content: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
  
  
  
                                      FORM 8-K
  
                Current Report Pursuant to Section 13 or 15(d) of the
                           Securities Exchange Act of 1934
  
                           Date of Report: August 2, 1996
  
  
  
                                    CONSECO, INC.
  
                               State of Incorporation:
                                       Indiana
  
        Commission File Number                           IRS Employer Id. Number
              No. 1-9250                                      No. 35-1468632
  
                       Address of Principal Executive Offices:
                           11825 North Pennsylvania Street
                                Carmel, Indiana 46032
  
                                    Telephone No.
                                   (317) 817-6100
  
  <PAGE>
    
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  
  
                                                         INDEX
  
  <TABLE>
  <CAPTION>
                                                                                                         Page
  <S>                                                                                                     <C>    
  
  Item 2.   Acquisition or Disposition of Assets.........................................................   3
  
  Item 7.   Financial Statements and Exhibits
            (a)  Life Partners Group, Inc. and Subsidiaries Unaudited
                 Consolidated Financial Statements as of June 30, 1996,
                 and for the six months ended June 30, 1996 and 1995
                    Consolidated Balance Sheet...........................................................   5
                    Consolidated Statement of Operations.................................................   7
                    Consolidated Statement of Stockholders' Equity.......................................   8
                    Consolidated Statement of Cash Flows.................................................   9
                    Notes to Consolidated Financial Statements...........................................   10
  
                 Life Partners Group, Inc. and Subsidiaries Audited
                 Consolidated Financial Statements as of December 31,
                 1995 and 1994, and for each of the three years ended
                 December 31, 1995
                    Report of Independent Accountants....................................................   18
                    Consolidated Balance Sheet...........................................................   19
                    Consolidated Statement of Operations.................................................   20
                    Consolidated Statement of Stockholders' Equity.......................................   21
                    Consolidated Statement of Cash Flows.................................................   23
                    Notes to Consolidated Financial Statements...........................................   24
  
            (b)  Pro Forma Consolidated Financial Information of Conseco, Inc. and Subsidiaries..........   55
                    Pro forma Consolidated Statement of Operations for the year ended
                       December 31, 1995.................................................................   56
                    Pro forma Consolidated Statement of Operations for the six months
                       ended June 30, 1996...............................................................   57
                    Pro Forma Consolidated Balance Sheet as of June 30, 1996.............................   58
                    Notes to Pro Forma Consolidated Financial Statements.................................   60
  
            (c)  Exhibits
  
                    2.5    Agreement and Plan of Merger dated as of March 11, 1996
  
  
  
  </TABLE>
  
  
  
                                          2
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.
  
         On August 2, 1996, Conseco,  Inc.  ("Conseco")  completed its merger with
  Life Partners Group, Inc. ("LPG"), in a transaction pursuant to which LPG became
  a wholly owned subsidiary of Conseco (the "Merger").  The Merger was consummated
  pursuant to an Agreement and Plan of Merger dated March 11, 1996. In the Merger,
  each of the issued and outstanding shares of LPG common stock was converted into
   .5833 of a share of Conseco's  common stock.  A total of 16.3 million  shares of
  the Conseco common stock (or  equivalent  shares) with a value of $588.4 million
  were issued.
  
         The acquisition of LPG will be accounted for under the purchase method of
  accounting in the third quarter of 1996. Under this method,  the cost to acquire
  LPG will be  allocated  to the assets  and  liabilities  acquired  based on fair
  values as of the date of the Merger,  with the excess of the total purchase cost
  over the  fair  value  of the  assets  acquired  less  the  fair  values  of the
  liabilities assumed recorded as goodwill.
  
                                          3
  
  
  <PAGE>
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(a).     Financial Statements and Exhibits
  
                 (a)  Life  Partners  Group,   Inc.  and  Subsidiaries   Unaudited
                      Consolidated  Financial  Statements as of June 30, 1996, and
                      for the six months ended June 30, 1996 and 1995.
  
                                          4
  <PAGE>
  
  <TABLE>
  <CAPTION>
                              LIFE PARTNERS GROUP, INC.
  
                             CONSOLIDATED BALANCE SHEET
                               (Dollars in thousands)
  
                                       ASSETS
  
  
                                                                                                           June 30,      December 31,
                                                                                                             1996            1995
                                                                                                             ----            ----
                                                                                                          (unaudited)      (audited)
  <S>                                                                                                    <C>            <C>
  Investments:
     Fixed maturities:
       Held-to-maturity, at amortized cost...........................................................     $  661,193     $  678,826
       Available-for-sale, at fair value.............................................................      2,731,180      2,672,365
     Equity securities, at fair value................................................................         23,818         23,721
     Mortgage loans on real estate, at amortized cost................................................        103,222        110,214
     Investment in real estate, at cost, net of accumulated depreciation.............................          4,564          4,921
     Policy loans....................................................................................        227,439        226,212
     Collateral loans................................................................................          4,686          4,373
     Cash and short-term investments.................................................................         79,121        197,684
     Other invested assets...........................................................................         68,945         59,593
                                                                                                          ----------     ----------
  
         Total investments...........................................................................      3,904,168      3,977,909
  
  Notes and accounts receivable and uncollected premiums.............................................         31,228         29,303
  Receivable from reinsurers.........................................................................        279,640        244,828
  Accrued investment income..........................................................................         55,980         54,785
  Deferred policy acquisition costs, net.............................................................        265,416        238,736
  Cost of insurance acquired.........................................................................        300,893        306,015
  Goodwill, net of accumulated amortization..........................................................         99,501        100,470
  Deferred income taxes..............................................................................          9,716            -
  Other assets.......................................................................................         28,147         28,819
                                                                                                          ----------     ----------
         Total assets................................................................................     $4,974,689     $4,980,865
                                                                                                          ==========     ==========
  
  
  
  
  
  
  
  
  
                              (continued on next page)
  
  
  
  <FN>
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
  
                                          5
  
  <PAGE>
  <TABLE>
  <CAPTION>
  
  
  
