits and other expenses of
Mr. Fakkert, who was then an employee of one of
Fortis' subsidiaries, and his support staff. We
discontinued these payments as of October 3, 2003. See
"Certain Relationships and Related Transactions —
Reimbursement of Fortis Liaison Office."
Executive Officers
The table below sets forth certain information
concerning our executive officers:
Name
Age
Positions
J. Kerry Clayton
57
President, Chief Executive Officer and Director
Robert B. Pollock
49
Executive Vice President and Chief Financial
    Officer
Lesley Silvester
56
Executive Vice President
Benjamin M. Cutler
59
Executive Vice President
Michael J. Peninger
48
Executive Vice President; President and Chief
    Executive Officer of Assurant Employee Benefits
Alan W. Feagin
57
Executive Vice President; President and Chief
    Executive Officer of Assurant PreNeed
Donald Hamm
48
Executive Vice President; President and Chief
    Executive Officer of Assurant Health
Philip Bruce Camacho
45
Executive Vice President; President and Chief
    Executive Officer of Assurant Solutions
Katherine Greenzang
39
Senior Vice President, General Counsel and
    Secretary
Jeffrey Helman
49
Senior Vice President and General Auditor
Lucinda Landreth
56
President and Chief Investment Officer of
    Assurant Asset Management
Larry M. Cains
56
Senior Vice President, Finance
Robert Haertel
48
Senior Vice President, Compensation and Benefits
Edwin L. Harper
61
Senior Vice President, Public Affairs/ Government
    Relations
Barbara R. Hege
60
Senior Vice President, Finance (Taxation)
Lance R. Wilson
56
Senior Vice President and Chief Information
    Officer
J. Kerry Clayton, President, Chief
Executive Officer and Director.
Biography available under "—Directors."
Robert B. Pollock, Executive Vice President
and Chief Financial Officer.
Mr. Pollock has been our Executive Vice President and Chief
Financial Officer since January 1999. He is also the Chairman of
Assurant Solutions. From 1993 to 1999, he served as President
and Chief Executive Officer of Assurant Employee Benefits.
Mr. Pollock began his career as an actuary at CUNA Mutual
Insurance Group in 1974. He then joined the Company as a staff
actuary at Assurant Employee Benefits in 1981. In July 1992,
Mr. Pollock was appointed Senior Vice President, Group Life
and Disability at Assurant Employee Benefits. In July 1993, he
was appointed President and Chief Executive Officer of Assurant
Employee Benefits. He is a Fellow of the Society of Actuaries
and a member of the American Academy of Actuaries.
Mr. Pollock was the Chairman of the Disability Insurance
Committee for the Health Insurance Association of America (HIAA)
for three years.
130
Lesley Silvester, Executive Vice President.
Ms. Silvester has been our
Executive Vice President since January 2001.
Ms. Silvester's professional career spans more than
two and a half decades, much of which has been in the insurance
industry in human resources management, organization development
and strategy. Ms. Silvester's experience includes
15 years with different parts of the Company in the United
States and with Fortis in Europe, focusing recently on
world-wide senior management development, company learning,
human resources strategy and post-merger integration.
Ms. Silvester is a Graduate Member of the Institute of
Personnel Management in the United Kingdom and holds both her
F.L.M.I. and American Compensation Association Certification.
Benjamin M. Cutler, Executive Vice President.
Mr. Cutler has been Executive
Vice President of the Company and Chairman, Assurant Health
since January 2003. Mr. Cutler has over 30 years of
experience in the insurance industry. Prior to his current
position, Mr. Cutler served as President and Chief
Executive Officer of Assurant Health from 1998 to 2002. Before
joining the Company in 1985, Mr. Cutler held various
positions at Sun Life Group of America and USLIFE Corporation.
Mr. Cutler currently serves as Chairman of the board of
directors of HIAA. Mr. Cutler serves on the board of the
Wellness Councils of America.
Michael J. Peninger, Executive Vice President;
President and Chief Executive Officer, Assurant Employee
Benefits.
Mr. Peninger has been
President and Chief Executive Officer of Assurant Employee
Benefits since January 1999. Mr. Peninger began his career
at Northwestern National Life in 1977 as an actuary. He then
joined Assurant Employee Benefits in 1985 as a corporate actuary
and has held various positions within the Company. In 1991,
Mr. Peninger was appointed Senior Vice President and Chief
Financial Officer and in 1993 he became Senior Vice President of
Finance and Claims of Assurant Employee Benefits. In 1998,
Mr. Peninger was appointed Executive Vice President.
Mr. Peninger is a Fellow of the Society of Actuaries and a
member of the American Academy of Actuaries.
Alan W. Feagin, Executive Vice President;
President and Chief Executive Officer, Assurant PreNeed.
Mr. Feagin is President and Chief
Executive Officer of Assurant PreNeed and Vice-Chairman and
Chief Executive Officer of AMLIC, positions he has held since
January 1995. Mr. Feagin joined United Family Life
Insurance Company (now part of Assurant PreNeed) in 1989 as
Senior Vice President, Marketing. He also served as Senior Vice
President of Sales of United Family Life before being named
President and Chief Executive Officer in 1995. Mr. Feagin
has more than 20 years of experience in the marketing,
advertising and sales arenas, beginning his career in the soft
drink industry. He has served in various senior marketing
positions with the McCann-Erickson advertising agency,
RJ Reynolds Industries and Canada Dry/ Sunkist Corporation
prior to joining the Company.
Donald Hamm, Executive Vice President;
President and Chief Executive Officer, Assurant Health.
Mr. Hamm has been President and
Chief Executive Officer of Assurant Health since January 2003.
Mr. Hamm first joined Assurant Health in 1982, holding
several executive positions until 1993. He then worked as a
principal with William M. Mercer, a consultant with
Tillinghast-Towers Perrin and as Vice President of the Southeast
Region for Blue Cross/ Blue Shield of Wisconsin prior to
rejoining Assurant Health in 1999 as Chief Financial Officer.
Mr. Hamm is a Fellow in the Society of Actuaries, a member
of the American Academy of Actuaries and a Fellow of the Life
Management Institute.
Philip Bruce Camacho, Executive Vice
President; President and Chief Executive Officer, Assurant
Solutions.
Mr. Camacho has been
President and Chief Executive Officer of Assurant Solutions
since January 2003. Prior to his appointment as President,
Mr. Camacho served as Assurant Group's Executive Vice
President for Sales and Marketing. Mr. Camacho joined
American Bankers in 1990 as Vice President of Information
Systems. At the time of the Company's acquisition of
American Bankers, he was Executive Vice President, Investor
Relations, with responsibility for legal and regulatory affairs,
marketing services, licensing, state filings and client
administration, as well as investor relations. A certified
public accountant, before joining American Bankers,
Mr. Camacho worked as an accountant with
PricewaterhouseCoopers LLP, specializing in insurance in the
United States, United Kingdom and the Caribbean.
Katherine Greenzang, Senior Vice President,
General Counsel and Secretary.
Ms. Greenzang has been our Senior Vice President, General
Counsel and Secretary and has managed the Company's Legal
Department since June 2001. Ms. Greenzang joined the
Company in August 1994 as Corporate Counsel. She was named
131
Assistant Vice President and Corporate Counsel in
1995 and Vice President, Corporate Counsel in 1996 before
assuming her current position. Prior to joining the Company,
Ms. Greenzang worked as an associate at Dewey Ballantine
LLP. She is a member of the American Bar Association, the New
York State Bar Association and the American Corporate Counsel
Association.
Jeffrey Helman, Senior Vice President and
General Auditor.
Mr. Helman has
been Senior Vice President and General Auditor since January
1997. As head of Audit Services, he is responsible for
fulfilling the internal auditing requirements of the Company and
its individual business segments. Mr. Helman has over two
decades of experience and expertise in finance and auditing.
Prior to joining the Company in 1993 as Vice President, he was a
Partner at Arthur Andersen & Company, where he had
worked since graduating from college in 1975. Mr. Helman is
a Certified Public Accountant and is a member of the Institute
of Internal Auditors and the American Institute of Certified
Public Accountants.
Lucinda Landreth, President and Chief
Investment Officer, Assurant Asset Management.
Ms. Landreth has been President
and Chief Investment Officer of Assurant Asset Management, a
division of the Company since June 2002. Ms. Landreth is
responsible for managing the Company's investment portfolio
and for overseeing the development and implementation of the
Company's investment policy. Ms. Landreth first worked
at the Company from 1997 until 2001 as Executive Vice President
and Chief Investment Officer of Fortis Mutual Funds, and was
responsible for investment performance and process, equity
strategy and compliance, as well as developing investment
professionals. When the sale of Fortis Financial Group was
finalized, Ms. Landreth left the Company. She returned in
July of 2002 as Senior Vice President before assuming her
current title. Prior to joining the Company, Ms. Landreth
was Chief Investment Officer of Alex. Brown Advisory and Trust
Co., a subsidiary of a major investment bank and securities
brokerage in Baltimore. Ms. Landreth started her career as
an equity analyst with Philadelphia's Provident National
Bank in 1970. After holding a succession of positions with what
later became PNC Financial Services Group, she was named
Managing Director of PNC's Equity Investment area in 1992.
Ms. Landreth is a Chartered Financial Analyst.
Larry M. Cains, Senior Vice President,
Finance.
Mr. Cains has been our
Senior Vice President, Finance, since January 1995 and is
responsible for managing the departments of the Controller,
Shared Services (Syracuse), corporate insurance and Information
Technology (New York). Prior to assuming his present position,
Mr. Cains served as the Company's Vice President and
Controller for seven years. Mr. Cains has three decades of
experience in accounting, finance and general management. Prior
to joining the Company in 1988, he was Marsh &
McLennan's Vice President and Controller for ten years.
Earlier in his career, he was employed by Arthur
Andersen & Company and Hertz Corporation in accounting
and auditing. Mr. Cains is a Certified Public Accountant
and is a member of the American Institute of Certified Public
Accountants, the New York Society of Certified Public
Accountants and Financial Executives International.
Robert Haertel, Senior Vice President,
Compensation and Benefits.
Mr. Haertel has been Senior Vice
President of the Company since January 2001. Prior to his
current position he was Vice President, Compensation, a position
he held since June 1998. Mr. Haertel began his career in
Human Resources as an employee relations generalist for Shell
Oil Company in 1979. He then went on to hold various management
positions specializing in compensation and human resources at
Citicorp, Engelhard Corporation, Bankers Trust and CS First
Boston. Prior to joining the Company in June 1998,
Mr. Haertel was the director of compensation and benefits
at Nielsen Media Research. Mr. Haertel holds a Certified
Compensation Professional designation from World at Work
(formerly the American Compensation Association) and is a member
of the Society of Human Resources Management.
Edwin L. Harper, Senior Vice President, Public
Affairs/ Government Relations.
Mr. Harper has been our Senior Vice President, Public
Affairs/ Government Relations since July 2001. Prior to his
current position, Mr. Harper held a number of senior
management positions including Chief Operating Officer and Chief
Financial Officer of American Security Group (now Assurant
Solutions) from 1998 to 2001. Prior to joining American Security
Group, Mr. Harper held various executive positions,
including President and Chief Executive Officer of the
Association of American Railroads, Executive Vice President and
Chief Financial Officer of the Campbell Soup Company and Senior
Vice President and Chief Administrative Officer of CertainTeed
Corporation. In 1980, Mr. Harper joined then
President-elect Reagan's Transition Team. He
132
stayed on to become an Assistant to the
President, Deputy Director of the Office on Management and
Budget and, later, Chief of Policy Development. Earlier, from
1970 and 1973, he served under President Nixon as a Special
Assistant to the President with policy planning and budgeting
responsibilities. Mr. Harper has served on the boards of
several public companies, academic institutions, civic
organizations and professional associations. Currently he is a
member of the board of directors of CompuCon Inc., the Council
on Excellence in Government and The American Quality and
Productivity Center.
Barbara R. Hege, Senior Vice President,
Finance.
Ms. Hege has been Senior
Vice President, Finance since December 2000. Ms. Hege
joined the Company as Vice President, Taxation, in 1991. Prior
to joining the Company, she was Vice President, Finance and
Taxation at Mutual Benefit Life Insurance Company. Earlier in
her career she was a Senior Manager with KPMG LLP in Chicago.
She is a Certified Public Accountant and a Chartered Life
Underwriter. She is a member of the American Institute of
Certified Public Accountants, the New Jersey Society of
Certified Public Accountants, the American Woman's Society
of Certified Public Accountants, The Society of Financial
Service Professionals and a past president of the Chicago
Society of Women Certified Public Accountants.
Lance R. Wilson, Senior Vice President and
Chief Information Officer.
Mr. Wilson has been our Senior
Vice President, Shared Services, and Chief Information Officer
since April 2000. Prior to joining the Company, Mr. Wilson
was Chief Information Officer at Sunbeam Corporation from 1999
to 2001, and also worked for Honeywell Corporation from 1997 to
1999 as Vice President and Chief Information Officer. From 1989
to 1997, Mr. Wilson provided leadership for the information
systems activities of the Pillsbury Company, where he was Vice
President, Management Information Systems. From 1979 to 1989,
Mr. Wilson held various positions with Land O'Lakes,
Inc., where he was responsible for the creation and
implementation of a marketing and sales decision support system.
Mr. Wilson started his career in 1974 at the
U.S. Department of Defense, U.S. Navy, where he was
responsible for Management Systems Analysis.
Executive Management Committee and Management
Board
A group of executive officers that we refer to as
the Executive Management Committee, consisting of the Chief
Executive Officer and all Executive Vice Presidents of the
Company and the Chief Executive Officers of each of our
operating business segments, is ultimately responsible for
setting the policies, strategy and direction of the Company,
subject to the overall direction and supervision of the board of
directors. The current members of the Executive Management
Committee are J. Kerry Clayton, Robert B. Pollock, Lesley
Silvester, Benjamin M. Cutler, Michael J. Peninger, Alan W.
Feagin, Donald Hamm and Philip Bruce Camacho. All of the
Company's executive officers constitute a group that we
refer to as the Management Board. This group is responsible for
setting the operational policies of the Company, including those
dealing with shared services, issues that pertain to multiple
business segments and corporate functions.
133
Stock Ownership of Directors and Executive
Officers
The following table shows the number of Fortis
Shares, comprised of one ordinary share of Fortis N.V. together
with one ordinary share of Fortis SA/NV, beneficially owned as
of October 1, 2003 by each director and each executive
officer named in the Summary Compensation Table in the
"—Management Compensation and Incentive Plans"
section below, and by all of our directors and executive
officers as a group. Unless otherwise noted, each of the named
individuals had sole voting and investment power with respect to
the shares shown. Shares underlying stock options that are
exercisable within 60 days are deemed to be outstanding for
the purpose of computing the outstanding shares owned by the
particular person and by the group, but are not deemed
outstanding for any other purpose. The beneficial ownership of
each director, each executive officer and of the group is less
than 1% of the outstanding Fortis Shares. See "Principal
and Selling Stockholders" for a description of the
beneficial ownership of our common stock.
Amount and Nature of
Beneficial Ownership of
Name
Fortis Shares(1)(2)
J. Kerry Clayton
—
*
Robert B. Pollock
—
*
Benjamin M. Cutler
—
*
Lesley Silvester
—
*
Philip Bruce Camacho
—
*
John Michael Palms
—
*
Anton van Rossum
25,450
(1)*
Michel Baise
17,142
(2)*
Robert J. Blendon
—
*
Beth L. Bronner
—
*
Howard L. Carver
—
*
Arie A. Fakkert
3,715
(3)*
Allen R. Freedman
—
*
H. Carroll Mackin
—
*
Gilbert Mittler
38,850
(4)*
Georges Valckenaere
42,450
(5)*
All directors and executive officers as a group
    (27 persons)
—
*
*
Less than 1%
(1)
Includes 25,450 shares that are subject to stock
    options exercisable within 60 days.
(2)
Includes 16,050 shares that are subject to stock
    options exercisable within 60 days.
(3)
Includes 3,500 shares that are subject to stock
    options exercisable within 60 days.
(4)
Includes 38,850 shares that are subject to stock
    options exercisable within 60 days.
(5)
Includes 42,450 shares that are subject to stock
    options exercisable within 60 days.
134
Management Compensation and Incentive
Plans
The following table sets forth certain summary
information concerning compensation paid or accrued by the
Company for services rendered in all capacities during the
fiscal years ended December 31, 2000, December 31,
2001 and December 31, 2002 for our Chief Executive Officer
and each of the next four most highly compensated executive
officers during the fiscal year ended December 31, 2002.
These individuals are referred to as the "named executive
officers."
Summary Compensation Table
Long-Term
Compensation
Annual Compensation
Awards
Payouts
Other
Securities
Name and
Annual
Underlying
All Other
Principal Position
Year
Salary
Bonus
Compensation(1)
Options(2)
LTIP(3)
Compensation(4)
($)
($)
($)
(#)
($)
($)
J. Kerry Clayton
2002
780,000
1,560,000
—
30,000
—
54,600
President and Chief
2001
750,000
—
30,000
450,389
125,067
Executive Officer
2000
633,333
1,036,667
20,000
133,881
16,500
Robert B. Pollock
2002
624,000
1,067,368
—
15,000
—
43,680
Executive Vice
2001
609,615
6,568
14,000
125,543
87,500
President and Chief
2000
508,510
806,568
10,000
94,945
16,500
Financial Officer
Benjamin M. Cutler
2002
442,000
530,400
—
4,000
—
66,640
Executive Vice
2001
425,000
510,000
3,500
83,937
44,996
President
2000
355,000
453,792
3,600
63,497
16,500
Lesley Silvester
2002
416,000
540,800
—
10,000
—
29,120
Executive Vice
2001
400,000
—
3,200
28,609
42,700
President
2000
300,000
295,000
2,000
—
16,500
Philip Bruce Camacho
2002
478,400
278,907
—
4,000
220,000
33,488
Executive Vice
2001
464,615
—
3,700
—
48,554
President; President
2000
407,025
229,019
—
—
—
and Chief Executive Officer, Assurant Solutions
(1)
Perquisites and other personal benefits to the
    named executive officers were less than both $50,000 and 10% of
    the total annual salary and bonus reported for the named
    executive officers, and therefore, information regarding
    perquisites and other personal benefits has not been included.
(2)
The option grants shown in this table represent
    options granted pursuant to the Fortis, Inc. Stock Option Plan
    to acquire shares of our Series D Preferred Stock, the
    value of which is related to the market value of shares of
    Fortis N.V. and Fortis SA/NV, and the Euro to U.S. dollar
    conversion rate. On October 15, 2003, our board of
    directors authorized the discontinuance of this plan and all
    stock options outstanding thereunder were cancelled in exchange
    for a payment of the fair value of such options, as determined
    by an independent third party.
(3)
Amounts shown in this column represent amounts
    that were paid or payable in the given year under the Assurant
    Appreciation Incentive Rights Plan, or the now terminated
    Fortis, Inc. Long-Term Incentive Plan, including amounts payable
    under these plans that were invested in options to acquire
    third-party mutual funds under the Assurant Investment Plan, as
    described under "—Assurant Investment Plan."
(4)
Amounts shown in this column for fiscal year
    ended December 31, 2002 include the following amounts:
    (i) for Mr. Clayton, $14,000 for Company contributions
    under the Assurant 401(k) Plan and $40,600 for Company
    contributions under the 401(k) portion of the Assurant Executive
    Pension and 401(k) Plan; (ii) for Mr. Pollock, $14,000
    for Company contributions under the Assurant 401(k) Plan and
    $29,680 for Company contributions under the 401(k) portion of
    the Assurant Executive Pension and 401(k) Plan;
135
(iii) for Mr. Cutler, $14,000 for
    Company contributions under the Assurant 401(k) Plan and $52,640
    for Company contributions under the 401(k) portion of the
    Assurant Executive Pension and 401(k) Plan; (iv) for
    Ms. Silvester, $14,000 for Company contributions under the
    Assurant 401(k) Plan and $15,120 for Company contributions under
    the 401(k) portion of the Assurant Executive Pension and 401(k)
    Plan; and (v) for Mr. Camacho, $14,000 for Company
    contributions under the Assurant 401(k) Plan and $19,488 for
    Company contributions under the 401(k) portion of the Assurant
    Executive Pension and 401(k) Plan.
Option Grants in 2002
The following tables present information
concerning stock options granted pursuant to our Stock Option
Plan to acquire shares of our Series D Preferred Stock to
the named executive officers during the fiscal year ended
December 31, 2002. The Stock Option Plan was terminated
effective as of September 22, 2003, and all stock options
outstanding thereunder were cancelled in exchange for a payment
of the fair value of such options, as determined by an
independent third party. Such payment totaled approximately
$2.1 million.
Number of
Securities
Percent of
Underlying
Total Options
Grant Date
Options
Granted to
Exercise or
Present
Granted(1)
Employees in
Base Price
Expiration
Value(2)
Name
(#)
Fiscal Year
($/Sh)
Date
($)
J. Kerry Clayton
30,000
34.2
%
39.91
3/22/12
154,200
Robert B. Pollock
15,000
17.1
%
39.91
3/22/12
77,100
Benjamin M. Cutler
4,000
4.6
%
39.91
3/22/12
20,560
Lesley Silvester
10,000
11.4
%
39.91
3/22/12
51,400
Philip Bruce Camacho
4,000
4.6
%
39.91
3/22/12
20,560
(1)
The options were granted pursuant to the Fortis,
    Inc. Stock Option Plan to acquire shares of our Series D
    Preferred Stock, the value of which is related to the market
    value of shares of Fortis N.V. and Fortis SA/NV and the Euro to
    U.S. dollar conversion rate. The options had a term of ten years
    and were scheduled to vest as to one-third of the shares on the
    first three anniversaries of the date of grant.
(2)
There was no public market for shares of our
    Series D Preferred Stock as of December 31, 2002. The
    estimated present values for the options listed above are based
    on the binomial values of the options calculated as of
    September 22, 2003 by an independent third party, using the
    following assumptions: (i) the value of one share of
    Series D Preferred Stock is the sum of the value of 0.9 of
    one share of Fortis SA/NV and 0.9 of one share of common stock
    of Fortis N.V., (ii) the exercise price of the option was
    equal to the fair market value as of the date of grant,
    (iii) the stock price equals the average of the combined
    Fortis N.V./Fortis SA/NV share price for the three months prior
    to the calculation; (iv) volatility was calculated as the
    average of the 60-month historical volatility of the Fortis
    SA/NV and Fortis N.V. shares at the date of calculation;
    (v) the annual dividend was calculated as the average of
    the Fortis SA/NV and Fortis N.V. stock dividend, and
    (vi) the discount rate was based on the Euro benchmark
    yield curve for the outstanding term of each option. Although
    this calculation is not necessarily the value of the options as
    of their date of grant, it is the value for which they were
    cashed out, as discussed above.
2002 Year-End Option Values
The following table sets forth the total number
of shares of our Series D Preferred Stock underlying
options granted pursuant to the Company's Stock Option Plan
and held by our named executive officers as of December 31,
2002. None of these options were in-the-money as of
December 31, 2002, and none of our named executive officers
exercised any options during the fiscal year ended
December 31, 2002. The Stock
136
Option Plan was terminated effective as of
September 22, 2003, and all stock options outstanding
thereunder were cancelled in exchange for a payment of the fair
value of such options, as determined by an independent
third-party.
Preferred
Total Shares of Preferred
Value of Unexercised
Stock
Stock Underlying
In-The-Money
Acquired
Unexercised Options at
Options Held at
on
Value
December 31, 2002(#)
December 31, 2002($)
Exercise
Realized
Name
(#)
($)
Exercisable
Unexercisable
Exercisable
Unexercisable
J. Kerry Clayton
—
—
71,700
30,000
—
—
Robert B. Pollock
—
—
37,733
14,667
—
—
Benjamin M. Cutler
—
—
15,565
3,834
—
—
Lesley Silvester
—
—
9,166
7,734
—
—
Philip Bruce Camacho
—
—
3,800
3,900
—
—
Long-Term Incentive Plan Awards
The following table presents information
concerning long-term incentive plan awards to the named
executive officers under the Assurant Appreciation Incentive
Rights Plan during the fiscal year ended December 31, 2002:
Estimated Future
Payouts Under
Performance Or
Non-Stock Price-
Number Of Shares,
Other Period Until
Based Plans
Units or Other
Maturation Or
Name
Rights(#)
Payout
Target(1)($)
J. Kerry Clayton
22,154(2
)
3 Years
780,000
Robert B. Pollock
15,951(2
)
3 Years
561,600
Benjamin M. Cutler
7,306(2
)
3 Years
287,300
Lesley Silvester
8,861(2
)
3 Years
312,000
Philip Bruce Camacho
7,508(3
)
3 Years
311,000
(1)
As described more fully under
    "—Assurant Appreciation Incentive Rights Plan,"
    an eligible employee of Assurant, Inc. receives 75% of his or
    her award in Assurant, Inc. incentive rights and 25% of his or
    her award in operating business segment incentive rights.
    Conversely, an eligible employee of an operating business
    segment of Assurant receives 25% of his or her award in
    Assurant, Inc. incentive rights and 75% of his or her award in
    operating business segment incentive rights. Each incentive
    right represents the right to the appreciation in value of an
    incentive right over the vesting period of the award, based on a
    valuation provided by an independent, qualified appraiser.
(2)
Represents the total number of incentive rights
    awarded. Rights are distributed between Assurant, Inc. (75%) and
    each of the four operating business segments (25%). The
    Assurant, Inc. incentive rights will be replaced with stock
    appreciation rights on Assurant common stock from and after the
    closing of the offering contemplated by this prospectus, as more
    fully described under "—Assurant Appreciation
    Incentive Rights Plan."
(3)
Represents the total number of incentive rights
    awarded. Rights are distributed between Assurant, Inc. (25%) and
    Assurant Solutions (75%). The Assurant, Inc. incentive rights
    will be replaced with stock appreciation rights on Assurant
    common stock from and after the closing of the offering
    contemplated by this prospectus, as more fully described under
    "—Assurant Appreciation Incentive Rights Plan."
Pension Plans
We maintain two executive defined benefit pension
plans, each of which is inter-related with our broad-based,
tax-qualified, defined benefit pension plan.
137
Supplemental Executive Retirement Plan.
Effective January 1, 1990, our
board of directors adopted the Supplemental Executive Retirement
Plan (SERP), which is a non-qualified, unfunded supplemental
pension plan for certain key executives of the Company and its
subsidiaries. Under the SERP, participants who meet certain
conditions are entitled to receive a benefit, called a
"target benefit," that is then offset
(reduced) by certain other benefits, such as the pension
payable under our tax-qualified defined benefit pension plan
(the Assurant Pension Plan, described below), the benefit
payable under the pension portion of the Executive Pension and
401(k) Plan, described below, certain other nonqualified benefit
plans and Social Security benefits. If the SERP benefit
commences at age 60 or later, the target benefit, expressed as a
single life annuity, is 50% of the employee's base pay plus
target short-term incentive bonus, each as most recently
approved by our board of directors, multiplied by a fraction,
the numerator of which is the employee's number of months
of employment with the Company or its subsidiaries, and the
denominator of which is 240. If the SERP benefit commences prior
to age 60, then the target benefit will be reduced on an
actuarially equivalent basis from age 60 to the date the benefit
actually commences.
A participant is not vested in any of his or her
benefit under the SERP until the second anniversary of the date
he or she commences participation in the plan. On the second
anniversary of participation, the participant vests in the SERP
benefit at the rate of 3% for each month of employment
thereafter with the Company or its subsidiaries. A participant
will become 100% vested in his or her SERP benefit in the event
of death or disability. If a participant is terminated for
cause, as defined in the SERP, or commits a material breach of
certain covenants regarding non-competition, confidentiality,
non-solicitation of employees or non-solicitation of customers,
then the participant will forfeit any remaining SERP benefits.
The default form of payment under the SERP is a
single lump payment that is the actuarial equivalent of the SERP
benefit. The participant may also elect optional forms of
payment under the SERP.
If there is a change in control with respect to
the Company or a division, and within two years after the change
in control a participant's employment is terminated without
cause or the participant terminates employment for good reason,
then (1) the participant will become 100% vested in his or
her SERP benefit; (2) the participant will be credited with
36 additional months of service for purposes of computing his or
her target benefit; and (3) the actuarial reduction for
commencement of the SERP benefit prior to age 60 will be
calculated as though the participant was 36 months older
than his or her actual age.
The SERP provides that if the payments to a
participant or beneficiary will be made over a period of more
than one year and if at the time payments commence the Company
is not subject to pending proceedings as a debtor under the
U.S. Bankruptcy Code, then Fortis Insurance N.V. will
guarantee the payment of SERP benefits to such participant or
beneficiary. The SERP further provides that if Fortis Insurance
N.V. ceases to be the beneficial owner of the Company, then such
guarantee will be limited to the actuarially equivalent value of
the participant's SERP benefit immediately following such
cessation of beneficial ownership.
138
The table below shows the target benefit payable
under the SERP. The benefit shown is a single life annuity
commencing at age 60.
Target Benefits Payable Under the Assurant,
Inc. SERP
Years of Service(1)
Final Compensation
10
15
20
25
30
$ 500,000
$
125,000
$
187,500
$
250,000
$
250,000
$
250,000
750,000
187,500
281,250
375,000
375,000
375,000
1,000,000
250,000
375,000
500,000
500,000
500,000
1,250,000
312,500
468,750
625,000
625,000
625,000
1,500,000
375,000
562,500
750,000
750,000
750,000
1,750,000
437,500
656,250
875,000
875,000
875,000
2,000,000
500,000
750,000
1,000,000
1,000,000
1,000,000
(1)
At December 31, 2002, J. Kerry Clayton had
    32.2 years of service and SERP compensation of $1,560,000;
    Robert B. Pollock had 21.6 years of service and SERP
    compensation of $1,154,400; Lesley Silvester had 18.3 years
    of service and SERP compensation of $686,400; and Benjamin M.
    Cutler had 17.1 years of service and SERP compensation of
    $707,200. Philip Bruce Camacho became a SERP participant on
    January 1, 2003.
Executive Pension and 401(k) Plan.
Effective January 1, 1994, our
board of directors adopted the Executive Pension and 401(k)
Plan, which is a non-qualified, unfunded deferred compensation
plan for certain key executives of the Company and its
subsidiaries. The pension portion of this plan (referred to
herein as the Executive Pension Plan) is intended to restore to
participants amounts that they are restricted from receiving
under the Assurant Pension Plan, described below, due to section
401(a)(17) of the U.S. tax code, which generally limits the
compensation that may be taken into account under a
tax-qualified pension plan to no more than $200,000 annually
(subject to cost of living adjustments).
A participant becomes vested in the benefits
under the Executive Pension Plan after three years of vesting
service, if the participant has elected to participate in the
pension equity portion of the Assurant Pension Plan and after
five years of vesting service if the participant has elected to
participate in the pension formula that predated the pension
equity formula under the Assurant Pension Plan. The benefits
under the Executive Pension Plan are payable in a single lump
sum in cash as soon as practicable after the participant
terminates employment, unless exchanged for options under the
Assurant Investment Plan.
Assurant Pension Plan.
Since 1984, the Company has maintained
the Assurant Pension Plan, which is a tax-qualified, defined
benefit pension plan subject to regulation under ERISA. Eligible
employees generally may participate in the Plan after completing
one year of service with the Company. The Assurant Pension Plan
provides for three different benefit formulas for different
groups of participants. Benefits under the plan are payable at
termination of employment. A participant's benefit may be
paid in a lump sum or in various annuity forms.
For the fiscal year ended December 31, 2002,
we had $9,311,532 in expense under the SERP, $1,461,243 of
expense under the Executive Pension Plan and $14,310,651 of
expense under the Assurant Pension Plan.
401(k) Plan
Assurant 401(k) Plan.
Since 1983, we have maintained the
Assurant 401(k) Plan, which is a tax-qualified, defined
contribution plan subject to regulation under ERISA. Employees
generally are eligible to make pre-tax contributions to the plan
immediately upon beginning work with Assurant. Participants may
elect to contribute up to 50% of their earnings to the plan on a
pre-tax or after-tax basis. Earnings include base salary,
short-term incentive bonus, overtime and commissions.
139
After one year of service, a participant is
eligible to begin receiving employer matching contributions.
Each year, we may determine whether to declare an employer
matching contribution. The Assurant 401(k) plan provides for
three different matching allocation formulas for different
groups of participants. A participant generally vests in his
employer matching contributions and investment earnings thereon
after three years of vesting service.
Before a participant terminates employment, a
participant's vested pre-tax account generally is payable
after age 59 1/2, in the event of a hardship, or as a loan.
A participant's vested account is also payable at
termination of employment in the form of a lump sum.
Participants may invest their own contributions and Company
matching contributions in various investment options offered
under the plan, including common stock of the Company. The
investment fund within the plan that consists of common stock of
the Company will be designed as an employee stock ownership plan
under ERISA and the U.S. tax code.
Under the Executive Pension and 401(k) Plan
discussed above, the 401(k) portion of this plan (referred to
herein as the Executive 401(k) Plan) is intended to restore to
participants amounts that they are restricted from receiving
under the Assurant 401(k) Plan due to section 401(a)(17) of the
U.S. tax code, which generally limits the compensation that
may be taken into account under a tax-qualified pension plan to
no more than $200,000 annually (subject to cost of living
adjustments).
Under the Executive 401(k) Plan, a participant
who is actively employed on the last regularly scheduled work
day of a fiscal year is entitled to receive a credit equal to 7%
of compensation as determined under the Assurant 401(k) Plan,
but determined as though the compensation limitation of section
401(a)(17) of the U.S. tax code did not exist and as though any
compensation exchanged for options under the Assurant Investment
Plan was received as compensation in the year the options are
granted. Such credit is then offset by the amount of the
employer matching contribution received in the Assurant 401(k)
Plan. The amounts credited to a participant's account under
the 401(k) portion of this plan are deemed to be invested at the
participant's direction in investment vehicles that are
also available under the Assurant 401(k) Plan (including common
stock of the Company).
A participant becomes vested in the 401(k)
credits and deemed investment earnings thereon in the Executive
401(k) Plan after three years of vesting service. The benefits
under the Executive 401(k) Plan are payable in a single lump sum
in cash as soon as practicable after the participant terminates
employment, unless exchanged for options under the Assurant
Investment Plan.
For the fiscal year ended December 31, 2002,
we made combined employer allocations of $24 million under
the Executive 401(k) Plan and employer matching contributions
under the Assurant 401(k) Plan.
Employment and Change in Control
Agreements
We have entered into change in control severance
agreements with Mr. Clayton, our other named executive officers
and other officers and key employees. The severance agreements
generally provide that if a change in control (as defined)
occurs with respect to the business segment for which an
employee works, then a two-year trigger period begins. If the
employee's employment is terminated by us without cause or
if the employee resigns for good reason (each as defined) during
such two-year period, the employee is entitled to certain cash
severance payments and continuation of medical and other welfare
benefits for a period of 18 months following the
termination of employment at the rate charged active employees.
The amount of cash severance benefits payable to
an employee is equal to a multiple (ranging from 1 to 3
depending on the agreement, and equal to 3 for Mr. Clayton
and our other named executive officers) times the sum of the
employee's annual base salary and target annual bonus.
One-half of the cash severance is payable within thirty days of
the date of the employee's termination, and one-half of the
cash severance is payable in equal monthly installments over a
period ranging from six months (for those with a severance
multiple of 1) to 18 months (for those with a severance
multiple of 3), offset by the amount of pre-tax compensation
earned by the executive during such period. In addition, if a
change in control has occurred and the employee's
employment has been terminated by us without cause or if the
employee has resigned for good reason within one year prior to
the change in control, then the employee is entitled to the cash
severance benefits described
140
above, to be paid in a lump sum in cash within
30 days after the change in control has occurred, and
continuation of medical and other welfare benefits for a period
of 18 months at the rate charged active employees, except
that we shall reimburse the employee for the cost of obtaining
such welfare benefits between the date his or her termination
and the date of the change in control. These agreements may also
provide additional rights including, but not limited to,
outplacement services, legal fee reimbursement and reimbursement
for any excise tax imposed on the officer by section 4999 of the
U.S. tax code.
The offering contemplated by this prospectus does
not constitute a change in control as defined in these
agreements.
American Bankers Insurance Group has a severance
agreement with Mr. Camacho. If Mr. Camacho terminates
his employment because of retirement (as determined in
accordance with normal company policies) or death, then
Mr. Camacho will receive a severance payment equal to 150%
of his current salary, defined as his salary for the
12 months preceding the severance, excluding any bonus or
deferred compensation. If Mr. Camacho's employment is
terminated because of disability, then Mr. Camacho will
receive a severance payment equal to 50% of his current annual
salary, as defined above. If either Mr. Camacho's
employment is terminated without cause (as defined in the
agreement), or Mr. Camacho terminates employment after a
decrease in his base salary to a level less than 80% of the
level for any prior year, then Mr. Camacho will receive a
severance payment equal to 100% of his current salary, as
defined. In each case the severance benefit will be paid in a
lump sum on the fifth business day following termination of
employment.
2004 Long-Term Incentive Plan
Our board of directors has adopted and our sole
stockholder has approved the 2004 Long-Term Incentive Plan, to
be effective as of the closing of the offering contemplated by
this prospectus. This equity-based incentive plan is intended to
promote our success and enhance our value by linking the
personal interests of our employees, directors and consultants
to those of our stockholders, and by providing such persons with
an incentive for outstanding performance.
The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, directors and
consultants in the following forms:
•
options to purchase shares of our common stock,
    which may be nonstatutory stock options or incentive stock
    options under the U.S. tax code;
•
stock appreciation rights, which give the holder
    the right to receive the difference between the fair market
    value per share on the date of exercise over the grant price;
•
performance awards, which are payable in cash or
    stock upon the attainment of specified performance goals;
•
restricted stock, which is subject to
    restrictions on transferability and subject to forfeiture on
    terms set by the Compensation Committee of our board of
    directors;
•
dividend equivalents, which entitle the
    participant to payments equal to any dividends paid on the
    shares of stock underlying an award; and
•
other stock-based awards in the discretion of the
    Compensation Committee, including unrestricted stock grants.
The number of shares reserved and available for
issuance under the plan is 10,000,000 shares. In the event
that any outstanding award expires for any reason or is settled
in cash, any unissued shares subject to the award will again be
available for issuance under the plan. If a participant pays the
exercise price of an option by delivering to us previously owned
shares, only the number of shares we issue in excess of the
surrendered shares will count against the plan's share
limit. Also, if the full number of shares subject to an option
is not issued upon exercise for any reason (other than to
satisfy a tax withholding obligation), only the net number of
shares actually issued upon exercise will count against the
plan's share limit.
In the event of a corporate transaction involving
the Company (including any stock dividend, stock split, merger,
spin-off or related transaction), the share authorization limits
of the 2004 Long-Term Incentive Plan
141
will be adjusted proportionately, and the
Compensation Committee may adjust outstanding awards to preserve
their benefits or potential benefits.
The 2004 Long-Term Incentive Plan will be
administered by the Compensation Committee of our board of
directors. The committee has the authority to designate
participants, determine the type or types of awards to be
granted to each participant and the number, terms and conditions
of awards, establish, adopt or revise any rules and regulations
to administer the plan, and make all other decisions and
determinations that may be required under the plan. Our board of
directors may at any time administer this plan. If so, it will
have all the powers of the committee.
All awards must be evidenced by a written
agreement with the participant, which will include the
provisions specified by the Compensation Committee.
Under section 162(m) of the U.S. tax code, a
public company generally may not deduct compensation in excess
of $1 million paid to its chief executive officer and the
four next most highly compensated executive officers. Until the
annual meeting of our stockholders in 2007, or until the 2004
Long-Term Incentive Plan is materially amended, if earlier,
awards granted under the plan will be exempt from the deduction
limits of section 162(m). In order for awards granted after the
expiration of such grace period to be exempt, the plan must be
amended to comply with the exemption conditions and be
re-submitted for approval of our stockholders.
Unless otherwise provided in an award certificate
or plan document, upon the death or disability of a participant,
all of his or her outstanding awards under the 2004 Long-Term
Incentive Plan will become fully vested. Unless otherwise
provided in an award certificate or plan document, if a
participant's employment is terminated without cause or the
participant resigns for good reason (as such terms are defined
in the plan) within two years after a change in control of the
Company, all of such participant's outstanding awards under
the plan will become fully vested. The Compensation Committee
may in its discretion accelerate the vesting of an award at any
other time, and may discriminate among participants or among
awards in exercising its discretion.
Our board of directors or the Compensation
Committee may at any time terminate or amend the 2004 Long-Term
Incentive Plan, but any such amendment would be subject to
stockholder approval if, in the reasonable judgment of the board
or committee, the amendment would materially increase the number
of shares available under the plan, expand the types of awards
available under the plan, materially extend the term of the plan
or otherwise constitute a material change requiring stockholder
approval under applicable laws or the applicable requirements of
a stock exchange on which our stock is listed. No termination or
amendment of the plan may, without the written consent of the
participant, reduce or diminish the value of an outstanding
award determined as if the award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or
termination. The Compensation Committee may amend or terminate
outstanding awards, but such amendments may require the consent
of the participant and, unless approved by our stockholders or
otherwise permitted by the antidilution provisions of the plan,
the exercise price of an outstanding option may not be reduced,
directly or indirectly, and the original term of an option may
not be extended.