  
                              LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED BALANCE SHEET, continued
                   (Dollars in thousands, except per share amount)
  
                        LIABILITIES AND STOCKHOLDERS' EQUITY
  
  
                                                                                                           June 30,      December 31,
                                                                                                             1996            1995
                                                                                                             ----            ----
                                                                                                          (unaudited)      (audited)
  
  <S>                                                                                                  <C>              <C>
  Future policy benefits and claims..................................................................   $  737,116      $   708,226
  Dividends, endowments and other policyholder funds.................................................       89,531           86,162
  Policyholder account balances......................................................................    3,331,094        3,271,906
  Deferred policy fees...............................................................................       85,938           80,590
  Investment borrowings..............................................................................       71,547           73,585
  Notes payable:
     Due within one year.............................................................................       26,591           15,000
     Due after one year..............................................................................      212,332          231,083
  Federal income taxes payable:
     Current.........................................................................................        5,110           13,444
     Deferred........................................................................................           -            25,812
  Other liabilities..................................................................................       63,814           74,548
                                                                                                        ----------       ----------
  
         Total liabilities...........................................................................    4,623,073        4,580,356
                                                                                                        ----------       ----------
  
  Commitments and contingencies
  
  Stockholders' equity:
     Common stock, $.001 par value;  50,000,000 shares authorized;  28,189,593 and 27,911,851 shares
       issued and outstanding at June 30, 1996 and December 31, 1995, respectively...................           28               28
     Additional paid-in capital......................................................................      286,572          287,863
     Net unrealized investment gains (losses)........................................................       (3,517)          58,269
     Retained earnings...............................................................................       68,533           54,349
                                                                                                        ----------       ----------
  
         Total stockholders' equity..................................................................      351,616          400,509
                                                                                                        ----------       ----------
  
         Total liabilities and stockholders' equity..................................................   $4,974,689       $4,980,865
                                                                                                        ==========       ==========
  
  
  
  
  
  
  
  
  
  <FN>
  
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
                                          6
  
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
                              LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED STATEMENT OF OPERATIONS
                    (Dollars in thousands, except per share data)
                                     (unaudited)
  
  
                                                                              Three months ended             Six months ended
                                                                                   June 30,                       June 30,
                                                                             -------------------            ------------------
                                                                             1996           1995            1996          1995
                                                                             ----           ----            ----          ----
  
  <S>                                                                    <C>             <C>            <C>           <C>
  Revenues:
     Universal life and investment product charges...............        $   70,280      $  64,970      $ 139,962     $ 118,379
     Universal life charges ceded to client companies............            (6,867)        (7,575)       (14,355)      (14,679)
     Universal life and investment product surrender
       charges, net..............................................             5,162          4,916          9,203         8,178
     Traditional life and annuity premiums.......................            14,223         15,272         28,206        28,113
     Traditional reinsurance premiums............................           (11,415)       (11,089)       (22,096)      (19,022)
     Accident and health insurance premiums, net.................             6,990          7,083         14,818         8,478
                                                                         ----------      ----------     ---------     ---------
  
       Total premium income and other considerations.............            78,373         73,577        155,738       129,447
     Net investment income.......................................            72,665         73,932        146,225       134,948
     Net realized gains (losses).................................               408           (143)         2,296         2,418
     Other income................................................             1,429            917          2,619         1,824
                                                                         ----------      ---------      ---------     ---------
  
       Total revenues............................................           152,875        148,283        306,878       268,637
                                                                         ----------      ---------      ---------     ---------
  
  Benefits and expenses:
     Policyholder benefits.......................................            34,906         46,569         69,486        76,829
     Interest credited to policyholders..........................            44,622         43,907         88,574        78,189
     Amortization of deferred policy acquisition costs,
       costs of insurance acquired and deferred policy fees......            32,024         20,300         64,317        32,472
     Other operating expenses....................................            18,009         23,493         35,870        50,243
     Acquisition and merger expenses.............................             7,091             -           7,891            -
     Amortization of goodwill....................................               722            687          1,439         1,284
     Interest expense............................................             5,839          6,600         11,812        11,977
                                                                         ----------      ---------      ---------     ---------
  
       Total expenses............................................           143,213        141,556        279,389       250,994
                                                                         ----------      ---------      ---------     ---------
  
  Earnings before income taxes...................................             9,662          6,727         27,489        17,643
     Federal income tax expense..................................             5,174          2,361         11,622         6,378
                                                                         ----------      ---------      ---------     ---------
  
  Net earnings...................................................        $    4,488      $   4,366      $  15,867     $  11,265
                                                                         ==========      =========      =========     =========
  
  Weighted average common shares and common
     equivalent shares outstanding...............................        28,441,048     27,542,276     28,400,337    26,845,898
                                                                         ==========     ==========     ==========    ==========
  
  Net earnings per common share and common
     equivalent share outstanding................................             $0.16          $0.16          $0.56         $0.42
                                                                              =====          =====          =====         =====
  
  
  
  
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
                                         7
  
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
                              LIFE PARTNERS GROUP, INC.
  