The 2004 Long-Term Incentive Plan will become
effective as of the closing of the offering contemplated by this
prospectus. We estimate that, as of its effective date,
approximately 12,000 employees, officers and directors will be
eligible to participate in the plan. No awards will be granted
under the plan prior to its effective date. Any awards will be
made at the discretion of the Compensation Committee. Therefore,
it is not presently possible to determine the benefits or
amounts that will be received by any individuals or groups
pursuant to the 2004 Long-Term Incentive Plan in the future.
2004 Employee Stock Purchase Plan
The 2004 Employee Stock Purchase Plan was adopted
by our board of directors and was approved by our sole
stockholder on October 15, 2003. It will go into effect as
of the first July 1 or January 1 following the closing
of the offering contemplated by this prospectus.
142
The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company and our participating subsidiaries through ownership of
our common stock. The stock purchase plan is designed to allow
eligible employees to purchase shares of our common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are customarily
employed by us, or one of our subsidiaries designated by our
Compensation Committee, for at least 20 hours per week and
five months per calendar year, and provided they have served as
an employee for at least six months. We have reserved
5,000,000 shares of our common stock for issuance under the
stock purchase plan.
The plan is intended to be a qualified employee
stock purchase plan within the meaning of section 423 of the
U.S. tax code. Under the stock purchase plan, our Compensation
Committee may from time to time grant to eligible employees
rights to purchase our common stock during designated purchase
periods. Provided the offering contemplated by this prospectus
closes on or before July 1, 2004, the initial purchase
period will begin on July 1, 2004 and will end on
December 31, 2004. Unless otherwise determined by the
Compensation Committee, new purchase periods of six months
duration will begin each following January 1 and
July 1.
Employees who elect to participate in a purchase
period may have up to 15% of their compensation withheld
pursuant to the stock purchase plan, subject to any limit
imposed from time to time by the committee (currently $6,000 per
six-month purchase period). The amount withheld is then used to
purchase shares of our common stock on the designated purchase
dates at the end of each purchase period. Until the Compensation
Committee determines otherwise, the price of common stock
purchased under the plan is equal to the lower of 90% of the
market value (closing price) of our common stock at the
beginning date of each purchase period or 90% of the market
value (closing price) of our common stock at the end of the
purchase period. The Compensation Committee may designate a
different discount formula, but not less than 85% of the market
value at the beginning or end of any purchase period. Since the
shares are purchased at less than market value, employees will
receive a benefit from participating in the stock purchase plan.
The maximum number of shares of our common stock that may be
purchased by any participant in the stock purchase plan on any
one purchase date is 5,000 shares.
Certain limits are imposed by law. For example,
an employee may not be granted a purchase right for a purchase
period if immediately after the grant, he or she would own 5% or
more of the total combined voting power or value of all classes
of our stock or the stock of our subsidiaries. Also, a
participant cannot receive purchase rights that, in combination
with purchase rights under other section 423 plans, would result
during any calendar year in the purchase of shares having an
aggregate fair market value of more than $25,000.
In the event of a stock dividend, stock split or
combination of shares, recapitalization or other change in our
capitalization, or other distribution with respect to our
stockholders other than normal cash dividends, an automatic
adjustment will be made in the number and kind of shares as to
which outstanding purchase rights will be exercisable and in the
available shares and limits described above, so that the
proportionate interest of the participants is maintained as
before the occurrence of such event.
The stock purchase plan will terminate on the
tenth anniversary of its effective date, unless terminated
earlier by the Compensation Committee. The Compensation
Committee has the authority to amend the stock purchase plan at
any time, but, with limited exceptions, no amendment may
adversely affect any outstanding rights to purchase stock.
Certain amendments to the stock purchase plan would require
approval of our stockholders, such as a change in eligibility
requirements or an increase in the number of shares reserved for
purchase under the plan.
Executive Management Incentive Plan
Our Executive Management Incentive Plan was
adopted by the board of directors and approved by our sole
stockholder on October 15, 2003, to be effective as of
January 1, 2004. Participation in the Executive Management
Incentive Plan is limited to senior officers of the Company and
its subsidiaries who are selected to participate in the plan for
a given year by the Compensation Committee of our board of
directors. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant's base salary based upon the achievement of
certain designated performance goals.
143
Each participant in the plan will be eligible to
receive a cash bonus in connection with a particular calendar
year during the term of the plan if performance goals set for
that year by the Compensation Committee are met or exceeded. Not
later than ninety days after the commencement of any year during
the term of the plan, the Compensation Committee will set in
writing performance goals based on one or more performance
criteria, which may be expressed in terms of Company-wide
objectives or in terms of objectives that relate to the
performance of an affiliate or a division, department, region or
function within the Company or an affiliate.
At the time the Compensation Committee sets the
performance goals for a particular year, it will also set in
writing the percentages of each participant's salary that
will be awarded to the participant if the Company (or one or
more of our subsidiaries or divisions, as applicable) achieves
the designated performance goals. Payments under the plan will
be made promptly after the Compensation Committee certifies in
writing that the relevant performance goals and other terms of
the plan were satisfied in connection with such payments. Our
board of directors or the Compensation Committee may terminate,
suspend or amend the plan at any time.
Only our senior officers and senior officers of
our subsidiaries are eligible to participate in the Executive
Management Incentive Plan. The amount of awards under the plan
will be determined at the discretion of the Compensation
Committee. Therefore, it is not presently possible to determine
the benefits or amounts that will be received by any individuals
or groups pursuant to this plan.
Assurant Appreciation Incentive Rights
    Plan
Since January 1, 1999, the Company has
maintained the Fortis Appreciation Incentive Rights Plan (to be
renamed the Assurant Appreciation Incentive Rights Plan), which
provides key employees with the right to receive long-term
incentive cash compensation based on the appreciation in value
of incentive units of Assurant and incentive units of each of
its operating business segments. This plan is administered by a
committee appointed by our board of directors.
Under this plan as currently in effect, an
eligible employee of Assurant receives 75% of his or her award
in Assurant incentive rights and 25% of his or her award in
operating business segment incentive rights. Conversely, an
eligible employee of an operating business segment of Assurant
receives 25% of his or her award in Assurant incentive rights
and 75% of his or her award in operating business segment
incentive rights. Each incentive right represents the right to
the appreciation in value of an incentive unit. Each Assurant
incentive unit originally represented one ten millionth
(.0000001) of the entity value of Assurant, and each operating
business segment incentive unit represented one ten millionth of
the entity value of each operating business segment that
participates in the plan. However, the number of incentive units
has been adjusted over time for cash flows into and out of each
entity. The entity value of Assurant and the entity value of the
respective operating business segments are determined by the
committee as of each December 31st based on a valuation
provided by an independent, qualified appraiser. The committee
also determines the adjustment to the number of incentive units
outstanding in each entity and the value of each unit as of the
valuation date. Each incentive right entitles the holder to a
cash payment equal to the difference between the value of the
incentive unit on the December 31st immediately preceding
the date of exercise and the value of the incentive unit on the
December 31st immediately preceding the date of grant.
Each right becomes vested on December 31st
of the second year following the year of grant, except that
(1) each Assurant right becomes fully vested if Assurant
undergoes a change in control (as defined in the plan);
(2) each business unit segment becomes fully vested if that
operating business segment undergoes a change in control; and
(3) if a participant retires, becomes disabled, or dies,
then the participant vests in 1/36th of each right for each
month elapsed from January 1st of the year of grant to the date
the participant terminates employment. Rights that have become
vested may be exercised during a 45-day exercise period
following the announcement by the plan committee of the value of
Assurant incentive units and of the incentive units of each
operating business segment. To the extent not previously
exercised, all rights will automatically be exercised on the
tenth anniversary of the date of grant. Rights that are
exercised are payable solely in cash. A participant may elect to
have any amounts payable under the Assurant Appreciation
Incentive Rights Plan exchanged for options in the Assurant
Investment Plan, described below.
144
Our board of directors amended the Fortis
Appreciation Incentive Rights Plan to provide for the cash-out
and replacement of Fortis, Inc. incentive rights with stock
appreciation rights related to Assurant common stock from and
after the closing of the offering contemplated by this
prospectus. The business segment rights outstanding under the
plan will not be changed or affected. The conversion of
outstanding Fortis, Inc. incentive rights will take place as
described in this paragraph. The Fortis, Inc. incentive rights
will be valued as of December 31, 2003 using a special
valuation method, as follows. The measurement value of each
Fortis, Inc. incentive right as of December 31, 2002 will
be adjusted to reflect dividends paid by the Company, consistent
with past practice; such adjusted value shall then be multiplied
by the arithmetic average of the change during calendar year
2003 in the Dow Jones Life Insurance Index, the Dow Jones
Property Casualty Index, and the Dow Jones Healthcare
Providers Index; and the result will be the measurement value of
a Fortis, Inc. incentive right as of December 31, 2003. As
soon as practical after this special valuation is completed, and
before the closing of the offering contemplated by this
prospectus, the Company will cash out each Fortis, Inc.
incentive right then outstanding under the plan for a cash
payment equal to the difference, if any, between the measurement
value of the Fortis, Inc. incentive right as of the
December 31st immediately preceding the date of grant, and
the measurement value of that right determined as of
December 31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, the Company will grant to each participant
whose rights were cashed out a number of stock appreciation
rights on our common stock (referred to as "replacement
rights"). The number of replacement rights to be granted to
a participant will equal (1) the measurement value of the
participant's cashed-out Fortis, Inc. incentive rights,
divided by (2) the public offering price set forth on the
cover of this prospectus. Each replacement right that replaces a
vested cashed-out right will be vested immediately, and each
replacement right that replaces a non-vested cashed-out right
will become vested on the vesting date for the corresponding
cashed-out right, but no replacement right, whether or not
vested, may be exercised sooner than one year from the closing
date of the offering contemplated by this prospectus. After that
waiting period, each replacement right will be exercisable for
the remaining term of the corresponding cancelled right.
All future grants of Assurant rights under the
amended and restated plan, now called the Assurant Appreciation
Incentive Rights Plan, will consist of Assurant stock
appreciation rights that will give the holder the right to
receive, upon exercise of the right, a cash payment equal to the
difference between the market price of Assurant common stock on
the date of exercise over the market price of Assurant common
stock on the date of grant. Except as provided above with
respect to the replacement Assurant stock appreciation rights,
all such rights will vest over a three-year period from the date
of grant, will have a ten-year term and will be exercisable at
any time after they are vested and before the expiration of the
term.
Assurant Investment Plan
Our board of directors adopted the Assurant
Investment Plan, which provides key employees the ability to
exchange a portion of their compensation for options to purchase
certain third-party mutual funds. The plan became effective as
of January 1, 1999 and is administered by our Senior Vice
President—Compensation and Benefits, who is referred to as
the administrator. Under the Assurant Investment Plan, a
participant may exchange all or a portion of his or her eligible
compensation for a specific number of options under the plan.
Each option represents the right to purchase shares of a
third-party mutual fund, as selected by the participant. Each
option is exercisable for a dollar amount equal to the greater
of 25% of the trading price of the applicable mutual fund units
at the date the option is granted and 50% of the trading price
of the applicable mutual fund units on the date the option is
exercised. Each option is fully vested and exercisable on the
grant date. Options may not be exercised more than twice in any
calendar year, except with the consent of the administrator. For
most options, the exercise period generally will expire on the
earlier of 120 months after the participant's death,
disability or retirement and 60 months after the
participant's termination of employment for any other
reason. Until the options are exercised, a participant may
instruct the administrator to exchange some or all of the
options for options to purchase different underlying mutual fund
units.
145
PRINCIPAL AND SELLING STOCKHOLDERS
Before this offering, 100% of the outstanding
shares of our common stock have been beneficially owned by
Fortis N.V. and Fortis SA/ NV, the parent companies of the
selling stockholder, Fortis Insurance N.V. After the completion
of this offering, Fortis N.V. and Fortis SA/ NV will
beneficially own
approximately           %
of our common stock,
or           %
if the underwriters exercise their over-allotment option in
full. Although it has no contractual obligation to do so, Fortis
has advised us that its current intent is to divest its
remaining shares of our common stock over a period of time
following the expiration of the lock-up agreement described
under "Underwriting." Pursuant to the lock-up
agreements, we, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV, Fortis Insurance N.V., and
purchasers of shares under the directed share program have
agreed not to sell or cause to be sold or otherwise dispose of
any shares of our common stock for a period of 180 days
after the date of this prospectus without the prior written
consent of Morgan Stanley & Co. Incorporated on behalf of
the underwriters.
The following table sets forth information as of
October 1, 2003 regarding the beneficial ownership of our
common stock by:
•
all persons known by us to own beneficially more
    than 5% of our common stock;
•
our chief executive officer and each of the named
    executive officers;
•
each director;
•
all directors and executive officers as a group;
    and
•
the selling stockholder.
Beneficial ownership is determined in accordance
with the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of
that person, shares of common stock subject to options held by
that person that are currently exercisable or exercisable within
60 days of October 1, 2003 are deemed issued and
outstanding. These shares, however, are not deemed outstanding
for purposes of computing percentage ownership of each other
stockholder.
146
Beneficial Ownership
Beneficial Ownership
of Principal
of Principal
Stockholders Prior
Number of
Stockholders After
to the Offering
Shares To Be
the Offering(1)
Name and Address
Sold in the
of Beneficial Owner
Number
Percentage
Offering
Number
Percentage
Fortis Insurance N.V.(2)
8,300,002
100%
%
J. Kerry Clayton
—
—
—
—
—
Robert B. Pollock
—
—
—
—
—
Benjamin M. Cutler
—
—
—
—
—
Lesley Silvester
—
—
—
—
—
Philip Bruce Camacho
—
—
—
—
—
John Michael Palms
—
—
—
—
—
Anton van Rossum
—
—
—
—
—
Michel Baise
—
—
—
—
—
Robert J. Blendon
—
—
—
—
—
Beth L. Bronner
—
—
—
—
—
Howard L. Carver
—
—
—
—
—
Arie A. Fakkert
—
—
—
—
—
Allen R. Freedman
—
—
—
—
—
H. Carroll Mackin
—
—
—
—
—
Gilbert Mittler
—
—
—
—
—
Georges Valckenaere
—
—
—
—
—
All directors and executive officers as a group
    (27 persons)
—
—
—
—
—
(1)
Beneficial ownership of principal and selling
    stockholders after the offering does not take into account
    shares that may be sold by the selling stockholder in the event
    the underwriters' over-allotment option is exercised. If
    the underwriters' over-allotment option is exercised in
    full, Fortis Insurance N.V. will beneficially
    own                      shares
    of our common stock,
    or           %
    immediately after the offering. In addition, beneficial
    ownership of principal and selling stockholders after the
    offering does not include shares that may be purchased in the
    offering, including in the directed share program. See
    "Underwriting—Directed Share Program."
(2)
Includes 7,596,679 shares of Class A
    Common Stock held by Fortis Insurance N.V. directly,
    41,832 shares of Class A Common Stock and
    150,001 shares of Class B Common Stock held by Fortis
    (US) Funding Partners I LP and 111,489 shares of
    Class A Common Stock and 400,001 shares of Class C
    Common Stock held by Fortis (US) Funding Partners II LP.
    Fortis Insurance N.V. is an indirect, wholly owned
    subsidiary of Fortis N.V. and Fortis SA/NV.
147
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
We describe below some of the transactions we
have entered into with parties that are related to our Company,
including Fortis.
Certain relationships and related transactions
with respect to the underwriters are set forth in
"Underwriting."
General
We are currently an indirect subsidiary of
Fortis. Prior to and following the offering, some of our
directors also were and will continue to be directors, officers
and employees of Fortis and/or its subsidiaries. We will enter
into a shareholders' agreement with Fortis Insurance N.V.
that will give Fortis the right to nominate designees to our
board of directors and the right to approve certain significant
corporate actions as described under
"—Shareholders' Agreement."
In the ordinary course of business, we have
entered into a number of agreements with Fortis and its
subsidiaries relating to our historical business and our
relationship with the Fortis group of companies, the material
terms of which are described below. In addition, in connection
with the offering, we will enter into agreements with Fortis
relating to our separation from Fortis and the ongoing
relationship of the two companies after the offering date, as
described below. We will enter into these agreements while we
are still a wholly owned subsidiary of Fortis and the agreements
will become effective concurrently with the completion of the
offering. Forms of the agreements summarized below will be filed
as exhibits to the registration statement of which this
prospectus forms a part.
Registration Rights Agreement
Concurrently with the offering contemplated by
this prospectus, we will enter into a registration rights
agreement with Fortis Insurance N.V. pursuant to which we will
grant to Fortis Insurance N.V. and its affiliates that become
our stockholders (collectively, Fortis Insurance) rights to
request registration under the Securities Act to effect a public
offering with respect to all of the shares of our common stock
owned by them from time to time during the term of the
agreement. The maximum number of shares to be included in any
such public offering will not exceed the maximum number that the
managing underwriter of such public offering considers to be
appropriate.
In addition, subject to limited exceptions, if we
propose to register any shares of our common stock, other equity
securities or securities convertible into or exchangeable for
equity securities, whether or not for sale for our own account,
we are required to provide notice to Fortis Insurance, and if
requested by Fortis Insurance, we will include its shares in the
registration statement. The maximum number of shares to be
included in any such public offering will not exceed the maximum
number that the managing underwriter of such public offering
considers to be appropriate.
During the term of the agreement, Fortis
Insurance will agree not to sell, transfer or hedge any shares
of our common stock or any securities convertible into or
exchangeable for our common stock during the period
ending       days after the
effective date of a registration statement for an underwritten
public offering of any of our equity securities (unless the
underwriters of such offering permit a shorter period).
We are obligated to pay all expenses of the
registration and offering of shares in connection with any such
registration, other than underwriting discounts and commissions.
In addition, we will agree to indemnify Fortis Insurance for
damages relating to a material misstatement or omission in any
registration statement or prospectus relating to shares of our
common stock to be sold by Fortis Insurance. Fortis Insurance
will agree to indemnify us, our officers and our directors on
the same basis with respect to material misstatements or
omissions relating to information about Fortis Insurance.
148
Shareholders' Agreement
Concurrently with the offering contemplated by
this prospectus, we will enter into a shareholders'
agreement with Fortis Insurance N.V. The shareholders'
agreement will set forth the following agreements as to
corporate governance matters:
Composition of Board of Directors.
Fortis will have the right to nominate
designees to our board of directors and subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i) so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii) so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Upon consummation of the offering
contemplated by this prospectus, three Fortis designees will be
designated as Class II directors and two Fortis designees
will be designated as Class III directors. See
"Description of Share Capital— Shareholders'
Agreement— Composition of Board of Directors" for more
detail on these provisions.
Supermajority Voting
Requirement.
As long as Fortis owns at
least 50% of our outstanding common stock, we will be required
to have a by-law provision requiring a supermajority of our
directors to approve certain actions, which would require the
approval of two or more Fortis directors. See "Description
of Share Capital— Shareholders' Agreement—
Supermajority Voting Requirement."
Cooperation Agreement
Concurrently with the offering contemplated by
this prospectus, we will enter into a cooperation agreement with
Fortis Insurance N.V., Fortis N.V. and Fortis SA/NV relating to
our separation from Fortis and the ongoing relationship between
the companies, pursuant to which Fortis will grant us rights to
use the Fortis name for various transition periods following the
offering contemplated by this prospectus.
SERP Guarantee
Our SERP program provides that if the payments to
a participant or beneficiary will be made over a period of more
than one year and if at the time payments commence we are not
subject to pending proceedings as a debtor under the
U.S. Bankruptcy Code, then Fortis Insurance will guarantee
the payment of SERP benefits to such participant or beneficiary.
The SERP further provides that if Fortis Insurance ceases to be
the beneficial owner of the Company, then such guarantee will be
limited to the actuarially equivalent value of the
participant's SERP benefit immediately following such
cessation of beneficial ownership.
The 1999 Trust Capital Securities and the
Company's Subordinated Debentures
The 1999 Trust Capital Securities and the 1999
Subordinated Debentures were issued at the time of the issuance
by (i) Fortis Floating Rate Capital Funding Trust of Euro
400 million floating rate noncumulative guaranteed trust
capital securities, (ii) Fortis Fixed Rate Quarterly
Capital Funding Trust of Euro 200 million fixed rate
quarterly noncumulative guaranteed trust capital securities and
(iii) Fortis Fixed Rate Annual Capital Funding Trust of
Euro 50 million fixed rate annual noncumulative guaranteed
trust capital securities (collectively, the Fortis Trusts and
the Fortis Trust Securities), the common equity of each such
Fortis Trust being owned indirectly by Fortis. The payments we
make on the 1999 Subordinated Debentures and accordingly the
payments made on the 1999 Trust Capital Securities are
ultimately used by Fortis Insurance N.V. and Fortis Capital
Funding LP to make payments on the Fortis Trust Securities. The
payments we make on the 1999 Subordinated Debentures and
therefore on the 1999 Trust Capital Securities exceed the total
payments due by the Fortis Trusts on the Fortis Trust
Securities. In addition, in connection with the Fortis Trust
Securities, we entered into a services agreement pursuant to
which we are obligated to provide legal, accounting, tax and
other general support services, including providing necessary
administrative and record-keeping services for Fortis Capital
Funding LP and the Fortis Trusts for an annual fee of $100,000.
Guarantee of Capital Securities
Fortis has guaranteed certain payments in
connection with our junior subordinated debentures and the
Capital Securities of Fortis Capital Trust and Fortis Capital
Trust II. See "Description of Other Securities."
149
Commercial Paper Program and Other
Indebtedness
Historically, Fortis has maintained a
$1 billion commercial paper facility that we have been able
to access (via intercompany loans) for up to $750 million.
We have used the commercial paper facility to cover any cash
shortfalls, which may occur from time to time. We had no
intercompany loans with Fortis associated with this commercial
paper facility during the year ended December 31, 2002. In
2001, $235 million in commercial paper was issued and
redeemed by Fortis on our behalf. We had no outstanding
intercompany loans with Fortis related to this commercial paper
facility at year end December 31, 2002 and 2001. In
connection with our separation from Fortis, we will no longer
have access to this facility.
In addition, we previously had indebtedness
outstanding in the amount of $225 million to Fortis Finance
N.V., which was repaid in April 2001. See
"Management's Discussion and Analysis of Financial
Condition and Results of Operations."
See "Description of Other Securities"
for a description of our 2000 Trust Capital Securities, which
are owned by Fortis Insurance N.V.
Reimbursement of Fortis Liaison
Office
During 2003, 2002, 2001 and 2000, we paid
$427,000, $749,000, $516,000 and $0, respectively, to Fortis for
costs representing salary, benefits and other expenses of Arie
Fakkert, a director of the Company, who was then an employee of
one of Fortis' subsidiaries, and his support staff. We
discontinued these payments as of October 3, 2003.
150
CERTAIN UNITED STATES TAX CONSEQUENCES TO
NON-U.S. HOLDERS
The following summary describes the material
United States federal income and estate tax consequences of the
ownership of common stock by a Non-U.S. Holder (as defined
below) as of the date hereof. This discussion does not address
all aspects of United States federal income and estate taxes and
does not deal with foreign, state and local consequences that
may be relevant to such Non-U.S. Holders in light of their
personal circumstances. Special rules may apply to certain
Non-U.S. Holders, such as United States expatriates,
"controlled foreign corporations," "passive
foreign investment companies," "foreign personal
holding companies," corporations that accumulate earnings
to avoid United States federal income tax, and investors in
pass-through entities that are subject to special treatment
under the Internal Revenue Code of 1986, as amended (the
"Code"). Such Non-U.S. Holders should consult
their own tax advisors to determine the United States federal,
state and local income and other tax consequences that may be
relevant to them. Furthermore, the discussion below is based
upon the provisions of the Code, and regulations, rulings and
judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified, perhaps
retroactively, so as to result in United States federal income
tax consequences different from those discussed below.
Persons considering the purchase, ownership or disposition of
common stock should consult their own tax advisors concerning
the United States federal income tax consequences in light of
their particular situations as well as any consequences arising
under the laws of any other taxing jurisdiction.
As used herein, a "U.S. Holder" of
common stock means a holder that is for United States federal
income tax purposes (i) a citizen or resident of the United
States, (ii) a corporation or partnership created or
organized in or under the laws of the United States or any
political subdivision thereof, (iii) an estate the income
of which is subject to United States federal income taxation
regardless of its source or (iv) a trust if it (X) is
subject to the primary supervision of a court within the United
States and one or more United States persons have the authority
to control all substantial decisions of the trust or
(Y) has a valid election in effect under applicable United
States Treasury regulations to be treated as a United States
person. A "Non-U.S. Holder" is a holder that is
not a U.S. Holder. If a partnership holds the common stock,
the tax treatment of a partner will generally depend upon the
status of the partner and the activities of the partnership.
Persons who are partners of partnerships holding the common
stock should consult their tax advisors.
Dividends
Dividends paid to a Non-U.S. Holder of
common stock generally will be subject to withholding of United
States federal income tax at a 30% rate or such lower rate as
may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a
trade or business by the Non-U.S. Holder within the United
States and, where a tax treaty applies, are attributable to a
United States permanent establishment of the
Non-U.S. Holder, are not subject to the withholding tax,
but instead are subject to United States federal income tax on a
net income basis at applicable graduated individual or corporate
rates. Certain certification and disclosure requirements must be
satisfied for effectively connected income to be exempt from
withholding. Any such effectively connected dividends received
by a foreign corporation may be subject to an additional
"branch profits tax" at a 30% rate or such lower rate
as may be specified by an applicable income tax treaty.
A Non-U.S. Holder of common stock who wishes to
claim the benefit of an applicable income tax treaty rate (and
avoid backup withholding as discussed below) for dividends, will
be required to (a) complete Internal Revenue Service (IRS)
Form W-8BEN (or other applicable form) and certify under
penalties of perjury that such holder is not a United States
person or (b) if the common stock is held through certain
foreign intermediaries, satisfy the relevant certification
requirements of applicable United States Treasury regulations.
Special certification and other requirements apply to certain
Non-U.S. Holders that are entities rather than individuals.
A Non-U.S. Holder of common stock eligible
for a reduced rate of United States withholding tax pursuant to
an income tax treaty may obtain a refund of any excess amounts
withheld by filing an appropriate claim for refund with the IRS.
151
Gain on Disposition of Common Stock
A Non-U.S. Holder generally will not be
subject to United States federal income tax with respect to gain
recognized on a sale or other disposition of common stock unless
(i) the gain is effectively connected with a trade or
business of the Non-U.S. Holder in the United States, and,
where an income tax treaty applies, is attributable to a United
States permanent establishment of the Non-U.S. Holder,
(ii) in the case of a Non-U.S. Holder who is an
individual and holds the common stock as a capital asset, such
holder is present in the United States for 183 or more days in
the taxable year of the sale or other disposition and certain
other conditions are met, or (iii) the Company is or has
been a "United States real property holding
corporation" for United States federal income tax purposes.
An individual Non-U.S. Holder described in clause
(i) above will be subject to tax on the net gain derived
from the sale under regular graduated United States federal
income tax rates. An individual Non-U.S. Holder described in
clause (ii) above will be subject to a flat 30% tax on the
gain derived from the sale, which may be offset by United States
source capital losses (even though the individual is not
considered a resident of the United States). If a
Non-U.S. Holder that is a foreign corporation falls under
clause (i) above, it will be subject to tax on its gain
under regular graduated United States federal income tax rates
and, in addition, may be subject to the branch profits tax equal
to 30% of its effectively connected earnings and profits or at
such lower rate as may be specified by an applicable income tax
treaty.
The Company believes it is not and does not
anticipate becoming a "United States real property holding
corporation" for United States federal income tax purposes.
Federal Estate Tax
Common stock held by an individual Non-U.S.
Holder at the time of death will be included in such
holder's gross estate for United States federal estate tax
purposes, unless an applicable estate tax treaty provides
otherwise.
Information Reporting and Backup
Withholding
The Company must report annually to the IRS and
to each Non-U.S. Holder the amount of dividends paid to such
holder and the tax withheld with respect to such dividends,
regardless of whether withholding was required. Copies of the
information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in
which the Non-U.S. Holder resides under the provisions of
an applicable income tax treaty. A Non-U.S. Holder will be
subject to backup withholding on dividends paid to such holder
unless applicable certification requirements are met.
Information reporting and, depending on the
circumstances, backup withholding, will apply to the proceeds of
a sale of common stock within the United States or conducted
through United States-related financial intermediaries unless
the beneficial owner certifies under penalties of perjury that
it is a Non-U.S. Holder (and the payor does not have actual
knowledge or reason to know that the beneficial owner is a
United States person) or the holder otherwise establishes an
exemption.
Any amounts withheld under the backup withholding
rules may be allowed as a refund or a credit against such
holder's United States federal income tax liability
provided the required information is furnished to the IRS.
152
DESCRIPTION OF SHARE CAPITAL
Our certificate of incorporation authorizes
capital stock consisting of 80,000,000 shares of common stock,
par value $.01 per share, and 20,000,000 shares of preferred
stock, par value $1.00 per share. Our board of directors has
designated a portion of our common stock as Class B Common
Stock and a portion as Class C Common Stock. The following
summary of the terms and provisions of our capital stock does
not purport to be complete and is qualified in its entirety by
reference to our certificate of incorporation and by-laws,
copies of which will be filed as exhibits to the Registration
Statement on Form S-1 of which this prospectus is a part,
and applicable law. As of October 1, 2003, the following
shares were outstanding: 7,750,000 shares of Common Stock;
150,001 shares of Class B Common Stock; 400,001 shares of
Class C Common Stock; 19,160 shares of Series B
Preferred Stock; and 5,000 shares of Series C Preferred
Stock. As of October 1, 2003, we had three common
stockholders of record.
Common Stock
General.
All
outstanding shares of common stock are, and all shares of common
stock to be outstanding upon completion of the offering will be,
fully-paid and nonassessable.
Dividends.
Subject to any preferential rights of any outstanding series of
preferred stock that our board of directors may create from time
to time or of our Class B or Class C Common Stock, the
holders of our Common Stock will be entitled to dividends as may
be declared from time to time by the board of directors from
funds available therefor. Our board of directors does not
currently intend to pay dividends to holders of our Common
Stock. See "Dividend Policy" and
"Regulation."
Voting
Rights.
Each share of Common Stock
entitles the holder thereof to one vote on all matters,
including the election of directors, and, except as otherwise
required by law or provided in any resolution adopted by our
board of directors with respect to any series of preferred stock
and our Class B or Class C Common Stock, the holders
of the shares of our Common Stock will possess all voting power.
The holders of our Series B and Series C Preferred
Stock are entitled to vote on all matters as a single class with
the holders of our Common Stock. Our certificate of
incorporation does not provide for cumulative voting in the
election of directors. Generally, all matters to be voted on by
the stockholders must be approved by a majority, or, in the case
of the election of directors, by a plurality, of the votes cast,
subject to state law and any voting rights granted to any of the
holders of preferred stock and our Class B or Class C
Common Stock. Notwithstanding the foregoing, approval of the
following matters requires the vote of holders of at least
two-thirds of our outstanding capital stock entitled to vote in
the election of directors:
•
altering, amending, repealing or adopting of
    certain provisions of our certificate of incorporation or
    by-laws by the stockholders, including amendments to the
    provisions governing the classified board, the approval of
    mergers and the liability of directors;
•
removing directors (which is permitted for cause
    only);
•
effecting any merger or consolidation;
•
selling all or substantially all of our assets;
    and
•
amending of any of the super-majority voting
    provisions.
See "—Shareholders'
Agreement."
Preemptive
Rights.
The holders of Common
Stock do not have any preemptive rights. There are no
subscription, redemption, conversion or sinking fund provisions
with respect to the Common Stock.
Liquidation
Rights.
Upon dissolution,
liquidation or winding-up of Assurant, Inc., subject to the
rights of holders of any preferred stock and our Class B or
Class C Common Stock outstanding or any other class or
series of stock having preferential rights, the holders of
Common Stock will be entitled to receive our assets available
for distribution proportionate to their pro rata ownership of
the outstanding shares of Common Stock.
153
Class B and Class C Common
Stock
General.
Shares of our Class B and
Class C Common Stock rank senior to our common stock with
respect to the payment of dividends at the indicative rates for
those shares (described below for those shares) and with respect
to the payment of liquidation amounts upon the liquidation,
dissolution or winding up of Assurant, Inc. In all other
respects, shares of our Class B and Class C Common
Stock rank
pari passu
with our common stock and
participate equally with our common stock with respect to
dividends and other distributions paid by us and with respect to
any amounts payable upon our liquidation, dissolution or winding
up. The Class B and Class C Common Stock rank junior
in all respects to our Series B and Series C Preferred
Stock. We may not issue any further class or series of equity
securities ranking senior to or
pari passu
with our
Class B and Class C Common Stock with respect to
dividends and other distributions paid by us or with respect to
any amounts payable upon our liquidation, dissolution or winding
up, without the prior consent of the holders of not less than a
majority of the outstanding Class B and Class C Common
Stock, except that we may issue additional Class B or
Class C Common Stock and other equity securities that rank
pari passu
with the Class B and Class C Common
Stock without such consent if we have paid in full each of the
last four dividends at the indicated rate on their respective
dividend payment dates.
The holders of the Class B and Class C
Common Stock have no preemptive rights with respect to any other
securities of Assurant, Inc. and the Class B and
Class C Common Stock are not convertible into any other
securities of Assurant, Inc.
Dividends.
Cash dividends on the Class B and Class C Common
Stock are payable in arrears on a non-cumulative basis out of
available cash when, as and if declared by our board of
directors, on each dividend date, in such amounts as may be
declared by our board of directors. Our board of directors has
authorized the payment of (1) dividends semi-annually on
our Class B Common Stock in the amount of $37.502 per share
and (2) dividends semi-annually on our Class C Common
Stock in the amount of $38.505 per share. The indicative rate
for the Class B Common Stock is currently 7.48% and after
March 1, 2005, will be a variable rate of six-month LIBOR
plus 1.10%, reset semi-annually. The indicative rate for the
Class C Common Stock is currently 7.684% per annum and
after March 1, 2010, will be a variable rate of six-month
LIBOR plus 1.25%, reset semi-annually. When dividends are paid
on the Class B or C Common Stock at less than the
applicable indicative rate, all dividends declared on the
Class B and Class C Common Stock will be paid
pro
rata.
No cash dividend or other distribution may be
declared or paid or set apart for payment on any shares of our
common stock or any other junior shares, and neither we nor any
of our affiliates may purchase or redeem for cash any
outstanding shares of common stock or any other junior shares,
unless (i) full dividends have been declared and paid or
set apart for payment on the shares of the Class B and
Class C Common Stock in an amount at least equal to the
greater of (A) the dividends payable during such dividend
period at the indicative rate for such Class B or
Class C Common Stock or (B) the dividends paid by us
on the corresponding number of shares of common stock and other
junior shares during such dividend period (treating any cash
payment in connection with a purchase or redemption of common
stock or junior shares by us as a cash dividend), (ii) the
Fortis (US) Funding Partners LPs have paid the full amount
of payments on the securities issued by them (the Preference
Securities) for the current Preference Securities payment period
and (iii) such repurchase or redemption does not cause our
net worth to be less than $1.6 billion. If a dividend is
paid on the shares of Class B or C Common Stock during any
dividend period at a rate less than the indicative rate for such
Class B or Class C Common Stock, we may not make any
dividend payments on any shares of common stock or other junior
shares and may only make dividend payments on our other
securities that rank
pari passu
with the Class B and
Class C Common Stock, if any, in the same proportion as the
partial dividend paid on the Class B and Class C Common
Stock for the current dividend period bears to the full dividend
payment determined for such dividend period at the indicative
rate for such Class B and Class C Common Stock. The
corresponding number of junior shares is currently
2.2996 shares of common stock. For so long as the
Preference Securities are outstanding, if a partial Preference
Securities payment is made for any Preference Securities payment
period, we may not make any dividend payments on our common
stock or other junior shares and may only make dividend payments
on our other securities ranking
pari passu
with the
corresponding Class B and Class C Common Stock in the
same proportion as the lesser of (i) the proportion the
partial Preference
154
Securities payment made for the current
Preference Securities payment period bears to the full
Preference Securities payment determined for such Preference
Securities payment period and (ii) the proportion the
partial dividend paid on the Class B and Class C
Common Stock for the corresponding dividend period bears to the
full dividend payment determined for such dividend period at the
applicable indicative rate.
In addition, we will not purchase or redeem any
common stock or other junior shares if such purchase or
redemption would cause our net worth, as of the last day of the
most recently ended fiscal quarter and after giving effect to
such purchase or redemption, to be less than $1.6 billion,
subject to adjustment for issuances and redemptions of
Class B or Class C Common Stock or other
pari passu
securities.
To the extent that dividends paid with respect to
the Class B and Class C Common Stock exceed our
earnings and profits as calculated for U.S. federal income tax
purposes, they will not constitute dividends for U.S. federal
income tax purposes and will not qualify for the
dividends-received deduction. In such event, we must make
additional distributions to place each holder of the
Class B and Class C Common Stock in the same position
it would have been in if all dividends from us were paid from
such earnings and profits, assuming for these purposes that such
holder was eligible for the dividends-received deduction.
Voting Rights.
As long as any Class B and
Class C Common Stock is owned by the applicable Fortis
(US) Funding Partners LP, the holders of such Class B
or Class C Common Stock will be entitled to one vote per
share and will be entitled to vote with our common stock as a
single class on all matters submitted to a vote of our common
stock (other than those matters affecting only our common
stock). The holders of the Class B and Class C Common
Stock will be entitled to vote separately as a single class on
certain matters affecting the Class B and Class C
Common Stock.
Whenever dividends on the Class B or
Class C Common Stock are in arrears for five or more
consecutive dividend periods, the holders of those shares,
voting as a single class, will be entitled, subject to any
necessary regulatory actions, to elect two special independent
directors to our board of directors at a special meeting called
by the holders of record of at least 25% of the Class B or
Class C Common Stock, as applicable. The special
independent directors will vacate office if dividends are
resumed and are paid regularly for at least two consecutive
dividend periods.
Redemption.
Shares of the Class B and
Class C Common Stock are not subject to mandatory
redemption at any time and, prior to March 1, 2030, are not
subject to optional redemption. On or after March 1, 2030,
shares of Class B and Class C Common Stock may be
redeemed at our option at any time, in whole but not in part, at
their fair market value as determined by a nationally recognized
investment bank.
Liquidation Rights.
Upon any voluntary or involuntary
dissolution, liquidation or winding up of Assurant, Inc., after
payment or provision for our liabilities and the expenses of
such dissolution, liquidation or winding up, the holders of the
outstanding Class B and Class C Common Stock will be
entitled to receive out of our assets or proceeds thereof
available for distribution to holders of Class B and
Class C Common Stock, before any payment or distribution of
assets is made to holders of common stock or any other junior
shares, the applicable liquidation amount, which is generally
$1,000 per share or the amount that would be payable on the
corresponding number of junior shares, whichever is greater.
Merger, Consolidation or Amalgamation of
Assurant, Inc.
So long as the
Class B and Class C Common Stock remain outstanding,
we may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease our properties and
assets substantially as an entirety to, any corporation or other
entity, except that we may, with the consent of at least one of
the special independent directors, if any, on our board of
directors at the time the issue is considered and without the
consent of the holders of the Class B and Class C
Common Stock, consolidate, amalgamate, merge with or into, or be
replaced by a corporation organized as such under the laws of
any state of the United States provided that specified
conditions are met.
Preferred Stock
Our board of directors has the authority, without
further action of our stockholders, to issue up to 20,000,000
shares of preferred stock, par value $1.00 per share, in one or
more series and to fix the powers, preferences, rights and
qualifications, limitations or restrictions thereof, which may
include dividend rights,
155
conversion rights, voting rights, terms of
redemption, liquidation preferences and the number of shares
constituting any series or the designations of the series. The
issuance of preferred stock could adversely affect the holders
of common stock. The potential issuance of preferred stock may
discourage bids for our common stock at a premium over the
market price of our common stock, may adversely affect the
market price of our common stock and may discourage, delay or
prevent a change of control of Assurant, Inc.
We currently have Series B Preferred Stock
consisting of 30,000 designated shares, 19,160 of which are
outstanding, and Series C Preferred Stock consisting of
5,000 designated shares, all of which are outstanding. All of
such shares have a liquidation price of $1,000 per share and
rank senior to our common stock and the Class B and
Class C Common Stock with respect to right to receive
dividends and to receive distributions upon the liquidation,
dissolution or winding up of Assurant, Inc. Holders of the
Series B Preferred Stock are entitled to receive cumulative
dividends at the rate of 4.0% per share per annum, multiplied by
the $1,000 liquidation price, and holders of the Series C
Preferred Stock are entitled to receive dividends at the rate of
4.5% per share per annum multiplied by the $1,000 liquidation
price. All dividends are payable in arrears on a quarterly
basis. Any dividend that is not paid on a specified dividend
payment date with respect to a share of such Preferred Stock
shall be deemed added to the liquidation price of such share for
purposes of computing the future dividends on such share, until
such delinquent dividend has been paid.
Holders of the Series B Preferred Stock may
elect to have any or all of their shares redeemed by us at any
time after April 1, 2002, and we must redeem all shares of
the Series B Preferred Stock no later than July 1,
2017. Holders of the Series C Preferred Stock may elect to
have any or all of their shares redeemed by us any time after
April 1, 2022, and we must redeem all shares of the
Series C Preferred Stock no later than July 1, 2027.
We also have the right and the obligation to redeem the
Series B Preferred Stock and Series C Preferred Stock
upon the occurrence of certain specified events. The redemption
price in all cases shall equal the $1,000 per share liquidation
price plus all accumulated and unpaid dividends. We are not
required to establish any sinking fund or similar funds with
respect to such redemptions.
None of the shares of Series B Preferred
Stock or Series C Preferred Stock is convertible into
common stock or any other equity security of Assurant, Inc.
However, holders of the Series B Preferred Stock and
Series C Preferred Stock are entitled to one vote per share
owned of record on all matters voted upon by Assurant, Inc.
stockholders, voting with the holders of common stock as a
single class, and not as a separate class or classes. The shares
of Series B Preferred Stock and Series C Preferred
Stock are subject to certain restrictions on transferability,
and we have a right of first refusal to acquire the shares if
any holder thereof desires to make a transfer not otherwise
permitted by the terms thereof.
We have no current plans to issue any additional
shares of preferred stock.
Anti-takeover Effects of Certain Provisions of
the Certificate of Incorporation, By-Laws and Delaware General
Corporation Law
The provisions of the Delaware General
Corporation Law and our certificate of incorporation and by-laws
summarized below may have the effect of discouraging, delaying
or preventing hostile takeovers, including those that might
result in a premium being paid over the market price of our
common stock, and discouraging, delaying or preventing changes
in control or management of our Company.
Certificate of Incorporation and
    By-Laws
Our certificate of incorporation, which provides
for the issuance of preferred stock, may have the effect of
delaying, deferring or preventing a change in control of our
Company without further action by the stockholders and may
adversely affect the voting and other rights of the holders of
common stock. Our certificate of incorporation provides that the
approval of certain matters requires the vote of the holders of
at least two-thirds of our outstanding capital stock entitled to
vote in the election of directors. Further, our certificate of
incorporation requires that any action required or permitted to
be taken by our stockholders must be effected at a duly called
annual or special meeting of our stockholders and may not be
effected by a consent in writing. Special meetings of our
stockholders may be called only by our Chief Executive Officer
or by our board of directors pursuant to a resolution approved
by the board of directors. In addition, our by-laws
156
establish advance notice procedures with respect
to stockholder proposals and the nomination of candidates for
election as directors. These provisions may have the effect of
delaying, deferring or preventing a change in control.
Super-Majority Voting
Provision.
Our certificate of
incorporation requires the affirmative vote of the holders of at
least two-thirds of the voting power of the common stock for
approval of the following actions:
•
altering, amending, repealing or adopting certain
    provisions of our certificate of incorporation or our by-laws,
    including amendments to the provisions governing the classified
    board, the approval of mergers and the liability of directors;
•
removing directors (which is permitted for cause
    only);
•
effecting any merger or consolidation;
•
selling all or substantially all of our assets;
    and
•
any amendment of the super-majority voting
    provision.
In addition, the shareholders' agreement we
will enter into with Fortis will give Fortis the right to
nominate designees to our board of directors and, subject to
limited exceptions, our board of directors will nominate those
designees as follows: (i) so long as Fortis owns at least
50% of our outstanding common stock, five designees and,
(ii) so long as Fortis owns less than 50% but at least 10%
of our outstanding common stock, two designees. In addition, as
long as Fortis holds 50% or more of our outstanding common
stock, certain significant corporate actions cannot be taken
without the approval of a supermajority of our board of
directors, which will require approval of two or more Fortis
board designees. These actions include those listed under
"— Shareholders' Agreement— Supermajority
Voting Requirement." These voting requirements could have
the effect of delaying, deferring or preventing such
transactions.
Classified Board of
Directors.
Our board of directors will
be divided into three classes, with the members of each class
serving for staggered three-year terms. As a result, only one
class of directors will be elected at each annual meeting of
stockholders, with the other classes continuing for the
remainder of their respective three-year terms. Stockholders
have no cumulative voting rights, and a plurality of the
stockholders are able to elect all of the directors. The
classification of the directors and lack of cumulative voting
will have the effect of making it more difficult not only for
another party to obtain control of our Company by replacing our
board of directors, but also for our existing stockholders to
force an immediate change in the composition of our board of
directors. Since our board of directors has the power to retain
and discharge our officers, these provisions could also make it
more difficult for existing stockholders or another party to
effect a change in management. In addition, pursuant to the
shareholders' agreement we will enter into with Fortis
Insurance N.V., three of the Fortis director designees will be
designated as Class II directors, and two of the Fortis
director designees will be designated as Class III
directors. See "—Shareholders' Agreement."
The anti-takeover and other provisions of our
certificate of incorporation and by-laws could discourage
potential acquisition proposals and could delay or prevent a
change in control. These provisions are intended to enhance the
likelihood or continuity and stability in the composition of the
board of directors and in the policies formulated by the board
of directors and to discourage certain types of transactions
that may involve an actual or threatened change of control.
These provisions are designed to reduce our vulnerability to an
unsolicited acquisition proposal. The provisions also are
intended to discourage certain tactics that may be used in proxy
fights. However, such provisions could have the effect of
discouraging others from making tender offers for our shares
and, as a consequence, they also may inhibit fluctuations in the
market price of our shares that could result from actual or
rumored takeover attempts. Such provisions also may have the
effect of preventing changes in our management.
Delaware General Corporation
    Law
We are subject to Section 203 of the
Delaware General Corporation Law, which we refer to as
"Section 203." In general, Section 203
prevents a person who owns 15% or more of our outstanding voting
stock, an "interested stockholder," from engaging in
some business combinations, as described below, with us
157
for three years following the time that that
person becomes an interested stockholder unless one of the
following occurs:
•
the board of directors either approves the
    business combination or the transaction in which the person
    became an interested stockholder before that person became an
    interested stockholder;
•
upon consummation of the transaction which
    resulted in the person becoming an interested stockholder, the
    interested stockholder owned at least 85% of our voting stock
    outstanding at the time the transaction commenced, excluding
    stock held by:
-
directors who are also officers of our Company;
    and
-
employee stock plans that do not provide
    employees with the right to determine confidentiality whether
    shares held subject to the plan will be tendered in a tender or
    exchange offer; or
•
at or subsequent to the time that the transaction
    in which the person became an interested stockholder, the
    business combination is:
-
approved by the board of directors; and
-
authorized at a meeting of stockholders by the
    affirmative vote of the holders of at least two-thirds of our
    outstanding voting stock which is not owned by the interest
    stockholder.
For purposes of Section 203, the term
"business combinations" includes mergers,
consolidations, asset sales or other transactions that result in
a financial benefit to the interested stockholder and
transactions that would increase the interested
stockholder's proportionate share ownership of our Company.
Under some circumstances, Section 203 makes
it more difficult for an interested stockholder to effect
various business combinations with us for a period of three
years after the stockholder becomes an interested stockholder.
Although our stockholders have the right to exclude us from the
restrictions imposed by Section 203, they have not done so.
Section 203 may encourage companies interested in acquiring
us to negotiate in advance with the board of directors, because
the requirement stated above regarding stockholder approval
would be avoided if a majority of the directors approves, prior
to the time the party became an interested stockholder, either
the business combination or the transaction which results in the
stockholder becoming an interested stockholder.
Shareholders' Agreement
Concurrently with the offering contemplated by
this prospectus, we will enter into a shareholders'
agreement with Fortis Insurance N.V. The shareholders'
agreement will set forth the following agreements as to
corporate governance matters:
Composition of Board of Directors.
Fortis has the right to nominate
designees to our board of directors and, subject to limited
exceptions, our board of directors will nominate those designees
as follows: (i) so long as Fortis owns at least 50% of our
outstanding common stock, five designees and (ii) so long
as Fortis owns less than 50% but at least 10% of our outstanding
common stock, two designees. Upon consummation of the offering
contemplated by this prospectus, three Fortis designees will be
designated as Class II directors and two Fortis designees
will be designated as Class III directors. If a vacancy in
a Fortis director slot occurs, subject to limited exceptions,
those vacancies will be filled with a person nominated by
Fortis. We will agree to use our best efforts to cause each
person designated by Fortis pursuant to the shareholders'
agreement to be nominated to our board of directors.
Supermajority Voting
Requirement.
As long as Fortis owns at
least 50% of our outstanding common stock, we will be required
to have a by-law provision requiring a supermajority of our
directors to approve certain actions, which would require the
approval of two or more Fortis directors. These actions include:
•
any reorganization, recapitalization,
    reclassification or combination of any our securities or any of
    those of our principal subsidiaries;
158
•
any liquidation, dissolution, winding up or
    commencement of voluntary bankruptcy or insolvency proceedings
    with respect to us or our principal subsidiaries;
•
any acquisition or disposition with a value in
    excess of $500 million;
•
the incurrence or assumption of indebtedness
    resulting in total indebtedness in excess of $1.5 billion
    on a consolidated basis; and
•
any offer or sale of shares of our common stock,
    other equity securities or securities convertible into or
    exchangeable into our equity securities in excess of 10% of the
    common stock outstanding or such amounts as would reduce
    Fortis' ownership to below 50% of our outstanding common
    stock.
Registration Rights
Concurrently with the offering contemplated by
this prospectus, we will grant Fortis Insurance N.V. and its
affiliates certain demand and piggyback registration rights with
respect to all of the shares of our common stock owned by them.
Pursuant to this registration rights agreement, after completion
of this offering, Fortis will have the right to require us to
register its shares of our common stock under the Securities Act
for sale into the public markets, subject to the 180-day lock-up
agreements. See "Underwriting" and "Certain
Relationships and Related Transactions— Registration Rights
Agreement."
Listing
We intend to apply to have our common stock
listed on the New York Stock Exchange under the trading symbol
"AIZ."
Transfer Agent and Registrar
The transfer agent and registrar for our common
stock will be Mellon Investor Services LLC, 85 Challenger
Road, Overpeck Centre, Ridgefield Park, New Jersey 07660.
159
DESCRIPTION OF OTHER SECURITIES
2000 Trust Capital Securities and Subordinated
Debentures
In March 2000, two of our subsidiary trusts,
Fortis Capital Proceeds Trust 2000-1 and Fortis Capital
Proceeds Trust 2000-2, issued 150,000 8.48% and 400,000
8.40% trust capital securities (collectively, the 2000 Trust
Capital Securities), respectively, to Fortis Insurance N.V.
(formerly, Fortis Insurance Holding N.V.), in each case
with a liquidation amount of $1,000 per security.
Fortis Capital Proceeds Trust 2000-1 and
Fortis Capital Proceeds Trust 2000-2 used the proceeds from
the sale of the applicable 2000 Trust Capital Securities and
trust common securities to purchase $150,001,000 and
$400,001,000, respectively, of our 8.48% and 8.40% subordinated
debentures due 2030 (collectively, the 2000 Subordinated
Debentures), respectively. These debentures are the sole assets
of the trusts.
The payments we make on the applicable 2000
Subordinated Debentures are the sole source of funds available
for the applicable trust to make the distributions on the
applicable 2000 Trust Capital Securities. Interest on the 2000
Subordinated Debentures is payable semi-annually, except we have
the right to extend the interest payment period under the
applicable 2000 Subordinated Debentures for up to ten
consecutive semi-annual periods, during which periods interest
will compound semi-annually. Distributions on the 2000 Trust
Capital Securities are cumulative and payable semi-annually,
except distributions are deferrable to the extent we exercise
our right described in the preceding sentence.
The 2000 Subordinated Debentures restrict our
ability to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of our capital stock, (ii) make
any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any of our debt securities that
rank pari passu with or junior in right of payment to the
applicable 2000 Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by us of any
securities of any subsidiary of ours if such guarantee ranks
pari passu or junior in right of payment to the applicable 2000
Subordinated Debentures, if at any time (1) any 2000
Subordinated Debentures are held by Fortis Capital Proceeds
Trust 2000-1 or 2, as applicable, and there shall have
occurred and be continuing an event of default under the
declaration of trust of Fortis Capital Proceeds
Trust 2000-1 or 2, as applicable, (2) there shall have
occurred and be continuing an event of default under the
applicable indenture pursuant to which the applicable 2000
Subordinated Debentures were issued or (3) we shall have
given notice of our election to extend the interest payment
period under the applicable 2000 Subordinated Debentures as
described above and we shall not have rescinded such notice, and
such extension period has commenced and is continuing.
On or after April 2005 and April 2010,
respectively, we have the right to redeem the applicable 2000
Subordinated Debentures, in each case at a redemption price
equal to 100% of the principal amount, plus accrued and unpaid
interest. The 2000 Trust Capital Securities are mandatorily
redeemable upon the maturity of the applicable 2000 Subordinated
Debentures in March 2030 or such earlier date as the
applicable 2000 Subordinated Debentures may be redeemed. On
April 1, 2005 and April 1, 2010, Fortis Insurance
N.V., as holder of the 2000 Trust Capital Securities, has the
right to require Fortis Capital Proceeds Trust 2000-1
and 2, respectively, to repurchase all (but not less than
all) of Fortis Insurance N.V.'s applicable 2000 Trust
Capital Securities at a purchase price equal to 100% of the
liquidation amount of the applicable 2000 Trust Capital
Securities plus an amount equal to accumulated and unpaid
distributions, in which case we would be required to repurchase
all the applicable 2000 Subordinated Debentures at a repurchase
price equal to the principal amount, plus accrued and unpaid
interest.
1999 Trust Capital Securities and Subordinated
Debentures
In April 1999, two of our subsidiary trusts, 1999
Fortis Capital Trust I and 1999 Fortis Capital
Trust II, issued 200,000 7.60% and 499,850 7.876% trust
capital securities (collectively, the 1999 Trust Capital
Securities), respectively, to Fortis Capital Funding LP and
Fortis Insurance N.V. (formerly, Fortis Insurance Holding N.V.),
respectively in each case with a liquidation amount of $1,000
per security.
160
1999 Fortis Capital Trust I and 1999 Fortis
Capital Trust II used the proceeds from the sale of the
applicable 1999 Trust Capital Securities and trust common
securities to purchase $200,001,000 and $499,851,000,
respectively, of our 7.60% and 7.876% subordinated debentures
due 2029 (collectively, the 1999 Subordinated Debentures),
respectively. These debentures are the sole assets of the trusts.
The payments we make on the applicable 1999
Subordinated Debentures are the sole source of funds available
for the applicable trust to make the distributions on the
applicable 1999 Trust Capital Securities. Interest on the 1999
Subordinated Debentures is payable quarterly, except we have the
right to extend the interest payment period under the applicable
1999 Subordinated Debentures for up to twenty consecutive
quarterly periods, during which periods interest will compound
quarterly. Distributions on the 1999 Trust Capital Securities
are cumulative and payable quarterly, except distributions are
deferrable to the extent we exercise our right described in the
preceding sentence.
The 1999 Subordinated Debentures restrict our
ability to (i) declare or pay any dividends or
distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of our capital stock, (ii) make
any payment of principal, interest or premium, if any, on or
repay or repurchase or redeem any of our debt securities that
rank pari passu with or junior in right of payment to the
applicable 1999 Subordinated Debentures or (iii) make any
guarantee payments with respect to any guarantee by us of any
securities of any subsidiary of ours if such guarantee ranks
pari passu or junior in right of payment to the applicable 1999
Subordinated Debentures, if at any time (1) any 1999
Subordinated Debentures are held by 1999 Fortis Capital Trust I
or II, as applicable, and there shall have occurred and be
continuing an event of default under the declaration of trust of
1999 Fortis Capital Trust I or II, as applicable, (2) there
shall have occurred and be continuing an event of default under
the applicable indenture pursuant to which the applicable 1999
Subordinated Debentures were issued or (3) we shall have
given notice of our election to extend the interest payment
period under the 1999 Subordinated Debentures as described above
and we shall not have rescinded such notice, and such extension
period has commenced and is continuing.
On June 30, 2009 or any interest payment
date thereafter, we have the right to redeem the 1999
Subordinated Debentures at a redemption price equal to 100% of
the principal amount or the principal amount multiplied by a
percentage that ranges from 103.8% to 100.0%, depending on the
year of redemption and depending on the series, plus accrued and
unpaid interest. The 1999 Trust Capital Securities are
mandatorily redeemable upon the maturity of the applicable 1999
Subordinated Debentures in April 2029 or such earlier date
as the applicable 1999 Subordinated Debentures may be redeemed.
1997 Capital Securities and Junior
Subordinated Debentures
In May 1997, Fortis Capital Trust, a subsidiary
trust of ours, issued 150,000 8.40% capital securities (the 1997
Capital Securities I) to purchasers and 4,640 8.40% common
securities (the 1997 Common Securities I) to us, in each
case with a liquidation amount of $1,000 per security. Fortis
Capital Trust used the proceeds from the sale of the 1997
Capital Securities I and the 1997 Common Securities I
to purchase $154,640,000 of our 8.40% junior subordinated
debentures due 2027 (the 1997 Junior Subordinated
Debentures I). These debentures are the sole assets of
Fortis Capital Trust.
In July 1997, Fortis Capital Trust II, a
subsidiary trust of ours, issued 50,000 7.94% capital securities
(the 1997 Capital Securities II and, together with the 1997
Capital Securities I, the 1997 Capital Securities) to
purchasers and 1,547 7.94% common securities (the 1997 Common
Securities II and, together with the 1997 Common
Securities I, the 1997 Common Securities) to us, in each
case with a liquidation amount of $1,000 per security. Fortis
Capital Trust II used the proceeds from the sale of the
1997 Capital Securities II and the 1997 Common
Securities II to purchase $51,547,000 of our 7.94% junior
subordinated debentures due 2027 (the 1997 Junior Subordinated
Debentures II and, together with the 1997 Junior
Subordinated Debentures I, the 1997 Junior Subordinated
Debentures). These debentures are the sole assets of Fortis
Capital Trust II.
With respect to each of Fortis Capital Trust and
Fortis Capital Trust II, we, Fortis SA/ NV and
Fortis N.V. entered into a junior subordinated guarantee of
the distributions and payments on the liquidation and redemption
of the 1997 Capital Securities I and the 1997 Capital
Securities II, respectively, but only to
161
the extent the funds are held by Fortis Capital
Trust and Fortis Capital Trust II, respectively. Fortis SA/
NV and Fortis N.V. also entered into a junior subordinated
guarantee of the payment of the principal, premium, if any, and
interest on the 1997 Junior Subordinated Debentures. The 1997
Junior Subordinated Debentures and the guarantees are unsecured,
junior subordinated obligations.
The payments we or the guarantors make on the
applicable 1997 Junior Subordinated Debentures are the sole
source of funds available for the applicable trust to make the
distributions on the applicable 1997 Capital Securities.
Interest on the 1997 Junior Subordinated Debentures is payable
semi-annually, except we, so long as no event of default has
occurred or is continuing and with the consent of the
guarantors, may exercise our right to defer payment on the 1997
Junior Subordinated Debentures for up to ten consecutive
semi-annual periods, during which periods interest will compound
semi-annually. Distributions on the 1997 Capital Securities are
cumulative and payable semi-annually, except distributions are
deferrable to the extent we exercise our right described in the
preceding sentence.
The 1997 Junior Subordinated Debentures I
and the 1997 Junior Subordinated Debentures II each
restrict our and the guarantors' ability to:
(i) declare or pay any dividends on or distributions on or
redeem, purchase, acquire or make a liquidation payment on any
of the capital stock of ours or such guarantor, (ii) make
any payment of principal, premium, if any, or interest on or
repay, redeem or repurchase any debt securities that rank pari
passu with or junior to the applicable 1997 Junior Subordinated
Debentures or the guarantees or (iii) make any guarantee
payment with respect to any guarantee of the debt securities of
any subsidiary if such guarantee ranks pari passu with or junior
to the applicable 1997 Junior Subordinated Debentures or the
guarantees, if at any time (1) we elect to defer payment on
the applicable 1997 Junior Subordinated Debentures, (2) at
any time there has occurred any event of which we or a guarantor
has knowledge that would constitute an event of default under
the applicable 1997 Junior Subordinated Debentures and that we
and the guarantors have not taken reasonable steps to cure or
(3) we or the guarantors are in default with respect to our
payment of obligations under the guarantees.
The 1997 Capital Securities rank pari passu with
the 1997 Common Securities with respect to cash distributions
and amounts payable on liquidation, except that the 1997 Common
Securities will be subordinated to the 1997 Capital Securities
if an event of default has occurred and is continuing as a
result of any failure by us to pay amounts when due in respect
of the applicable 1997 Junior Subordinated Debentures.
The 1997 Junior Subordinated Debentures I
and the 1997 Junior Subordinated Debentures II mature in
May and July 2027, respectively.
The 1997 Capital Securities are subject to
mandatory redemption, in whole or in part, upon repayment of the
applicable 1997 Junior Subordinated Debentures at their stated
maturity or earlier redemption. The 1997 Junior Subordinated
Debentures are redeemable prior to maturity at our option in
whole at any time or in part from time to time at redemption
prices calculated according to a specified formula.
Events of default under the 1997 Junior
Subordinated Debentures include: (i) failure for
30 days to pay interest when due (subject to any deferral
as described above), (ii) failure to pay principal or
premium, if any, when due, (iii) failure to perform the
covenants in the indenture for 90 days after notice and
(iv) certain events of bankruptcy, insolvency or
reorganization of us or the guarantors. Events of default under
the guarantees of the 1997 Capital Securities include the
failure of us or the guarantors to perform any payment
obligations thereunder or to perform any non-payment obligation
for 30 days.
We and the guarantors have also agreed to
guarantee to each person to whom the applicable trust becomes
indebted or liable, the full payment of any costs, expenses or
liabilities of the trust (other than the obligations to pay
amounts due to the holders of the 1997 Capital Securities and
the 1997 Common Securities pursuant to their terms).
162
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering we will have a
total
of                      shares
of our common stock outstanding. All of
the                      shares
sold in the offering will be freely tradable without restriction
or further registration under the Securities Act by persons
other than our "affiliates." Under the Securities Act,
an "affiliate" of a company is a person that directly
or indirectly controls, is controlled by or is under common
control with that company.
The
remaining                      shares
of our common stock outstanding will be "restricted
securities" within the meaning of Rule 144 under the
Securities Act, as they will be held by Fortis, and may not be
sold in the absence of registration under the Securities Act
unless an exemption from registration is available, including
the exemptions contained in Rule 144.
In general, under Rule 144, a person (or
persons whose shares are aggregated), including any person who
may be deemed our affiliate, is entitled to sell within any
three-month period, a number of restricted securities that does
not exceed the greater of 1% of the then outstanding common
stock and the average weekly trading volume in the
over-the-counter market during the four calendar weeks preceding
each such sale, provided that at least one year has elapsed
since such shares were acquired from us or any affiliate of ours
and certain manner of sale, notice requirements and requirements
as to availability of current public information about us are
satisfied. Any person who is deemed to be our affiliate must
comply with the provisions of Rule 144 (other than the
one-year holding period requirement) in order to sell shares of
common stock which are not restricted securities (such as shares
acquired by affiliates either in the offering or through
purchases in the open market following the offering). In
addition, under Rule 144(k), a person who is not our
affiliate, and who has not been our affiliate at any time during
the 90 days preceding any sale, is entitled to sell such
shares without regard to the foregoing limitations, provided
that at least two years have elapsed since the shares were
acquired from us or any affiliate of ours.
We, our directors and executive officers, Fortis
N.V., Fortis SA/NV and Fortis Insurance N.V. have agreed with
the underwriters not to, directly or indirectly, dispose of or
hedge any shares of our common stock or securities convertible
into or exchangeable for common stock for a period of
180 days from the date of this prospectus, without the
prior written consent of Morgan Stanley & Co. Incorporated,
on behalf of the underwriters, subject to certain exceptions. We
may, however, grant options to purchase common stock under our
existing plans and issue common stock upon the exercise of those
options.
Fortis has advised us that it intends to divest
its remaining shares of our common stock over a period of time
following the expiration of the lock-up period. Concurrently
with the offering contemplated by this prospectus, we will enter
into a registration rights agreement with Fortis Insurance N.V.
pursuant to which we will grant Fortis Insurance N.V. and its
affiliates certain demand and piggyback registration rights with
respect to all of the shares of our common stock owned by them.
Pursuant to this agreement, after completion of this offering,
Fortis will have the right to require us to register its shares
of our common stock under the Securities Act for sale into the
public markets, subject to the lock-up agreement. Shares
registered under any such registration statement will be
available for sale in the open market unless restrictions apply.
See "Certain Relationships and Related
Transactions—Registration Rights Agreement" and
"Description of Share Capital—Registration
Rights."
Following the consummation of this offering, we
intend to file one or more registration statements on
Form S-8 under the Securities Act to register common stock
issued or reserved for issuance under our Directors Compensation
Plan, our 2004 Long-Term Incentive Plan and our Employee Stock
Purchase Plan. Any such Form S-8 registration statement
will automatically become effective upon filing. Accordingly,
shares registered under such registration statement will be
available for sale in the open market, unless such shares are
subject to vesting restrictions with us or the lock-up
restrictions described above. We expect that the registration
statement on Form S-8 will
cover                      shares
and options.
No prediction can be made as to the effect, if
any, future sales of shares, or the availability of shares for
future sales, will have on the market price of our common stock
prevailing from time to time. The sale of substantial amounts of
our common stock in the public market, or the perception that
such sales could occur, could harm the prevailing market price
of our common stock.
163
UNDERWRITING
Under the terms and subject to the conditions
contained in an underwriting agreement dated the date of this
prospectus, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated is acting as representative,
have severally agreed to purchase, and the selling stockholder
has agreed to sell to them, the number of shares indicated below:
Name
Number of Shares
Morgan Stanley & Co. Incorporated
Credit Suisse First Boston LLC
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Total
The underwriters are offering the shares of
common stock subject to their acceptance of the shares from the
selling stockholder and subject to prior sale. The underwriting
agreement provides that the obligations of the several
underwriters to pay for and accept delivery of the shares of
common stock offered by this prospectus are subject to the
approval of certain legal matters by their counsel and to
certain other conditions. The underwriters are obligated to take
and pay for all of the shares of common stock offered by this
prospectus if any such shares are taken. However, the
underwriters are not required to take or pay for the shares
covered by the underwriters' over-allotment option
described below.
The underwriters initially propose to offer part
of the shares of common stock directly to the public at the
public offering price listed on the cover page of this
prospectus and part to certain dealers at a price that
represents a concession not in excess of
$                    a
share under the public offering price. After the initial
offering of the shares of common stock, the offering price and
other selling terms may from time to time be varied by the
representative.
The selling stockholder has granted to the
underwriters an option, exercisable for 30 days from the
date of this prospectus, to purchase up to an aggregate
of                     additional
shares of common stock at the public offering price set forth on
the cover page of this prospectus, less underwriting discounts
and commissions. The underwriters may exercise this option
solely for the purpose of covering over-allotments, if any, made
in connection with the offering of the shares of common stock
offered by this prospectus. To the extent the option is
exercised, each underwriter will become obligated, subject to
certain conditions, to purchase approximately the same
percentage of the additional shares of common stock as the
number listed next to the underwriter's name in the
preceding table bears to the total number of shares of common
stock listed next to the names of all underwriters in the
preceding table. If the underwriters' option is exercised
in full, the total price to the public would be
$                    million,
the total underwriters' discounts and commissions would be
$                    million
and total proceeds to the selling stockholder, excluding
estimated offering expenses, would be
$                    million.
The estimated offering expenses, in addition to
the underwriting discounts and commissions, are approximately
$                    million,
which includes legal, accounting and printing costs and various
other fees associated with the registration and listing of the
shares of common stock.
The underwriters have informed us that they do
not intend sales to discretionary accounts to exceed 5% of the
total number of shares of common stock offered by them.
We intend to apply to list our common stock on
the New York Stock Exchange under the symbol "AIZ." In
connection with the listing of the common stock on the New York
Stock Exchange, the underwriters will undertake to sell round
lots of 100 shares or more to a minimum of 2,000 beneficial
owners.
We, each of our directors and executive officers,
Fortis N.V., Fortis SA/ NV, Fortis Insurance N.V. and purchasers
of shares under the directed share program, have agreed that,
without the prior written consent of
164
Morgan Stanley & Co. Incorporated on behalf
of the underwriters, we and they will not, during the period
ending 180 days after the date of this prospectus:
•
offer, pledge, sell, contract to sell, sell any
    option or contract to purchase, purchase any option or contract
    to sell, grant any option, right or warrant to purchase, lend,
    or otherwise transfer or dispose of, directly or indirectly, any
    shares of common stock or any securities convertible into or
    exercisable or exchangeable for common stock;
•
file any registration statement with the SEC
    relating to the offering of any shares of common stock or any
    securities convertible into or exercisable or exchangeable for
    common stock; or
•
enter in any swap or other arrangement that
    transfers to another, in whole or in part, any of the economic
    consequences of ownership of common stock;
whether any such transaction described above is
to be settled by delivery of common stock or such other
securities, in cash or otherwise. The restrictions described in
this paragraph do not apply to:
•
the sale of shares to the underwriters;
•
the issuance by us of shares of common stock upon
    the exercise of an option or a warrant or the conversion of a
    security outstanding on the date of this prospectus of which the
    underwriters have been advised in writing;
•
grants by us of options to purchase shares of our
    common stock or grants by us of restricted stock pursuant to our
    benefit plans;
•
transactions by any person other than us relating
    to shares of common stock or other securities acquired in open
    market transactions after the completion of the offering of the
    shares of common stock; and
•
transfers by any person other than us to an
    affiliate of such person, a family member of such person or a
    trust created for the benefit of such person or family member,
    provided that any transferee agrees to be bound by the transfer
    restrictions described in this paragraph and subject to certain
    other conditions.
In order to facilitate the offering of the common
stock, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common
stock. Specifically, the underwriters may sell more shares than
they are obligated to purchase under the underwriting agreement,
creating a short position. A short sale is covered if the short
position is no greater than the number of shares available for
purchase by the underwriters under the over-allotment option.
The underwriters can close out a covered short sale by
exercising the over-allotment option or purchasing shares in the
open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other
things, the open market price of shares compared to the price
available under the over-allotment option. The underwriters may
also sell shares in excess of the over-allotment option,
creating a naked short position. The underwriters must close out
any naked short position by purchasing shares in the open
market. A naked short position is more likely to be created if
the underwriters are concerned that there may be downward
pressure on the price of the common stock in the open market
after pricing that could adversely affect investors who purchase
in the offering. As an additional means of facilitating the
offering or to cover any over-allotments, the underwriters may
bid for, and purchase, common stock in the open market to
stabilize the price of the common stock. The underwriting
syndicate may also reclaim selling concessions allowed to an
underwriter or a dealer for distributing the common stock in the
offering, if the syndicate repurchases previously distributed
common stock to cover syndicate short positions or to stabilize
the price of the common stock. These activities may raise or
maintain the market price of the common stock. The underwriters
are not required to engage in these activities, and may end any
of these activities at any time.
A prospectus in electronic format may be made
available on the web sites maintained by one or more
underwriters. The underwriters may agree to allocate a number of
shares to underwriters for sale to their
165
online brokerage account holders. Internet
distributions will be allocated by the representative to
underwriters that may make Internet distributions on the same
basis as other allocations.
We, the selling stockholder and the underwriters
have agreed to indemnify each other against certain liabilities,
including liabilities under the Securities Act.
Relationships with Underwriters
The underwriters and their affiliates have from
time to time provided, and expect to provide in the future,
investment banking, commercial banking and other financial
services to us and our affiliates, including Fortis and the
selling stockholder, for which they have received and may
continue to receive customary fees and commissions.
Directed Share Program
At our request, the underwriters have reserved
for sale as part of the underwritten offering, at the initial
offering price, up
to            shares
offered in this prospectus for our directors, officers and
employees. The number of shares of common stock available for
sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares which
are not so purchased will be offered by the underwriters to the
general public on the same basis as the other shares offered in
this prospectus.
Pricing of the Offering
Prior to this offering, there has been no public
market for the common stock. The initial public offering price
will be determined by negotiations between us, the selling
stockholder and the representative of the underwriters. Among
the factors to be considered in determining the initial public
offering price will be our future prospects and those of our
industry in general, our premiums, earnings and certain other
financial and operating information in recent periods, and the
price-earnings ratios, price-book value ratios, market prices of
securities and certain financial and operating information of
companies engaged in activities similar to ours. The estimated
initial public offering price range set forth on the cover page
of this preliminary prospectus is subject to change as a result
of market conditions and other factors.
166
LEGAL MATTERS
The validity of the common stock will be passed
upon for us by Simpson Thacher & Bartlett LLP, New
York, New York. Certain legal matters in connection with this
offering will be passed upon for the underwriters by Skadden,
Arps, Slate, Meagher & Flom LLP, New York, New York.
Skadden, Arps, Slate, Meagher & Flom LLP has in the past
performed, and continues to perform, legal services for us and
our affiliates.
EXPERTS
The consolidated financial statements of Fortis,
Inc. as of December 31, 2002 and 2001 and for each of the
three years in the period ended December 31, 2002 included
in this prospectus, have been audited by PricewaterhouseCoopers
LLP, independent accountants, as stated in their report
appearing in this prospectus, given on the authority of said
firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC, a Registration
Statement on Form S-1 under the Securities Act with respect
to the common stock offered in this prospectus. This prospectus,
filed as part of the registration statement, does not contain
all of the information set forth in the registration statement
and its exhibits and schedules, portions of which have been
omitted as permitted by the rules and regulations of the SEC.
For further information about us and our common stock, we refer
you to the registration statement and to its exhibits and
schedules. Statements in this prospectus about the contents of
any contract, agreement or other document are not necessarily
complete and, in each instance, we refer you to the copy of such
contract, agreement or document filed as an exhibit to the
registration statement, with each such statement being qualified
in all respects by reference to the document to which it refers.
Anyone may inspect the registration statement and its exhibits
and schedules without charge at the public reference facilities
the SEC maintains at 450 Fifth Street, N.W., Washington,
D.C. 20549. You may obtain copies of all or any part of these
materials from the SEC upon the payment of certain fees
prescribed by the SEC. You may obtain further information about
the operation of the SEC's Public Reference Room by calling
the SEC at 1-800-SEC-0330. You may also inspect these reports
and other information without charge at a web site maintained by
the SEC. The address of this site is http://www.sec.gov.
Upon completion of this offering, we will become
subject to the informational requirements of the Exchange Act
and will be required to file reports, proxy statements and other
information with the SEC. You will be able to inspect and copy
these reports, proxy statements and other information at the
public reference facilities maintained by the SEC at the address
noted above. You also will be able to obtain copies of this
material from the Public Reference Room of the SEC as described
above, or inspect them without charge at the SEC's web
site. We intend to furnish our stockholders with annual reports
containing consolidated financial statements audited by an
independent accounting firm.
167
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
Page
Report of Independent Accountants
F-2
Consolidated Balance Sheets of Fortis, Inc. at
    December 31, 2002 and December 31, 2001
F-3
Consolidated Statements of Operations of Fortis,
    Inc. for the Three Fiscal Years in the Period Ended
    December 31, 2002
F-4
Consolidated Statements of Changes in
    Stockholders' Equity of Fortis, Inc. for the Three Fiscal
    Years in the Period Ended December 31, 2002
F-5
Consolidated Statements of Cash Flows of Fortis,
    Inc. for the Three Fiscal Years in the Period Ended
    December 31, 2002
F-6
Notes to Consolidated Financial Statements of
    Fortis, Inc.
F-8
Unaudited Interim Consolidated Balance Sheets of
    Fortis, Inc. at June 30, 2003 and December 31, 2002
F-54
Unaudited Interim Consolidated Statements of
    Operations of Fortis, Inc. for the Six Months Ended
    June 30, 2003 and June 30, 2002
F-55
Unaudited Interim Consolidated Statements of
    Changes in Stockholders' Equity of Fortis, Inc. for the Six
    Months Ended June 30, 2003 and June 30, 2002
F-56
Unaudited Interim Consolidated Statements of Cash
    Flows of Fortis, Inc. for the Six Months Ended June 30,
    2003 and June 30, 2002
F-57
Notes to Unaudited Interim Consolidated Financial
    Statements of Fortis, Inc.