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                               (Dollars in thousands)
                                     (unaudited)
  
  
                                                                                           Net
                                                                        Additional     unrealized                        Total
                                                              Common      paid-in      investment        Retained    stockholders'
                                                               stock      capital    gains (losses)      earnings       equity
                                                               -----      -------    --------------      --------       ------   
  
  <S>                                                          <C>        <C>           <C>             <C>             <C>
  Balance at January 1, 1995............................       $26        $245,652      $(22,783)       $70,751        $293,646
  
     Common stock issued for cash.......................         -           1,942            -               -           1,942
     Common stock issued in acquisition of
       subsidiaries.....................................         2          39,457            -               -          39,459
     Cash dividends paid on common stock................         -               -            -          (3,018)         (3,018)
     Compensation for management options................         -             812            -               -             812
     Change in unrealized gains (losses), net...........         -               -        81,052             -           81,052
     Net loss...........................................         -               -            -         (13,384)        (13,384)
                                                               ---        --------      ---------       -------        --------
  
  Balance at December 31, 1995..........................        28         287,863        58,269         54,349         400,509
  
     Common stock issued for cash.......................         -             528             -              -             528
     Common stock retained in lieu of cash
       on exercise of stock options.....................         -          (1,819)            -              -          (1,819)
     Cash dividends paid on common stock................         -               -             -         (1,683)         (1,683)
     Change in unrealized gains (losses), net...........         -               -       (61,786)             -         (61,786)
     Net earnings.......................................         -               -             -         15,867          15,867
                                                               ---        --------      ---------       -------        --------
  
  Balance at June 30, 1996..............................       $28        $286,572      $ (3,517)       $68,533        $351,616
                                                               ===        ========      =========       =======        ========
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
                                          8
  
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
                              LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                               (Dollars in thousands)
                                     (unaudited)
                                                                                                              Six months ended
                                                                                                                  June 30,
                                                                                                           ----------------------
                                                                                                           1996              1995
                                                                                                           ----              ----
  <S>                                                                                                   <C>              <C>   
  Cash flows from operating activities:
     Net earnings..................................................................................     $  15,867        $  11,265
     Adjustments to reconcile net earnings to net cash used by operating activities:
       Realized gains..............................................................................        (2,296)          (2,418)
       Adjustments relating to universal life and annuity products:
         Interest credited to account balances.....................................................        75,074           63,930
         Charges for mortality and administration..................................................      (125,607)        (103,700)
       Depreciation and amortization...............................................................         3,055            2,831
       Decrease in future policy benefits..........................................................       (10,106)         (11,972)
       Increase in reserve liability on modified coinsurance agreements............................        12,570            5,587
       Increase in deferred policy acquisition costs...............................................       (15,019)         (26,651)
       Amortization of cost of insurance acquired, net.............................................        21,689           14,657
       Amortization of deferred policy fees........................................................        (8,818)          (5,898)
       Decrease in currently payable taxes.........................................................        (8,334)          (1,520)
       Deferred tax (benefit) expense..............................................................        (1,872)           6,755
       (Decrease) increase in policy liabilities, other policyholder funds, and other liabilities..        (7,878)          20,635
       Increase in notes and accounts receivable and accrued investment income.....................        (3,120)            (112)
       Amortization of bond and mortgage loan discount and premium, net............................          (719)              29
       Other, net..................................................................................        (5,365)         (12,317)
                                                                                                        ---------        ---------
  
            Net cash used by operating activities..................................................       (60,879)         (38,899)
                                                                                                        ---------        ---------
  
  Cash flows from investing activities:
     Sales of fixed maturities:
       Available-for-sale..........................................................................        59,895          153,574
       Held-to-maturity............................................................................         2,307            9,802
     Maturities of fixed maturities:
       Available-for-sale..........................................................................        86,400           40,393
       Held-to-maturity............................................................................        18,193           34,045
     Sales of other long-term invested assets......................................................        21,157           22,643
     (Increase) decrease in policy loans, net......................................................        (1,227)             122
     Purchases of fixed maturities.................................................................      (325,990)        (209,921)
     Purchases of other long-tem invested assets...................................................       (24,441)         (11,369)
     Purchase of subsidiaries, net of cash and short-term investments acquired.....................           -            (20,591)
                                                                                                        ---------        ---------
  
            Net cash provided (used) by investing activities.......................................      (163,706)          18,698 
                                                                                                        ---------        ---------
  
  Cash flows from financing activities:
     Policyholder contract deposits................................................................       265,151          226,515
     Policyholder contract withdrawals.............................................................      (148,436)        (138,890)
     Proceeds from issuance of common stock........................................................           528            1,653
     Change in principal of investment borrowings..................................................        (2,038)         (12,030)
     Proceeds from notes payable...................................................................           -             36,000
     Principal repayments on notes payable.........................................................        (7,500)         (53,073)
     Cash dividends paid on common stock...........................................................        (1,683)          (1,346)
                                                                                                        ---------        ---------
  
            Net cash provided by financing activities..............................................       106,022           58,829
                                                                                                        ---------        ---------
  
            Net (decrease) increase in cash and short-term investments.............................      (118,563)          38,628
  
  Cash and short-term investments at beginning of period...........................................       197,684           41,715
                                                                                                        ---------         --------
  
  Cash and short-term investments at end of period.................................................     $  79,121         $ 80,343
                                                                                                        =========         ========
  
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
                                          9
  
  <PAGE>
  
  
  
                              LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
  
       The following  notes to the  unaudited  consolidated  financial  statements
  should  be  read  in  conjunction  with  the  notes  to  consolidated  financial
  statements  contained in the 1995 Form 10-K of Life Partners Group,  Inc. ("Life
  Partners").  Life Partners and its  consolidated  subsidiaries  are collectively
  referred to as the "Company."
  
       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
       The unaudited  consolidated  financial  statements as of June 30, 1996, and
  for the quarters ended June 30, 1996 and 1995, and for the six months ended June
  30,  1996 and  1995,  reflect  all  adjustments,  consisting  solely  of  normal
  recurring  items,  which are  necessary  for a fair  presentation  of  financial
  position,  results of operations and cash flows on a basis  consistent with that
  of the prior audited consolidated financial statements.
  
       The Company has reclassified certain prior period information to conform to
  the 1996 presentation.
  
       ACQUISITIONS
  
       On April 28, 1995,  Life Partners  Group,  Inc.  acquired  Lamar  Financial
  Group, Inc. ("Lamar"), together with all its subsidiaries,  including Lamar Life
  Insurance Company of Jackson,  Mississippi, for a purchase price of $77 million.
  The acquisition was accounted for using the purchase method,  and the results of
  operations  of Lamar were included in the  consolidated  statement of operations
  from the date of acquisition.
  