F-58
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Fortis, Inc.:
In our opinion, the accompanying consolidated
balance sheets and the related consolidated statements of
operations, of changes in stockholders' equity and of cash
flows present fairly, in all material respects, the financial
position of Fortis, Inc. and its subsidiaries at
December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of
the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 28, 2003, except as to Note 23
as to which the date is October 20, 2003
F-2
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At December 31, 2002 and 2001
At December 31,
2002
2001
(in thousands except
number of shares and per
share amounts)
Assets
Investments:
Fixed maturities available for sale, at fair
    value (amortized cost—$7,630,576 in 2002 and $7,470,641 in
    2001)
$
8,035,530
$
7,630,432
Equity securities available for sale, at fair
    value (cost—$264,635 in 2002 and $243,352 in 2001)
271,700
247,139
Commercial mortgage loans on real estate at
    amortized cost
841,940
868,754
Policy loans
69,377
68,236
Short-term investments
684,350
626,727
Other investments
125,870
159,217
Total investments
10,028,767
9,600,505
Cash and cash equivalents
549,648
559,304
Premiums and accounts receivable
401,094
384,437
Reinsurance recoverables
4,649,909
4,751,654
Accrued investment income
126,761
106,161
Deferred acquisition costs
1,313,594
1,094,765
Property and equipment, at cost less accumulated
    depreciation
250,785
233,473
Deferred income taxes, net
168,200
336,450
Goodwill
834,138
2,089,704
Value of businesses acquired
215,245
308,933
Other assets
268,252
285,759
Assets held in separate accounts
3,411,616
4,698,732
Total assets
$
22,218,009
$
24,449,877
Liabilities
Future policy benefits and expenses
$
5,637,127
$
5,392,019
Unearned premiums
3,207,635
3,267,197
Claims and benefits payable
3,543,861
3,405,427
Commissions payable
348,188
366,174
Reinsurance balances payable
167,688
133,694
Funds held under reinsurance
183,838
215,814
Deferred gain on disposal of businesses
462,470
542,271
Accounts payable and other liabilities
1,204,602
1,281,610
Income tax payable
25,191
223,300
Liabilities related to separate accounts
3,411,616
4,698,732
Total liabilities
18,192,216
19,526,238
Commitments and contingencies (note 24)
—
—
Mandatorily redeemable preferred securities of
    subsidiary trusts
1,446,074
1,446,074
Mandatorily redeemable preferred stock
24,660
25,160
Stockholders' equity
Common stock, par value $.10 per share:
Class A: 40,000,000 shares authorized,
    7,750,000 shares issued and outstanding
775
775
Class B: 150,001 shares issued and
    outstanding
15
15
Class C: 400,001 shares issued and
    outstanding
40
40
(Class B and C; 40,000,000 total shares
    authorized)
Additional paid-in capital
2,064,025
2,064,025
Retained earnings
245,219
1,289,346
Accumulated other comprehensive income
244,985
98,204
Total stockholders' equity
2,555,059
3,452,405
Total liabilities, mandatorily redeemable
    preferred securities of subsidiary trusts, mandatorily
    redeemable preferred stock and stockholders' equity
$
22,218,009
$
24,449,877
See the accompanying notes to the consolidated
financial statements
F-3
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Years Ended December 31, 2002, 2001 and
2000
Years Ended December 31,
2002
2001
2000
(in thousands except number of shares
and per share amounts)
Revenues
Net earned premiums and other considerations
$
5,681,596
$
5,242,185
$
5,144,375
Net investment income
631,828
711,782
690,732
Net realized losses on investments
(118,372
)
(119,016
)
(44,977
)
Amortization of deferred gain on disposal of
    businesses
79,801
68,296
10,284
Gain on disposal of businesses
10,672
61,688
11,994
Fees and other income
246,675
221,939
399,571
Total revenues
6,532,200
6,186,874
6,211,979
Benefits, losses and expenses
Policyholder benefits
3,429,145
3,238,925
3,208,054
Amortization of deferred acquisition costs and
    value of business acquired
876,185
875,703
766,904
Underwriting, general and administrative expenses
1,738,077
1,620,931
1,801,196
Amortization of goodwill
—
113,300
106,773
Interest expense
—
14,001
24,726
Distributions on preferred securities of
    subsidiary trusts
118,396
118,370
110,142
Total benefits, losses and expenses
6,161,803
5,981,230
6,017,795
Income before income taxes
370,397
205,644
194,184
Income taxes
110,657
107,591
104,500
Net income before cumulative effect of change in
    accounting principle
259,740
98,053
89,684
Cumulative effect of change in accounting
    principle (note 18)
(1,260,939
)
—
—
Net income (loss)
$
(1,001,199
)
$
98,053
$
89,684
Earnings per share:
Weighted average of basic and diluted shares of
    common stock outstanding
8,300,002
8,300,002
8,208,335
Net income (loss) per share:
Basic and Diluted
Before cumulative effect of accounting change
$
31.29
$
11.81
$
10.93
Cumulative effect of accounting change
(151.92
)
—
—
Total
$
(120.63
)
$
11.81
$
10.93
See the accompanying notes to the consolidated
financial statements
F-4
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
Years Ended December 31, 2002, 2001 and
2000
Accumulated
Additional
Other
Outstanding
Common
Paid-in
Retained
Comprehensive
Shares of
Stock
Capital
Earnings
Income (Loss)
Total
Common Stock
(in thousands except number of shares and per share amounts)
Balance, January 1, 2000
$
775
$
2,064,025
$
1,234,073
$
(134,576
)
$
3,164,297
7,750,000
Issuance of common stock to Parent
55
—
(55
)
—
—
550,002
Dividends on common stock
—
—
(21,111
)
—
(21,111
)
—
Other
—
—
(947
)
—
(947
)
—
Comprehensive income (loss)
Net income
—
—
89,684
—
89,684
—
Net change in unrealized gains on securities
—
—
—
139,375
139,375
—
Foreign currency translation
—
—
—
(3,585
)
(3,585
)
—
Total comprehensive income
203,416
Balance, December 31, 2000
830
2,064,025
1,301,644
1,214
3,367,713
8,300,002
Dividends on common stock
—
—
(109,298
)
—
(109,298
)
—
Other
—
—
(1,053
)
—
(1,053
)
—
Comprehensive income (loss)
Net income
—
—
98,053
—
98,053
—
Net change in unrealized gains on securities
—
—
—
102,623
102,623
—
Foreign currency translation
—
—
—
(5,633
)
(5,633
)
—
Total comprehensive income
84,692
Balance, December 31, 2001
830
2,064,025
1,289,346
98,204
3,452,405
8,300,002
Dividends on common stock
—
—
(41,876
)
—
(41,876
)
—
Other
—
—
(1,052
)
—
(1,052
)
—
Comprehensive income (loss)
Net loss
—
—
(1,001,199
)
—
(1,001,199
)
—
Net change in unrealized gains on securities
—
—
—
173,699
173,699
—
Foreign currency translation
—
—
—
8,332
8,332
—
Pension under-funding, net of income tax benefit
    of $18,980
—
—
—
(35,250
)
(35,250
)
—
Total comprehensive loss
(897,346
)
Balance, December 31, 2002
$
830
$
2,064,025
$
245,219
$
244,985
$
2,555,059
8,300,002
See the accompanying notes to the consolidated
financial statements
F-5
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Years Ended December 31, 2002, 2001 and
2000
Years Ended December 31,
2002
2001
2000
(in thousands except number of shares
and per share amounts)
Operating activities
Net (loss) income
$
(1,001,199
)
$
98,053
$
89,684
Adjustments to reconcile net income to net cash
    provided by operating activities:
Cumulative effect of change in accounting
    principle
1,260,939
—
—
Change in reinsurance recoverable
101,745
335,306
(577,739
)
Change in premiums and accounts receivable
(23,406
)
(82,085
)
(20,954
)
Depreciation and amortization
46,867
43,599
61,897
Change in deferred acquisition costs and value of
    businesses acquired
(126,424
)
(195,648
)
(297,670
)
Change in accrued investment income
(20,600
)
49,223
(15,954
)
Amortization of goodwill
—
113,300
106,773
Change in insurance policy reserves and
    liabilities
325,894
130,621
928,405
Change in accounts payable and other liabilities
(102,996
)
4,449
46,068
Change in commissions payable
(17,986
)
28,729
9,063
Change in reinsurance balances payable
33,994
129,254
42,340
Change in funds held under reinsurance
(31,976
)
(63,315
)
79,651
Amortization of deferred gain on disposal of
    businesses
(79,801
)
(68,296
)
(10,284
)
Change in income taxes
(108,050
)
(11,259
)
48,675
Net realized losses on investments
118,372
119,016
44,977
Gain on disposal of businesses
(10,672
)
(61,688
)
(11,994
)
Other
30,091
(33,103
)
9,878
Net cash provided by operating activities
394,792
536,156
532,816
Investing activities
Sales of:
Fixed maturities available for sale
3,626,752
3,607,260
3,246,522
Equity securities available for sale
113,866
169,124
268,931
Property and equipment
10,488
5,985
971
Other invested assets
75,658
55,141
131,010
Maturities, prepayments, and scheduled redemption
    of:
Fixed maturities available for sale
860,927
528,483
383,127
Purchases of:
Fixed maturities available for sale
(4,780,009
)
(4,164,948
)
(3,483,522
)
Equity securities available for sale
(131,775
)
(212,736
)
(225,159
)
Property and equipment
(74,667
)
(47,783
)
(37,454
)
Other invested assets
(42,311
)
(115,853
)
(102,617
)
Decrease in commercial mortgage loans on real
    estate
26,814
52,862
42,132
(Increase) decrease in short term investments
(57,623
)
(187,340
)
95,101
(Increase) in policy loans
(1,141
)
(3,182
)
(20,501
)
Net cash received (paid) related to
    acquisition/sale of business
12,000
137,840
(326,666
)
Net cash (used in) investing activities
$
(361,021
)
$
(175,147
)
$
(28,125
)
F-6
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Years Ended December 31, 2002, 2001 and
2000—(Continued)
Years Ended December 31,
2002
2001
2000
(in thousands except number of shares
and per share amounts)
Financing activities
Activities related to investment products:
Considerations received
$
—
$
45,577
$
231,779
Surrenders and death benefits
—
(79,646
)
(453,204
)
Interest credited to policyholders
—
7,258
33,200
Proceeds from issuance of trust preferred
    securities
—
—
549,888
Repayment of preferred securities of subsidiary
    trusts
—
(3,664
)
—
Redemption of mandatorily redeemable preferred
    stock
(500
)
—
—
Borrowings from Parent
—
216,924
81,996
Repayment of borrowings from Parent
—
(455,907
)
(850,256
)
Dividends paid
(41,876
)
(109,298
)
(21,111
)
Other
(1,052
)
(1,053
)
(947
)
Net cash used in financing activities
(43,428
)
(379,809
)
(428,655
)
Change in cash and cash equivalents
(9,657
)
(18,800
)
76,036
Cash and cash equivalents at beginning of period
559,305
578,104
502,068
Cash and cash equivalents at end of period
$
549,648
$
559,304
$
578,104
Supplemental information:
Income taxes paid
$
215,866
$
144,767
$
42,284
Distributions on mandatorily redeemable preferred
    securities of subsidiary trusts and interest paid
$
117,114
$
133,667
$
112,816
Non cash activities:
Pension under funding, net
35,250
—
—
Foreign currency translation
8,332
(5,633
)
(3,585
)
Issuance of preferred shares
—
—
3,000
Issuance of 550,002 shares to the parent
—
—
55
See the accompanying notes to the consolidated
financial statements
F-7
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 2002, 2001 and
2000
1.     Nature of
Operations
Fortis, Inc. (the "Company") is a
holding company provider of specialized insurance products and
related services in North America and selected other markets.
The Company is incorporated in the State of Nevada and is
indirectly wholly owned by Fortis N.V. of The Netherlands and
Fortis SA/NV of Belgium (collectively, the "Parent")
through their affiliates, including their wholly owned
subsidiary, Fortis Insurance N.V. (see note 11).
Through its operating subsidiaries, the Company
provides creditor-placed homeowners insurance, manufactured
housing homeowners insurance, debt protection administration,
credit insurance, warranties and extended service contracts,
individual health and small employer group health insurance,
group dental insurance, group disability insurance, group life
insurance and pre-funded funeral insurance. The Company had
certain individual life insurance policies, annuity contracts
and mutual fund operations during 2001 and 2000, which were sold
to The Hartford Financial Services Group ("The
Hartford") (see note 4).
2.     Summary of
Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America
("GAAP"). The preparation of financial statements in
conformity with GAAP requires management to make estimates when
recording transactions resulting from business operations based
on information currently available. The most significant items
on the Company's balance sheet that involve accounting
estimates and actuarial determinations are the value of business
acquired, goodwill, reinsurance recoverables, valuation of
investments, deferred acquisition costs ("DAC"),
liabilities for future policy benefits and expenses, and claims
and benefits payable. The accounting estimates and actuarial
determinations are sensitive to market conditions, investment
yields, mortality, morbidity, commissions and other acquisition
expenses, and terminations by policyholders. As additional
information becomes available, or actual amounts are
determinable, the recorded estimates will be revised and
reflected in operating results. Although some variability is
inherent in these estimates, the Company believes the amounts
provided are reasonable.
Dollar amounts are presented in U.S. dollars
and all amounts are in thousands except for number of shares and
per share amounts.
Principles of Consolidation
The consolidated financial statements include the
accounts of the Company and all of its wholly owned
subsidiaries. All significant inter-company transactions and
balances are eliminated in consolidation. See notes 3 and 4
for acquisitions and dispositions of businesses.
Comprehensive Income
Comprehensive income is comprised of net income
and other comprehensive income, which includes foreign currency
translation, unrealized gains and losses on securities
classified as available for sale, less deferred income taxes,
amounts attributable to universal life and annuity contracts,
and direct charges for additional minimum pension liability.
Reclassifications
Certain amounts in the 2001 and 2000 financial
statements have been reclassified to conform to the 2002
presentation.
F-8
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Cash and Cash Equivalents
The Company considers cash on hand, all operating
cash and working capital cash to be cash equivalents. These
amounts are carried principally at cost, which approximates fair
value.
Investments
The Company's investment strategy is
developed based on many factors including appropriate insurance
asset and liability management, rate of return, maturity, credit
risk, tax considerations and regulatory requirements.
Fixed maturities and equity securities are
classified as available-for-sale and reported at fair value. If
the fair value is higher than the amortized cost for debt
securities or the purchase cost for equity securities, the
excess is an unrealized gain; and if lower than cost, the
difference is an unrealized loss. The net unrealized gains and
losses, less deferred income taxes and amounts attributable to
universal life and annuity contracts, are included in
accumulated other comprehensive income.
Commercial mortgage loans on real estate are
reported at unpaid balances, adjusted for amortization of
premium or discount, less allowance for losses. Allowances, if
necessary, are established for mortgage loans based on the
difference between the unpaid loan balance and the estimated
fair value of the underlying real estate when such loans are
determined to be in default as to scheduled payments. The change
in the allowance for losses is recorded as realized gains and
losses on investments. Such allowances are based on the present
value of expected future cash flows discounted at the
loan's effective interest rate or at the loan's
observable market price, or the fair market value of the
collateral if the loan is collateral dependent.
Policy loans are reported at unpaid principal
balances, which do not exceed the cash surrender value of the
underlying policies.
Short-term investments include all investment
cash and highly liquid investments. These amounts are carried
principally at cost, which approximates fair value.
Other investments consist primarily of
investments in joint ventures and partnerships. The joint
ventures and partnerships are valued according to the equity
method.
The Company regularly monitors its investment
portfolio to ensure that investments that may be other than
temporarily impaired are identified in a timely fashion and
properly valued, and that any impairments are charged against
earnings in the proper period. The Company's methodology to
identify potential impairments requires professional judgment
and considers securities whose market price is equal to 85% or
less of their original purchase price. Any security that meets
this criterion, along with any other holdings related to this
issuer that the Company believes warrant monitoring, are added
to the impairment watchlist, which is discussed at monthly
meetings attended by members of the Company's investment,
accounting and finance departments. Any security whose price
decrease is deemed other-than-temporary is written down to its
then current market level. Inherently, there are risks and
uncertainties involved in making these judgments. Changes in
circumstances and critical assumptions such as a continued weak
economy, a more pronounced economic downturn or unforeseen
events which affect one or more companies, industry sectors or
countries could result in additional write downs in future
periods for impairments that are deemed to be
other-than-temporary.
Realized gains and losses on sales of investments
and declines in value judged to be other-than-temporary are
recognized on the specific identification basis.
Investment income is recorded as earned net of
investment expenses.
F-9
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The Company anticipates prepayments of principal
in the calculation of the effective yield for mortgage-backed
securities and structured securities. For such securities, the
retrospective method is used to adjust the effective yield
except for interest-only securities, which are valued using the
prospective method.
Reinsurance
Reinsurance recoverables include amounts related
to paid benefits and estimated amounts related to unpaid policy
and contract claims, future policyholder benefits and
policyholder contract deposits. The cost of reinsurance is
accounted for over the terms of the underlying reinsured
policies using assumptions consistent with those used to account
for the policies. Amounts recoverable from reinsurers are
estimated in a manner consistent with claim and claim adjustment
expense reserves or future policy benefits reserves and are
reported in the consolidated balance sheets. The cost of
reinsurance related to long-duration contracts is accounted for
over the life of the underlying reinsured policies. The ceding
of insurance does not discharge the Company's primary
liability to insureds. An estimated allowance for doubtful
accounts is recorded on the basis of periodic evaluations of
balances due from reinsurers, reinsurer solvency,
management's experience and current economic conditions.
Deferred Acquisition Costs
The costs of acquiring new business that vary
with and are primarily related to the production of new business
have been deferred to the extent that such costs are deemed
recoverable from future premiums or gross profits. Acquisition
costs primarily consist of commissions, policy issuance
expenses, premium tax and certain direct marketing expenses.
A premium deficiency is recognized immediately by
a charge to the statement of operations as a reduction of DAC to
the extent that future policy premiums, including anticipation
of interest income, are not adequate to recover all DAC and
related claims, benefits and expenses.
Short Duration Contracts
DAC relating to property contracts, warranty and
extended service contracts, and single premium credit insurance
contracts amortized over the term of the contracts in relation
to premiums earned.
Acquisition costs relating to monthly pay credit
insurance business consist mainly of direct marketing costs and
are deferred and amortized over the estimated average terms of
the underlying contracts.
Acquisition costs on small group medical, group
term life and group disability consist primarily of commissions
to agents and brokers, which are level, and compensation to
representatives, which is spread out and is not front-end
loaded. These costs do not vary with the production of new
business. As a result, these costs are not deferred, but rather
they are recorded in the statement of operations in the period
in which they are incurred.
Long Duration Contracts
Acquisition costs for pre-funded funeral life
insurance policies and life insurance policies no longer offered
are deferred and amortized in proportion to anticipated premiums
over the premium-paying period.
For pre-funded funeral annuity contracts and
universal life and annuities no longer offered, DAC is amortized
in proportion to the present value of estimated gross margins or
profits from investment, mortality, expense margins and
surrender charges over the estimated life of the policy or
contract. The assumptions used for the estimates are consistent
with those used in computing the policy or contract liabilities.
F-10
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Acquisition costs relating to individual medical
contracts are deferred and amortized over the estimated average
terms of the underlying contracts.
Acquisition costs on the FFG and LTC disposed
businesses were written off when the businesses were sold.
Property and Equipment
Property and equipment are reported at cost less
accumulated depreciation. Depreciation is calculated on a
straight-line basis over estimated useful lives with a maximum
of 39.5 years for buildings and 7 years for furniture
and equipment. Expenditures for maintenance and repairs are
charged to income as incurred. Expenditures for improvements are
capitalized and depreciated over the remaining useful life of
the asset.
Goodwill
Goodwill represents the excess of acquisition
costs over the net fair values of identifiable assets acquired
and liabilities assumed in a business combination. The Company
adopted Statement of Financial Accounting Standards No. 142
("FAS 142"),
Goodwill and Other Intangible
Assets,
as of January 1, 2002. Pursuant to
FAS 142, goodwill is deemed to have an indefinite life and
should not be amortized, but rather tested at least annually for
impairment. The goodwill impairment test has two steps. The
first identifies potential impairments by comparing the fair
value of a reporting unit with its book value, including
goodwill. If the fair value of the reporting unit exceeds the
carrying amount, goodwill is not impaired and the second step is
not required. If the carrying value exceeds the fair value, the
second step calculates the possible impairment loss by comparing
the implied fair value of goodwill with the carrying amount. If
the implied goodwill is less than the carrying amount, a write
down is recorded. Prior to the adoption of FAS 142,
goodwill was amortized over 20 years. Upon the adoption of
FAS 142, the Company ceased amortizing goodwill, and the
Company recognized a $1,260,939 impairment charge as the
cumulative effect of a change in accounting principle. The
measurement of fair value was determined based on a valuation
report prepared by an independent valuation firm. The valuation
was based on an evaluation of ranges of future discounted
earnings, public company trading multiples and acquisitions of
similar companies. Certain key assumptions considered include
forecasted trends in revenues, operating expenses and effective
tax rates.
Value of Businesses Acquired
The value of businesses acquired
("VOBA") is the identifiable intangible asset
representing the value of the insurance businesses acquired. The
amount is determined using best estimates for mortality, lapse,
maintenance expenses and investment returns at date of purchase.
The amount determined represents the purchase price paid to the
seller for producing the business. Similar to the amortization
of DAC, the amortization of VOBA is generally over the premium
payment period for traditional life insurance policies over the
expected lifetime of the policies for limited payment policies
or over the estimated gross profits or margins for universal
life or annuities.
VOBA is tested for recoverability annually. If it
is determined that future policy premiums and investment income
or gross profits are not adequate to cover related losses or
loss expenses, then VOBA is charged to current earnings.
Separate Accounts
Assets and liabilities associated with separate
accounts relate to premium and annuity considerations for
variable life and annuity products for which the
contract-holder, rather than the Company, bears the investment
risk. Separate account assets are reported at fair value.
Revenues and expenses related to the
F-11
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
separate account assets and liabilities, to the
extent of benefits paid or provided to the separate account
policyholders, are excluded from the amounts reported in the
accompanying consolidated statements of operations. Through
April 1, 2001, the Company received administrative fees for
managing the funds and other fees for assuming mortality and
certain expense risks. Such fees were included in net earned
premiums and other considerations in the consolidated statements
of operations. Since April 1, 2001, all fees have been
ceded to The Hartford (see note 4).
Income Taxes
Current federal income taxes are charged to
operations based upon amounts estimated to be payable or
recoverable as a result of taxable operations for the current
year. Deferred income taxes are recognized for temporary
differences between the financial reporting basis and income tax
basis of assets and liabilities, based on enacted tax laws and
statutory tax rates applicable to the periods in which we expect
the temporary differences to reverse.
Other Assets
Other assets include prepaid items and intangible
assets. Identifiable intangible assets with finite lives,
including costs capitalized relating to developing software for
internal use, are amortized on a straight line basis over their
estimated useful lives. The Company tests the intangible assets
for impairment whenever circumstances warrant, but at least
annually. If impairment exists, the excess of the un-amortized
balance over the fair value of the intangible assets will be
charged to income at that time. Other assets also include the
Company's 28% interest in Private Health Care Systems
("PHCS"). The Company was a co-founder of PHCS, a
provider network. The Company accounts for PHCS according to the
equity method.
Foreign Currency Translation
For those foreign affiliates where the foreign
currency is the functional currency, unrealized foreign exchange
gains (losses) net of income taxes have been reflected in
Stockholders' Equity under the caption "Accumulated
other comprehensive income."
Premiums
Short Duration Contracts
The Company's short duration contracts are
those on which the Company recognizes revenue on a pro-rata
basis over the contract term. The Company's short duration
contracts primarily include group term life, group disability,
medical and dental, property, credit insurance, warranties and
extended service contracts.
Long Duration Contracts
Currently, the Company's long duration
contracts being sold are pre-funded life insurance and
annuities. Revenue is recognized in the life insurance contracts
when due over the premium paying period. For annuity contracts,
revenues consist of charges assessed against policy balances.
For universal life insurance and annuity
contracts no longer offered, revenues also consist of charges
assessed against policy balances.
For the FFG and LTC businesses previously sold,
all revenue is ceded to The Hartford and John Hancock,
respectively.
For pre-funded funeral life insurance policies
and annuity contracts any excess of the gross premium over the
net premium is deferred and is recognized in income in a
constant relationship with the insurance in force.
F-12
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Premiums for LTC life insurance, annuity
contracts no longer offered, and traditional life insurance
contracts within FFG are recognized as revenue when due from the
policyholder.
Reinsurance Assumed
Reinsurance premiums assumed are estimated based
on information received from ceding companies and any subsequent
differences arising on such estimates are recorded in the period
in which they are determined.
Fee Income
The Company derives income from fees received
from providing administration services. Fee income is earned
when services are performed.
Reserves
Reserves are established according to generally
accepted actuarial principles and are based on a number of
factors. These factors include experience derived from
historical claim payments and actuarial assumptions to arrive at
loss development factors. Such assumptions and other factors
include trends, the incidence of incurred claims, the extent to
which all claims have been reported, and internal claims
processing charges. The process used in computing reserves
cannot be exact, particularly for liability coverages, since
actual claim costs are dependent upon such complex factors as
inflation, changes in doctrines of legal liability and damage
awards. The methods of making such estimates and establishing
the related liabilities are periodically reviewed and updated.
Short Duration Contracts
For short duration contracts, claims and benefits
payable reserves are recorded when insured events occur. The
liability is based on the expected ultimate cost of settling the
claims. The claims and benefits payable reserves include
(1) case basis reserves for known but unpaid claims as of
the balance sheet date; (2) incurred but not reported
("IBNR") reserves for claims where the insured event
has occurred but has not been reported to the Company as of the
balance sheet date; and (3) loss adjustment expense
reserves for the expected handling costs of settling the claims.
For group disability the case base reserves and
the IBNR are calculated based on historical experience and on
assumptions relating to claim severity, frequency, and other
factors. These assumptions are modified as necessary to reflect
anticipated trends, with any adjustment being reflected in
current operations. We establish reserves for disability
policies in an amount equal to the net present value of the
expected claims future payments. Group long-term disability
reserves are discounted to the valuation date at the valuation
interest rate. The valuation interest rate is determined by
taking into consideration actual and expected earned rates on
our asset portfolio, with adjustments for investment expenses
and provisions for adverse deviation.
The Company has exposure to asbestos,
environmental and other general liability claims arising from
its participation in various reinsurance pools from 1971 through
1983. The Company carried case reserves for these liabilities as
recommended by the various pool managers and bulk reserves for
claims incurred but not yet reported of $40 million (before
reinsurance) and $39 million (after reinsurance) in the
aggregate at December 31, 2002. It is not possible to make
a reasonable actuarial estimate of the ultimate liabilities due
to the general lack of sufficient detailed data, reporting
delays, and absence of a generally accepted actuarial
methodology for those exposures. There are significant
unresolved industry legal issues, including such items as
whether coverage exists and what constitutes an occurrence. In
addition, the determination of ultimate damages and the final
allocation of losses to financially responsible parties are
highly uncertain. Accordingly, any estimation of these
liabilities is subject to greater than normal variation and
uncertainty.
F-13
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Unearned premium reserves are maintained for the
portion of the premiums on short duration contracts that is
related to the unexpired period of the policy.
Long Duration Contracts
Future policy benefits and expense reserves on
LTC, life insurance policies that are no longer offered,
individual medical and the traditional life insurance contracts
within FFG are recorded at the present value of future benefits
to be paid to policyholders and related expenses less the
present value of the future net premiums. These amounts are
estimated and include assumptions as to the expected investment
yield, inflation, mortality, morbidity and withdrawal rates as
well as other assumptions that are based on the Company's
experience. These assumptions reflect anticipated trends and
include provisions for possible unfavorable deviations.
Future policy benefits and expense reserves for
pre-funded funeral annuities, universal life insurance policies
and annuity contracts no longer offered, and the variable life
insurance and annuity contracts in FFG consist of policy account
balances before applicable surrender charges and certain
deferred policy initiation fees that are being recognized in
income over the terms of the policies. Policy benefits charged
to expense during the period include amounts paid in excess of
policy account balances and interest credited to policy account
balances.
The benefit liability for pre-funded funeral life
insurance contracts includes the amount of gross premium that is
received in excess of the net premium and accounted for as
unearned premium revenue.
Changes in the estimated liabilities are charged
or credited to operations as the estimates are revised.
Stock Based Compensation
The Company accounts for the Fortis, Inc. stock
option plan as prescribed by APB Opinion No. 25,
Accounting for Stock Issued to Employees
("APB 25") and related interpretations.
Accordingly, compensation cost is charged to income over the
service period (vesting period) and is adjusted for subsequent
changes in the market value of the stock that are subsequently
amortized over the vesting period.
The following table illustrates the effect of
applying the fair value recognition provisions of FAS 123,
Accounting for Stock Based Compensation
on net income and
earnings per share. Pro forma information of net (loss) income
and net (loss) income per share assuming the Company had applied
the fair value recognition provisions of FAS 123, is as
follows:
Years Ended December 31,
2002
2001
2000
Net (loss) income as reported
$
(1,001,199
)
$
98,053
$
89,684
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects
(630
)
(740
)
(874
)
Add: Total stock-based employee compensation
    expense determined under intrinsic value based method for all
    awards, net of related tax effects
—
(703
)
(A)
454
Pro forma net (loss) income
$
(1,001,829
)
$
96,610
$
89,264
Earnings per share:
Basic and diluted net (loss) income per
    share as reported
$
(120.63
)
$
11.81
$
10.93
Basic and diluted net (loss) income per
    share pro forma
$
(120.70
)
$
11.64
$
10.87
F-14
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
(A)
Represents reversal of expense accrual due to
    reduction of intrinsic value.
The fair value of each option granted was
estimated at the date of grant using the Black-Scholes multiple
option approach with the following assumptions for options
granted during the three-year period ended December 31,
2002.
2002
2001
2000
Risk-free U.S. dollar interest rate
5.03
%
5.09
%
6.44
%
Risk-free Euro interest rate
4.92
%
4.75
%
5.07
%
Weighted averaged expected life
8.50
8.30
8.10
Expected volatility
32.70
%
32.70
%
32.70
%
Expected dividend yield
1.98
%
1.98
%
1.98
%
Business Combinations
Effective July 1, 2001, the Company adopted
Financial Accounting Standard 141,
Business
Combinations
("FAS 141"). FAS 141 requires
that all business combinations initiated after June 30,
2001 be accounted for under the purchase method of accounting
and establishes specific criteria for the recognition of
intangible assets separately from goodwill. The Company followed
this statement for the acquisitions of the Dental Benefits
Division ("DBD") of Protective Life Corporation
("Protective") and CORE, Inc. ("CORE") (see
note 3). For the years ended December  31, 2002 and
2001, the Company recognized $2,700 and $0, respectively, of
amortization expense related to other identifiable intangible
assets, which are included in underwriting, general and
administrative expenses in the consolidated statements of
operations.
Recent Accounting
    Pronouncements
In June 2002, the Financial Accounting Standards
Board ("FASB") issued FAS 146,
Accounting for
Costs Associated with Exit or Disposal Activities
("FAS 146"). This statement addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
("EITF") Issue 94-3,
Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit on
Activity (Including Certain Costs Incurred in Restructuring
("EITF 94-3"). EITF 94-3 required accrual of
liabilities related to exit and disposal activities at a plan
(commitment) date. FAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. The provisions of this statement
are effective for exit or disposal activities that are initiated
after December 31, 2002. The Company adopted this Statement
on January 1, 2003. The adoption of this standard did not
have a material impact on the Company's financial position
or the results of operations.
In November 2002, the FASB issued
Interpretation 45,
Guarantor's Accounting and
Disclosure Requirements for Guarantees
("FIN 45"). FIN 45 requires that a liability
be recognized at the inception of certain guarantees for the
fair value of the obligation, including the ongoing obligation
to stand ready to perform over the term of the guarantee.
Guarantees, as defined in FIN 45, include contracts that
contingently require the Company to make payments to a
guaranteed party based on changes in an underlying obligation
that is related to an asset, liability or equity security of the
guaranteed party, performance guarantees, indemnification
agreements and indirect guarantees of indebtedness of others.
This new accounting standard is effective for certain guarantees
issued or modified after December 31, 2002. In addition,
FIN 45 requires certain additional disclosures. The Company
adopted this standard on January 1, 2003, and the adoption
did not have a material impact on the Company's financial
position or the results of operations.
F-15
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
In December 2002, the FASB issued FAS 148,
Accounting for Stock-Based Compensation—Transition and
Disclosure—an Amendment of FAS No. 123
("FAS 148"). FAS 148 provides alternative
methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee
compensation. FAS 148 also amends the disclosure
requirements of FAS 123,
Accounting for Stock-Based
Compensation,
to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect
of the method used on reported results. This guidance is
effective for fiscal years ending after December 15, 2002,
for transition guidance and annual disclosure provisions and is
effective for interim reports beginning after December 15,
2002, for interim disclosure provisions. The Company adopted
this standard for the year ended December 31, 2002.
In January 2003, the FASB issued
Interpretation 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51
("ARB 51"), which clarifies the consolidation
accounting guidance in ARB 51,
Consolidated Financial
Statements,
as it applies to certain entities in which
equity investors who do not have the characteristics of a
controlling financial interest or do not have sufficient equity
at risk for the entities to finance their activities without
additional subordinated financial support from other parties.
Such entities are known as variable interest entities
("VIEs"). FIN 46 requires that the primary
beneficiary of a VIE consolidates the VIE. FIN 46 also
requires new disclosures for significant relationships with
VIEs, whether or not consolidation accounting is used or
anticipated. The consolidation requirements of FIN 46 apply
immediately to VIEs created after January 31, 2003. They
apply in the first fiscal year or interim period beginning after
June 15, 2003 to VIEs in which an enterprise holds a
variable interest that was acquired before February 1,
2003. On October 8, 2003, the FASB deferred the adoption of
FIN 46 until reporting periods ending after
December 15, 2003. The Company is assessing whether the
adoption of this interpretation will have a material impact on
the Company's financial position or the results of
operations.
In April 2003, the FASB's Derivative
Implementation Group ("DIG") released FAS 133
Implementation Issue B36,
Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments that Incorporate
Credit Risk Exposures that are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under those
Instruments
("DIG B36"). DIG B36
addresses whether FAS 133 requires bifurcation of a debt
instrument into a debt host contract and an embedded derivative
if the debt instrument incorporates both interest rate risk and
credit risk exposures that are unrelated or only partially
related to the creditworthiness of the issuer of that
instrument. Under DIG B36, modified coinsurance and
coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or a
total return debt index are examples of arrangements containing
embedded derivatives requiring bifurcation. The effective date
of the implementation guidance is October 1, 2003. The
Company is assessing whether adoption of DIG B36 will have
a material impact on the Company's financial position or
the results of operations.
In April 2003, the FASB issued FAS 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities
("FAS 149"). This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under
FAS 133,
Accounting for Derivative Instruments and
Hedging Activities
. This Statement is effective
prospectively for contracts entered into or modified after
June 30, 2003 and prospectively for hedging relationships
designated after June 30, 2003. The Company has assessed
that the adoption of this standard will not have a material
impact on the Company's financial position or the results
of operations.
In May 2003, the FASB issued FAS 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity
("FAS 150"). This statement improves the
accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity, and
requires that these
F-16
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
instruments be classified as liabilities in the
consolidated balance sheets. This statement is effective
prospectively for financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after
June 15, 2003. This statement shall be implemented by
reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance
date of the statement and still existing at the beginning of the
interim period of adoption. The Company has assessed that the
adoption of this standard will result in a reclassification of
mandatorily redeemable preferred securities of subsidiary trusts
and mandatorily redeemable preferred stock from mezzanine to
liabilities, and will not have a material impact on the
Company's results of operations.
On July 7, 2003, the Accounting Standards
Executive Committee ("AcSEC") of the American
Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 03-1,
Accounting and Reporting
by Insurance Enterprises for Certain Nontraditional Long
Duration Contracts and for Separate Accounts
("SOP
03-1"). SOP 03-1 provides guidance on a number of topics
unique to insurance enterprises, including separate account
presentation, interest in separate accounts, gains and losses on
the transfer of assets from the general account to a separate
account, liability valuation, returns based on a contractually
referenced pool of assets or index, accounting for contracts
that contain death or other insurance benefit features,
accounting for reinsurance and other similar contracts,
accounting for annuitization benefits and sales inducements to
contract holders. SOP 03-1 will be effective for the
Company's financial statements on January 1, 2004. The
Company is assessing whether adoption of this statement will
have a material impact on the Company's financial position
or the results of operations.
3.     Acquisitions
The following transactions have been accounted
for under the purchase method. Consequently, the purchase price
has been allocated to assets acquired and liabilities assumed
based on the relative fair values. The results of operations of
the businesses acquired have been included in the consolidated
financial statements since the date of acquisition.
Dental Benefits Division ("DBD")
    of Protective Life Corporation
    ("Protective")
On December 31, 2001, the Company acquired
DBD, including the acquisition through reinsurance of
Protective's indemnity dental, life, and disability
businesses and purchase of the stock of its prepaid dental
subsidiaries.
Protective's Dental Benefits Division at the
time of acquisition was a leading provider of voluntary
(employee-paid) indemnity dental and prepaid dental coverage for
employee groups. As a result of the acquisition, the Company
expects to be a leading provider of dental insurance products in
the voluntary (employee-paid) market. It also expects to reduce
costs through economies of scale.
F-17
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The following table summarizes the purchase price
and net cash paid for the transaction:
As of
December 31,
2001
Cash
$
33,200
Invested assets
16,200
Goodwill
156,400
Other intangible assets
54,300
Accounts receivable and other assets
60,300
Purchase price
320,400
Net liabilities assumed
72,000
Net cash paid
$
248,400
Of the $54,300 of acquired intangible assets,
$5,600 was assigned to licenses that are not subject to
amortization. The remaining $48,700 consists of the current
groups in force and a dental provider network, which are
amortized on a straight-line basis over their estimated useful
lives, which range from 20 to 30 years.
The following table reflects the results of
operations on an unaudited pro forma basis as if the acquisition
of DBD had been completed on January 1, 2000. The pro forma
results include estimates and assumptions which management
believes are reasonable. However, pro forma results do not
include the effects of synergies and cost reduction initiatives
directly related to the acquisitions. The pro forma financial
information is not necessarily indicative of the operating
results that would have occurred had the acquisitions been
consummated as of the dates indicated, nor are they necessarily
indicative of future operating results.
Unaudited Pro
Forma Information
for the Year Ended
December 31,
2001
2000
Revenues
$
321,900
$
334,400
Net income
$
21,300
$
23,400
CORE, Inc. ("CORE")
On July 12, 2001, the Company acquired 100%
of the outstanding common shares of CORE for approximately
$57,000 in cash. CORE at the time of acquisition was a leading
national provider of employee absence management services and a
major provider of disability reinsurance management services to
middle-market insurance carriers. As a result of the
acquisition, the Employee Benefits segment derives expertise in
disability services and solutions, including clinical disability
management and Family and Medical Leave Act administration. The
segment also expects to realize improvements in pricing accuracy
and duration care management through direct access to
CORE's data.
American Memorial Life Insurance Company
    ("AMLIC")
On October 1, 2000, the Company acquired
100% of the outstanding common shares of AMLIC from Service
Corporation International ("SCI") for $210,420 in
cash. AMLIC is a South Dakota-based pre-funded funeral insurance
company. At the date of purchase the Company entered into a
10-year exclusive North American pre-funded funeral insurance
marketing agreement with SCI. Goodwill of $14,806 was recorded
on the purchase.
F-18
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The following table summarizes the estimated fair
values of the assets and liabilities at the date of acquisition.
As of
October 1,
2000
Cash and investments
$
774,076
Goodwill
14,806
VOBA
170,171
Other assets
329,014
Total assets acquired
1,288,067
Policy liabilities
743,956
Accounts payable and other liabilities
333,691
Total liabilities
1,077,647
Net purchase price
$
210,420
The following table reflects the results of
operations on an unaudited pro forma basis as if the acquisition
of AMLIC had been completed on January 1, 2000. The pro
forma results for 2000 include estimates and assumptions which
management believes are reasonable. However, pro forma results
do not include the effects of synergies and cost reduction
initiatives directly related to the acquisition. The pro forma
financial information is not necessarily indicative of the
operating results that would have occurred had the acquisition
been consummated as of the date indicated, nor is it necessarily
indicative of future operating results.
Unaudited
Pro Forma
Information for
the Year Ended
December 31,
2000
Revenues
$
316,860
Net income
$
20,144
4.     Dispositions
Neighborhood Health Partnership
    ("NHP")
On June 28, 2002, the Company sold its 50%
ownership in NHP to NHP Holding LLC for $12,000. NHP is a
Florida Health Maintenance Organization. The Company recorded a
pre-tax gain on sale of $10,672.
Fortis Financial Group
    ("FFG")
On April 2, 2001, the Company sold its FFG
business to The Hartford for $1,086,752, net of expenses. FFG
included certain individual life insurance policies, annuities
and mutual fund operations. The transaction was structured as a
stock sale for the mutual fund management operations and as a
reinsurance arrangement for the insurance operations (see
note 13).
The reinsurance contracts did not legally replace
the Company as the insurer to policyholders or extinguish the
Company's liabilities to its policyholders. The reserves
for this block of business are included in the Company's
reserves (see note 14).
F-19
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The sale resulted in a pre-tax gain of $623,071
of which $61,688 was for the mutual fund operations and $3,854
was for property and equipment. The net assets sold related to
the stock and property and equipment sale were $66,210.
A $557,529 pre-tax gain related to the
reinsurance contracts was deferred and is being recognized over
the remaining life of the related contracts. During 2002 and
2001, the Company recognized pre-tax income of approximately
$73,024 and $59,647, respectively, reflecting the amortization
of a portion of the deferred gain in the results of operations.
Associated California State Insurance
    Agencies, Inc. ("ACSIA")
On May 11, 2000, the Company sold 100% of
the issued and outstanding stock of ACSIA to Conseco Corporation
for approximately $32,905 in cash. ACSIA is a distributor of
long-term care insurance. The Company recorded a pre-tax gain on
sale of $11,994.
Long-Term Care ("LTC") Insurance
    Business
On March 1, 2000, the Company sold its LTC
business to John Hancock Mutual Life Insurance Company for
$164,000. The business was sold via a 100% coinsurance agreement
whereby the Company ceded substantially all assets and
liabilities related to its long-term care business. The
reinsurance contracts entered into did not legally replace the
Company as the insurer to policyholders or extinguish its
liabilities to these policyholders. Therefore, the transaction
resulted in a deferred pre-tax gain of $51,431, which is being
recognized over the remaining lives of the related contracts.
During 2002, 2001 and 2000, the Company recognized pre-tax
income of approximately $5,297, $6,979 and $8,384, respectively,
reflecting the amortization of a portion of the deferred gain in
the results of operations. As part of the sale, the Company
transferred various other assets and liabilities and recorded
reinsurance recoverables of $321,000.
F-20
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
5.     Investments
The amortized cost and fair value of fixed
maturities and equity securities at December 31, 2002 were
as follows:
Cost or
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Fixed maturities
Bonds:
United States Government and government agencies
    and authorities
$
1,576,339
$
70,549
$
(26
)
$
1,646,862
States, municipalities and political subdivisions
196,186
15,441
(115
)
211,512
Foreign governments
202,154
19,096
(17,413
)
203,837
Public utilities
834,021
54,940
(9,875
)
879,086
All other corporate bonds
4,821,876
298,955
(26,598
)
5,094,233
Total fixed maturities
$
7,630,576
$
458,981
$
(54,027
)
$
8,035,530
Equity securities
Common stocks:
Public utilities
$
19
$
—
$
(12
)
$
7
Banks, trusts and insurance companies
14,043
1,410
(1,641
)
13,812
Industrial, miscellaneous and all other
2,392
1,737
(95
)
4,034
Non-redeemable preferred stocks:
Non-sinking fund preferred stocks
248,181
7,592
(1,926
)
253,847
Total equity securities
$
264,635
$
10,739
$
(3,674
)
$
271,700
F-21
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The amortized cost and fair value of fixed
maturities and equity securities at December 31, 2001 were
as follows:
Cost or
Gross
Gross
Amortized
Unrealized
Unrealized
Fair
Cost
Gains
Losses
Value
Fixed maturities
Bonds:
United States Government and government agencies
    and authorities
$
1,160,207
$
35,412
$
(3,778
)
$
1,191,841
States, municipalities and political subdivisions
239,174
10,235
(1,042
)
248,367
Foreign governments
229,145
5,542
(450
)
234,237
Public utilities
1,228,057
37,056
(29,324
)
1,235,789
All other corporate bonds
4,614,058
183,033
(76,893
)
4,720,198
Total fixed maturities
$
7,470,641
$
271,278
$
(111,487
)
$
7,630,432
Equity securities
Common stocks:
Banks, trusts and insurance companies
$
28,555
$
3,305
$
(4,486
)
$
27,374
Industrial, miscellaneous and all other
18,734
5,198
(39
)
23,893
Non-redeemable preferred stocks:
Non-sinking fund preferred stocks
196,063
3,306
(3,497
)
195,872
Total equity securities
$
243,352
$
11,809
$
(8,022
)
$
247,139
The amortized cost and fair value of fixed
maturities at December 31, 2002 by contractual maturity are
shown below. Expected maturities may differ from contractual
maturities because issuers of the securities may have the right
to call or prepay obligations with or without call or prepayment
penalties.