       The following  unaudited pro forma  information  presents the  consolidated
  results of operations of the Company and Lamar as if the  acquisitions  had been
  effective at the  beginning  of the period  presented,  after  giving  effect to
  adjustments to reflect the acquisition and the financing related thereto.
  <TABLE>
  <CAPTION>
  
  
                                                                              Pro forma
                                                                             six months
                                                                                ended
                                                                            June 30, 1995
                                                                            -------------
                                                                           (in thousands,
                                                                         except share data)
  
  <S>                                                                     <C>
  Revenues............................................................       $306,644
  Earnings before income taxes........................................         19,385
  Net earnings........................................................         12,366
  
  Net earnings per share..............................................          $0.44
  
  Weighted average common shares and common
     equivalent shares outstanding....................................     28,156,705
  </TABLE>
  
      The  above  unaudited  pro forma information was intended  for informational
  purposes only.
                                         10
  
  <PAGE>
  
                              LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
       CHANGES IN STOCKHOLDERS' EQUITY
  
       During the six months ended June 30, 1996, 432,083 option shares previously
  granted under the Company's incentive stock option plan were exercised and 5,858
  options were forfeited. Included in the options exercised during the period were
  352,941 options exercised by the former chairman of the Company,  net of 166,914
  shares  remitted to the Company in lieu of cash.  Also  during  1996,  the Stock
  Option  Committee of the Life  Partners  Board of Directors  granted  additional
  options to purchase  157,400 shares of common stock reserved under the Company's
  stock  option  plan to certain  key  employees  and  executive  officers  of the
  Company. The options are exercisable at prices ranging from $13.50 to $13.75 per
  share,  vest equally  over three or five year  periods,  and expire in 2006.  In
  addition,  on February  14,  1996,  the Company  repriced  certain  common stock
  options to reflect the market value of the Company's common stock on the date of
  repricing.  Such  repricing  reduced the  exercise  price of certain  previously
  granted  shares to $13.50 per share from previous  prices ranging from $16.75 to
  $20.25.  In exchange for the  reduction in exercise  price,  the number of stock
  options  previously  granted  was reduced by a ratio of the new  exercise  price
  divided by the original  exercise price. A total of 856,800  previously  granted
  option shares were subject to the repricing,  which correspondingly  reduced the
  total number of option shares outstanding by 237,673.  At June 30, 1996, 957,822
  options were unexercised and outstanding.
  
       In  addition,  warrants to purchase  12,573  shares were  exercised  by the
  former  chairman of the Company  during the six months  ended June 30, 1996 at a
  price  of  $3.98  per  share.  At  June  30,  1996,  no  further  warrants  were
  outstanding.
  
       In October 1995, the Financial  Accounting Standards Board issued Statement
  of  Financial   Accounting   Standards  No.  123,   Accounting  for  Stock-Based
  Compensation  ("SFAS 123"). SFAS 123 establishes fair value based accounting and
  reporting  standards for all  transactions in which a company  acquires goods or
  services by issuing equity securities, including stock-based compensation plans.
  Under SFAS 123,  compensation  cost is  measured  at the grant date based on the
  value of the award and is recognized over the service  period,  which is usually
  the  vesting  period.  The fair value of stock  options is  determined  using an
  option-pricing model. This statement encourages, but does not require, companies
  to adopt the fair value based method of  accounting  to  recognize  compensation
  expense for  employee  stock  compensation  plans.  However,  it does  require a
  company to comply with the disclosure  requirements  set forth in the statement.
  The Company  continues to utilize the accounting in Accounting  Principles Board
  Opinion No. 25,  Accounting  for Stock Issued to Employees,  and beginning  with
  year end 1996,  and  thereafter,  expects to make pro forma  disclosures  of net
  income as if the fair value based method of  accounting  defined in SFAS 123 had
  been applied.
  
       NOTES PAYABLE
  
       Notes payable at  June 30, 1996 and December 31, 1995 are summarized as
  follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                                       Amount outstanding
                                                                               Face amount            net of unamortized
                                                                               outstanding              issuance costs
                                                                        -----------------------    -------------------------
                                                                        June 30,   December 31,    June 30,     December 31,
                                                                          1996         1995          1996           1995
                                                                          ----         ----          ----           ----
  
  <S>                                                                   <C>          <C>           <C>            <C>
  Borrowings under Bank Credit Facility............................     $148,678     $156,178      $148,194       $155,581
  12-3/4% senior subordinated notes due 2002.......................       95,100       95,100        90,729         90,502
                                                                        --------     --------      --------       --------
  
                                                                        $243,778     $251,278      $238,923       $246,083
                                                                        ========     ========      ========       ========
  </TABLE>
  
       Wabash  has  certain  surplus  debentures  outstanding  to  Life  Partners.
  Payments made by Wabash on these surplus debentures are used by Life Partners to
  pay principal and interest on Life  Partners'  notes payable.  Accordingly,  the
  principal and interest  payment terms of the surplus  debentures are structured,
  subject  to  certain  surplus  restrictions,  to  provide  essentially  all cash
  required to meet Life Partners'  obligations  under the bank credit facility and
  the senior subordinated notes.
  
  
                                         11
  
  <PAGE>
  
  
  
                              LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
  
       INVESTMENTS
  
       Investment income by type of investment was as follows (in thousands):
  <TABLE>
  <CAPTION>
                                                                                                    Six months ended
                                                                                                       June 30,
                                                                                                  ------------------
                                                                                                  1996          1995
                                                                                                  ----          ----
  
  <S>                                                                                           <C>           <C>  
  Gross investment income:
     Fixed maturities.......................................................................    $132,051      $120,238
     Short-term investments.................................................................       2,573         3,484
     Policy loans...........................................................................       7,353         7,194
     Other invested assets..................................................................       3,402         5,210
     Mortgage loans.........................................................................       5,147         3,619
     Equity securities......................................................................         715           939
     Collateral loans.......................................................................         136            53
     Investment real estate.................................................................         438           527
                                                                                                --------      --------
  
       Gross investment income..............................................................     151,815       141,264
  
  Less:
     Investment expenses....................................................................       3,476         2,311
     Interest expense on investment borrowings..............................................       2,114         4,005
                                                                                                --------      --------
  
       Net investment income................................................................    $146,225      $134,948
                                                                                                ========      ========
  </TABLE>
  
  
     Following is an analysis of net realized gains on investments (in thousands):
  <TABLE>
  <CAPTION>
                                                                                                      Six months ended
                                                                                                         June 30,
                                                                                                    ------------------
                                                                                                    1996          1995
                                                                                                    ----          ----
  
  <S>                                                                                            <C>           <C>
  Fixed maturities..........................................................................     $  887        $   458
  Equity securities.........................................................................        118          1,874
  Other.....................................................................................      1,291             86
                                                                                                 ------         ------
  
                                                                                                 $2,296         $2,418
                                                                                                 ======         ======
  
  </TABLE>
  
  
  
                                         12
  
  <PAGE>
  
  
  
                              LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
  
       The cost and estimated fair values of equity  securities are as follows (in
  thousands):
  <TABLE>
  <CAPTION>
  
                                                                                       Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  June 30, 1996                                                          cost          gains        losses       fair value
  - -------------                                                          ----          -----        ------       ----------
  
  <S>                                                                   <C>             <C>         <C>             <C>
  Preferred stock..................................................     $18,936         $1,333      $2,211          $18,058
  Common stock.....................................................       4,262          3,094       1,596            5,760
                                                                        -------         ------      ------          -------
  
     Totals........................................................     $23,198         $4,427      $3,807          $23,818
                                                                        =======         ======      ======          =======
  
  
  December 31, 1995
  - -----------------
  Preferred stock..................................................     $18,984         $1,123        $502          $19,605
  Common stock.....................................................       1,945          2,271         100            4,116
                                                                        -------         ------        ----          -------
  
     Totals........................................................     $20,929         $3,394        $602          $23,721
                                                                        =======         ======        ====          =======
  </TABLE>
  
       The amortized cost and estimated fair values of debt securities  classified
  as fixed maturity investments held-to-maturity are as follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                         Gross         Gross
                                                                       Amortized      unrealized    unrealized      Estimated
  June 30, 1996                                                          cost            gains        losses       fair value
  - -------------                                                          ----            -----        ------       ----------
  
  <S>                                                                  <C>             <C>            <C>            <C>
  United States treasury securities and obligations of United
     States government corporations and agencies...................    $  1,950        $    76        $  -          $  2,026
  Obligations of states and political subdivisions.................       2,392            222           -             2,614
  Debt securities issued by foreign governments....................      16,256             68           459          15,865
  Corporate securities.............................................     514,233         21,911         9,205         526,939
  Mortgage-backed securities.......................................      71,992            564           779          71,777
  Other debt securities............................................      54,370          3,206           730          56,846
                                                                       --------        -------        -------       --------
  
     Totals........................................................    $661,193        $26,047        $11,173       $676,067
                                                                       ========        =======        =======       ========
  
  </TABLE>
  
  
                                         13
  
  <PAGE>
  
  
  
                              LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  <TABLE>
  <CAPTION>
  
  
                                                                                       Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  December 31, 1995                                                      cost          gains        losses       fair value
  - -----------------                                                      ----          -----        ------       ----------
  
  <S>                                                                  <C>             <C>          <C>            <C>
  United States treasury securities and obligations of United
     States government corporations and agencies...................    $  2,024        $    44      $    -         $  2,068
  Obligations of states and political subdivisions.................       2,420            307           -            2,727
  Debt securities issued by foreign governments....................      16,272          1,014           -           17,286
  Corporate securities.............................................     533,110         36,273       4,280          565,103
  Mortgage-backed securities.......................................      74,470          4,959         107           79,322
  Other debt securities............................................      50,530          4,641         301           54,870
                                                                       --------        -------      ------         --------
  
     Totals........................................................    $678,826        $47,238      $4,688         $721,376
                                                                       ========        =======      ======         ========
  </TABLE>
  
       The amortized cost and estimated fair values of debt securities  classified
  as investments available-for-sale are as follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                       Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  June 30, 1996                                                          cost          gains        losses       fair value
  - -------------                                                          ----          -----        ------       ----------
  
  <S>                                                                <C>              <C>          <C>         <C>
  United States treasury securities and obligations of United
     States government corporations and agencies...................  $   88,188       $  1,412     $   886     $    88,714
  Obligations of states and political subdivisions.................       8,393            191         317           8,267
  Debt securities issued by foreign governments....................      18,429             31       1,010          17,450
  Corporate securities.............................................   1,230,876         25,898      30,573       1,226,201
  Mortgage-backed securities.......................................   1,140,482         16,464      15,275       1,141,671
  Other debt securities............................................     253,540          2,867       7,530         248,877
                                                                     ----------        -------     -------      ----------
  
     Totals........................................................  $2,739,908        $46,863     $55,591      $2,731,180
                                                                     ==========        =======     =======      ==========
  </TABLE>
  
  <TABLE>
  <CAPTION>
  
                                                                                       Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  December 31, 1995                                                      cost          gains        losses       fair value
  - -----------------                                                      ----          -----        ------       ----------
  
  <S>                                                                 <C>              <C>          <C>           <C>
  United States treasury securities and obligations of United
     States government corporations and agencies...................   $   93,368       $  4,620     $   110       $   97,878
  Obligations of states and political subdivisions.................        8,443            273          -             8,716
  Debt securities issued by foreign governments....................       18,440            673          66           19,047
  Corporate securities.............................................    1,044,051         52,822      11,965        1,084,908
  Mortgage-backed securities.......................................    1,147,848         52,606       1,345        1,199,109
  Other debt securities............................................      249,325         14,584       1,202          262,707
                                                                      ----------       --------     -------       ----------
  
     Totals........................................................   $2,561,475       $125,578     $14,688       $2,672,365
                                                                      ==========       ========     =======       ==========
  </TABLE>
  
  
  
  
                                         14
  
  <PAGE>
  
  
  
                              LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
  
       REINSURANCE
  
       Policyholder  benefits reflects the reduction of policy and contract claims
  by  amounts  recovered  from  reinsurers  of $65.5  million  and $41.4  million,
  including  accident and health claims recovered from reinsurers of $42.2 million
  and $16.6 million for the six months ended June 30, 1996 and 1995, respectively.
  Accident and health premiums are reported net of premiums ceded to reinsurers of
  $45.0 million and $20.1 million for the six months ended June 30, 1996 and 1995,
  respectively.
  