Amortized
Cost
Fair Value
Due in one year or less
$
271,422
$
273,644
Due after one year through five years
1,990,498
2,084,678
Due after five years through ten years
1,646,665
1,732,441
Due after ten years
2,312,687
2,482,623
Total
6,221,272
6,573,386
Mortgage and asset backed securities
1,409,304
1,462,144
Total
$
7,630,576
$
8,035,530
Proceeds from sales of available for sale
securities were $3,740,619, $3,857,865 and $3,515,453 during
2002, 2001 and 2000 respectively. Gross gains of $117,612,
$115,202 and $59,917 and gross losses of $150,951, $140,472 and
$114,077 were realized on these sales in 2002, 2001 and 2000,
respectively.
F-22
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Major categories of net investment income were as
follows:
Years ended December 31,
2002
2001
2000
Fixed maturities
$
510,121
$
564,207
$
540,215
Equity securities
22,674
31,075
26,560
Commercial mortgage loans on real estate
77,913
81,816
97,946
Policy loans
3,511
7,109
12,607
Short-term investments
8,510
6,604
9,509
Other investments
19,546
17,656
6,171
Cash and cash equivalents
9,079
15,274
14,055
Investment expenses
(19,526
)
(11,959
)
(16,331
)
Net investment income
$
631,828
$
711,782
$
690,732
The net realized gains (losses) recorded in
income for 2002, 2001 and 2000 are summarized as follows:
Years ended December 31,
2002
2001
2000
Fixed maturities
$
(120,939
)
$
(90,727
)
$
(77,964
)
Equity securities
2,305
(12,776
)
18,382
Total marketable securities
(118,634
)
(103,503
)
(59,582
)
Real estate
80
(356
)
281
Other
182
(15,157
)
14,324
Total
$
(118,372
)
$
(119,016
)
$
(44,977
)
The Company recorded $85,295, $78,232 and $5,421
of pre-tax realized losses in 2002, 2001 and 2000, respectively,
associated with other-than-temporary declines in value of
available for sale securities.
The Company has made commercial mortgage loans,
collateralized by the underlying real estate, on properties
located throughout the United States. At December 31, 2002,
approximately 47% of the outstanding principal balance of
commercial mortgage loans were concentrated in the states of
California, New York, Connecticut, Pennsylvania and Florida.
Although the Company has a diversified loan portfolio, an
economic downturn could have an adverse impact on the ability of
its debtors to repay their loans. The outstanding balance of
commercial mortgage loans range in size from $1 to $9,495 at
December 31, 2002. The mortgage loan balance is net of an
allowance for losses of $19,106 and $25,091 at December 31,
2002 and 2001, respectively.
At December 31, 2002, loan commitments
outstanding totaled approximately $29,050. Furthermore, at
December 31, 2002, the Company is committed to funding
additional capital contributions of $27,000 to certain
investments in limited partnerships.
The Company had fixed maturities carried at
$216,055 and $262,694 at December 31, 2002 and 2001,
respectively, on deposit with various governmental authorities
as required by law.
Security lending
The Company engages in transactions in which
fixed maturities, especially bonds issued by the United States
Government and Government agencies and authorities, are loaned
to selected broker/ dealers. Collateral, greater than or equal
to 102% of the fair value of securities lent plus interest, is
received in the form
F-23
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
of cash or marketable securities. The Company
monitors the fair value of securities loaned and the collateral
received on a daily basis, with additional collateral obtained
as necessary. The Company is subject to the risk of loss to the
extent that the loaned securities are not returned and the value
of the collateral is less than the market value of the
securities loaned. Management believes such an event is
unlikely. At December 31, 2002 and 2001, securities with a
fair value of $419,000 and $289,000, respectively, were on loan
to selected brokers.
6.     Property and
Equipment
Property and equipment consist of the following:
As of
December 31,
2002
2001
Land
$
8,788
$
8,788
Buildings and improvements
135,627
136,949
Furniture, fixtures and equipment
345,162
299,556
Total
489,577
445,293
Less accumulated depreciation
(238,792
)
(211,820
)
Total
$
250,785
$
233,473
Depreciation expense for 2002, 2001 and 2000
amounted to $46,871, $39,958 and $45,213, respectively.
Depreciation expense is included in underwriting, general and
administrative expenses in the consolidated results of
operations.
7.     Premiums and
Accounts Receivable
Receivables are reported at the estimated amounts
collectable net of an allowance for uncollectible items. A
summary of such items is as follows:
As of
December 31,
2002
2001
Insurance premiums receivable
$
303,049
$
272,959
Other receivables
134,010
143,639
Allowance for uncollectible items
(35,965
)
(32,161
)
Total
$
401,094
$
384,437
F-24
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
8.
Mandatorily Redeemable Preferred Securities of
    Subsidiary Trusts
Mandatorily redeemable preferred securities of
subsidiary trusts consisted of the following as of
December 31:
Security
Interest Rate
Maturity
2002
2001
2000 Trust Capital Securities I
8.48
%
03/01/30
$
150,000
$
150,000
2000 Trust Capital Securities II
8.40
%
03/01/30
400,000
400,000
1999 Trust Capital Securities I
7.60
%
04/26/29
200,000
200,000
1999 Trust Capital Securities II
7.876
%
04/26/29
499,850
499,850
1997 Capital Securities I
8.40
%
05/30/27
150,000
150,000
1997 Capital Securities II
7.94
%
07/31/27
46,224
46,224
Total
$
1,446,074
$
1,446,074
Distributions on preferred securities of
subsidiary trusts were $118,396, $118,370 and $110,142 for the
years ended December 31, 2002, 2001 and 2000, respectively.
2000 Trust Capital Securities and
    Subordinated Debentures
In March 2000, two subsidiary trusts of the
Company, Fortis Capital Proceeds Trust 2000-1 and Fortis Capital
Proceeds Trust 2000-2, issued 150,000 8.48% and 400,000 8.40%
trust capital securities (collectively, the "2000 Trust
Capital Securities"), respectively, to Fortis Insurance
N.V. (formerly, Fortis Insurance Holding N.V.), in each case
with a liquidation amount of $1,000 per security.
Fortis Capital Proceeds Trust 2000-1 and Fortis
Capital Proceeds Trust 2000-2 used the proceeds from the sale of
the applicable 2000 Trust Capital Securities and trust common
securities to purchase $150,001 and $400,001, respectively, of
the Company's 8.48% and 8.40% subordinated debentures due
2030 (collectively, the "2000 Subordinated
Debentures"), respectively. These debentures are the sole
assets of the trusts.
The payments the Company makes on the applicable
2000 Subordinated Debentures are the sole source of funds
available for the applicable trust to make the distributions on
the applicable 2000 Trust Capital Securities. Interest on the
2000 Subordinated Debentures is payable semi-annually, except
the Company has the right to extend the interest payment period
under the applicable 2000 Subordinated Debentures for up to ten
consecutive semi-annual periods, during which periods interest
will compound semi-annually. Distributions on the 2000 Trust
Capital Securities are cumulative and payable semi-annually,
except distributions are deferrable to the extent the Company
exercises its right described in the preceding sentence.
The 2000 Subordinated Debentures restrict the
Company's ability to (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of the Company's capital stock,
(ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any of the
Company's debt securities that rank pari passu with or
junior in right of payment to the applicable 2000 Subordinated
Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of any securities of any
subsidiary of the Company if such guarantee ranks pari passu or
junior in right of payment to the applicable 2000 Subordinated
Debentures, if at any time (1) any 2000 Subordinated
Debentures are held by Fortis Capital Proceeds Trust 2000-1 or
2, as applicable, and there shall have occurred and be
continuing an event of default under the declaration of trust of
Fortis Capital Proceeds Trust 2000-1 or 2, as applicable,
(2) there shall have occurred and be continuing an event of
default under the applicable indenture pursuant to which the
applicable 2000 Subordinated Debentures were issued or
(3) the Company shall have given notice of its election to
extend the interest payment period under the applicable 2000
F-25
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Subordinated Debentures as described above and
the Company shall not have rescinded such notice, and such
extension period has commenced and is continuing.
On or after April 2005 and April 2010,
respectively, the Company has the right to redeem the applicable
2000 Subordinated Debentures, respectively, in each case at a
redemption price equal to 100% of the principal amount, plus
accrued and unpaid interest. The 2000 Trust Capital Securities
are mandatorily redeemable upon the maturity of the applicable
2000 Subordinated Debentures in March 2030 or such earlier
date as the applicable 2000 Subordinated Debentures may be
redeemed. On April 1, 2005 and April 1, 2010, Fortis
Insurance N.V., as holder of the 2000 Trust Capital Securities,
has the right to require Fortis Capital Proceeds Trust 2000-1
and 2, respectively, to repurchase all (but not less than all)
of Fortis Insurance N.V.'s applicable 2000 Trust Capital
Securities at a purchase price equal to 100% of the liquidation
amount of the applicable 2000 Trust Capital Securities plus an
amount equal to accumulated and unpaid distributions, in which
case the Company would be required to repurchase all the
applicable 2000 Subordinated Debentures at a repurchase price
equal to the principal amount, plus accrued and unpaid interest.
1999 Trust Capital Securities and
    Subordinated Debentures
In April 1999, two subsidiary trusts of the
Company, 1999 Fortis Capital Trust I and 1999 Fortis
Capital Trust II, issued 200,000 7.60% and 499,850 7.876%
trust capital securities (collectively, the "1999 Trust
Capital Securities"), respectively, to Fortis Capital
Funding LP and Fortis Insurance N.V. (formerly, Fortis Insurance
Holding N.V.), respectively, in each case with a liquidation
amount of $1,000 per security.
1999 Fortis Capital Trust I and 1999 Fortis
Capital Trust II used the proceeds from the sale of the
applicable 1999 Trust Capital Securities and trust common
securities to purchase $200,001 and $499,851, respectively, of
the Company's 7.60% and 7.876% subordinated debentures due
2029 (collectively, the "1999 Subordinated
Debentures"), respectively. These debentures are the sole
assets of the trusts.
The payments the Company makes on the applicable
1999 Subordinated Debentures are the sole source of funds
available for the applicable trust to make the distributions on
the applicable 1999 Trust Capital Securities. Interest on the
1999 Subordinated Debentures is payable quarterly, except the
Company has the right to extend the interest payment period
under the applicable 1999 Subordinated Debentures for up to
twenty consecutive quarterly periods, during which periods
interest will compound quarterly. Distributions on the 1999
Trust Capital Securities are cumulative and payable quarterly,
except distributions are deferrable to the extent the Company
exercises its right described in the preceding sentence.
The 1999 Subordinated Debentures restrict the
Company's ability to (i) declare or pay any dividends
or distributions on, or redeem, purchase, acquire or make a
liquidation payment on, any of the Company's capital stock,
(ii) make any payment of principal, interest or premium, if
any, on or repay or repurchase or redeem any of the
Company's debt securities that rank pari passu with or
junior in right of payment to the applicable 1999 Subordinated
Debentures or (iii) make any guarantee payments with
respect to any guarantee by the Company of any securities of any
subsidiary of the Company if such guarantee ranks pari passu or
junior in right of payment to the applicable 1999 Subordinated
Debentures, if at any time (1) any 1999 Subordinated
Debentures are held by 1999 Fortis Capital Trust I or II,
as applicable, and there shall have occurred and be continuing
an event of default under the declaration of trust of 1999
Fortis Capital Trust I or II, as applicable, (2) there
shall have occurred and be continuing an event of default under
the applicable indenture pursuant to which the applicable 1999
Subordinated Debentures were issued or (3) the Company
shall have given notice of its election to extend the interest
payment period under the applicable 1999 Subordinated Debentures
as described above and the Company shall not have rescinded such
notice, and such extension period has commenced and is
continuing.
F-26
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
On June 30, 2009 or any interest payment
date thereafter, the Company has the right to redeem the 1999
Subordinated Debentures at a redemption price equal to 100% of
the principal amount or the principal amount multiplied by a
percentage that ranges from 103.8% to 100.0%, depending on the
year of redemption and depending on the series, plus accrued and
unpaid interest. The 1999 Trust Capital Securities are
mandatorily redeemable upon the maturity of the applicable 1999
Subordinated Debentures in April 2029 or such earlier date
as the applicable 1999 Subordinated Debentures may be redeemed.
1997 Capital Securities I &
    II
In May 1997, Fortis Capital Trust, a trust
declared and established by the Company and other parties,
issued 150,000 8.40% capital securities (the "1997 Capital
Securities I") to purchasers and 4,640 8.40% common
securities (the "1997 Common Securities I") to
the Company, in each case with a liquidation amount of $1,000
per security. Fortis Capital Trust used the proceeds from the
sale of the 1997 Capital Securities I and the 1997 Common
Securities I to purchase $154,640 of the Company's
8.40% junior subordinated debentures due 2027 (the "1997
Junior Subordinated Debentures I"). These debentures
are the sole assets of Fortis Capital Trust.
In July 1997, Fortis Capital Trust II,
a trust declared and established by the Company and other
parties, issued 50,000 7.94% capital securities (the "1997
Capital Securities II" and, together with the 1997
Capital Securities, the "1997 Capital Securities") to
purchasers and 1,547 7.94% common securities (the "1997
Common Securities II") to the Company, in each case with a
liquidation amount of $1,000 per security. Fortis Capital
Trust II used the proceeds from the sale of the 1997
Capital Securities II and the 1997 Common
Securities II to purchase $51,547 of the Company's
7.94% junior subordinated debentures due 2027 (the "1997
Junior Subordinated Debentures II" and, together with
the 1997 Junior Subordinated Debentures I, the "1997
Junior Subordinated Debentures"). These debentures are the
sole assets of Fortis Capital Trust II.
With respect to each of Fortis Capital Trust and
Fortis Capital Trust II, the Company, Fortis SA/NV and
Fortis N.V. entered into a junior subordinated guarantee of the
distributions and payments on the liquidation and redemption of
the 1997 Capital Securities I and the 1997 Capital
Securities II, respectively, but only to the extent the
funds are held by Fortis Capital Trust and Fortis Capital
Trust II, respectively. Fortis SA/NV and Fortis N.V. also
entered into a junior subordinated guarantee of the payment of
the principal, premium, if any, and interest on the 1997 Junior
Subordinated Debentures. The 1997 Junior Subordinated Debentures
and the guarantees are unsecured, junior subordinated
obligations.
The payments the Company or the guarantors make
on the applicable 1997 Junior Subordinated Debentures are the
sole source of funds available for the applicable trust to make
the distributions on the applicable 1997 Capital Securities.
Interest on the 1997 Junior Subordinated Debentures are payable
semi-annually, except the Company, so long as no event of
default has occurred or is continuing and with the consent of
the guarantors, may exercise its right to defer payment on the
1997 Junior Subordinated Debentures for up to ten consecutive
semi-annual periods, during which periods interest will compound
semi-annually. Distributions on the 1997 Capital Securities are
cumulative and payable semi-annually, except distributions are
deferrable to the extent the Company exercises its right
described in the preceding sentence.
The 1997 Junior Subordinated Debentures I
and the 1997 Junior Subordinated Debentures II each
restrict the Company's and the guarantors' ability to:
(i) declare or pay any dividends on or distributions on or
redeem, purchase, acquire or make a liquidation payment on any
of the capital stock of the Company or such guarantor,
(ii) make any payment of principal, premium, if any, or
interest on or repay, redeem or repurchase any debt securities
that rank pari passu with or junior to the applicable 1997
Junior Subordinated Debentures or the guarantees or
(iii) make any guarantee payment with respect to any
guarantee of the debt securities of any subsidiary if such
guarantee ranks pari passu with or junior to the applicable 1997
Junior Subordinated
F-27
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Debentures or the guarantees, if at any time
(1) the Company elects to defer payment on the applicable
1997 Junior Subordinated Debentures, (2) at any time there
has occurred any event of which the Company or a guarantor has
knowledge that would constitute an event of default under the
applicable 1997 Junior Subordinated Debentures and that the
Company and the guarantors have not taken reasonable steps to
cure or (3) the Company or the guarantors are in default
with respect to the payment of obligations under the guarantees.
The 1997 Capital Securities rank pari passu with
the 1997 Common Securities with respect to cash distributions
and amounts payable on liquidation, except that the 1997 Common
Securities will be subordinated to the 1997 Capital Securities
if an event of default has occurred and is continuing as a
result of any failure by the Company to pay amounts when due in
respect of the applicable 1997 Junior Subordinated Debentures.
The 1997 Junior Subordinated Debentures I
and the 1997 Junior Subordinated Debentures II mature in
May and July 2027, respectively.
The 1997 Capital Securities are subject to
mandatory redemption, in whole or in part, upon repayment of the
applicable 1997 Junior Subordinated Debentures at their stated
maturity or earlier redemption. The 1997 Junior Subordinated
Debentures are redeemable prior to maturity at the
Company's option in whole at any time or in part from time
to time at redemption prices calculated according to a specified
formula.
Events of default under the 1997 Junior
Subordinated Debentures include: (i) failure for
30 days to pay interest when due (subject to any deferral
as described above), (ii) failure to pay principal or
premium, if any, when due, (iii) failure to perform the
covenants in the indenture for 90 days after notice and
(iv) certain events of bankruptcy, insolvency or
reorganization of the Company or the guarantors. Events of
default under the guarantees of the 1997 Capital Securities
include the failure of the Company or the guarantors to perform
any payment obligations thereunder or to perform any non-payment
obligation for 30 days.
The Company and the guarantors have also agreed
to guarantee to each person to whom the applicable trust becomes
indebted or liable, the full payment of any costs, expenses or
liabilities of the trust (other than the obligations to pay
amounts due to the holders of the 1997 Capital Securities and
the 1997 Common Securities pursuant to their terms).
F-28
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
9.     Income
Taxes
The Company and the majority of its subsidiaries
are subject to U.S. tax and file a U.S. consolidated federal
income tax return. Certain life insurance subsidiaries that were
acquired in 1997, 1998, 1999 and 2000 are not included in the
consolidated return. Information about current and deferred tax
expense follows:
Years Ended December 31,
2002
2001
2000
Current expense:
Federal
$
11,688
$
256,045
$
13,430
Foreign
8,910
11,721
9,675
Total current expense
20,598
267,766
23,105
Deferred expense (benefit):
Federal
92,209
(160,222
)
81,562
Foreign
(2,150
)
47
(167
)
Total deferred expense (benefit)
90,059
(160,175
)
81,395
Total income tax expense
$
110,657
$
107,591
$
104,500
The provision for foreign taxes includes amounts
attributable to income from U.S. possessions that are considered
foreign under U.S. tax laws. International operations of the
Company are subject to income taxes imposed by the jurisdiction
in which they operate.
A reconciliation of the federal income tax rate
to the Company's effective income tax rate follows:
December 31,
2002
2001
2000
Federal income tax rate:
35.0
%
35.0
%
35.0
%
Reconciling items:
Tax exempt interest
(0.5
)
(1.1
)
(2.7
)
Dividends received deduction
(0.2
)
(1.9
)
(2.8
)
Subpart F income
(2.2
)
(0.9
)
0.3
Permanent nondeductible expenses
0.2
0.8
1.4
Adjustment for deferred liabilities
—
—
2.9
Goodwill
—
19.2
19.8
Foreign tax credit
(1.1
)
(2.3
)
(2.6
)
Low-income housing credit
(1.3
)
(2.5
)
(2.3
)
Low-income housing adjustments
—
5.4
—
Other
—
0.6
4.8
Effective income tax rate:
29.9
%
52.3
%
53.8
%
F-29
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The tax effects of temporary differences that
result in significant deferred tax assets and deferred tax
liabilities are as follows:
December 31,
2002
2001
Deferred tax assets:
Policyholder and separate account reserves
$
754,921
$
701,492
Accrued liabilities
159,620
126,880
Investment adjustments
66,792
101,967
Gross deferred tax assets
981,333
930,339
Deferred tax liabilities:
Deferred acquisition costs
380,872
354,326
Other assets
291,908
184,781
Unrealized gains on fixed maturities and equities
140,353
54,782
Gross deferred tax liabilities
813,133
593,889
Net deferred income tax asset
$
168,200
$
336,450
Deferred taxes have not been provided on the
undistributed earnings of wholly owned foreign subsidiaries
since the Company intends to indefinitely reinvest these
earnings. The cumulative amount of undistributed earnings for
which the Company has not provided deferred income taxes is
approximately $134,000. Upon distribution of such earnings in a
taxable event, the Company would incur additional U.S. income
taxes in the amount of $34,000 net of anticipated foreign tax
credits.
Under pre-1984 life insurance company income tax
laws, a portion of a life insurance company's "gain
from operations" was not subject to current income taxation
but was accumulated, for tax purposes, in a memorandum account
designated as "policyholders' surplus account."
Amounts in this account only become taxable upon the occurrence
of certain events. The approximate amount in this account was
$95,163 at December 31, 2002 and 2001. Deferred taxes have
not been provided on amounts in this account since the Company
neither contemplates any action nor foresees any events
occurring that would create such tax.
At December 31, 2002, the Company and its
subsidiaries had capital loss carryforwards for U.S. federal
income tax purposes. Capital loss carryforwards total $84,007
and will expire if unused as follows:
Expiration Year
Amount
2003
$
8
2004
21
2005
5,225
2006
202
2007
78,551
Total
$
84,007
10.
Mandatorily Redeemable Preferred
    Stocks
The Company has three classes of mandatorily
redeemable preferred stock: Series A, Series B and
Series C. The carrying value equals the redemption value
for all classes of preferred stock. The Company's board of
directors has the authority, without further action of the
Parent, to issue up to 20,000,000 shares of
F-30
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
preferred stock, par value $1.00 per share, in
one or more series and to fix the powers, preferences, rights
and qualifications, limitations or restrictions thereof, which
may include dividend rights, conversion rights, voting rights,
terms of redemption, liquidation preferences and the number of
shares constituting any series or the designations of the series.
Information about the preferred stock is as
follows:
December 31,
2002
2001
Preferred stock, par value $1.00 per share:
Series A: 10,000 shares authorized, none
    issued or outstanding
$
—
$
—
Series B: 30,000 shares authorized, 19,660
    and 20,160 shares issued and outstanding in 2002 and 2001,
    respectively
19,660
20,160
Series C: 5,000 shares authorized, issued
    and outstanding
5,000
5,000
Total
$
24,660
$
25,160
There was no change in the outstanding shares of
Series A or Series C for the years ended
December 31, 2002, 2001 and 2000. Changes in the number of
Series B shares outstanding are as follows:
For the Years Ended
December 31,
2002
2001
2000
Shares outstanding, beginning
20,160
20,160
20,160
Shares redeemed
(500
)
—
—
Shares outstanding, ending
19,660
20,160
20,160
All shares have a liquidation price of $1,000 per
share and rank senior to common stock with respect to rights to
receive dividends and to receive distributions upon the
liquidation, dissolution or winding up of the Company.
Series A: Series A shares were redeemed
in 1999 and have the status of authorized and unissued preferred
stock and may be reissued by the Company.
Series B and C: Holders of the Series B
Preferred Stock are entitled to receive cumulative dividends at
the rate of 4.0% per share per annum, multiplied by the $1,000
liquidation price, and holders of the Series C Preferred
Stock are entitled to receive dividends at the rate of 4.5% per
share per annum multiplied by the $1,000 liquidation price. All
dividends are payable in arrears on a quarterly basis. Any
dividend that is not paid on a specified dividend payment date
with respect to a share of such Preferred Stock shall be deemed
added to the liquidation price of such share for purposes of
computing the future dividends on such share, until such
delinquent dividend has been paid.
Holders of the Series B Preferred Stock may
elect to have any or all of their shares redeemed by the Company
at any time after April 1, 2002, and the Company must
redeem all shares of the Series B Preferred Stock no later
than July 1, 2017. Holders of the Series C Preferred
Stock may elect to have any or all of their shares redeemed by
the Company any time after April 1, 2022, and the Company
must redeem all shares of the Series C Preferred Stock no
later than July 1, 2027. The Company also has the right and
the obligation to redeem the Series B Preferred Stock and
Series C Preferred Stock upon the occurrence of certain
specified events. The redemption price in all cases shall equal
the $1,000 per share liquidation price plus all accumulated and
unpaid dividends. The Company is not required to establish any
sinking fund or similar funds
F-31
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
with respect to such redemptions. None of the
shares of Series B Preferred Stock or Series C Preferred
Stock are convertible into common stock or any other equity
security of the Company. However, holders of the Series B
Preferred Stock and Series C Preferred Stock are entitled
to one vote per share owned of record on all matters voted upon
by the Company stockholders, voting with the holders of common
stock as a single class, and not as a separate class or classes.
The shares of Series B Preferred Stock and Series C
Preferred Stock are subject to certain restrictions on
transferability, and the Company has the right of first refusal
to acquire the shares if any holder thereof desires to make a
transfer not otherwise permitted by the terms thereof.
11.     Stockholders'
Equity
Common Stock
The Board of Directors of the Company has
authorized 80,000,000 shares of common stock with a par value of
$0.10 per share, designated as Class A, Class B and
Class C shares. The Class B and Class C shares
rank senior to the Class A shares solely with respect to
dividend payments and payments on liquidation. There are 150,001
Class B shares and 400,001 Class C shares outstanding,
all of which are owned by Fortis (US) Funding Partners I LP
("Partnership I") and Fortis (US) Funding
Partners II LP ("Partnership II"),
respectively. Affiliates of Fortis own the general partnership
and limited partnership interests in Partnership I and
Partnership II. Partnership I and Partnership II
have each issued a series of Preference Securities.
The following dividends have been paid for the
years ended December 31:
2002
2001
2000
Per Share
Total
Per Share
Total
Per Share
Total
Class A common stock
$
—
$
—
$
8.65
$
67,000
$
—
$
—
Class B common stock
74.69
11,204
75.44
11,316
37.66
5,649
Class C common stock
76.68
30,672
77.45
30,982
38.65
15,462
Total
$
41,876
$
109,298
$
21,111
Preferred Stock
The Board of Directors of the Company has
designated Preferred Stock shares as Series A,
Series B and Series C (see Note 10) and in
connection with the stock option plan designated certain shares
as Series D (see Note 20).
12.     Statutory
Information
The Company's insurance subsidiaries prepare
financial statements on the basis of statutory accounting
practices ("SAP") prescribed or permitted by the
insurance departments of their states of domicile. Prescribed
SAP includes the Accounting Practices and Procedures Manual of
the National Association of Insurance Commissioners
("NAIC") as well as state laws, regulations and
administrative rules.
The principal differences between SAP and GAAP
are: 1) policy acquisition costs are expensed as incurred
under SAP, but are deferred and amortized under GAAP;
2) the value of business acquired is not capitalized under
SAP but is under GAAP; 3) amounts collected from holders of
universal life-type and annuity products are recognized as
premiums when collected under SAP, but are initially recorded as
contract deposits under GAAP, with cost of insurance recognized
as revenue when assessed and other contract charges recognized
over the periods for which services are provided; 4) the
classification and carrying amounts of investments in certain
securities are different under SAP than under GAAP; 5) the
criteria for providing asset valuation allowances, and the
methodologies used to determine the amounts thereof, are
different under SAP
F-32
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
than under GAAP; 6) the timing of
establishing certain reserves, and the methodologies used to
determine the amounts thereof, are different under SAP than
under GAAP; and 7) certain assets are not admitted for
purposes of determining surplus under SAP.
The combined statutory net income and capital and
surplus of the insurance subsidiaries follow:
Years Ended and at
December 31,
2002
2001
2000
Statutory Net Income
$
387,639
$
156,121
$
387,185
Statutory Capital and Surplus
$
1,939,616
$
1,767,624
$
1,867,281
Insurance enterprises are required by state
insurance departments to adhere to minimum risk-based capital
("RBC") requirements developed by the NAIC. All of the
Company's insurance subsidiaries exceed minimum RBC
requirements.
The payment of dividends to the Company by the
Company's insurance subsidiaries in excess of a certain
amount (i.e., extraordinary dividends) must be approved by the
subsidiaries' domiciliary state department of insurance.
Ordinary dividends, for which no regulatory approval is
generally required, are limited to amounts determined by
formula, which varies by state. The formula for the majority of
the states in which the Company's subsidiaries are
domiciled is the lesser of (i) 10% of the statutory surplus
as of the end of the prior year or (ii) the prior
year's statutory net income. In some states, the formula is
the greater amount of clauses (i) and (ii). Some states,
however, have an additional stipulation that dividends may only
be paid out of earned surplus. If insurance regulators determine
that payment of an ordinary dividend or any other payments by
the Company's insurance subsidiaries to the Company (such
as payments under a tax sharing agreement or payments for
employee or other services) would be adverse to policyholders or
creditors, the regulators may block such payments that would
otherwise be permitted without prior approval. In connection
with the acquisition of American Bankers Insurance Group
("ABIG") in 1999, the Company entered into an
agreement with the Florida Insurance Department pursuant to
which American Bankers Insurance Company and American Bankers
Life Assurance Company have agreed to limit the amount of
ordinary dividends they would pay to the Company to an amount no
greater than 50% of the amount otherwise permitted under Florida
law. This agreement expires in August 2004. In addition, the
Company entered into an agreement with the New York Insurance
Department in connection with the merger of Bankers Atlantic
Life Assurance Company, one of the Company's New
York-domiciled insurance subsidiaries, into First Fortis Life
Insurance Company ("FFLIC") in 2001, pursuant to which
FFLIC agreed not to pay any dividends to the Company until
fiscal year 2004. No assurance can be given that there will not
be further regulatory actions restricting the ability of the
Company's insurance subsidiaries to pay dividends. Based on
the dividend restrictions under applicable laws and regulations,
the maximum amount of dividends that the Company's
subsidiaries could pay to the Company in 2003 without regulatory
approval is approximately $289,806. The Company expects that as
a result of statutory accounting for sold businesses, the
maximum amount of dividends the Company's subsidiaries will
be able to pay to the Company will be significantly lower in
2004.
Effective January 1, 2001, the NAIC revised
the Accounting Practices and Procedures Manual in a process
referred to as Codification. The domiciliary states of the
Company's insurance subsidiaries have adopted the
provisions of the revised manual with certain exceptions.
Codification has changed, to some extent, prescribed statutory
accounting practices and resulted in changes to the accounting
practices that the Company's insurance subsidiaries use to
prepare their statutory basis financial statements. The
cumulative effect of all changes resulting from the Codification
guidance was recorded as a direct adjustment to statutory
surplus on January 1, 2001. The effect of adoption
increased statutory surplus by approximately $85,000.
F-33
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
13.     Reinsurance
In the ordinary course of business, the Company
is involved in both the assumption and cession of reinsurance
with non-affiliated companies. The following table provides
details of the reinsurance recoverables balance for the years
ended December 31:
2002
2001
Ceded future policy holder benefits and expense
$
2,451,700
$
2,348,208
Ceded unearned premium
1,247,350
1,495,887
Ceded claims and benefits payable
756,706
737,901
Ceded paid losses
194,153
169,658
Total
$
4,649,909
$
4,751,654
The effect of reinsurance on premiums earned and
benefits incurred was as follows:
Years Ended December 31,
2002
2001
2000
Gross earned premiums and other considerations
$
7,813,538
$
7,862,372
$
7,430,177
Premiums assumed
515,666
235,616
290,528
Premiums ceded
(2,647,608
)
(2,855,803
)
(2,576,330
)
Net earned premiums and other considerations
$
5,681,596
$
5,242,185
$
5,144,375
Gross policyholder benefits
$
4,798,035
$
4,504,390
$
3,781,029
Benefits assumed
487,965
292,212
280,375
Benefits ceded
(1,856,855
)
(1,557,677
)
(853,350
)
Net policyholder benefits
$
3,429,145
$
3,238,925
$
3,208,054
The Company had $451,135 of assets held in trusts
as of December 31, 2002 for the benefit of others related
to certain reinsurance arrangements.
The Company utilizes ceded reinsurance for loss
protection and capital management, business dispositions, and,
in the Solutions segment, for client risk and profit sharing.
Loss Protection and Capital
    Management
As part of the Company's overall risk and
capacity management strategy, the Company purchases reinsurance
for certain risks underwritten by the Company's various
segments, including significant individual or catastrophic
claims, and to free up capital to enable the Company to write
additional business.
For those product lines where there is exposure
to catastrophes, the Company closely monitors and manages the
aggregate risk exposure by geographic area and the Company has
entered into reinsurance treaties to manage exposure to these
types of events.
Under indemnity reinsurance transactions in which
the Company is the ceding insurer, the Company remains liable
for policy claims if the assuming company fails to meet its
obligations. To limit this risk, the Company has control
procedures in place to evaluate the financial condition of
reinsurers and to monitor the concentration of credit risk to
minimize this exposure. The selection of reinsurance companies
is based on criteria related to solvency and reliability and, to
a lesser degree, diversification as well as on developing strong
relationships with the Company's reinsurance partners for
the sharing of risks.
F-34
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Business Dispositions
The Company has used reinsurance to exit certain
businesses, such as the disposals of FFG and LTC (see
note 4). Reinsurance was used in these cases to facilitate
the transactions because the businesses shared legal entities
with business segments that the Company retained. Assets backing
the liabilities ceded related to these businesses are held in
trusts for the benefit of the Company and the separate accounts
relating to FFG are still reflected in the Company's
balance sheet.
The reinsurance recoverable from The Hartford was
$1,679,681 and $1,748,099 as of December 31, 2002 and 2001,
respectively. The reinsurance recoverable from John Hancock was
$693,373 and $545,690 as of December 31, 2002 and 2001,
respectively. The Company would be responsible for administering
this business in the event of a default by reinsurers. In
addition, under the reinsurance agreement, The Hartford is
obligated to contribute funds to increase the value of the
separate accounts relating to the business sold if such value
declines. If The Hartford fails to fulfill these obligations,
the Company will be obligated to make these payments.
Solutions' Segment Client Risk and
    Profit Sharing:
The Solutions segment writes business produced by
its clients, such as mortgage lenders and servicers and
financial institutions, and reinsures all or a portion of such
business to insurance subsidiaries of the clients. Such
arrangements allow significant flexibility in structuring the
sharing of risks and profits on the underlying business.
A substantial portion of Solutions'
reinsurance activities are related to agreements to reinsure
premiums generated by certain clients to the clients' own
captive insurance companies or to reinsurance subsidiaries in
which the clients have an ownership interest. Collateral is
obtained in amounts equal to the outstanding reserves when
captive companies are not authorized to operate in the
Company's insurance subsidiary's state of domicile as
required by statutory accounting principles.
The Company's reinsurance agreements do not
relieve the Company from its direct obligation to its insured.
Thus, a credit exposure exists to the extent that any reinsurer
is unable to meet the obligations assumed in the reinsurance
agreements. To minimize its exposure to reinsurance
insolvencies, the Company evaluates the financial condition of
its reinsurers and holds substantial collateral (in the form of
funds, trusts, and letters of credit) as security under the
reinsurance agreements.
F-35
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
14.     Reserves
The following table provides reserve information
by the Company's major lines of business as of:
December 31, 2002
December 31, 2001
Future Policy
Claims and
Future Policy
Claims and
Benefits and
Unearned
Benefits
Benefits and
Unearned
Benefits
Expenses
Premiums
Payable
Expenses
Premiums
Payable
Long Duration Contracts:
Pre-funded funeral life insurance policies and
    annuity contracts
$
1,990,554
$
3,289
$
14,634
$
1,764,435
$
1,635
$
11,574
Life insurance no longer offered
693,333
1,392
5,182
704,066
1,438
5,196
Universal life and annuities no longer offered
334,038
9,541
12,074
358,474
507
19,859
FFG and LTC disposed businesses
2,619,202
48,497
138,604
2,565,044
45,989
120,356
Short Duration Contracts:
Group term life
—
11,270
456,642
—
15,480
438,204
Group disability
—
3,949
1,298,704
—
4,473
1,203,698
Medical and dental
—
125,505
583,075
—
107,894
559,017
Property
—
739,251
231,664
—
603,314
332,414
Credit
—
1,385,735
414,288
—
1,707,745
431,706
Warranties and extended service contracts
—
830,377
29,707
—
721,606
27,414
All other
—
48,829
359,287
—
57,116
255,989
Total
$
5,637,127
$
3,207,635
$
3,543,861
$
5,392,019
$
3,267,197
$
3,405,427
Long Duration
Contracts
The Company's long duration contracts are
comprised of pre-funded funeral life insurance policies and
annuity contracts, life insurance policies no longer offered,
universal life and annuities no longer offered and FFG and LTC
disposed businesses. The principal products and services
included in these categories are described in the summary of
significant accounting policies (see note 2).
The Company's PreNeed segment distributes
pre-funded funeral insurance products through two separate
divisions, the independent division and the AMLIC division. The
reserves for future policy benefits and expenses for pre-funded
funeral life and annuity contracts and life insurance no longer
offered by the PreNeed segment differ by division and are
established based upon the following assumptions:
Independent
Division
Interest and discount rates for pre-funded
funeral life insurance are level, vary by year of issuance and
product, and ranged from 7.0% to 7.3% in 2002 and 2001 before
provisions for adverse deviation, which ranged from 0.2% to 0.5%
in both 2002 and 2001.
Interest and discount rates for pre-funded life
insurance no longer offered vary by year of issuance and
products and were 7.5% grading to 5.25% over 20 years in
2002 and 2001 with the exception of a block of pre-1980 business
which had a level 8.75% discount rate in both 2002 and 2001.
Mortality assumptions are based upon pricing
assumptions and modified to allow provisions for adverse
deviation. Surrender rates vary by product and are based upon
pricing assumptions. The weighted average
F-36
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
lapse rate, including surrenders, for all life
policies issued by the independent channel was approximately
3.2% and 3.8% in 2002 and 2001, respectively.
Future policy benefit increases on pre-funded
life insurance policies ranged from 2.5 to 6.5% in 2002 and
2001. Some policies have future policy benefit increases, which
are guaranteed or tied to equal some measure of inflation. The
inflation assumption for these inflation-linked benefits was
3.0% in 2002 and 2001. Traditional life products issued by the
PreNeed segment have level benefits.
The reserves for annuities issued by the
independent division are based on assumed interest rates
credited on deferred annuities, which vary by year of issuance,
and ranged from 3.5% to 5.0% in 2002 and 2001. Withdrawal
charges, if any, generally range from 7.0% to 0%, grading to
zero over a period of seven years for business issued in the
United States. Canadian annuity products have a surrender charge
that varies by product series and premium paying period,
typically grading to zero after all premiums have been paid.
AMLIC
Division
Interest and discount rates for pre-funded
funeral life insurance policies issued October 2000 and beyond
vary by issue year and are based on pricing assumptions and
modified to allow for provisions for adverse deviation. 2002
issues used a level 5.75% discount rate, 2001 issues used a
level 6% discount rate and 2000 issues used a discount rate of
7% grading to 6.25% over nine years. Pre-funded life insurance
policies issued prior to October 2000 and all traditional life
policies issued by the AMLIC division use discount rates, which
vary by issue year and product and ranged from 2.5% to 7.5% in
2002 and 2001.
Mortality assumptions for pre-funded life
insurance products issued in October 2000 and beyond are based
upon pricing assumptions and modified to allow for provisions
for adverse deviation. Surrender rates for pre-funded life
insurance products issued in October 2000 and beyond vary by
product and are based upon pricing assumptions. Mortality
assumptions for all pre-funded funeral life insurance and
traditional life insurance issued by the AMLIC division prior to
October 2000 are based on Statutory valuation requirements with
no explicit provision for lapses. The weighted average lapse
rate, including surrenders, for all life policies issued by the
AMLIC division was approximately 1.1% and 1.3% in 2002 and 2001,
respectively.
Future policy benefit increases are based upon
pricing assumptions. First-year guaranteed benefit increases
range from 0.0% to 6.0% in 2002 and 2001. Renewal guaranteed
benefit increases range from 0.0% to 3.0% in 2002 and 2001. For
contracts with minimum benefit increases associated with an
inflation index, assumed benefit increases equaled the discount
rate less 3% in 2002 and 2001.
The reserves for annuities issued by the AMLIC
division are based on assumed interest rates credited on
deferred annuities and ranged from 1.0% to 6.5% in 2002 and
2001. Withdrawal charges ranged from 0.0% to 8.0% grading to
zero over eight years for business issued in the United States.
Canadian annuity products have a flat 35% surrender charge.
Nearly all the deferred annuities contracts have a 3.0%
guaranteed interest rate.