       FEDERAL INCOME TAXES
  
       Life Partners and its non-life insurance  subsidiaries each file a separate
  corporate  federal  income tax return.  The life insurance  subsidiaries  file a
  consolidated federal income tax return.
  
       The components of the provision for income taxes on operating  earnings are
  as follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                                     Six months ended
                                                                                                         June 30,
                                                                                                   --------------------
                                                                                                   1996            1995
                                                                                                   ----            ----
  
  <S>                                                                                            <C>              <C>   
  Current tax provision (benefit)...........................................................     $13,494          $  (377)
  Deferred tax provision (benefit)..........................................................      (1,872)           6,755
                                                                                                 -------           ------
  
     Total income tax provision.............................................................     $11,622           $6,378
                                                                                                 =======           ======
  </TABLE>
  
  
       SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
  
       Cash  payments  for  interest  expense and income taxes were as follows (in
  thousands):
  <TABLE>
  <CAPTION>
                                                                                                    Six months ended
                                                                                                        June 30,
                                                                                                   -----------------
                                                                                                   1996         1995
                                                                                                   ----         ----
  
  <S>                                                                                            <C>           <C>
  Interest expense..........................................................................     $12,959       $10,925
  Income taxes..............................................................................      20,725         7,200
  </TABLE>
  
       In connection  with the acquisition of Lamar,  liabilities  were assumed as
  follows (in thousands):
  <TABLE>
  
  
  <S>                                                                            <C>   
  Fair value of assets acquired, including cash and short-term
     investments of $20,591 ............................................         $1,004,182
  Cash paid.............................................................            (37,937)
  Common stock issued...................................................            (39,459)
                                                                                 ----------
  
     Fair value of liabilities assumed..................................         $  926,786
                                                                                 ==========
  </TABLE>
  
  
  
                                         15
  
  <PAGE>
  
  
                              LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
  
       SUBSEQUENT EVENT
  
       On August 2, 1996,  the Company  completed  its merger with  Conseco,  Inc.
  ("Conseco").  As a result  of the  merger,  the  Company  became a wholly  owned
  subsidiary of Conseco.  In the merger, each of the issued and outstanding shares
  of LPG common stock was converted into .5833 of a share of Conseco common stock.
  A total of 16.3 million shares of Conseco  common stock (or  equivalent  shares)
  with a value of approximately $588 million were issued. As a result of Conseco's
  ownership of the Company, a new basis of accounting under the "push down" method
  will be adopted by the Company in the third quarter of 1996.  Under this method,
  the assets and  liabilities  of the Company will reflect  Conseco's  cost basis,
  which is based on the fair values of the Company's assets and liabilities at the
  effective date of the merger.
  
       As a  result  of the  merger,  Conseco  plans  to  relocate  the  Company's
  operations to Conseco's headquarters in Carmel, Indiana, by August 30, 1996.
  
       During the first six months of 1996, the Company  incurred costs related to
  the  Acquisition  of the Company by Conseco  totaling $7.9  million.  Such costs
  include but are not limited to, financial  advisory  services,  and attorney and
  accounting fees.
                                         16
  
  <PAGE>
  
                     CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(a).     Financial Statements and Exhibits, continued
  
                 (a), continued
  
                      Life  Partners   Group,   Inc.  and   Subsidiaries   Audited
                      Consolidated  Financial  Statements  as of December 31, 1995
                      and 1994, and for each of the three years ended December 31,
                      1995.
  
  
  
                                         17
  
  <PAGE>
  
  
  
  
  
    REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Board of Directors and Stockholders
  Life Partners Group, Inc.
  
      We  have  audited  the  accompanying  consolidated  balance  sheets  of Life
  Partners Group,  Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
  related  consolidated  statements of operations,  stockholders'  equity and cash
  flows for each of the three years in the period ended  December 31, 1995.  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 in  accordance  with  generally  accepted  auditing
  standards.  Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement.  An audit includes examining, on a test basis, evidence supporting
  the amounts and disclosures in the financial statements.  An audit also includes
  assessing the  accounting  principles  used and  significant  estimates  made by
  management,  as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.
  
      In our opinion,  the financial  statements referred to above present fairly,
  in all material respects,  the consolidated  financial position of Life Partners
  Group,  Inc.  and  Subsidiaries  as of  December  31,  1995  and  1994,  and the
  consolidated  results of their  operations  and their cash flows for each of the
  three years in the period ended December 31, 1995, in conformity  with generally
  accepted accounting principles.
  
      As  more  fully  explained  in  Note  1(d)  to  the  consolidated  financial
  statements,  the Company adopted Statement of Financial  Accounting Standard No.
  115,  "Accounting  For  Certain  Investments  in Debt  and  Equity  Securities",
  effective December 31, 1993.
  
                                            Coopers & Lybrand L.L.P.
  
  Denver, Colorado
  March 27, 1996
  
  
  
                                         18
  <PAGE>
  
  
  <TABLE>
  <CAPTION>
  
  
  
                             LIFE PARTNERS GROUP, INC.
                            CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
  
                                       ASSETS
  
  
  
                                                                                             DECEMBER 31,
                                                                                     ----------------------------
                                                                                         1995           1994
                                                                                     -------------  -------------
  <S>                                                                                <C>            <C>
  Investments:
    Fixed maturities:
      Held-to-maturity, at amortized cost..........................................  $     678,826  $   1,570,034
      Available-for-sale, at fair value............................................      2,672,365      1,058,710
    Equity securities, at fair value...............................................         23,721         27,510
    Mortgage loans on real estate, at amortized cost...............................        110,214         34,177
    Investment real estate, at cost, net of accumulated depreciation...............          4,921          2,796
    Policy loans...................................................................        226,212        192,909
    Collateral loans...............................................................          4,373          1,825
    Cash and short-term investments................................................        197,684         41,715
    Other invested assets..........................................................         59,593         56,039
                                                                                     -------------  -------------
      Total investments............................................................      3,977,909      2,985,715
  Notes and accounts receivable and uncollected premiums...........................         29,303         20,607
  Receivable from reinsurers.......................................................        244,828         78,176
  Federal income tax recoverable...................................................                         6,444
  Accrued investment income........................................................         54,785         46,340
  Deferred policy acquisition costs, net...........................................        238,736        276,938
  Cost of insurance acquired.......................................................        306,015        234,471
  Goodwill, net of accumulated amortization........................................        100,470         84,079
  Other assets.....................................................................         28,819         15,996
                                                                                     -------------  -------------
                                                                                     $   4,980,865  $   3,748,766
                                                                                     =============  =============
  
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
  Future policy benefits and claims................................................  $     708,226  $     625,814
  Dividends, endowments and other policyholder funds...............................         86,162         64,479
  Policyholder account balances....................................................      3,271,906      2,354,169
  Deferred policy fees.............................................................         80,590         78,700
  Investment borrowings............................................................         73,585         63,786
  Notes payable:
    Due within one year............................................................         15,000         15,000
    Due after one year.............................................................        231,083        195,460
  Federal income taxes payable:
    Current........................................................................         13,444
    Deferred.......................................................................         25,812         13,889
  Other liabilities................................................................         74,548         43,823
                                                                                     -------------  -------------
                                                                                         4,580,356      3,455,120
                                                                                     -------------  -------------
  Commitments and contingencies
  Stockholders' equity:
  Common stock,  $.001 par value;  50,000,000  shares  authorized;  27,911,851 and
   25,530,334 shares issued and outstanding at December 31, 1995 and 1994,
   respectively....................................................................             28             26
  Additional paid-in capital.......................................................        287,863        245,652
  Net unrealized investment gains (losses).........................................         58,269        (22,783)
  Retained earnings................................................................         54,349         70,751
                                                                                     -------------  -------------
                                                                                           400,509        293,646
                                                                                     -------------  -------------
                                                                                     $   4,980,865  $   3,748,766
                                                                                     =============  =============
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
  
                                         19
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
  
  
                             LIFE PARTNERS GROUP, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
  
  
  
                                                                                YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------------------
                                                                          1995            1994            1993
                                                                     --------------  --------------  --------------
  
  <S>                                                                <C>             <C>                <C>
  Revenues:
    Universal life and investment product charges..................  $      252,925  $      199,512     $   180,013
    Universal life charges ceded to client companies...............         (29,564)        (22,275)        (15,861)
    Universal life and investment product surrender charges, net...          16,364          12,750          13,380
    Traditional life and annuity premiums..........................          56,593          50,501          54,658
    Traditional reinsurance premiums...............................         (40,416)        (28,109)        (27,551)
    Accident and health insurance premiums, net....................          24,178           5,512           6,125
                                                                     --------------  --------------  --------------
      Total premium income and other considerations................         280,080         217,891         210,764
    Net investment income..........................................         277,068         225,378         221,131
    Net realized gains (losses)....................................          15,785         (19,652)         18,404
    Other income...................................................           3,183           4,626           5,433
                                                                     --------------  --------------  --------------
      Total revenues...............................................         576,116         428,243         455,732
                                                                     --------------  --------------  --------------
  Benefits and expenses:
    Policyholder benefits..........................................         153,307         110,870         102,202
    Interest credited to policyholders.............................         165,415         136,853         139,442
    Amortization of deferred policy acquisition costs, costs of
     insurance acquired, and deferred policy fees..................         148,659          46,224          52,020
    Other operating expenses.......................................          94,784          52,709          51,905
    Amortization of goodwill.......................................           2,745           2,388           2,323
    Interest expense...............................................          27,861          20,728          25,980
                                                                     --------------  --------------  --------------
      Total expenses...............................................         592,771         369,772         373,872
                                                                     --------------  --------------  --------------
  Earnings (loss) before income taxes and extraordinary items......         (16,655)         58,471          81,860
    Federal income tax expense (benefit)...........................          (3,271)         21,265          29,868
                                                                     --------------  --------------  --------------
  Earnings (loss) before extraordinary items.......................         (13,384)         37,206          51,992
    Extraordinary loss, net of tax effect..........................                           2,558           4,776
                                                                     --------------  --------------  --------------
  Net earnings (loss)..............................................         (13,384)         34,648          47,216
    Less dividends in kind on preferred stock......................                                          (3,978)
                                                                     --------------  --------------  --------------
  Net earnings (loss) applicable to common stock...................  $      (13,384) $       34,648     $    43,238
                                                                     ==============  ==============  ==============
  Weighted average common shares and common equivalent share
   outstanding.....................................................      27,127,171      26,111,032      23,407,192
                                                                     ==============  ==============  ==============
  
  Earnings (loss) per common share and common equivalent share outstanding:
    Earnings (loss) before extraordinary items.....................  $        (0.49) $         1.43  $         2.05
    Extraordinary loss.............................................                           (0.10)          (0.20)
                                                                     --------------  --------------  --------------
      Net earnings (loss)..........................................  $        (0.49) $         1.33  $         1.85
                                                                     ==============  ==============  ==============
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
  
                                         20
  <PAGE>
  <TABLE>
  <CAPTION>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (IN THOUSANDS)
  