Universal Life and Annuities No Longer
    Offered
The reserves for universal life and annuity
products no longer offered in the Assurant Solutions segment
have been established based on the following assumptions:
Interest rates credited on annuities, which vary by product and
time when funds were received, ranged from 4.0% to 5.0% in 2001
and were universally 4.0% in 2002. Guaranteed crediting rates on
annuities range from 3.5% to 4.0%. Annuities are also subject to
surrender charges, which vary by contract year and grade to zero
over a period no longer than seven years. Surrender values will
never be less than the amount of paid-in premiums regardless of
the surrender charge. Credited interest rates on universal life
funds vary by product and the funds received ranged from 4.0% to
5.5% in 2002 and 4.0% to 7.0% in 2001. Guaranteed crediting
rates where present are equal to 4%. Additionally, universal
F-37
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
life funds are subject to surrender charges that
vary by product, age, sex, year of issue, risk class and face
amount grading to zero over a period not longer than
20 years.
FFG
and LTC
A description of the disposal of FFG and LTC can
be found in the dispositions footnote (see note 4). The
reserves for these blocks of business are included in the
Company's reserves in accordance with FAS 113,
Accounting and Reporting for Reinsurance of Short-Duration
and Long-Duration Contracts.
The Company maintains an
offsetting reinsurance recoverable related to these reserves
(see note 13).
Short
Duration Contracts
The Company's short duration contracts are
comprised of group term life, group disability, medical and
dental, property, credit, warranty and all other. The principal
products and services included in these categories are described
in the summary of significant accounting policies (see
note 2).
The disability category includes short and long
term disability products. Claims and benefits payable for
long-term disability have been discounted at 6%. The
December 31, 2002 and 2001 liabilities include $1,286,463
and $1,190,618, respectively, of such reserves. The amount of
discounts deducted from outstanding reserves as of
December 31, 2002 and 2001 are $405,507 and $390,803,
respectively.
15.
Fair Value Disclosures
Statement of Financial Accounting Standards
No. 107,
Disclosures About Fair Value of Financial
Instruments
("FAS 107") requires disclosure
of fair value information about financial instruments, as
defined therein, for which it is practicable to estimate such
fair value. These financial instruments may or may not be
recognized in the consolidated balance sheets. In the
measurement of the fair value of certain financial instruments,
if quoted market prices were not available other valuation
techniques were utilized. These derived fair value estimates are
significantly affected by the assumptions used. Additionally,
FAS 107 excludes certain financial instruments including
those related to insurance contracts.
In estimating the fair value of the financial
instruments presented, the Company used the following methods
and assumptions:
Cash, cash equivalents and short-term
    investments:
the carrying amount
    reported approximates fair value because of the short maturity
    of the instruments.
Fixed maturity
    securities:
the fair value for fixed
    maturity securities is based on quoted market prices, where
    available. For fixed maturity securities not actively traded,
    fair values are estimated using values obtained from independent
    pricing services or, in the case of private placements, are
    estimated by discounting expected future cash flows using a
    current market rate applicable to the yield, credit quality, and
    maturity of the investments.
Equity securities:
fair value of equity securities and non-sinking fund preferred
    stocks is based upon quoted market prices.
Commercial mortgage loans and policy
    loans:
the fair values of mortgage
    loans are estimated using discounted cash flow analyses, based
    on interest rates currently being offered for similar loans to
    borrowers with similar credit ratings. Mortgage loans with
    similar characteristics are aggregated for purposes of the
    calculations. The carrying amounts of policy loans reported in
    the balance sheets approximate fair value.
F-38
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Other investments:
the fair values of joint ventures are calculated based on fair
    market value appraisals. The carrying amounts of the remaining
    other investments approximate fair value.
Policy reserves under investment
    products:
the fair values for the
    Company's policy reserves under the investment products are
    determined using cash surrender value.
Separate account assets and
    liabilities:
separate account assets
    and liabilities are reported at their estimated fair values in
    the balance sheet.
December 31, 2002
December 31, 2001
Carrying
Fair
Carrying
Fair
Value
Value
Value
Value
Financial assets
Cash and cash equivalents
$
549,648
$
549,648
$
559,304
$
559,304
Fixed maturities
8,035,530
8,035,530
7,630,432
7,630,432
Equity securities
271,700
271,700
247,139
247,139
Commercial mortgage loans on real estate
841,940
969,247
868,754
930,140
Policy loans
69,377
69,377
68,236
68,236
Short-term investments
684,350
684,350
626,727
626,727
Other investments
125,870
158,571
159,217
180,971
Assets held in separate accounts
3,411,616
3,411,616
4,698,732
4,698,732
Financial liabilities
Policy reserves under investment products
    (Individual and group annuities, subject to discretionary
    withdrawal)
$
533,721
$
527,575
$
523,726
$
513,813
Liabilities related to separate accounts
3,411,616
3,411,616
4,698,732
4,698,732
The fair value of the Company's liabilities
for insurance contracts other than investment-type contracts are
not required to be disclosed. However, the fair values of
liabilities under all insurance contracts are taken into
consideration in the Company's overall management of
interest rate risk, such that the Company's exposure to
changing interest rates is minimized through the matching of
investment maturities with amounts due under insurance contracts.
16.
Retirement and Other Employee
    Benefits
The Company and its subsidiaries participate in a
noncontributory defined benefit pension plan covering
substantially all of their employees. Benefits are based on
certain years of service and the employee's compensation
during certain such years of service. The Company's funding
policy is to contribute amounts to the plan sufficient to meet
the minimum funding requirements set forth in the Employee
Retirement Income Security Act of 1974, plus such additional
amounts as the Company may determine to be appropriate from time
to time up to the maximum permitted. Contributions are intended
to provide not only for benefits attributed to service to date,
but also for those expected to be earned in the future. The
Company also has noncontributory, nonqualified supplemental
programs covering certain employees.
In addition, the Company provides certain life
and healthcare benefits for retired employees and their
dependents. Substantially all employees of the Company may
become eligible for these benefits depending on age and years of
service. The Company has the right to modify or terminate these
benefits.
F-39
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Summarized information on the Company's
qualified pension benefits and postretirement plans for the
years ended December 31 is as follows:
Pension Benefits
Retirement Health Benefits
2002
2001
2000
2002
2001
2000
Change in benefit obligation
Benefit obligation at beginning of year
$
(236,500
)
$
(216,588
)
$
(177,608
)
$
(37,763
)
$
(33,334
)
$
(14,359
)
Service cost
(12,166
)
(11,317
)
(9,322
)
(1,913
)
(1,662
)
(527
)
Interest cost
(16,806
)
(16,481
)
(13,894
)
(2,847
)
(2,604
)
(1,120
)
Benefits paid
13,654
13,511
7,724
1,200
1,010
652
Actuarial losses
(18,141
)
(21,494
)
(492
)
(3,785
)
(2,960
)
958
Plan amendments
—
(2,524
)
(22,996
)
—
—
(18,938
)
Acquisition
—
—
—
(1,297
)
—
—
Curtailment gains
—
3,910
—
—
1,787
—
Settlement gain
—
14,483
—
—
—
—
Benefit obligation at end of year
(269,959
)
(236,500
)
(216,588
)
(46,405
)
(37,763
)
(33,334
)
Change in plan assets
Fair value of plan assets at beginning of year
178,966
190,508
182,881
—
—
—
Actual return on plan assets
(24,961
)
(2,798
)
16,940
—
—
—
Employer contributions
35,000
20,000
—
1,200
1,010
652
Benefits paid
(13,654
)
(13,511
)
(7,724
)
(1,200
)
(1,010
)
(652
)
Administrative expenses
(750
)
(750
)
(1,589
)
—
—
—
Settlement gain
—
(14,483
)
—
—
—
—
Fair value of plan assets at end of year
174,601
178,966
190,508
—
—
—
Funded status at end of year
(95,358
)
(57,534
)
(26,080
)
(46,405
)
(37,763
)
(33,334
)
Unrecognized actuarial loss or (gain)
84,215
22,756
(13,303
)
1,777
(2,008
)
(4,988
)
Unrecognized transition asset
—
—
(179
)
—
—
—
Unrecognized prior service cost
17,743
20,689
22,937
14,438
15,780
18,938
Accrued net periodic pension cost
$
6,600
$
(14,089
)
$
(16,625
)
$
(30,190
)
$
(23,991
)
$
(19,384
)
Amounts recognized in the statement of financial
    position consist of accrued benefits liability
$
(59,624
)
$
(14,089
)
$
(16,625
)
$
(30,190
)
$
(23,991
)
$
(19,384
)
Intangible asset
17,743
—
—
—
—
—
Accumulated other comprehensive income
48,481
—
—
—
—
—
Net amount recognized
$
6,600
$
(14,089
)
$
(16,625
)
$
(30,190
)
$
(23,991
)
$
(19,384
)
The curtailment and settlement gains in 2001
resulted from the sale of FFG (see note 4).
The Company's nonqualified plans are
unfunded. At December 31, 2002, 2001 and 2000 these plans
had projected benefit obligations of $64,118, $52,790 and
$45,780, respectively, and accumulated benefit obligations of
$53,511, $44,495 and $38,803, respectively.
F-40
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Determination of the projected benefit obligation
was based on the following weighted average assumptions at
December 31:
Retirement Health
Pension Benefits
Benefits
2002
2001
2000
2002
2001
2000
Discount rate
6.75
%
7.40
%
7.75
%
6.75
%
7.40
%
7.75
%
Expected return on plan assets
8.25
%
9.00
%
9.00
%
—
—
—
Components of net pension cost for the year ended
December 31 were as follows:
Retirement Health
Pension Benefits
Benefits
2002
2001
2000
2002
2001
2000
Service cost
$
12,166
$
11,317
$
9,322
$
1,913
$
1,662
$
527
Interest cost
16,805
16,481
13,894
2,846
2,604
1,120
Expected return on plan assets
(17,606
)
(15,849
)
(16,198
)
—
—
—
Amortization of prior service cost
2,946
2,713
71
1,343
1,343
—
Amortization of transition (asset)
—
(171
)
(179
)
—
—
—
Recognized actuarial (gain)
—
—
(393
)
—
(19
)
(332
)
Curtailment loss
—
2,059
—
—
28
—
Settlement loss
—
913
—
—
—
—
Net periodic benefit cost
$
14,311
$
17,463
$
6,517
$
6,102
$
5,618
$
1,315
A one percentage point change in assumed health
care cost trend rates would have the following effects:
Retirement Health
Benefits
2002
2001
2000
One percentage point increase in health care
    cost trend rate
Effect on total of service and interest cost
    components
$
50
$
45
$
85
Effect on postretirement benefit obligation
712
683
560
One percentage point decrease in health care
    cost trend rate
Effect on total of service and interest cost
    components
(48
)
(47
)
(78
)
Effect on postretirement benefit obligation
(677
)
(650
)
(530
)
The Company and its subsidiaries have a defined
contribution plan covering substantially all employees which
provides benefits payable to participants on retirement or
disability and to beneficiaries of participants in the event of
the participant's death. Amounts contributed to the plan
and expensed by the Company were $23,669, $21,792 and $14,071 in
2002, 2001 and 2000, respectively.
F-41
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
17.
Deferred Acquisition Costs
Information about deferred acquisition costs
follows:
December 31,
2002
2001
2000
Beginning Balance
$
1,094,765
$
1,283,966
$
907,684
Costs deferred
1,002,585
1,075,473
1,069,441
Amortization
(782,473
)
(729,223
)
(590,166
)
Adjustment related to sale of FFG and LTC
—
(531,329
)
(98,126
)
Other
(1,283
)
(4,122
)
(4,867
)
Ending Balance
$
1,313,594
$
1,094,765
$
1,283,966
18.     Goodwill and
VOBA
Information about goodwill and VOBA follows:
Goodwill for the Year Ended
VOBA for the Year Ended
December 31,
December 31,
2002
2001
2000
2002
2001
2000
Beginning Balance
$
2,089,704
$
1,995,155
$
1,994,322
$
308,933
$
471,895
$
474,098
Amounts acquired
5,373
207,849
107,606
24
(4,482
)
174,535
Amortization, net of interest accrued
—
(113,300
)
(106,773
)
(93,712
)
(146,480
)
(176,738
)
Adjustment related to FFG sale
—
—
—
—
(12,000
)
—
Impairment charge
(1,260,939
)
—
—
—
—
—
Ending Balance
$
834,138
$
2,089,704
$
1,995,155
$
215,245
$
308,933
$
471,895
As of December 31, 2002, the majority of the
outstanding balance of VOBA is in the Company's PreNeed
segment. VOBA in this segment assumes an interest rate ranging
from 6.5% to 7.5%.
At December 31, 2002, the estimated
amortization of VOBA for the next five years is as follows:
Year
Amount
2003
$
23,825
2004
21,420
2005
19,169
2006
17,310
2007
15,714
Prior to January 1, 2002, goodwill was
amortized over 20 years. Upon the adoption of FAS 142,
amortization of goodwill ceased and the Company recognized a
$1,260,939 impairment reflecting the
F-42
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
cumulative effect of change in accounting
principle. Had the provisions of FAS 142 been applied as of
January 1, 2000 net income would have been adjusted as
follows:
Years Ended December 31,
2002
2001
2000
Net (loss) income, as reported
$
(1,001,199
)
$
98,053
$
89,684
Goodwill amortization, net of tax
—
113,300
106,773
Net (loss) income excluding goodwill amortization
(1,001,199
)
211,353
196,457
Net (loss) income per share
$
(120.63
)
$
25.46
$
23.93
19.     Segment
Information
The Company has five reportable segments, which
are defined based on the nature of the products and services
offered: Solutions, Health, Employee Benefits, PreNeed, and
Corporate and Other. Solutions provides credit insurance,
including life, disability and unemployment, debt protection
administration services, creditor-placed homeowners insurance,
and manufactured housing homeowners insurance. Health provides
individual, short-term, and small group health insurance.
Employee Benefits provides employee-paid dental insurance and
employer-paid dental, disability and life insurance products and
related services. PreNeed provides life insurance policies and
annuity products that provide benefits to fund pre-arranged
funerals. Corporate and Other includes activities of the holding
company, financing expenses, realized gains (losses) on
investments, interest income earned from short-term investments
held, and interest income from excess surplus of insurance
subsidiaries not allocated to other segments. Corporate and
Other also includes results of operations of FFG for 2000 and
the period from January 1 through March 31, 2001 and
LTC (from January 1 through March 1, 2000). Corporate
and Other also includes the amortization of deferred gains
associated with the sales of FFG and LTC via reinsurance
agreements.
The Company evaluates performance based on
segment income after-tax, excluding realized gains (losses) on
investments. The Company determines reportable segments in a
manner consistent with the way the Company organizes for
purposes of making operating decisions and assessing
performance. The accounting policies of the reportable segments
are the same as those described in the summary of significant
accounting policies.
The Company allocates a notional amount of
invested assets to the segments primarily based on future policy
benefits, claims and unearned premiums, and capital allocated to
each segment. The Company assigns net deferred acquisition
costs, value of businesses acquired, reinsurance recoverables,
and other assets and liabilities to the respective segments
where those assets or liabilities originate.
Net investment income is allocated based on a
segment's proportional share of assets and capital required
to support their business.
F-43
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The following tables summarize selected financial
information by segment for the year ended or as of
December 31, 2002, 2001 and 2000:
Year Ended December 31, 2002
Employee
Corporate
Solutions
Health
Benefits
PreNeed
& Other
Consolidated
Revenues
Net earned premiums and other considerations
$
2,077,277
$
1,833,656
$
1,232,942
$
537,721
$
—
$
5,681,596
Net investment income
205,037
55,268
147,722
183,634
40,167
631,828
Net realized losses on investments
—
—
—
—
(118,372
)
(118,372
)
Amortization of deferred gain on disposal of
    businesses
—
—
—
—
79,801
79,801
Gain on disposal of businesses
—
—
—
—
10,672
10,672
Fees and other income
118,949
22,716
74,324
5,123
25,563
246,675
Total revenues
2,401,263
1,911,640
1,454,988
726,478
37,831
6,532,200
Benefits, losses and expenses
Policyholder benefits
755,140
1,222,049
944,593
507,363
—
3,429,145
Amortization of deferred acquisition costs and
    value of business acquired
714,178
64,029
—
96,550
1,428
876,185
Underwriting, general and administrative expenses
735,008
482,057
422,230
45,964
52,818
1,738,077
Interest expense and distributions on preferred
    securities of subsidiary trusts
—
—
—
—
118,396
118,396
Total benefits, losses and expenses
2,204,326
1,768,135
1,366,823
649,877
172,642
6,161,803
Segment income before income tax
196,937
143,505
88,165
76,601
(134,811
)
370,397
Income taxes
64,782
49,059
31,048
26,943
(61,175
)
110,657
Segment income after tax
$
132,155
$
94,446
$
57,117
$
49,658
$
(73,636
)
$
259,740
Cumulative effect of change in accounting
    principle
(1,260,939
)
Net income (loss)
$
(1,001,199
)
Segment Assets:
Segments assets, excluding goodwill
$
7,074,703
$
1,062,930
$
2,458,404
$
3,509,425
$
7,278,409
$
21,383,871
Goodwill
834,138
Total assets
$
22,218,009
F-44
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Year Ended December 31, 2001
Employee
Corporate
Solutions
Health
Benefits
PreNeed
& Other
Consolidated
Revenues
Net earned premiums and other considerations
$
1,906,426
$
1,837,839
$
933,594
$
506,716
$
57,610
$
5,242,185
Net investment income
218,213
58,073
144,378
179,093
112,025
711,782
Net realized losses on investments
—
—
—
—
(119,016
)
(119,016
)
Amortization of deferred gain on disposal of
    businesses
—
—
—
—
68,296
68,296
Gain on disposal of businesses
—
—
—
—
61,688
61,688
Fees and other income
97,685
14,229
39,568
3,336
67,121
221,939
Total revenues
2,222,324
1,910,141
1,117,540
689,145
247,724
6,186,874
Benefits, losses and expenses
Policyholder benefits
639,905
1,306,477
737,802
484,736
70,005
3,238,925
Amortization of deferred acquisition costs and
    value of business acquired
733,186
42,967
—
85,008
14,542
875,703
Underwriting, general and administrative expenses
711,137
452,528
316,310
35,864
105,092
1,620,931
Interest expense and distributions on preferred
    securities of subsidiary trusts
—
—
—
—
132,371
132,371
Total benefits, losses and expenses
2,084,228
1,801,972
1,054,112
605,608
322,010
5,867,930
Segment income before income tax
138,096
108,169
63,428
83,537
(74,286
)
318,944
Income taxes
39,909
37,548
22,184
29,260
(21,310
)
107,591
Segment income after tax
$
98,187
$
70,621
$
41,244
$
54,277
$
(52,976
)
$
211,353
Amortization of goodwill
(113,300
)
Net income (loss)
$
98,053
Segment Assets:
Segments assets, excluding goodwill
$
6,822,052
$
1,066,290
$
2,117,443
$
3,316,830
$
9,037,558
$
22,360,173
Goodwill
2,089,704
Total assets
$
24,449,877
F-45
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Year Ended December 31, 2000
Employee
Corporate
Solutions
Health
Benefits
PreNeed
& Other
Consolidated
Revenues
Net earned premiums and other considerations
$
1,780,547
$
1,966,982
$
903,148
$
276,640
$
217,058
$
5,144,375
Net investment income
211,596
58,319
135,470
128,396
156,951
690,732
Net realized losses on investments
—
—
—
—
(44,977
)
(44,977
)
Amortization of deferred gain on disposal of
    businesses
—
—
—
—
10,284
10,284
Gain on disposal of businesses
—
—
—
—
11,994
11,994
Fees and other income
68,284
11,253
8,171
1,532
310,331
399,571
Total revenues
2,060,427
2,036,554
1,046,789
406,568
661,641
6,211,979
Benefits, losses and expenses
Policyholder benefits
525,270
1,498,060
701,704
279,437
203,583
3,208,054
Amortization of deferred acquisition costs and
    value of business acquired
646,160
37,572
—
50,426
32,746
766,904
Underwriting, general and administrative expenses
658,254
433,661
280,004
25,103
404,174
1,801,196
Interest expense and distributions on preferred
    securities of subsidiary trusts
—
—
—
—
134,868
134,868
Total benefits, losses and expenses
1,829,684
1,969,293
981,708
354,966
775,371
5,911,022
Segment income before income tax
230,743
67,261
65,081
51,602
(113,730
)
300,957
Income taxes
75,837
23,047
23,011
18,180
(35,575
)
104,500
Segment income after tax
$
154,906
$
44,214
$
42,070
$
33,422
$
(78,155
)
$
196,457
Amortization of goodwill
(106,773
)
Net income (loss)
$
89,684
The Company operates primarily in the United
States and Canada. The following table summarizes selected
financial information by geographic location for the years ended
or at December 31:
Long-lived
Location
Revenues
Assets
2002
United States
$
6,335,645
$
245,936
Foreign
196,555
4,849
Total
$
6,532,200
$
250,785
2001
United States
$
6,001,842
$
230,006
Foreign
185,032
3,467
Total
$
6,186,874
$
233,473
2000
United States
$
6,046,972
$
226,165
Foreign
165,007
3,759
Total
$
6,211,979
$
229,924
Revenue is based in the country where the product
was sold and long-lived assets are based on the physical
location of those assets. The Company has no reportable major
customers.
F-46
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
20.     Incentive
Plans
Fortis Appreciation Incentive Rights Plan
    ("FAIR Plan"):
Since January 1, 1999, the Company has
maintained the Fortis Appreciation Incentive Rights Plan, which
provides key employees with the right to receive long-term
incentive cash compensation based on the appreciation in value
of incentive units of the Company and incentive units of each of
its operating business segments. The FAIR Plan is administered
by a committee appointed by the Company's board of
directors. See note 23 for subsequent amendment to the FAIR
Plan.
The Company accounts for the FAIR Plan as a
variable plan in accordance with the provisions of APB 25
and its interpretations. Therefore, compensation expense is
recognized based on the intrinsic value method.
The value of each right is based on an
independent valuation of the Company performed by a qualified
appraiser. Each year, the appraiser determines a fair market
value for Fortis, Inc. and the individual business segments.
Based on this valuation, "phantom share prices" are
established for Fortis, Inc. and each business segment. These
share prices are calculated by dividing the market value, as
determined by the appraiser of Fortis, Inc. or a business
segment by the number of outstanding "phantom shares"
in Fortis, Inc. or in that segment.
The phantom share price established for a given
grant year becomes the strike price for that year and the
exercise price for prior grant years. When the phantom share
price determined by subsequent annual valuations increases above
the strike price, the rights accrue intrinsic value that will be
paid in cash when exercised.
Employees of Fortis, Inc. receive 75% of their
award value in Fortis, Inc. incentive rights and the remaining
25% in equal portions of incentive rights from the business
segments. Segment participants receive 75% of their award value
from their own particular business segment and 25% from Fortis,
Inc.
The incentive rights vest over a three-year
period from the date of grant and are exercisable for a period
of 7 years from the date the rights are fully vested.
Unexercised vested incentive rights are exercised automatically
following the tenth anniversary of the date of grant. If upon
expiration of the award the strike price is below the exercise
price, then the award is automatically forfeited.
The Company recognized $19,570, $7,605, and
$5,484 of compensation expense for the FAIR Plan in 2002, 2001,
and 2000, respectively.
Fortis, Inc. Stock Option Plan ("Stock
    Option Plan"):
Under the Company's Stock Option Plan, the
compensation committee of the Board of Directors may award
nonqualified stock options to acquire shares of Series D
Preferred Stock to eligible members of senior management. The
Stock Option Plan was adopted in 1998.
The Series D Preferred Stock consists of
10,000,000 authorized, non-redeemable shares, none of which are
outstanding at December 31, 2002 and 2001. Because the
intention of the Stock Option Plans is to permit senior
management to participate in the growth in value of the Parent,
as a consolidated group, certain terms of the Series D
Preferred Stock are based upon the performance and value of the
capital stock of Fortis N.V. and Fortis SA/NV.
The Series D Preferred Stock has a
liquidation price per share equal to the fair market value of
one unit of "Euro Fortis Stock," which is defined as
the aggregate of (i) nine-tenths (.9) of one share of the
common stock of Fortis N.V. and (ii) nine-tenths (.9) of
one share of the common stock of Fortis SA/NV.
F-47
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
The exercise price of the option is set by the
compensation committee of the Board of Directors and may not be
less than the market value of the Parent's common stock on
the date of the grant. Under the stock option plan, 33% of the
award vests annually starting the year of grant. Additionally,
the option can be exercised upon vesting and it expires in a ten
year period from the date of grant.
The Company accounts for the Stock Option Plan as
a variable plan in accordance with the provisions of APB 25 and
its interpretations. Therefore, compensation expense is
recognized based on the intrinsic value method. Compensation
cost charged to income was $0, $(1,081) (represents reversal of
expense accrual due to reduction of intrinsic value), and $698
for the years ended December 31, 2002, 2001 and 2000,
respectively.
Summarized information about the Company's
Stock Option Plan as of December 31, 2002, 2001 and 2000, and
changes during the years ended on those dates is presented below:
2002
2001
2000
Weighted-Average
Weighted-Average
Weighted-Average
Exercise Price
Exercise Price
Exercise Price
Options
Per Share
Options
Per Share
Options
Per Share
Outstanding beginning of year
314,250
$
46.66
243,601
$
49.49
204,050
$
54.68
Granted
83,000
47.75
72,400
46.25
55,750
43.44
Exercised
—
—
—
—
—
—
Forfeited
(56,550
)
55.71
(1,751
)
51.80
(16,199
)
50.06
Outstanding end of year
340,700
45.42
314,250
48.73
243,601
52.42
Exercisable at end of year
189,800
$
54.84
186,350
$
48.47
102,334
$
45.01
Weighted average fair value of options granted
    during the year
$
14.21
$
16.45
$
14.61
The following table summarizes certain stock
option information at December 31, 2002:
Exercise
# of Options
Remaining
# of Options
Price
Outstanding
Contractual Life
Exercisable
$47.75
83,000
9.2
—
48.37
51,750
7.2
51,750
50.11
73,600
5.7
73,600
54.43
67,900
8.2
—
65.45
64,450
6.2
64,450
Total
340,700
189,800
Fortis Investment Plan
    ("FIP")
The Company has adopted the FIP, which provides
key employees the ability to exchange a portion of their
compensation for options to purchase certain third-party mutual
funds. The plan became effective as of January 1, 1999 and
is administered by the Company's Senior Vice
President—Compensation and Benefits, who is referred to as
the administrator. Under the FIP, a participant may exchange all
or a portion of his or her eligible compensation for a specific
number of options under the plan. Each option represents the
right to purchase shares of a third-party mutual fund, as
selected by the participant. Each option is exercisable for a
dollar amount equal to the greater of 25% of the trading price
of the applicable mutual fund units at the date the option is
granted and 50% of the trading price of the applicable mutual
fund units on the date the option is exercised. Each option is
fully vested and exercisable on the grant date. Options may not
be exercised more
F-48
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
than twice in any calendar year, except with the
consent of the administrator. For most options, the exercise
period generally will expire on the earlier of 120 months
after the participant's death, disability or retirement and
60 months after the participant's termination of
employment for any other reason. Until the options are
exercised, a participant may instruct the administrator to
exchange some or all of the options to purchase different
underlying mutual fund units. The amounts included in other
assets and other liabilities was $55,311 and $50,028 at
December 31, 2002 and 2001, respectively.
21.
Other Comprehensive Income (Loss)
The Company's components of other
comprehensive income (loss) net of tax at December 31
are as follows:
Accumulated
Foreign
Unrealized
Other
Currency
Gains
Pension
Comprehensive
Translation
(Losses) on
Under-
Income
Adjustment
Securities
funding
(Loss)
Balance at December 31, 1999
$
1,360
$
(135,936
)
—
$
(134,576
)
Activity in 2000
(3,585
)
139,375
—
135,790
Balance at December 31, 2000
(2,225
)
3,439
—
1,214
Activity in 2001
(5,633
)
102,623
—
96,990
Balance at December 31, 2001
(7,858
)
106,062
—
98,204
Activity in 2002
8,332
173,699
(35,250
)
146,781
Balance at December 31, 2002
$
474
$
279,761
$
(35,250
)
$
244,985
22.
Related Party Transactions
In the ordinary course of business, the Company
has entered into a number of agreements with the Parent.
Historically, the Parent has maintained a
$1,000,000 commercial paper facility that the Company has been
able to access (via intercompany loans) for up to $750,000. The
Company has used the commercial paper facility to cover any cash
shortfalls, which may occur from time to time. The Company had
no intercompany loans with the Parent associated with this
commercial paper facility during the year ended
December 31, 2002. In 2001, $235,000 in commercial paper
was issued and redeemed by the Parent on the Company's
behalf. The Company had no outstanding intercompany loans with
the Parent related to this commercial paper facility at year-end
December 31, 2002 and 2001.
In addition, we previously had indebtedness
outstanding in the amount of $225,000 to Fortis Finance N.V.,
which was repaid in April 2001.
During 2002, 2001 and 2000, the Company paid
$749, $516, and $0, respectively, to Fortis for costs
representing salary, benefits and other expenses of a director
of the Company, who was then an employee of one of the
Parent's subsidiaries, and his support staff. We
discontinued these payments as of October 3, 2003.
The other related party transactions are
disclosed in notes 1, 8, 10 and 11.
F-49
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
23.
Subsequent Events
Assurant, Inc. ("Assurant") was
incorporated in October 2003 as a Delaware corporation and a
wholly owned subsidiary of Fortis, Inc. In connection with the
planned offering, the parent company and the board of directors
of Assurant, Inc. approved certain employee benefits programs on
October 15, 2003 as follows:
2004 Long-Term Incentive Plan
The 2004 Long-Term Incentive Plan will be
effective as of the closing of the initial public offering.
The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, and directors in the
following forms: (1) options to purchase shares of
Assurant's common stock, which may be non-statutory stock
options or incentive stock options under the U.S. tax code;
(2) stock appreciation rights, which give the holder the
right to receive the difference between the fair market value
per share on the date of exercise over the grant price;
(3) performance awards, which are payable in cash or stock
upon the attainment of specified performance goals;
(4) restricted stock, which is subject to restrictions on
transferability and subject to forfeiture on terms set by the
Compensation Committee; (5) dividend equivalents, which
entitle the participant to payments equal to any dividends paid
on the shares of stock underlying an award; and (6) other
stock-based awards in the discretion of the Compensation
Committee, including unrestricted stock grants.
There are 10,000,000 shares reserved and
available for issuance under the plan.
No awards will be granted under the plan prior to
its effective date. Any awards will be made at the discretion of
the Compensation Committee. Therefore, it is not presently
possible to determine the benefits or amounts that will be
received by any individuals or groups pursuant to the 2004
Long-Term Incentive Plan in the future.
2004 Employee Stock Purchase
    Plan
The 2004 Employee Stock Purchase Plan will go
into effect as of the earliest of July 1 or January 1
following the closing of the initial public offering.
The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company. The stock purchase plan is designed to allow eligible
employees to purchase shares of Assurant's common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are designated by
the Compensation Committee and if they are customarily employed
for at least 20 hours per week and five months per calendar
year, and provided they have served as an employee for at least
six months. A total of 5,000,000 shares of Assurant's
common stock have been reserved for issuance under the stock
purchase plan.
Executive Management Incentive
    Plan
The Executive Management Incentive Plan will be
effective as of January 1, 2004. Participation in the
Executive Management Incentive Plan is limited to senior
officers of the Company and its subsidiaries who are selected to
participate in the plan for a given year by the Compensation
Committee. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant's base salary based upon the achievement of
certain designated performance goals.
The amount of awards under the plan will be
determined at the discretion of the Compensation Committee.
Therefore, it is not presently possible to determine the
benefits or amounts that will be received by any individuals or
groups pursuant to this plan.
F-50
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Amendment to Fortis Appreciation Incentive
    Rights Plan ("FAIR Plan")
The FAIR Plan was amended to provide for the
cash-out and replacement of Fortis, Inc. incentive rights with
stock appreciation rights on the Assurant common stock from and
after the closing of the initial public offering contemplated.
The business segment rights outstanding under the plan will not
be changed or effected. The conversion of outstanding Fortis,
Inc. incentive rights will take place as described in this
paragraph. The Fortis, Inc. incentive rights will be valued as
of December 31, 2003 using a special valuation method, as
follows. The measurement value of each Fortis, Inc. incentive
right as of December 31, 2002 will be adjusted to reflect
dividends paid by Fortis, Inc., consistent with past practice;
such adjusted value shall then be multiplied by the arithmetic
average of the change during calendar year 2003 in the Dow Jones
Life Insurance Index, the Dow Jones Property Casualty Index, and
the Dow Jones Healthcare Providers Index; and the result will be
the measurement value of a Fortis, Inc. incentive right as of
December 31, 2003. As soon as practical after this special
valuation is completed, and before the closing of the initial
public offering contemplated, each Fortis, Inc. incentive right
then outstanding under the plan will be cashed out for a cash
payment equal to the difference, if any, between the measurement
value of the Fortis, Inc. incentive rights as of
December 31st immediately preceeding the date of grant, and
the measurement value of that right determined as of
December 31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, Assurant will grant to each participant whose
rights were cashed out a number of stock appreciation rights on
Assurant's common stock (referred to as "replacement
rights"). The number of replacement rights to be granted to
a participant will equal (1) the measurement value of the
participant's cashed-out Fortis, Inc. incentive rights,
divided by (2) the initial public offering price. Each
replacement right that replaces a vested cashed-out right will
be vested immediately, and each replacement right that replaces
a non-vested cashed-out right will become vested on the vesting
date for the corresponding cashed-out right, but no replacement
right, whether or not vested, may be exercised sooner than one
year from the closing date of the initial public offering
contemplated. After that waiting period, each replacement right
will be exercisable for the remaining term of the corresponding
cancelled right.
See note 2 for a discussion of recent
accounting pronouncements issued and not adopted which contains
a description of the Company's current status of adopting
such pronouncements as of October 20, 2003.
See note 22 for a description of a change in
a related party transaction as of October 3, 2003.
See note 24 for a description of an
October 1, 2003 grand jury of Mower County, Minnesota,
indictment of ABIC and two corporate officers of the Solutions
segment.
24.
Commitments and Contingencies
The Company and its subsidiaries lease office
space and equipment under operating lease arrangements. Certain
facility leases contain escalation clauses based on increases in
the lessors' operating expenses. At December 31, 2002,
the aggregate future minimum lease payments under operating
lease agreements that have initial or non-cancelable terms in
excess of one year are:
2003
$
39,840
2004
34,682
2005
31,564
2006
27,304
2007
22,556
Thereafter
52,860
Total minimum future lease payment
$
208,806
F-51
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
Rent expense was $43,412, $32,546 and $32,931 for
2002, 2001 and 2000 respectively.
In the normal course of business, letters of
credit are issued primarily to support reinsurance arrangements.
These letters of credit are supported by commitments with
financial institutions. The Company had approximately
$120 million and $109 million of letters of credit
outstanding as of June 30, 2003 and December 31, 2002,
respectively. Additionally, as of June 30, 2003, the
Company had an unused $50 million letter of credit facility.
The Company is regularly involved in litigation
in the ordinary course of business, both as a defendant and as a
plaintiff. The Company may from time to time be subject to a
variety of legal and regulatory actions relating to the
Company's current and past business operations. While the
Company cannot predict the outcome of any pending or future
litigation, examination or investigation, the Company does not
believe that any pending matter will have a material adverse
effect on the Company's financial condition or results of
operations.
The Solutions segment is subject to a number of
pending actions, primarily in the State of Mississippi, many of
which allege that the Company's credit insurance products
were packaged and sold with lenders' products without buyer
consent. The judicial climate in Mississippi is such that the
outcome of these cases is extremely unpredictable. The Company
has been advised by legal counsel that the Company has
meritorious defenses to all claims being asserted against the
Company. The Company believes, based on information currently
available, that any liabilities that could result are not
expected to have a material adverse effect on the Company's
financial condition or results of operations.
American Bankers Insurance Group, part of the
Solutions segment, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company ("ABIC")
and American Bankers Life Assurance Company ("ABLAC")
previously entered into a Consent Order and a comprehensive
Compliance Plan with 43 participating states relating to
compliance with the often disparate state insurance laws,
regulations and administrative interpretations which have been
difficult to apply to the marketing of ABIG's credit
insurance products through financial institutions, retailers and
other entities offering consumer financing as a regular part of
their business. In addition to an initial settlement of
$12 million, ABIG agreed to a multi-state market conduct
examination commencing November 23, 1999, for review of
ABIG's implementation of the Compliance Plan. A final
report was issued on December 19, 2001, and ABIG paid a
final settlement of $3 million to participating states.
In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, two of
the Company's subsidiaries, in connection with certain
alleged regulatory violations. Thereafter, ABIC and ABLAC filed
suit in Minnesota state court seeking to enjoin the enforcement
action because the alleged regulatory matters included within
the enforcement action were resolved as a part of the
above-described Consent Order and Compliance Plan to which
Minnesota was a party. In February 2003, the State of Minnesota,
ABIC and ABLAC reached a final settlement of all matters
included within the enforcement action and the separate state
court action filed by ABIC and ABLAC. Pursuant to the
settlement, ABIC and ABLAC each agreed to pay $100,000 to the
State of Minnesota and agreed to compensate the state for its
investigative costs which totaled $1.8 million. In
addition, ABIC and ABLAC agreed to stop selling insurance in
Minnesota for five years, though they could apply for
reinstatement in 20 months. Other member companies of the
Solutions segment with product lines that overlap those offered
by ABIC and ABLAC currently remain authorized to do business in
the State of Minnesota. The Company does not believe that the
effect of the settlement during the next five years will have a
material impact on the Company's financial condition or
results of its operations.
On October 1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of the Solutions segment. The indictment alleges that
ABIC and its two named corporate
F-52
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
December 31, 2002, 2001 and
2000
officers each violated the Minnesota Fair
Campaign Practices Act in connection with two contributions by
ABIC to the Republican National State Election Committee
totaling $15,000. The maximum penalty for ABIC is a $40,000 fine
for each alleged violation and/or forfeiture of ABIC's
license to conduct business in Minnesota. Other member companies
of the Solutions segment with product lines that overlap those
offered by ABIC currently remain authorized to conduct business
in the State of Minnesota. ABIC believes that it has meritorious
defenses to the claims being asserted against it, and the
Company believes, based on information currently available, that
any liabilities that could result are not expected to have a
material effect on the Company's financial condition or
results of operations.
In addition, one of the Company's
subsidiaries, American Reliable Insurance Company
("ARIC"), participated in certain excess of loss
reinsurance programs in the London market and, as a result,
reinsured certain personal accident, ransom and kidnap insurance
risks from 1995 to 1997. ARIC and a foreign affiliate ceded a
portion of these risks to other reinsurers (retrocessionaires).
ARIC ceased reinsuring such business in 1997. However, certain
risks continued beyond 1997 due to the nature of the reinsurance
contracts written. ARIC and some of the other reinsurers
involved in the programs are seeking to avoid certain treaties
on various grounds, including material misrepresentation and
non-disclosure by the ceding companies and intermediaries
involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of certain treaties with
ARIC and the other reinsurers. The disputes generally involve
multiple layers of reinsurance, and allegations that the
reinsurance programs involved interrelated claims
"spirals" devised to disproportionately pass claims
losses to higher-level reinsurance layers. Many of the companies
involved in these programs, including ARIC, are currently
involved in negotiations, arbitration and/or litigation between
multiple layers of retrocessionaires, reinsurers, ceding
companies and intermediaries, including brokers, in an effort to
resolve these disputes. Based on information currently available
to the Company, and after consideration of the reserves
reflected in the Company's financial statements, the
Company believes that it is not likely that any liabilities the
Company experiences in connection with these programs would have
a material adverse effect on the Company's financial
condition or results of operations. However, the inherent
uncertainty of arbitrations and lawsuits, including the
uncertainty of estimating whether any settlements the Company
may enter into in the future would be on favorable terms, makes
it difficult to predict the outcomes with certainty.
As a result of regulatory scrutiny of the
Company's industry practices or its businesses, such as
examinations of race-based premiums charged in the past by two
of the Company's acquired subsidiaries, it is possible that
the Company may be subject to legal proceedings in the future
relating to those practices and businesses.
F-53
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
At June 30, 2003 and December 31,
2002
(unaudited)
June 30,
December 31,
2003
2002
(in thousands except
number of shares and
per share amounts)
Assets
Investments:
Fixed maturities available for sale, at fair
    value (amortized cost—$8,066,032 in 2003 and $7,630,576 in
    2002)
$
8,765,857
$
8,035,530
Equity securities available for sale, at fair
    value (cost—$422,228 in 2003 and $264,635 in 2002)
446,016
271,700
Commercial mortgage loans on real estate at
    amortized cost
869,557
841,940
Policy loans
69,966
69,377
Short-term investments
446,995
684,350
Other investments
136,232
125,870
Total investments
10,734,623
10,028,767
Cash and cash equivalents
403,604
549,648
Premiums and accounts receivable
361,494
401,094
Reinsurance recoverables
4,577,993
4,649,909
Accrued investment income
131,751
126,761
Deferred acquisition costs
1,409,056
1,313,594
Property and equipment, at cost less accumulated
    depreciation
278,653
250,785
Deferred income taxes, net
37,509
168,200
Goodwill
834,138
834,138
Value of businesses acquired
180,337
215,245
Other assets
257,464
268,252
Assets held in separate accounts
3,531,540
3,411,616
Total assets
$
22,738,162
$
22,218,009
Liabilities
Future policy benefits and expenses
$
5,849,967
$
5,637,127
Unearned premiums
3,141,118
3,207,635
Claims and benefits payable
3,641,226
3,543,861
Commissions payable
404,526
348,188
Reinsurance balances payable
108,977
167,688
Funds held under reinsurance
176,225
183,838
Deferred gain on disposal of businesses
433,778
462,470
Accounts payable and other liabilities
1,198,906
1,204,602
Income tax payable
2,775
25,191
Liabilities related to separate accounts
3,531,540
3,411,616
Total liabilities
18,489,038
18,192,216
Commitments and contingencies (note 10)
—
—
Mandatorily redeemable preferred securities of
    subsidiary trusts
1,446,074
1,446,074
Mandatorily redeemable preferred stock
24,160
24,660
Stockholders' equity
Common stock, par value $.10 per share:
Class A: 40,000,000 shares authorized,
    7,750,000 shares issued and outstanding
775
775
Class B: 150,001 shares issued and
    outstanding
15
15
Class C: 400,001 shares issued and
    outstanding
40
40
(Class B and C: 40,000,000 total shares
    authorized)
Additional paid-in capital
2,064,025
2,064,025
Retained earnings
248,456
245,219
Accumulated other comprehensive income
465,579
244,985
Total stockholders' equity
2,778,890
2,555,059
Total liabilities, mandatorily redeemable
    preferred securities of subsidiary trusts, mandatorily
    redeemable preferred stock, and stockholders' equity
$
22,738,162
$
22,218,009
See the accompanying notes to the consolidated
interim financial statements
F-54
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
OPERATIONS
Six months ended June 30, 2003 and
2002
(unaudited)
Six Months Ended June 30,
2003
2002
(in thousands except number
of shares and per share
amounts)
Revenues
Net earned premiums and other considerations
$
2,987,029
$
2,787,519
Net investment income
305,885
310,539
Net realized gains (losses) on investments
7,474
(49,204
)
Amortization of deferred gain on disposal of
    businesses
34,873
40,030
Gain on disposal of businesses
—
10,672
Fees and other income
119,881
125,435
Total revenues
3,455,142
3,224,991
Benefits, losses and expenses
Policyholder benefits
1,774,243
1,678,871
Amortization of deferred acquisition costs and
    value of business acquired
580,240
443,221
Underwriting, general and administrative expenses
794,120
842,390
Distributions on preferred securities of
    subsidiary trusts
58,566
58,716
Total benefits, losses and expenses
3,207,169
3,023,198
Income before income taxes
247,973
201,793
Income taxes
84,086
60,126
Net income before cumulative effect of change in
    accounting principle
163,887
141,667
Cumulative effect of change in accounting
    principle
—
(1,260,939
)
Net income (loss)
$
163,887
$
(1,119,272
)
Earnings per share:
Weighted average of basic and diluted shares of
    common stock outstanding
8,300,002
8,300,002
Net income (loss) per share:
Basic and Diluted
Before cumulative effect of accounting change
$
19.75
$
17.07
Cumulative effect of accounting change
—
(151.92
)
Total
$
19.75
$
(134.85
)
See the accompanying notes to the consolidated
interim financial statements
F-55
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
At June 30, 2003 and 2002
(unaudited)
Accumulated
Outstanding
Additional
Other
Shares of
Common
Paid-in
Retained
Comprehensive
Common
Stock
Capital
Earnings
Income (Loss)
Total
Stock
(in thousands except number of shares and per share amounts)
Balance, December 31, 2002
$
830
$
2,064,025
$
245,219
$
244,985
$
2,555,059
8,300,002
Dividends on common stock
—
—
(160,134
)
—
(160,134
)
—
Other
—
—
(516
)
—
(516
)
—
Comprehensive income (loss)
Net income
—
—
163,887
—
163,887
—
Net change in unrealized gains on securities
—
—
—
202,064
202,064
—
Foreign currency translation
—
—
—
18,530
18,530
—
Total comprehensive income
384,481
Balance, June 30, 2003
$
830
$
2,064,025
$
248,456
$
465,579
$
2,778,890
8,300,002
See the accompanying notes to the consolidated
interim financial statements.
F-56
FORTIS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
Six months ended June 30, 2003 and
2002
(unaudited)
Six-Months Ended
June 30,
2003
2002
(in thousands except
number of shares and
per share amounts)
Operating activities
Net income
$
163,887
$
(1,119,272
)
Adjustments to reconcile net income to net cash
    provided by operating activities:
Change in reinsurance recoverable
71,916
8,507
Change in premiums and accounts receivable
39,615
(106,554
)
Depreciation and amortization
21,287
27,510
Change in deferred acquisition costs and value of
    businesses acquired
(64,497
)
(36,204
)
Cumulative effect of change in accounting
    principle
—
1,260,939
Change in accrued investment income
(4,990
)
(29,051
)
Change in insurance policy reserves and
    liabilities
292,648
118,544
Change in accounts payable and other liabilities
(5,696
)
(124,426
)
Change in commissions payable
56,338
(30,328
)
Change in reinsurance balances payable
(58,711
)
(19,034
)
Change in funds held under reinsurance
(7,613
)
(2,352
)
Amortization of deferred gain on disposal of
    businesses
(34,873
)
(40,030
)
Change in income taxes
(522
)
(176,648
)
Net realized (gains) losses on investments
(7,474
)
47,204
Gain on disposal of businesses
—
(10,672
)
Change in other assets and other
(59,276
)
35,215
Net cash provided by (used in) operating
    activities
$
402,039
$
(196,652
)
Investing activities
Sales of:
Fixed maturities available for sale
$
649,355
$
2,168,767
Equity securities available for sale
73,302
84,951
Property and equipment
16,225
1,269
Other invested assets
12,699
29,144
Maturities, prepayments, and scheduled redemption
    of:
Fixed maturities available for sale
643,086
381,670
Purchase of:
Fixed maturities available for sale
(1,670,515
)
(2,734,010
)
Equity securities available for sale
(231,003
)
(132,324
)
Property and equipment
(66,170
)
(58,835
)
Other invested assets
(23,061
)
(52,453
)
(Increase) decrease in commercial mortgage loans
    on real estate
(27,617
)
21,434
Decrease in short term investments
237,355
255,529
(Increase) decrease in policy loans
(589
)
186
Net cash received related to sale of business
—
12,000
Net cash used in investing activities
$
(386,933
)
$
(22,672
)
Financing activities
Redemption of mandatorily redeemable preferred
    stock
$
(500
)
$
—
Dividends paid
(160,134
)
(20,477
)
Other
(516
)
(527
)
Net cash used in financing activities
$
(161,150
)
$
(21,004
)
Change in cash and cash equivalents
(146,044
)
(240,328
)
Cash and cash equivalents at beginning of period
549,648
559,305
Cash and cash equivalents at end of period
$
403,604
$
318,977
Supplemental Information:
Income Taxes Paid
$
33,020
$
205,735
Distributions or mandatorily redeemable preferred
    securities of subsidiary trusts and interest paid
$
58,430
$
44,387
Non cash activities
Foreign currency translation
18,530
12,141
See the accompanying notes to the consolidated
interim financial statements
F-57
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
Six months ended June 30, 2003 and
2002
(In thousands except number of shares and per
share amounts)
(unaudited)
1.     Nature of
Operations
Fortis, Inc. (the "Company") is a
holding company provider of specialized insurance products and
related services in North America and selected other markets.
The Company is incorporated in the State of Nevada and is
indirectly wholly owned by Fortis N.V. of The Netherlands and
Fortis SA/NV of Belgium (collectively, the "Parent").
Through its operating subsidiaries, the Company
provides creditor-placed homeowners insurance, manufactured
housing homeowners insurance, debt protection administration,
credit insurance, warranties and extended service contracts,
individual health insurance and small employer group health
insurance, group dental insurance, group disability insurance,
group life insurance and pre-funded funeral insurance. The
Company had certain individual life insurance policies, annuity
contracts and mutual fund operations during 2001 and 2000, which
were sold to The Hartford Financial Services Group ("The
Hartford")(see note 4).
2.     Basis of
Presentation
The accompanying unaudited interim consolidated
financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of
America for interim financial information. Accordingly, these
statements do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Certain
prior period amounts have been reclassified to conform to the
2003 presentation.
Dollar amounts are presented in U.S. dollars
and all amounts are in thousands except number of shares and per
share amounts.
Operating results for the six months ended
June 30, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003.
The accompanying interim consolidated financial statements
should be read in conjunction with the audited consolidated
financial statements and related notes for the year ended
December 31, 2002.
The balance sheet at December 31, 2002,
presented herein, has been derived from the audited financial
statements at that date but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements.
3.     Recently
Adopted Accounting Pronouncements
In June 2002, the Financial Accounting Standards
Board ("FASB") issued FAS 146,
Accounting for Costs
Associated with Exit or Disposal Activities
("FAS 146"). This statement addresses financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
("EITF") Issue 94-3,
Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit on
Activity (Including Certain Costs Incurred in Restructuring
("EITF 94-3"). EITF 94-3 required accrual of
liabilities related to exit and disposal activities at a plan
(commitment) date. FAS 146 requires that a liability
for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. The provisions of
this statement are effective for exit or disposal activities
that are initiated after December 31, 2002. The Company
adopted this Statement on January 1, 2003. The adoption of
this standard did not have a material impact on the
Company's financial position or the results of operations.
In November 2002, the FASB issued
Interpretation 45,
Guarantor's Accounting and
Disclosure Requirements for Guarantees
("FIN 45"). FIN 45 requires that a liability
be recognized at the inception of
F-58
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
certain guarantees for the fair value of the
obligation, including the ongoing obligation to stand ready to
perform over the term of the guarantee. Guarantees, as defined
in FIN 45, include contracts that contingently require the
Company to make payments to a guaranteed party based on changes
in an underlying obligation that is related to an asset,
liability or equity security of the guaranteed party,
performance guarantees, indemnification agreements and indirect
guarantees of indebtedness of others. This new accounting
standard is effective for certain guarantees issued or modified
after December 31, 2002. In addition, FIN 45 requires
certain additional disclosures. The Company adopted this
interpretation on January 1, 2003, and the adoption did not
have a material impact on the Company's financial position
or the results of operations.
In December 2002, the FASB issued
FAS 148,
Accounting for Stock-Based
Compensation — Transition and Disclosure —
an Amendment of FAS No. 123
("FAS 148").
FAS 148 provides alternative methods of transition for a
voluntary change to the fair value-based method of accounting
for stock-based employee compensation. FAS 148 also amends
the disclosure requirements of FAS 123,
Accounting for
Stock-Based Compensation
, to require prominent disclosures
in both annual and interim financial statements about the method
of accounting for stock-based employee compensation and the
effect of the method used on reported results. This guidance is
effective for fiscal years after December 15, 2002 for
transition guidance and annual disclosure provisions and is
effective for interim reports beginning after December 15,
2002 for interim disclosure provisions. The Company adopted this
standard for the year ended December 31, 2002.
4.     Recent
Accounting Pronouncements
In January 2003, the FASB issued
Interpretation 46 ("FIN 46"),
Consolidation of Variable Interest Entities, an
Interpretation of Accounting Research Bulletin No. 51
("ARB 51"), which clarifies the consolidation
accounting guidance in ARB 51,
Consolidated Financial
Statements
, as it applies to certain entities in which
equity investors who do not have the characteristics of a
controlling financial interest or do not have sufficient equity
at risk for the entities to finance their activities without
additional subordinated financial support from other parties.
Such entities are known as variable interest entities
("VIEs"). FIN 46 requires that the primary
beneficiary of a VIE consolidate the VIE. FIN 46 also
requires new disclosures for significant relationships with
VIEs, whether or not consolidation accounting is either used or
anticipated. The consolidation requirements of FIN 46 apply
immediately to VIEs created after January 31, 2003 and to
VIEs in which an enterprise obtains an interest after that date.
They apply in the first fiscal year or interim period beginning
after June 15, 2003 to VIEs in which an enterprise holds a
variable interest that is acquired before February 1, 2003.
On October 8, 2003, the FASB deferred the adoption of
FIN 46 until reporting periods ending after
December 15, 2003. The Company is assessing whether the
adoption of this interpretation will have a material impact on
the Company's financial position or the results of
operations.
In April 2003, the FASB's Derivative
Implementation Group ("DIG") released FAS 133
Implementation Issue B36,
Embedded Derivatives: Modified
Coinsurance Arrangements and Debt Instruments that Incorporate
Credit Risk Exposures that are Unrelated or Only Partially
Related to the Creditworthiness of the Obligor under those
Instruments
("DIG B36"). DIG B36
addresses whether FAS 133 requires bifurcation of a debt
instrument into a debt host contract and an embedded derivative
if the debt instrument incorporates both interest rate risk and
credit risk exposures that are unrelated or only partially
related to the creditworthiness of the issuer of that
instrument. Under DIG B36, modified coinsurance and
coinsurance with funds withheld reinsurance agreements as well
as other types of receivables and payables where interest is
determined by reference to a pool of fixed maturity assets or a
total return debt index are examples of arrangements containing
embedded derivatives requiring bifurcation. The effective date
of the implementation guidance is October 1, 2003. The
Company is assessing whether the adoption of DIG B36 will have a
material impact on the Company's financial position or the
results of operations.
F-59
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
In April 2003, the FASB issued FAS 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities
("FAS 149"). This
statement amends and clarifies financial accounting and
reporting for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under
FAS 133,
Accounting for Derivative Instruments and
Hedging Activities
. This Statement is effective
prospectively for contracts entered into or modified after
June 30, 2003 and prospectively for hedging relationships
designated after June 30, 2003. The Company has assessed
that the adoption of this standard will not have a material
impact on the Company's financial position or the results
of operations.
In May 2003, the FASB issued FAS 150,
Accounting For Certain Financial Instruments with
Characteristics of Both Liabilities and Equity
("FAS 150"). This statement improves the
accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity, and
requires that these instruments be classified as liabilities in
the consolidated balance sheets. This statement is effective
prospectively for financial instruments entered into or modified
after May 31, 2003 and otherwise is effective at the
beginning of the first interim period beginning after
June 15, 2003. This statement shall be implemented by
reporting the cumulative effect of a change in an accounting
principle for financial instruments created before the issuance
date of the statement and still existing at the beginning of the
interim period of adoption. The Company has assessed that the
adoption of this standard will result in a reclassification of
mandatorily redeemable preferred securities of subsidiary trusts
and mandatorily redeemable preferred stock from mezzanine to
liabilities, and will not have a material impact on the
Company's results of operations.
On July 7, 2003, the Accounting Standards
Executive Committee ("AcSEC") of the American
Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 03-1,
Accounting and
Reporting by Insurance Enterprises for Certain Nontraditional
Long Duration Contracts and for Separate Accounts
("SOP 03-1"). SOP 03-1 provides guidance
on a number of topics unique to insurance enterprises, including
separate account presentation, interest in separate accounts,
gains and losses on the transfer of assets from the general
account to a separate account, liability valuation, returns
based on a contractually referenced pool of assets or index,
accounting for contracts that contain death or other insurance
benefit features, accounting for reinsurance and other similar
contracts, accounting for annuitization benefits and sales
inducements to contract holders. SOP 03-1 will be effective
for the Company's financial statements on January 1,
2004. The Company is assessing whether the adoption of this
statement will have a material impact on the Company's
financial position or the results of operations.
5.     Dividends Per
Common Share
The Company has Class A, Class B and
Class C common stock. The following dividends have been
paid for the six months ended June 30, 2003 and 2002:
For the Six Months Ended June 30,
2003
2002
Per share
Total
Per share
Total
Class A Common Stock
$
17.98
$
139,310
$
—
$
—
Class B Common Stock
37.15
5,572
36.52
5,478
Class C Common Stock
38.13
15,252
37.50
14,999
F-60
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
6.
Stock Based Compensation
The following pro forma information of net income
(loss) and net income (loss) per share was determined as if the
Company had accounted for the Stock Option Plan under the fair
value method of FAS 123:
For the Six Months
Ended June 30,
2003
2002
Net income (loss) as reported
$
163,887
$
(1,119,272
)
Deduct: Total stock-based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects
(317
)
(315
)
Add: Total stock-based employee compensation
    expense determined under intrinsic value based method for all
    awards, net of related tax effects
—
—
Pro forma net (loss) income
$
163,570
$
(1,119,587
)
Earning per share:
Basic and diluted net (loss) income per
    share as reported
$
19.75
$
(134.85
)
Basic and diluted net (loss) income per
    share pro forma
$
19.71
$
(134.81
)
7.
Segment Information
The Company has five reportable segments, which
are defined based on the nature of the products and services
offered: Solutions, Health, Employee Benefits, PreNeed, and
Corporate and Other. Solutions provides credit insurance,
including life, disability and unemployment, debt protection
administration, creditor-placed homeowners insurance, and
manufactured housing insurance. Health provides individual,
short-term, and small group health insurance. Employee Benefits
provides employee-paid dental insurance and employer-paid
dental, disability and life insurance products and related
services. PreNeed provides life insurance policies and annuity
products that provide benefits to fund pre-arranged funerals.
Corporate and Other includes activities of the parent company,
financing expenses realized gains (losses) on investments,
interest income earned from short-term investments held, and
interest income from excess surplus of insurance subsidiaries
not allocated to other segments. Corporate and Other also
includes results of operations of Fortis Financial Group
("FFG") for 2000 and the period from January 1 through
March 31, 2001 and long-term care ("LTC") (from
January 1 through March 1, 2000). Corporate and Other also
includes the amortization of deferred gains associated with the
sales of FFG and LTC via reinsurance agreements.
The Company evaluates performance based on
segment income after tax, excluding realized gains
(losses) on investments. The Company determines reportable
segments in a manner consistent with the way the Company
organizes for purposes of making operating decisions and
assessing performance. The accounting policies of the reportable
segments are the same as those described in the summary of
significant accounting policies.
The Company allocates a notional amount invested
assets to the segments primarily based on future policy
benefits, claims and unearned premiums, and capital allocated to
each segment. The Company assigns net deferred acquisition
costs, value of businesses acquired, reinsurance recoverables,
and other assets and liabilities to the respective segments
where those assets or liabilities originate.
F-61
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
Net investment income is allocated based on a
segment's proportional share of assets and capital required
to support their business.
The following tables summarize selected financial
information by segment:
Six Months Ended June 30, 2003
Employee
Corporate &
Solutions
Health
Benefits
PreNeed
Other
Consolidated
Revenues
Net earned premiums and other considerations
$
1,123,934
$
968,835
$
623,038
$
271,222
$
—
$
2,987,029
Net investment income
95,877
25,000
69,917
93,490
21,601
305,885
Net realized gains on investments
—
—
—
—
7,474
7,474
Amortization of deferred gain on disposal of
    businesses
—
—
—
—
34,873
34,873
Fees and other income
68,173
15,141
33,063
2,488
1,016
119,881
Total revenues
1,287,984
1,008,976
726,018
367,200
64,964
3,455,142
Benefits, losses and expenses
Policyholder benefits
410,393
630,522
470,773
262,555
—
1,774,243
Amortization of deferred acquisition costs and
    value of business acquired
487,990
38,418
—
53,523
309
580,240
Underwriting, general and administrative expenses
287,816
244,485
214,416
21,964
25,439
794,120
Interest expense and distributions on preferred
    securities of subsidiary trusts
—
—
—
—
58,566
58,566
Total benefits, losses and expenses
1,186,199
913,425
685,189
338,042
84,314
3,207,169
Segment income before income tax
101,785
95,551
40,829
29,158
(19,350
)
247,973
Income taxes
33,105
33,585
14,291
10,152
(7,047
)
84,086
Segment income after tax
$
68,680
$
61,966
$
26,538
$
19,006
$
(12,303
)
$
163,887
Net income (loss)
$
163,887
Segment Assets:
Segments assets, excluding goodwill
$
6,965,339
$
1,080,674
$
2,387,396
$
3,577,497
$
7,910,083
$
21,920,989
Goodwill
817,173
Total assets
$
22,738,162
Six Months Ended June 30, 2002
Employee
Corporate &
Solutions
Health
Benefits
PreNeed
Other
Consolidated
Revenues
Net earned premiums and other considerations
$
995,061
$
903,491
$
620,698
$
268,269
$
—
$
2,787,519
Net investment income
100,730
28,281
72,441
92,631
16,456
310,539
Net realized gains on investments
—
—
—
—
(49,204
)
(49,204
)
Amortization of deferred gain on disposal of
    businesses
—
—
—
—
40,030
40,030
Gain on disposal of businesses
—
—
—
—
10,672
10,672
Fees and other income
57,541
9,764
36,870
2,591
18,669
125,435
Total revenues
1,153,332
941,536
730,009
363,491
36,623
3,224,991
F-62
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
Six Months Ended June 30, 2002
Employee
Corporate &
Solutions
Health
Benefits
PreNeed
Other
Consolidated
Benefits, losses and expenses
Policyholder benefits
345,819
601,915
480,698
250,439
—
1,678,871
Amortization of deferred acquisition costs and
    value of business acquired
370,478
24,000
—
46,687
2,056
443,221
Underwriting, general and administrative expenses
339,564
240,927
217,346
25,817
18,736
842,390
Interest expense and distributions on preferred
    securities of subsidiary trusts
—
—
—
—
58,716
58,716
Total benefits, losses and expenses
1,055,861
866,842
698,044
322,943
79,508
3,023,198
Segment income before income tax
97,471
74,694
31,965
40,548
(42,885
)
201,793
Income taxes
32,476
25,629
11,185
14,192
(23,356
)
60,126
Segment income after tax
$
64,995
$
49,065
$
20,780
$
26,356
$
(19,529
)
$
141,667
Cumulative effect of change in accounting
    principle
(1,260,939
)
Net income (loss)
$
(1,119,272
)
Segment Assets:
Segments assets, excluding goodwill
$
7,074,703
$
1,062,930
$
2,458,404
$
3,509,425
$
7,278,409
$
21,383,871
Goodwill
834,138
Total assets
$
22,218,009
8.     Subsequent
Events
Assurant, Inc. ("Assurant") was
incorporated in October 2003 as a Delaware corporation and a
wholly owned subsidiary of Fortis, Inc. In connection with the
planned offering, the parent company and the board of directors
of Assurant, Inc. approved certain employee benefits programs on
October 15, 2003 as follows:
2004 Long-Term Incentive Plan
The 2004 Long-Term Incentive Plan will be
effective as of the closing of the initial public offering.
The 2004 Long-Term Incentive Plan authorizes the
granting of awards to employees, officers, and directors in the
following forms: (1) options to purchase shares of
Assurant's common stock, which may be non-statutory stock
options or incentive stock options under the U.S. tax code;
(2) stock appreciation rights, which give the holder the
right to receive the difference between the fair market value
per share on the date of exercise over the grant price;
(3) performance awards, which are payable in cash or stock
upon the attainment of specified performance goals;
(4) restricted stock, which is subject to restrictions on
transferability and subject to forfeiture on terms set by the
Compensation Committee; (5) dividend equivalents, which
entitle the participant to payments equal to any dividends paid
on the shares of stock underlying an award; and (6) other
stock-based awards in the discretion of the Compensation
Committee, including unrestricted stock grants.
There are 10,000,000 shares reserved and
available for issuance under the plan.
No awards will be granted under the plan prior to
its effective date. Any awards will be made at the discretion of
the Compensation Committee. Therefore, it is not presently
possible to determine the benefits or amounts that will be
received by any individuals or groups pursuant to the 2004
Long-Term Incentive Plan in the future.
F-63
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
2004 Employee Stock Purchase
    Plan
The 2004 Employee Stock Purchase Plan will go
into effect as of the earliest of July 1 or January 1
following the closing of the initial public offering.
The purpose of the stock purchase plan is to
enhance the proprietary interest among the employees of the
Company. The stock purchase plan is designed to allow eligible
employees to purchase shares of Assurant's common stock, at
defined intervals, with their accumulated payroll deductions.
Employees are eligible to participate if they are designated by
the Compensation Committee and if they are customarily employed
for at least 20 hours per week and five months per calendar
year, and provided they have served as an employee for at least
six months. A total of 5,000,000 shares of Assurant's
common stock have been reserved for issuance under the stock
purchase plan.
Executive Management Incentive
    Plan
The Executive Management Incentive Plan will be
effective as of January 1, 2004. Participation in the
Executive Management Incentive Plan is limited to senior
officers of the Company and its subsidiaries who are selected to
participate in the plan for a given year by the Compensation
Committee. The plan provides for the payment of annual monetary
awards to each participant equal to a percentage of such
participant's base salary based upon the achievement of
certain designated performance goals.
The amount of awards under the plan will be
determined at the discretion of the Compensation Committee.
Therefore, it is not presently possible to determine the
benefits or amounts that will be received by any individuals or
groups pursuant to this plan.
Amendment to Fortis Appreciation Incentive
    Rights Plan ("FAIR Plan")
The FAIR Plan was amended to provide for the
cash-out and replacement of Fortis, Inc. incentive rights with
stock appreciation rights on the Assurant common stock from and
after the closing of the initial public offering contemplated.
The business segment rights outstanding under the plan will not
be changed or effected. The conversion of outstanding Fortis,
Inc. incentive rights will take place as described in this
paragraph. The Fortis, Inc. incentive rights will be valued as
of December 31, 2003 using a special valuation method, as
follows. The measurement value of each Fortis, Inc. incentive
right as of December 31, 2002 will be adjusted to reflect
dividends paid by Fortis, Inc., consistent with past practice;
such adjusted value shall then be multiplied by the arithmetic
average of the change during calendar year 2003 in the Dow Jones
Life Insurance Index, the Dow Jones Property Casualty Index, and
the Dow Jones Healthcare Providers Index; and the result will be
the measurement value of a Fortis, Inc. incentive right as of
December 31, 2003. As soon as practical after this special
valuation is completed, and before the closing of the initial
public offering contemplated, the each Fortis, Inc. incentive
right then outstanding under the plan will be cashed out for a
cash payment equal to the difference, if any, between the
measurement value of the Fortis, Inc. incentive rights as of
December 31st immediately preceeding the date of grant, and
the measurement value of that right determined as of
December 31, 2003, pursuant to the special valuation. Each
outstanding Fortis, Inc. incentive right, whether or not vested,
will be cancelled effective as of the date it is cashed out.
Following the cash-out and cancellation of Fortis, Inc.
incentive rights, Assurant will grant to each participant whose
rights were cashed out a number of stock appreciation rights on
Assurant's common stock (referred to as "replacement
rights"). The number of replacement rights to be granted to
a participant will equal (1) the measurement value of the
participant's cashed-out Fortis, Inc. incentive rights,
divided by (2) the initial public offering price. Each
replacement right that replaces a vested cashed-out right will
be vested immediately, and each replacement right that replaces
a non-vested cashed-out right will become vested on the vesting
date for the corresponding cashed-out right, but no replacement
right, whether or not vested, may be exercised sooner than
F-64
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
one year from the closing date of the initial
public offering contemplated. After that waiting period, each
replacement right will be exercisable for the remaining term of
the corresponding cancelled right.
9.
Income Taxes
The effective tax rate for the six months ended
June 30, 2003 was 33.9% compared to 29.8% for the six
months ended June 30, 2002. The increase in the effective
rate is due to the release in 2002 of approximately $6,000 of
previously provided tax accruals that were no longer considered
necessary based on the resolution of certain domestic tax
matters.
10.
Commitments and Contingencies
The Company and its subsidiaries lease office
space and equipment under operating lease arrangements. Certain
facility leases contain escalation clauses based on increases in
the lessors' operating expenses. At June 30, 2003, the
aggregate future minimum lease payments under operating lease
agreements that have initial or non-cancelable terms in excess
of one year are:
2003
$
20,633
2004
34,682
2005
31,564
2006
27,304
2007
22,556
Thereafter
52,860
Total minimum future lease payment
$
189,599
Rent expense was $19,207 for the six months ended
June 30, 2003 and $19,682 for the six months ended
June 30, 2002.
The Company is regularly involved in litigation
in the ordinary course of business, both as a defendant and as a
plaintiff. The Company may from time to time be subject to a
variety of legal and regulatory actions relating to the
Company's current and past business operations. While the
Company cannot predict the outcome of any pending or future
litigation, examination or investigation, the Company does not
believe that any pending matter will have a material adverse
effect on the Company's financial condition or results of
operations.
The Solutions segment is subject to a number of
pending actions, primarily in the State of Mississippi. Many of
which allege that the Company's credit insurance products
were packaged and sold with lenders' products without buyer
consent. The judicial climate in Mississippi is such that the
outcome of these cases is extremely unpredictable. The Company
has been advised by legal counsel that the Company has
meritorious defenses to all claims being asserted against the
Company. The Company believes, based on information currently
available, that any liabilities that could result are not
expected to have a material adverse effect on the Company's
financial condition or the results of operations.
American Bankers Insurance Group, part of the
Solutions segment, on behalf of certain of its subsidiaries,
including American Bankers Insurance Company ("ABIC")
and American Bankers Life Assurance Company ("ABLAC"),
previously entered into a Consent Order and a comprehensive
Compliance Plan with 43 participating states relating to
compliance with the often disparate state insurance laws,
regulations and administrative interpretations which have been
difficult to apply to the marketing of ABIG's credit
insurance products through financial institutions, retailers and
other entities offering consumer financing as a regular part of
their business. In addition to an initial settlement of
$12 million, ABIG agreed to a multi-
F-65
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
state market conduct examination commencing
November 23, 1999, for review of ABIG's implementation
of the Compliance Plan. A final report was issued on
December 19, 2001, and ABIG paid a final settlement of
$3 million to participating states.
In February 2002, the State of Minnesota
initiated an enforcement action against ABIC and ABLAC, two of
the Company's subsidiaries, in connection with certain
alleged regulatory violations. Thereafter, ABIC and ABLAC filed
suit in Minnesota state court seeking to enjoin the enforcement
action because the alleged regulatory matters included within
the enforcement action were resolved as a part of the
above-described Consent Order and Compliance Plan to which
Minnesota was a party. In February 2003, the State of Minnesota,
ABIC and ABLAC reached a final settlement of all matters
included within the enforcement action and the separate state
court action filed by ABIC and ABLAC. Pursuant to the
settlement, ABIC and ABLAC each agreed to pay $100,000 to the
State of Minnesota and agreed to compensate the state for its
investigative costs which totaled $1.8 million. In
addition, ABIC and ABLAC agreed to stop selling insurance in
Minnesota for five years, though they could apply for
reinstatement in 20 months. Other member companies of the
Solutions segment with product lines that overlap those offered
by ABIC and ABLAC currently remain authorized to do business in
the State of Minnesota. The Company does not believe that the
effect of the settlement during the next five years will have a
material impact on the Company's financial condition or
results of its operations.
On October 1, 2003, a grand jury in Mower
County, Minnesota issued an indictment of ABIC and two corporate
officers of the Solutions segment. The indictment alleges that
ABIC and its two named corporate officers each violated the
Minnesota Fair Campaign Practices Act in connection with two
contributions by ABIC to the Republican National State Election
Committee totaling $15,000. The maximum penalty for ABIC is a
$40,000 fine for each alleged violation and/or forfeiture of
ABIC's license to conduct business in Minnesota. Other
member companies of the Solutions segment with product lines
that overlap those offered by ABIC currently remain authorized
to conduct business in the State of Minnesota. ABIC believes
that it has meritorious defenses to the claims being asserted
against it, and the Company believes, based on information
currently available, that any liabilities that could result are
not expected to have a material effect on the Company's
financial condition or results of operations.
In addition, one of the Company's
subsidiaries, American Reliable Insurance Company
("ARIC"), participated in certain excess of loss
reinsurance programs in the London market and, as a result,
reinsured certain personal accident, ransom and kidnap insurance
risks from 1995 to 1997. ARIC and a foreign affiliate ceded a
portion of these risks to other reinsurers (retrocessionaires).
ARIC ceased reinsuring such business in 1997. However, certain
risks continued beyond 1997 due to the nature of the reinsurance
contracts written. ARIC and some of the other reinsurers
involved in the programs are seeking to avoid certain treaties
on various grounds, including material misrepresentation and
non-disclosure by the ceding companies and intermediaries
involved in the programs. Similarly, some of the
retrocessionaires are seeking avoidance of
F-66
FORTIS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS—(Continued)
Six months ended June 30, 2003 and
2002
(unaudited)
certain treaties with ARIC and the other
reinsurers. The disputes generally involve multiple layers of
reinsurance, and allegations that the reinsurance programs
involved interrelated claims "spirals" devised to
disproportionately pass claims losses to higher-level
reinsurance layers. Many of the companies involved in these
programs, including ARIC, are currently involved in
negotiations, arbitration and/or litigation between multiple
layers of retrocessionaires, reinsurers, ceding companies and
intermediaries, including brokers, in an effort to resolve these
disputes. Based on information currently available to the
Company, and after consideration of the reserves reflected in
the Company's financial statements, the Company believes
that it is not likely that any liabilities the Company
experiences in connection with these programs would have a
material adverse effect on the Company's financial
condition or results of operations. However, the inherent
uncertainty of arbitrations and lawsuits, including the
uncertainty of estimating whether any settlements the Company
may enter into in the future would be on favorable terms, makes
it difficult to predict the outcomes with certainty.
As a result of regulatory scrutiny of the
Company's industry practices or its businesses, such as
examinations of race-based premiums charged in the past by two
of the Company's acquired subsidiaries, it is possible that
the Company may be subject to legal proceedings in the future
relating to those practices and businesses.
F-67
GLOSSARY OF SELECTED INSURANCE AND REINSURANCE
TERMS
Accidental death and/or
    dismemberment
Form of accident insurance that indemnifies or
    pays a stated benefit to an insured or his/her beneficiary in
    the event of bodily injury or death due to accidental means
    (other than natural causes).
Administrative Services Only (ASO)
Services provided in an employee benefit plan.
    Specifically, as with a self-insured plan, the group may have an
    ASO contract with an insurance company or a third-party
    administrator to handle aspects of claims adjudication and
    administration.
Adverse selection
Process by which an applicant who believes
    himself to be uninsurable, or at greater than average risk,
    seeks to obtain a policy from an insurance company at a standard
    premium rate.
Annuity
A contract that provides for periodic payments to
    an annuitant, either beginning immediately (immediate annuity)
    or in the future (deferred annuity), for a specified period of
    time. In the case of the annuities sold by Assurant PreNeed, the
    benefits under the contract are scheduled to begin upon the
    death of the purchaser of the annuity and are used to fund the
    costs incurred in connection with pre-arranged funeral contracts.
Association
In the health insurance market, an entity that
    was formed and maintained in good faith for purposes other than
    obtaining insurance and does not make health insurance coverage
    offered through the association available other than in
    connection with a member of the association. The association is
    the policyholder, and individual association members may obtain
    certificates of coverage under the association's master
    policies.
Assumption basis
A form of reinsurance under which policy
    administration and the contractual relationship with the
    insured, as well as all liabilities, pass to the reinsurer; the
    novation of liability is evidenced by an assumption certificate
    issued to the insured who, in some jurisdictions, has the right
    to refuse the change in insurers.
Broker
One who negotiates contracts of insurance or
    reinsurance, receiving a commission for placement and other
    services rendered, between (i) a policyholder and a primary
    insurer, on behalf of the insured party, or (ii) a primary
    insurer and reinsurer, on behalf of the primary insurer or
    (iii) a reinsurer and a retrocessionaire on behalf of the
    reinsurer.
Captive agent
Representative of a single insurer or group of
    insurers who is obligated to submit business only to that
    company, or at a minimum, give that company first refusal rights
    on a sale.
Captive insurance company
A company that is controlled by the insured or a
    group of insureds and that is formed for the purpose of
    reinsuring risks associated with the activities of its
    shareholders or members.
Case management
A collaborative process which assesses, plans,
    implements, coordinates, monitors and evaluates options and
    services to meet an
G-1
individual's health needs using
    communication and available resources to promote quality
    cost-effective outcomes.
Casualty insurance
Insurance that is primarily concerned with the
    losses caused by injuries to third persons (in other words,
    persons other than the policyholder) and the legal liability
    imposed on the insured resulting therefrom.
Cede; Cedent; Ceding company
When a party reinsures its liability with
    another, it "cedes" business and is referred to as the
    "cedent" or "ceding company."
Claims
Request by an insured or reinsured for
    indemnification by an insurance company or reinsurance company
    for loss incurred from an insured peril or event.
Claims expense
The expenses of settling claims, including legal
    and other fees and the portion of general expenses allocated to
    claim settlement costs.
Claims management
The use by an insurer of a variety of means to
    mitigate the extent of losses incurred by those insured under
    its policies and the corresponding benefit costs, for example,
    efforts to improve the quality of medical care provided to its
    insureds or efforts to assist its insureds with vocational
    services.
Coinsurance
With respect to a direct medical contract between
    an insurer and the insured, the insured's share of covered
    losses in an arrangement pursuant to which the insured and the
    insurer share in a specific ratio of the covered losses. With
    respect to ceded reinsurance, a reinsurance arrangement in which
    coverage ceded to the reinsurer on an individual policy is in
    the same form as that of the direct policy issued to the
    policyholder. The reinsurer receives its proportionate share of
    the gross premium from the ceding company net of an expense
    allowance intended to reimburse the ceding company for
    commissions and other out of pocket expenses. The reinsurer
    establishes its proportionate share of reserves and shares
    proportionately in the risk of loss.
Consumer Price Index
Measurement of the rate of inflation according to
    a weighted market basket of goods and services that includes
    such items as transportation costs, health care costs, housing
    costs and food costs. These statistics are released monthly by
    the U.S. Bureau of Labor Statistics.
Co-payments
Partial payment of medical service expenses
    required in group health insurance. Typically, such payment is
    set at a fixed amount regardless of the expense of the services
    rendered or the actual costs of drugs and medicines provided.
Credit insurance
Insurance issued to a creditor or lender to cover
    the life (in the case of credit life insurance), unemployment
    (in the case of credit unemployment) or disability (in the case
    of credit disability) of a debtor or borrower for an outstanding
    loan. If the debtor dies before repayment of the debt, the
    policy will pay off the balance of the amount outstanding. If
    the debtor is unemployed or becomes disabled before repayment of
    the debt, the policy will typically pay any minimum amounts due
    under the outstanding loan until the debtor is no longer
    unemployed or disabled, as the case may be.
G-2
Debt protection
A non-insurance product that cancels or defers
    the required monthly payment on an outstanding loan when a
    covered event occurs. Examples of covered events include death,
    disability and unemployment. If the protected cardholder dies
    before repayment of the debt, the contract will cancel the
    outstanding balance at the time of death. If the protected
    cardholder is unemployed or becomes disabled before repayment of
    the debt, the contract will typically cancel or defer the
    required minimum monthly payment, during the period of
    unemployment or disability, if the cardholder is unemployed or
    disabled longer than the waiting period.
Deductibles
The amount of loss that an insured retains.
Disability insurance
Insurance that provides income payments to the
    insured wage earner when income is interrupted or terminated
    because of illness, sickness or accident. The insurance policy
    defines the nature of the disability it covers. Long-term
    disability policies typically provide coverage for a period
    greater than one year, which may be to age 65 or life.
    Short-term disability policies typically provide coverage for
    less than one year in duration.
Disease management
A system of coordinated healthcare interventions
    and communications for populations with conditions in which
    patient self-care efforts are significant. Disease management:
    (1) supports the physician or practitioner/ patient
    relationship and plan of care, (2) emphasizes prevention of
    exacerbations and complications utilizing evidence-based
    practice guidelines and patient empowerment strategies, and
    (3) evaluates clinical, humanistic and economic outcomes on
    an ongoing basis with the goal of improving overall health.
Duration corridor
Duration is a measure expressed in years of the
    price sensitivity of a financial instrument to changes in
    interest rates. The corridor refers to the minimum and maximum
    duration allowed.
Escrowed account
Funds that a lender collects monthly to pay
    monthly mortgage insurance premiums, homeowners insurance policy
    premiums and yearly property taxes.
Excess of loss
A generic term describing reinsurance that
    indemnifies the reinsured against all or a specified portion of
    losses on underlying insurance policies in excess of a specified
    amount, which is called a "level" or
    "retention." Also known as non-proportional
    reinsurance. Excess of loss reinsurance is written in layers. A
    reinsurer or group of reinsurers accepts a band of coverage up
    to a specified amount. The total coverage purchased by the
    cedent is referred to as a "program" and will
    typically be placed with predetermined reinsurers in
    pre-negotiated layers. Any liability exceeding the outer limit
    of the program reverts to the ceding company, which also bears
    the credit risk of a reinsurer's insolvency.
Fire and dwelling insurance
Fire insurance is coverage protecting the insured
    against the loss to real or personal property from damage caused
    by the peril of fire or lightning. Dwelling insurance is
    coverage for property damage to a building used as a dwelling,
    as well as its contents. The property
G-3
coverage for the building includes items attached
    to the building such as equipment and fixtures.
Flood insurance
Insurance that provides mortgage banking
    institutions coverage for the peril of flood for those borrowers
    who fail to provide proof of flood insurance on their mortgaged
    property, thereby protecting the mortgagor's collateral
    interest in the property.
Generally accepted accounting principles
    (GAAP)
United States generally accepted accounting
    principles as defined by the American Institute of Certified
    Public Accountants or statements of the Financial Accounting
    Standards Board and other authoritative guidance.
Group insurance
Single policy under which individuals in a
    natural group (such as employees of a business firm) and their
    dependents are covered. More generally, the collection of all
    such policies.
Group disability insurance
Coverage of a natural group, often an employee
    group, whose members receive a disability income benefit,
    subject to a maximum amount, if illness or an accident renders a
    member disabled as defined in the policy. Common requirements
    for disability are that the member is unable to perform the
    material duties of his or her own occupation, or at other times
    that the member is unable to perform the material duties of any
    gainful occupation for which he or she is suited by education,
    training or experience. Benefits are usually limited to a stated
    length of time, and the maximum income benefit is limited to a
    percentage of earnings prior to the disability or a flat dollar
    amount.
Group life insurance
Typically one-year coverage, provided as group
    insurance, that is renewable at the end of each year and that
    provides benefits in the event of the death of an insured. The
    premium rate upon renewal is based on the range of employee ages
    and, if the group is subject to experience rating, the loss
    record (deaths) of the group. Experience rating is a statistical
    procedure used to calculate a premium rate based on the loss
    experience of an insured group. The premiums paid are related to
    actual claims and expense experience expected for that specific
    group.
Guaranteed issue
The right to purchase insurance without physical
    examination or the answering of health questions; the present
    and past physical condition of the applicant are not considered.
Guaranteed renewable
With respect to an insurance policy, renewable at
    the option of the insured for a specified number of years or to
    a stated age. The insurance company cannot refuse to renew the
    policy and cannot change any of its provisions except the
    premium rate. In individual insurance, if the insurance company
    changes the premium, it must do so for the entire class to which
    a policyholder belongs, not just for one or a few members of the
    class.
Guaranty fund
State-regulated mechanism that is financed by
    assessing insurers doing business in those states. These funds
    are maintained by contributions of companies operating in a
    particular state in proportion to their business written in the
    state. Should insolvencies
G-4
occur, these funds are available to meet some or
    all of the insolvent insurer's obligations to policyholders.
Health Reimbursement Accounts
(HRAs)
Employer-funded accounts provided to employees
    for reimbursement of qualifying medical expenses, in which such
    reimbursements are excludable from employee gross income.
Homeowners insurance
Package of policies that combines
    (1) coverage against the insured's property being
    destroyed or damaged by various perils and (2) coverage for
    liability exposure of the insured. Our creditor-placed
    homeowners insurance policies generally cover only the property,
    including any adjacent structure of the home.
Incurred but not reported (IBNR)
    reserves
Reserves for estimated losses and loss expenses
    which have been incurred but not yet reported to the insurer.
Indemnity
Coverage for the percentage of the health care
    costs paid by the health insurance company, which is typically a
    specified percentage above the insured's deductible up to a
    dollar amount. The insurance company then pays 100% of the costs
    up to the policy limits. The insured may select a physician of
    his or her choice.
Loss draft
Payment of insurance proceeds for a claim
    resulting from a loss to insured mortgaged property.
Loss ratio
Policyholder benefits divided by net earned
    premiums.
Loss reserve
Liabilities established by insurers and
    reinsurers to reflect the estimated cost of claims payments and
    the related expenses that the insurer or reinsurer will
    ultimately be required to pay in respect of insurance or
    reinsurance it has written. Reserves are established for losses
    and for loss expenses.
Losses and loss expenses
The expenses of settling claims, including legal
    and other fees and the portion of general expenses allocated to
    claim settlement costs (also known as claim adjustment expenses)
    plus losses incurred with respect to claims.
Master contract
Single contract coverage on a group basis issued
    to an employer. Group members receive certificates as evidence
    of membership summarizing benefits provided.
Medical Savings Accounts (MSAs)
Savings accounts that have tax advantages
    combined with health insurance plans for the benefit of the
    employee. Both the employer and the employee are permitted to
    contribute to the MSA. The contributions can be directed to pay
    the deductible under the health insurance plan and/or the
    medical expenses not covered by the health insurance plan. Funds
    not spent are allowed to accumulate in the MSA on a continuous
    basis. When the employee reaches retirement age, the accumulated
    funds may be allocated to the employee's retirement income.
Modified coinsurance
A form of reinsurance that differs from
    coinsurance only in that the reserves continue to be held by the
    ceding company while the risk is transferred to the reinsurer.
    The reinsurer transfers funds to the ceding company for future
    reserve increases and receives funds
G-5
from the ceding company for future reserve
    declines. The ceding company is required to pay interest to the
    reinsurer to replace the income that would have been earned by
    the reinsurer if it had held the assets backing the reserves in
    its own investment portfolio.
Morbidity; Morbidity rate
"Morbidity" refers to the incidence of
    disease or disability in a specific population over a specific
    period of time. The "morbidity rate" refers to the
    relationship of the incidence of disease or disability
    contracted by individual members of a group to the entire group
    membership over a specific period of time.
Mortality; Mortality rate
"Mortality" refers to the number of
    deaths in a specific population over a specific period of time.
    The "mortality rate" refers to the relationship of the
    frequency of deaths of individual members of a group to the
    entire group membership over a specific period of time.
National Association of Insurance
    Commissioners (NAIC)
A voluntary organization of state insurance
    officials that promulgates model laws regulating the insurance
    industry, values securities owned by insurers, develops and
    modifies insurer financial reporting, statements and insurer
    performance criteria and performs other services with respect to
    the insurance industry.
Net earned premiums and other
    considerations
The amount of net premiums written allocable to
    the expired period of an insurance policy or policies, including
    fees earned on interest sensitive policies.
Persistency
Percentage of insurance policies or annuity
    contracts remaining in force between specified measurement
    dates. Also used with respect to premiums, to measure the amount
    of annualized premium remaining in force on a stated collection
    of policies between specified measurement dates.
Pre-arranged funeral contracts
An arrangement between a funeral firm and an
    individual whereby the funeral firm agrees to perform a selected
    funeral upon the individual's death.
Preferred Provider Organization
    (PPO)
An entity that acts as an intermediary between an
    insurer and a network of hospitals, physicians or other
    providers of health care who have agreed to provide care to
    insureds subject to contractually established reimbursement
    rates.
Pre-funded funeral insurance
Insurance policies designed to provide benefits
    to fund the costs incurred in connection with pre-arranged
    funeral contracts, which costs typically include funeral firm
    merchandise and services.
Pre-need
Whole life insurance or annuity policies used to
    fund pre-arranged funerals. These policies provide cash benefits
    at the time of death of the insured to cover the costs incurred
    in connection with a funeral contract pre-arranged before the
    death of the insured.
Pro rata reinsurance
A generic term describing all forms of
    reinsurance in which the reinsurer shares on a pro rata basis
    part of the original premiums and losses of the reinsured. Pro
    rata reinsurance is also known as
G-6
proportional reinsurance, quota share reinsurance
    or participating reinsurance.
Referable location
Every occurrence of a practitioner at a location.
    For example, if a dentist practices at three locations, there
    are three referable locations; or, if a single dental office has
    ten dentists, then there are ten referable locations.
Reinsurance
An arrangement in which an insurance company, the
    reinsurer, agrees to indemnify another insurance or reinsurance
    company, the ceding company, against all or a portion of the
    insurance or reinsurance risks underwritten by the ceding
    company under one or more policies. Reinsurance can provide a
    ceding company with several benefits, including a reduction in
    net liability on individual risks and catastrophe protection
    from large or multiple losses. Reinsurance also provides a
    ceding company with additional underwriting capacity by
    permitting it to accept larger risks and write more business
    than would be possible without a concomitant increase in capital
    and surplus, and facilitates the maintenance of acceptable
    financial ratios by the ceding company. Reinsurance does not
    legally discharge the primary insurer from its liability with
    respect to its obligations to the insured.
Renewable term life insurance
Term life insurance coverage that is renewable at
    the option of the insured, who is not required to take a medical
    examination in order to renew existing amounts of coverage.
Renters' insurance
Coverage for the contents of a renter's home
    or apartment and for liability. These policies are similar to
    homeowners insurance, except that they do not cover the
    structure. They do, however, cover changes made to the inside
    structure, such as kitchen appliances and built-in-bookshelves.
Reserves
Liabilities established by insurers and
    reinsurers to reflect the estimated costs of claim payments and
    the related expenses that the insurer or reinsurer will
    ultimately be required to pay in respect of insurance or
    reinsurance it has written. Reserves are established for losses,
    for loss expenses and for unearned premiums. Loss reserves
    consist of "case reserves," or reserves established
    with respect to individual reported claims. Unearned premium
    reserves constitute the portion of premium paid in advance for
    insurance or reinsurance that has not yet been provided. See
    also "Loss reserves."
Retention
The amount or portion of risk that an insurer
    retains for its own account. Losses in excess of the retention
    level up to the outer limit of the program, if any, are paid by
    the reinsurer.
Retrocessionaire
A transaction whereby a reinsurer cedes to
    another reinsurer, the retrocessionaire, all or part of the
    reinsurance that the first reinsurer has assumed. Reinsurance
    companies cede risks to retrocessionaires for reasons similar to
    those that cause primary insurers to purchase reinsurance: to
    reduce net liability on individual risks, to protect against
    catastrophic losses, to stabilize financial ratios and to obtain
    additional underwriting capacity.
G-7
Risk management
Procedure to minimize the adverse effect of a
    possible financial loss by (1) identifying potential
    sources of loss; (2) measuring the financial consequences
    of a loss occurring; and (3) using controls to minimize
    actual losses or their financial consequences.
Risk-based capital requirement (RBC)
A tool used by insurance regulators to analyze an
    insurance company's total adjusted capital, taking into
    consideration the risks associated with the company's
    particular assets, the risk that losses will be worse than
    expected, the company's exposure to interest rate risk and
    other business risks.
Separate account
Assets of insurance companies allocated under
    certain policies and contracts that are segregated from the
    general account and other separate accounts. The policyholder or
    contractholder bears the risk of investments held in a separate
    account.
Standard industry code
An industry code assigned to an operating
    establishment by a U.S. government agency or agencies on
    the basis of the operating establishment's primary
    activity, which is determined by its principal product or group
    of products produced or distributed or services rendered. While
    recently superceded by North American Industry Classification
    System (NAICS) codes, SIC codes remain in common use, and
    templates for translating one code to the other are readily
    available.
Statutory accounting principles
(SAP)
Recording transactions and preparing financial
    statements in accordance with the rules and procedures
    prescribed or permitted by United States state insurance
    regulatory authorities including the NAIC, which in general
    reflect a liquidating, rather than going concern, concept of
    accounting.
Statutory assets
Assets determined in accordance with SAP. This
    valuation methodology is generally considered very conservative,
    but is deemed most appropriate by regulators in evaluating
    solvency.
Statutory earnings
Earnings based on the conservative reserve
    requirements of various states.
Statutory net income
Net income based on the conservative reserve
    requirements of various states.
Statutory surplus
The excess of statutory admitted assets over
    statutory liabilities as shown on an insurer's statutory
    financial statements. Admitted assets are those assets which are
    permitted or admitted by the National Association of Insurance
    Commissioners or by the rules of a given state. The assets
    deemed as nonadmitted are those assets which are accorded
    limited or no value and are charged off directly to statutory
    capital and surplus. Nonadmitted assets are ones which are
    specifically identified in the statutory accounting principals
    as nonadmitted or not specifically identified as admitted.
Surrender charge
Fee charged to a policyholder when a life
    insurance policy or annuity is surrendered for its cash value
    prior to the end of the surrender charge period. This fee is
    intended to recover policy acquisition costs and subsequent
    administrative expenses.
G-8
Term life insurance
Life insurance written for a specified period and
    under which no cash value is generally available on surrender.
    If an insured dies within that period, the beneficiary receives
    the death payments. If the insured survives, the policy ends and
    the beneficiary receives nothing.
True group
Group insurance in which the employer or other
    group policyholder pays all or part of the premium on behalf of
    the insured members. This term is contrasted to
    "voluntary" group insurance, in which the insured
    members pay their own premium.
Turnkey
Built, supplied or installed complete and ready
    to operate.
Unearned premium
The portion of premium that is allocable to the
    unexpired portion of the policy term and, therefore, that has
    not yet been earned.
Utilization review
Review designed to control and limit medical
    expenses. This review includes: (1) requirement of
    certification for admission to a health care facility;
    (2) continuous analysis of the reasons for the patient to
    remain in the health care facility; (3) projected date for
    release of the patient; and (4) cost-effective ways of
    handling patients with catastrophic illnesses.
Variable insurance
Investment-oriented life insurance policy that
    offers fixed premiums and a minimum death benefit as well as
    providing a return linked to an underlying portfolio of
    securities that may be in either a separate account or general
    account of the insurer.
Waiver of premium
In life insurance, provision in a policy pursuant
    to which an insured, with total disability that lasts for a
    specified period, no longer has to pay premiums for the duration
    of the disability or for a stated period, during which time the
    life insurance coverage provides continued protection.
Whole life insurance
A form of life insurance that provides guaranteed
    death benefits and guaranteed cash values to policyholders.
G-9
[LOGO]
PART II
INFORMATION NOT REQUIRED IN
PROSPECTUS
ITEM 13.
OTHER EXPENSES OF ISSUANCE AND
    DISTRIBUTION.
The following table sets forth the expenses
payable by the Registrant in connection with the issuance and
distribution of the common stock being registered hereby. All of
such expenses are estimates, other than the filing and listing
fees payable to the Securities and Exchange Commission, the
New York Stock Exchange and the National Association of
Securities Dealers, Inc.
Filing Fee—Securities and Exchange Commission
$
80,900
Listing Fee—The New York Stock Exchange
*
Fee—National Association of Securities
    Dealers
$
30,500
Fees and Expenses of Counsel
*
Printing Expenses
*
Fees and Expenses of Accountants
*
Blue Sky Fees and Expenses
*
Transfer Agent Fees and Expenses
*
Miscellaneous Expenses
*
Premium for directors' and officers'
    liability insurance
*
Total
*
*
To be provided by amendment.
ITEM 14.
INDEMNIFICATION OF DIRECTORS AND
    OFFICERS.
Section 145 of the Delaware General
Corporation Law (the "DGCL") provides, in summary,
that directors and officers of Delaware corporations are
entitled, under certain circumstances, to be indemnified against
all expenses and liabilities (including attorneys' fees)
incurred by them as a result of suits brought against them in
their capacity as a director or officer, if they acted in good
faith and in a manner they reasonably believed to be in or not
opposed to our best interests, and, with respect to any criminal
action or proceeding, if they had no reasonable cause to believe
their conduct was unlawful; provided that no indemnification may
be made against expenses in respect of any claim, issue or
matter as to which they shall have been adjudged to be liable to
us, unless and only to the extent that the court in which such
action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all
the circumstances of the case, they are fairly and reasonably
entitled to indemnity for such expenses which the court shall
deem proper. Any such indemnification may be made by us only as
authorized in each specific case upon a determination by the
stockholders, disinterested directors or independent legal
counsel that indemnification is proper because the indemnitee
has met the applicable standard of conduct.
Our certificate of incorporation and by-laws
provide that we will indemnify our directors and officers to the
fullest extent permitted by law and that no director shall be
liable for monetary damages to us or our stockholders for any
breach of fiduciary duty, except to the extent provided by
applicable law.
Fortis currently maintains liability insurance
for our directors and officers. In connection with the offering,
we will obtain additional liability insurance for our directors
and officers. Such insurance would be available to our directors
and officers in accordance with its terms.
Reference is made to the form of underwriting
agreement to be filed as Exhibit 1.1 hereto for provisions
providing that the underwriters are obligated under certain
circumstances, to indemnify our directors, officers and
controlling persons against certain liabilities under the
Securities Act of 1933, as amended (Securities Act).
II-1
ITEM 15.
RECENT SALES OF UNREGISTERED
    SECURITIES.
During the period from 2000 to 2003, pursuant to
the Assurant Investment Plan, the Company granted to key
employees, in exchange for all or a portion of such
employees' eligible compensation, options to purchase
shares or other equity interests in certain third-party mutual
funds, which shares or other equity interests have been
registered under the Securities Act. The option grants were made
by the Company in reliance on the exemptions from the
registration requirements of the Securities Act provided by
(a) Rule 701 under the Securities Act as issuances by
a company not subject to the reporting requirements of the
Securities Exchange Act of 1934, as amended (Exchange Act),
pursuant to a written compensatory benefit plan of such company
established for its directors and senior employees, and/or
(b) Section 4(2) of the Securities Act as issuances to
a limited number of sophisticated investors in transactions not
involving any public offering.
II-2
ITEM 16.
EXHIBITS AND FINANCIAL STATEMENT
    SCHEDULES.
(a)     Exhibits
Exhibit
Number
Description of Document
1.1
Underwriting Agreement.*
3.1
Certificate of Incorporation of the Registrant.*
3.2
By-Laws of the Registrant.*
3.3
Form of Shareholders Agreement between the
    Registrant and Fortis Insurance N.V.*
3.4
Form of Registration Rights Agreement between the
    Registrant and Fortis Insurance N.V.*
4.1
Specimen Common Stock Certificate.*
5.1
Opinion of Simpson Thacher & Bartlett
    LLP.*
10.1
Form of Cooperation Agreement, among the
    Registrant, Fortis Insurance N.V., Fortis SA/ NV and Fortis N.V.*
10.2
Stock Option Plan*
10.3
Long-Term Incentive Plan*
10.4
Supplemental Executive Retirement Plan*
10.5
Executive Pension and 401(k) Plan*
10.6
Assurant Pension Plan*
10.7
Assurant 401(k) Plan*
10.8
Change in Control Severance Agreement with J.
    Kerry Clayton*
10.9
Change in Control Severance Agreement with Robert
    B. Pollock*
10.10
Change in Control Severance Agreement with
    Benjamin M. Cutler*
10.11
Change in Control Severance Agreement with Philip
    Bruce Camacho*
10.12
Change in Control Severance Agreement with Lesley
    Silvester*
10.13
2004 Long-Term Incentive Plan*
10.15
2004 Employee Stock Purchase Plan*
10.16
Executive Management Incentive Plan*
10.17
Assurant Appreciation Incentive Rights Plan*
10.18
Assurant Investment Plan*
10.19
Consulting, Non-Compete and Payments Agreement,
    dated July 19, 1999, among Fortis, Inc., Allen R. Freedman
    and Fortis Insurance N.V.*
10.20
Retirement Agreement among Fortis, Inc., Allen R.
    Freedman and Fortis Insurance N.V.*
21.1
Subsidiaries of the Registrant.*
23.1
Consent of PricewaterhouseCoopers LLP.
23.2
Consent of Simpson Thacher & Bartlett
    LLP (included as part of Exhibit 5.1).*
24.1
Power of Attorney (included on signature pages to
    this Registration Statement).
*
To be filed by amendment.
II-3
(b)     Financial
Statement Schedules
Schedule I
—
Summary of Investments — Other Than
    Investments in Related Parties.
Schedule II
—
Condensed Financial Information of Fortis, Inc.
Schedule III
—
Supplementary Insurance Information.
Schedule IV
—
Reinsurance.
Schedule V
—
Valuation and Qualifying Accounts.
II-4
ITEM 17.
UNDERTAKINGS.
(a)     The undersigned
Registrant hereby undertakes to provide to the underwriters at
the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names
as required by the underwriter to permit prompt delivery to each
purchaser.
(b)     The undersigned
Registrant hereby undertakes that:
(1)
For purposes of determining any liability under
    the Securities Act of 1933, the information omitted from the
    form of prospectus filed as part of this registration statement
    in reliance upon Rule 430A and contained in a form of
    prospectus filed by the Registrant pursuant to
    Rule 424(b)(1) or (4) or 497(h) under the Securities
    Act shall be deemed to be part of this registration statement as
    of the time it was declared effective.
(2)
For the purpose of determining any liability
    under the Securities Act of 1933, each post-effective amendment
    that contains a form of prospectus shall be deemed to be a new
    registration statement relating to the securities offered
    therein, and the offering of such securities at that time shall
    be deemed to be the initial bona fide offering thereof.
(c)
Insofar as indemnification for liabilities
    arising under the Securities Act of 1933 may be permitted to
    directors, officers and controlling persons of the Registrant
    pursuant to the foregoing provisions, or otherwise, the
    Registrant has been advised that in the opinion of the
    Securities and Exchange Commission such indemnification is
    against public policy as expressed in the Securities Act of 1933
    and is, therefore, unenforceable. In the event that a claim for
    indemnification against such liabilities (other than the payment
    by the Registrant of expenses incurred or paid by a director,
    officer or controlling person of the Registrant in the
    successful defense of any action, suit or proceeding) is
    asserted by such director, officer or controlling person in
    connection with the securities being registered, the Registrant
    will, unless in the opinion of its counsel the matter has been
    settled by controlling precedent, submit to a court of
    appropriate jurisdiction the question whether such
    indemnification by it is against public policy as expressed in
    the Securities Act of 1933 and will be governed by the final
    adjudication of such issue.
II-5
SIGNATURES
Pursuant to the requirements of the Securities
Act of 1933, as amended, the Registrant has duly caused this
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in New York, New York,
on the 24th day of October, 2003.
ASSURANT, INC.
By:
/s/ J. KERRY CLAYTON
Name:
J. Kerry Clayton
Title:
President and Chief
    Executive Officer
POWER OF ATTORNEY
Know all men by these presents, that the
undersigned directors and officers of the Registrant, a Delaware
corporation, which is filing a Registration Statement on
Form S-1 with the Securities and Exchange Commission,
Washington, D.C. 20549 under the provisions of the
Securities Act of 1933 hereby constitute and appoint J. Kerry
Clayton, Robert B. Pollock, Larry M. Cains, Katherine Greenzang,
Barbara R. Hege and Douglas Lowe, and each of them, the
individual's true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for the
person and in his or her name, place and stead, in any and all
capacities, to sign such registration statement and any or all
amendments, including post-effective amendments to the
registration statement, including a prospectus or an amended
prospectus therein and any registration statement for the same
offering that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and all other
documents in connection therewith to be filed with the
Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them full power and
authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said
attorneys-in-fact as agents or any of them, or their substitute
or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities
Act of 1933, as amended, this Registration Statement has been
signed by the following persons in the capacities indicated on
the 24th day of October, 2003.
Signature
Title
/s/ J. KERRY CLAYTON
J. Kerry Clayton
President and Chief Executive Officer and
    Director
(Principal Executive Officer)
/s/ ROBERT B. POLLOCK
Robert B. Pollock
Executive Vice President and Chief Financial
    Officer
(Principal Financial Officer)
/s/ LARRY M. CAINS
Larry M. Cains
Senior Vice President, Finance
(Principal Accounting Officer)
/s/ JOHN MICHAEL PALMS
John Michael Palms
Director
/s/ ANTON VAN ROSSUM
Anton van Rossum
Director
II-6
Signature
Title
/s/ MICHEL BAISE
Michel Baise
Director
/s/ ROBERT J. BLENDON
Robert J. Blendon
Director
/s/ BETH L. BRONNER
Beth L. Bronner
Director
/s/ HOWARD L. CARVER
Howard L. Carver
Director
/s/ ARIE A. FAKKERT
Arie A. Fakkert
Director
/s/ ALLEN R. FREEDMAN
Allen R. Freedman
Director
/s/ H. CARROLL MACKIN
H. Carroll Mackin
Director
/s/ GILBERT MITTLER
Gilbert Mittler
Director
/s/ GEORGES VALCKENAERE
Georges Valckenaere
Director
II-7
EXHIBIT INDEX
Exhibit
Number
Description of Document
1.1
Underwriting Agreement.*
3.1
Certificate of Incorporation of the Registrant.*
3.2
By-Laws of the Registrant.*
3.3
Form of Shareholders Agreement between the
    Registrant and Fortis Insurance N.V.*
3.4
Form of Registration Rights Agreement between the
    Registrant and Fortis Insurance N.V.*
4.1
Specimen Common Stock Certificate.*
5.1
Opinion of Simpson Thacher & Bartlett LLP.*
10.1
Form of Cooperation Agreement, among the
    Registrant, Fortis Insurance N.V., Fortis SA/ NV and Fortis N.V.*
10.2
Stock Option Plan*
10.3
Long-Term Incentive Plan*
10.4
Supplemental Executive Retirement Plan*
10.5
Executive Pension and 401(k) Plan*
10.6
Assurant Pension Plan*
10.7
Assurant 401(k) Plan*
10.8
Change in Control Severance Agreement with J.
    Kerry Clayton*
10.9
Change in Control Severance Agreement with Robert
    B. Pollock*
10.10
Change in Control Severance Agreement with
    Benjamin M. Cutler*
10.11
Change in Control Severance Agreement with Philip
    Bruce Camacho*
10.12
Change in Control Severance Agreement with Lesley
    Silvester*
10.13
2004 Long-Term Incentive Plan*
10.15
2004 Employee Stock Purchase Plan*
10.16
Executive Management Incentive Plan*
10.17
Assurant Appreciation Incentive Rights Plan*
10.18
Assurant Investment Plan*
10.19
Consulting, Non-Compete and Payments Agreement,
    dated July 19, 1999, among Fortis, Inc., Allen R. Freedman
    and Fortis Insurance N.V.*
10.20
Retirement Agreement among Fortis, Inc., Allen R.
    Freedman and Fortis Insurance N.V.*
21.1
Subsidiaries of the Registrant.*
23.1
Consent of PricewaterhouseCoopers LLP.
23.2
Consent of Simpson Thacher & Bartlett
    LLP (included as part of Exhibit 5.1).*
24.1
Power of Attorney (included on signature pages to
    this Registration Statement).
*
To be filed by amendment.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Fortis, Inc.
Our audits of the consolidated financial statements of Fortis, Inc. referred to
in our report dated March 28, 2003, except as to Note 23 as to which the date is
October 20, 2003 appearing in this Registration Statement of Assurant, Inc. on
Form S-1 also included an audit of the financial statement schedules listed in
Item 16(b). In our opinion, these financial statement schedules present fairly,
in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP
New York, New York
March 28, 2003, except as to Note 23
as to which the date is October 20, 2003
FORTIS, INC. AND SUBSIDIARIES
AT DECEMBER 31, 2002
SCHEDULE I — SUMMARY OF INVESTMENTS OTHER THAN INVESTMENTS IN RELATED PARTIES
AMOUNT AT
AMORTIZED
WHICH SHOWN IN THE
COST
FAIR VALUE
BALANCE SHEET
(in thousands)
FIXED MATURITIES
BONDS:
United States Government and government
agencies and authorities
$
1,576,339
$
1,646,862
$
1,646,862
States, municipalities and political subdivisions
196,186
211,512
211,512
Foreign governments
202,154
203,837
203,837
Public utilities
834,021
879,086
879,086
All other corporate bonds
4,821,876
5,094,233
5,094,233
Total fixed maturities
7,630,576
8,035,530
8,035,530
EQUITY SECURITIES
COMMON STOCKS:
Public utilities
19
7
7
Banks, trusts and insurance companies
14,043
13,812
13,812
Industrial, miscellaneous and all other
2,392
4,034
4,034
NON-SINKING FUND PREFERRED STOCKS
248,181
253,847
253,847
Total equity securities
264,635
271,700
271,700
Commercial mortgage loans on real estate, at amortized cost
841,940
841,940
Policy loans
69,377
69,377
Short-term investments
684,350
684,350
Other investments
125,870
125,870
Total investments
$
9,616,748
$
10,028,767
FORTIS, INC. AND SUBSIDIARIES
AT DECEMBER 31, 2002
Schedule II — - CONDENSED BALANCE SHEET (Parent Only)
December 31,
2002
2001
(in thousands except number of
shares and per share amounts)
ASSETS
Investments:
Equity investment in subsidiaries
$
2,898,147
$
3,731,940
Surplus Notes receivable from subsidiary
770,000
770,000
Other investments
601
312
Total investments
3,668,748
4,502,252
Cash and cash equivalents
238,802
206,015
Receivable from subsidiaries, net
22,420
155,922
Other assets
380,511
353,862
Total assets
$
4,310,481
$
5,218,051
LIABILITIES
Accounts payable and other liabilities
$
273,707
$
191,399
Income tax payable
10,981
103,013
Total liabilities
284,688
294,412
Mandatorily redeemable preferred securities of
subsidiary trusts
1,446,074
1,446,074
Mandatorily redeemable preferred stock
24,660
25,160
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share:
Class A: 40,000,000 shares authorized, 7,750,000
shares issued and outstanding
775
775
Class B: 150,001 shares issued and outstanding
15
15
Class C: 400,001 shares issued and outstanding
40
40
(Class B and C; 40,000,000 total shares authorized)
Additional paid-in capital
2,064,025
2,064,025
Retained earnings
245,219
1,289,346
Accumulated other comprehensive income
244,985
98,204
Total stockholders' equity
2,555,059
3,452,405
Total liabilities, mandatorily redeemable preferred securities of
subsidiary trusts, mandatorily redeemable preferred stock and
stockholders' equity
$
4,310,481
$
5,218,051
FORTIS, INC. AND SUBSIDIARIES
For the years ended December 31, 2002, 2001, and 2000
Schedule II — -
CONDENSED STATEMENT OF OPERATIONS (Parent Only), continued
Years Ended December 31,
2002
2001
2000
(in thousands)
REVENUES
Cash dividend income from consolidated subsidiaries
$
186,550
$
615,400
$
241,920
Net investment income
81,629
76,180
67,104
Gain on disposal of businesses
—
99,605
1,994
Fees and other income
17,570
24,435
26,211
Total revenues
285,749
815,620
337,229
EXPENSES
General and administrative expenses
32,697
69,375
73,284
Distributions on preferred securities of subsidiary
trusts and interest expense
118,395
132,371
134,869
Total expenses
151,092
201,746
208,153
Income before income taxes and equity in undistributed
net loss of consolidated subsidiaries
134,657
613,874
129,076
Income taxes
16,390
4,338
31,624
Net income before equity in undistributed
net loss of subsidiaries
151,047
618,212
160,700
Equity in undistributed net loss of consolidated
subsidiaries
(1,152,246
)
(520,159
)
(71,016
)
Net (loss) income
$
(1,001,199
)
$
98,053
$
89,684
FORTIS, INC. AND SUBSIDIARIES
For the years ended December 31, 2002, 2001 and 2000
Schedule II — - CONDENSED CASH FLOWS (Parent Only), continued
2002
2001
2000
(in thousands)
OPERATING ACTIVITIES
Net (loss) income
$
(1,001,199
)
$
98,053
$
89,684
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in undistributed net loss of subsidiaries
1,152,246
520,159
71,016
Change in receivables
161,739
(199,389
)
(67,052
)
Depreciation and amortization
21,605
19,195
20,440
Change in income taxes
(97,923
)
54,374
42,665
Other
10,192
30,543
(3,732
)
Net cash provided by operating activities
246,660
522,935
153,021
INVESTING ACTIVITIES
Capital contributed to subsidiaries
(136,422
)
(5,000
)
(60,000
)
Sale of subsidiaries
—
203,665
19,252
Purchase of subsidiaries
—
(142,921
)
(207,642
)
Subsidiary redemption of preferred stock
—
—
195,000
Other
(34,023
)
(76,836
)
(27,918
)
Net cash used in investing activities
(170,445
)
(21,092
)
(81,308
)
FINANCING ACTIVITIES
Proceeds from issuance of trust preferred securities
—
—
549,888
Repayment of preferred securities of subsidiary trusts
—
(3,664
)
—
Redemption of mandatorily redeemable preferred stock
(500
)
—
—
Borrowings from Parent
—
216,924
81,996
Repayment of borrowings from Parent
—
(455,907
)
(800,256
)
Dividends paid
(42,928
)
(110,351
)
(22,058
)
Net cash used in financing activities
(43,428
)
(352,998
)
(190,430
)
Change in cash and cash equivalents
32,787
148,845
(118,717
)
Cash and cash equivalents at beginning of period
206,015
57,170
175,887
Cash and cash equivalents at end of period
$
238,802
$
206,015
$
57,170
FORTIS, INC. AND SUBSIDIARIES
As of and for the years ended December 31, 2002, 2001 and 2000
SCHEDULE III — SUPPLEMENTARY INSURANCE INFORMATION
SEGMENT (1)
DEFERRED
ACQUISITION
COST
FUTURE POLICY
BENEFITS, LOSSES,
CLAIMS AND LOSS
EXPENSE
UNEARNED
PREMIUMS
OTHER
POLICY
CLAIMS AND
BENEFITS
PAYABLE
PREMIUM
REVENUE
NET
INVESTMENT
INCOME
(in thousands)
2002
Solutions
$
1,018,749
$
334,038
$
3,013,731
$
1,037,766
$
2,077,277
$
205,037
Employee Benefits
—
—
22,198
1,791,680
1,232,942
147,722
Health
158,142
—
118,432
537,163
1,833,656
55,268
Preneed
136,703
2,683,887
4,775
29,132
537,721
183,634
Corporate and Other
—
2,619,202
48,499
148,120
—
40,167
Total Segments
1,313,594
5,637,127
3,207,635
3,543,861
5,681,596
631,828
2001
Solutions
861,625
358,474
3,090,281
1,039,794
1,906,426
218,213
Employee Benefits
—
—
28,405
1,680,367
933,594
144,378
Health
138,768
—
99,358
511,405
1,837,839
58,073
Preneed
94,372
2,493,277
3,157
25,917
506,716
179,093
Corporate and Other
—
2,540,268
45,996
147,944
57,610
112,025
Total Segments
$
1,094,765
$
5,392,019
$
3,267,197
$
3,405,427
5,242,185
711,782
2000
Solutions
1,780,547
211,596
Employee Benefits
903,148
135,470
Health
1,966,982
58,319
Preneed
276,640
128,396
Corporate and Other
217,058
156,951
Total Segments
$
5,144,375
$
690,732
BENEFITS CLAIMS,
AMORTIZATION OF
LOSSES AND
DEFERRED
SETTLEMENT
ACQUISITION
OTHER OPERATING
PREMIUMS
SEGMENT (1)
EXPENSES
COSTS
EXPENSES
WRITTEN
2002
Solutions
$
755,140
$
638,074
$
811,112
$
1,109,819
Employee Benefits
944,593
—
422,230
—
Health
1,222,049
64,029
482,057
—
Preneed
507,363
80,370
62,144
—
Corporate and Other
—
—
54,246
—
Total Segments
3,429,145
782,473
1,831,789
1,109,819
2001
Solutions
639,905
613,607
830,716
1,058,619
Employee Benefits
737,802
—
316,310
—
Health
1,306,477
42,967
452,528
—
Preneed
484,736
64,936
55,936
—
Corporate and Other
70,005
7,713
111,921
—
Total Segments
3,238,925
729,223
1,767,411
1,058,619
2000
Solutions
525,270
493,692
810,722
1,017,156
Employee Benefits
701,704
—
280,004
—
Health
1,498,060
37,572
433,661
—
Preneed
279,437
39,448
36,081
—
Corporate and Other
203,583
19,454
417,466
—
Total Segments
$
3,208,054
$
590,166
$
1,977,934
$
1,017,156
FORTIS, INC. AND SUBSIDIARIES
For the years ended December 31, 2002, 2001 and 2000
SCHEDULE IV — REINSURANCE
PERCENTAGE
CEDED TO
ASSUMED FROM
OF AMOUNT
GROSS
OTHER
OTHER
ASSUMED
2002:
AMOUNT
COMPANIES
COMPANIES
NET AMOUNT
TO NET
(in thousands)
LIFE INSURANCE IN FORCE
$
192,247,499
$
67,628,124
$
3,016,082
$
127,635,457
2.4
%
PREMIUMS:
Life insurance
1,792,276
796,026
100,532
1,096,782
9.2
%
Accident and health insurance
4,065,768
1,046,245
268,211
3,287,734
8.2
%
Property and liability insurance
1,955,494
805,337
146,923
1,297,080
11.3
%
Total premiums
$
7,813,538
$
2,647,608
$
515,666
$
5,681,596
9.1
%
BENEFITS:
Life insurance
1,748,556
1,036,256
123,395
835,695
14.8
%
Accident and health insurance
2,343,568
462,206
211,440
2,092,802
10.1
%
Property and liability insurance
705,911
358,393
153,130
500,648
30.6
%
Total premiums
$
4,798,035
$
1,856,855
$
487,965
$
3,429,145
14.2
%
FORTIS, INC. AND SUBSIDIARIES
For the years ended December 31, 2002, 2001 and 2000
SCHEDULE IV — REINSURANCE, continued
ASSUMED FROM
PERCENTAGE OF
CEDED TO OTHER
OTHER
AMOUNT
2001:
GROSS AMOUNT
COMPANIES
COMPANIES
NET AMOUNT
ASSUMED TO NET
(in thousands)
LIFE INSURANCE IN FORCE
$
196,838,543
$
77,457,972
$
8,834,532
$
128,215,103
6.9
%
PREMIUMS:
Life insurance
2,013,923
967,318
68,151
1,114,756
6.1
%
Accident and health insurance
4,202,525
1,196,376
94,514
3,100,663
3.0
%
Property and liability insurance
1,645,924
692,109
72,951
1,026,766
7.1
%
Total premiums
$
7,862,372
$
2,855,803
$
235,616
$
5,242,185
4.5
%
BENEFITS:
Life insurance
1,517,288
718,510
101,565
900,343
11.3
%
Accident and health insurance
2,372,343
507,843
71,683
1,936,183
3.7
%
Property and liability insurance
614,759
331,324
118,964
402,399
29.6
%
Total premiums
$
4,504,390
$
1,557,677
$
292,212
$
3,238,925
9.0
%
FORTIS, INC. AND SUBSIDIARIES
for the years ended December 31, 2002, 2001, 2000
SCHEDULE IV — REINSURANCE, continued
ASSUMED FROM
PERCENTAGE OF
CEDED TO OTHER
OTHER
AMOUNT
2000:
GROSS AMOUNT
COMPANIES
COMPANIES
NET AMOUNT
ASSUMED TO NET
(in thousands)
LIFE INSURANCE IN FORCE
$
214,324,599
$
56,637,599
$
9,344,731
$
167,031,731
5.6
%
PREMIUMS:
Life insurance
1,494,003
577,257
148,601
1,065,347
13.9
%
Accident and health insurance
4,518,997
1,318,274
86,321
3,287,044
2.6
%
Property and liability insurance
1,417,177
680,799
55,606
791,984
7.0
%
Total premiums
$
7,430,177
$
2,576,330
$
290,528
$
5,144,375
5.6
%
BENEFITS:
Life insurance
741,403
79,541
134,240
796,102
16.9
%
Accident and health insurance
2,558,916
483,992
56,719
2,131,643
2.7
%
Property and liability insurance
480,710
289,817
89,416
280,309
31.9
%
Total premiums
$
3,781,029
$
853,350
$
280,375
$
3,208,054
8.7
%
FORTIS, INC. AND SUBSIDIARIES
As of December 31, 2002, 2001, 2000
SCHEDULE V — VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at
Charged to
Charged to
Balance at
Beginning of
Costs and
Other
End of
Year
Expenses
Accounts
Deductions
Year
(in thousands)
2002:
Valuation allowance for
mortgage loans on real
estate
$
25,091
$
—
$
—
$
5,985
19,106
Valuation allowance for
uncollectible agents
balances
30,929
6,488
—
1,930
35,487
Valuation allowance for
uncollectible accounts
1,232
276
55
1,085
478
Total
$
57,252
$
6,764
$
55
$
9,000
$
55,071
2001:
Valuation allowance for
mortgage loans on real
estate
$
25,091
$
—
$
—
$
—
$
25,091
Valuation allowance for
uncollectible agents
balances
21,152
14,153
—
4,376
30,929
Valuation allowance for
uncollectible accounts
646
1,041
70
525
1,232
Total
$
46,889
$
15,194
$
70
$
4,901
$
57,252
2000:
Valuation allowance for
mortgage loans on real
estate
$
28,225
$
—
$
—
$
3,134
$
25,091
Valuation allowance for
uncollectible agents
balances
16,650
6,796
—
2,294
21,152
Valuation allowance for
uncollectible accounts
4,189
402
—
3,945
646
Total
$
49,064
$
7,198
$
—
$
9,373
$
46,889