  
                                                                                                           NET
                                                                                                       UNREALIZED
                                                                CLASS A        CLASS B     ADDITIONAL  INVESTMENT    RETAINED
                                    PREFERRED     COMMON         COMMON         COMMON       PAID-IN      GAINS      EARNINGS
                                      STOCK        STOCK         STOCK          STOCK        CAPIAL     (LOSSES)     (DEFICIT)
                                    ---------  -------------  -----------  -------------  -----------  -----------  -----------
  <S>                               <C>          <C>           <C>           <C>           <C>          <C>         <C>
  Balance at January 1, 1993......  $ 118,005                  $      13     $       1     $  69,909    $  46,081   $  (4,150)
  Common stock issued for cash,
   net of related offering
   costs..........................               $      11                                   174,860
  Cash dividends paid on Common
   Stock..........................                                                                                        (950)
  Conversion of Class A and Class
   B Common Stock to Common
   Stock..........................                      14           (13)           (1)
  Preferred stock dividends in
   kind...........................      3,978                                                                           (3,978)
  Redemption of preferred stock...   (121,983)
  Compensation for management
   options........................                                                               163
  Change in unrealized gains
   (losses), net..................                                                                        (17,977)
  Net earnings....................                                                                                      47,216
                                    ---------          ---           ---            --    -----------  -----------  -----------
  Balance at December 31, 1993....          0           25             0             0       244,932       28,104       38,138
  
  Common stock issued for cash....                       1                                       377
  Cash dividends paid on Common
   Stock..........................                                                                                      (2,035)
  Compensation for and tax benefit
   of management options..........                                                               343
  Change in unrealized gains
   (losses), net..................                                                                        (50,887)
  Net earnings....................                                                                                      34,648
                                                                                   
                                    ---------          ---           ---            --    -----------  -----------  -----------
  Balance at December 31, 1994....          0           26             0             0       245,652      (22,783)      70,751
  
  Common Stock issued for cash....                                                             1,942
  Common Stock issued in
   acquisition of subsidiaries....                       2                                    39,457
  Cash dividends paid on Common
   Stock..........................                                                                                      (3,018)
  Tax benefit of management
   options exercised..............                                                               812
  Change in unrealized gains
   (losses), net..................                                                                         81,052
  Net earnings (loss).............                                                                                     (13,384)
                                                                                    --
                                    ---------          ---           ---                   ---------   ----------    ---------
  Balance at December 31, 1995....  $       0    $      28     $       0       $     0     $ 287,863     $ 58,269    $  54,349
                                    =========          ===           ====           ==     =========    =========    =========
  
                                    (Continued)
  
                                         21
  
  <PAGE>
  
                              LIFE PARTNERS GROUP, INC.
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
                                   (IN THOUSANDS)
  
  
                                       TOTAL
                                    STOCKHOLDERS'
                                       EQUITY
                                    ------------
  <S>                                <C>
  Balance at January 1, 1993......   $  229,859
  Common stock issued for cash,
   net of related offering
   costs..........................      174,871
  Cash dividends paid on Common
   Stock..........................         (950)
  Conversion of Class A and Class
   B Common Stock to Common
   Stock..........................
  Preferred stock dividends in
   kind...........................
  Redemption of preferred stock...     (121,983)
  Compensation for management
   options........................          163
  Change in unrealized gains
   (losses), net..................      (17,977)
  Net earnings....................       47,216
  
                                    ------------
  Balance at December 31, 1993....      311,199
  Common stock issued for cash....          378
  Cash dividends paid on Common
   Stock..........................       (2,035)
  Compensation for and tax benefit
   of management options..........          343
  Change in unrealized gains
   (losses), net..................      (50,887)
  Net earnings....................       34,648
  
                                    ------------
  Balance at December 31, 1994....      293,646
  Common Stock issued for cash....        1,942
  Common Stock issued in
   acquisition of subsidiaries....       39,459
  Cash dividends paid on Common
   Stock..........................       (3,018)
  Tax benefit of management
   options exercised..............          812
  Change in unrealized gains
   (losses), net..................       81,052
  Net earnings (loss).............      (13,384)
  
                                    -----------
  Balance at December 31, 1995....   $  400,509
                                    ===========
  </TABLE>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  
  
                                         22
  
  
  <PAGE>
  <TABLE>
  <CAPTION>
  
                             LIFE PARTNERS GROUP, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (IN THOUSANDS)
  
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                -----------------------------------
                                                                                  1995        1994         1993
                                                                                ---------  -----------  -----------
  
  <S>                                                                           <C>        <C>          <C>
  Cash flows from operating activities:
    Net earnings (loss).......................................................  $ (13,384) $    34,648  $    47,216
    Adjustments to reconcile net earnings (loss) to net cash used by operating
     activities:
        Extraordinary loss, net of tax effect.................................                   2,558        4,776
        Net realized (gains) losses...........................................    (15,785)      19,652      (18,404)
        Adjustments relating to universal life and annuity products:
          Interest credited to account balances...............................    138,465      110,946      114,294
          Charges for mortality and administration............................   (223,361)    (177,237)    (164,152)
        Depreciation and amortization.........................................      5,494        4,945        5,504
        Decrease in future policy benefits....................................    (13,253)      (3,470)     (20,591)
        Increase in reserve liability on modified coinsurance agreements......     17,571       12,534        5,471
        Decrease (increase) in deferred policy acquisition costs, net.........     20,561      (64,912)     (61,588)
        Amortization of cost of insurance acquired, net.......................     41,406       25,566       27,869
        Amortization of deferred policy fees..................................    (17,025)      (4,206)      (6,275)
        Increase (decrease) in currently payable taxes........................     19,888      (12,738)       6,683
        Deferred tax expense (benefit)........................................    (22,539)      19,168      (27,759)
        Increase in policy liabilities, other policyholder funds, and other
         liabilities..........................................................     14,959       13,601       15,693
        Increase in notes and accounts receivable and accrued investment
         income...............................................................     (1,311)      (2,903)     (10,402)
        Amortization of bond and mortgage loan discount and premium, net......        573         (663)      (9,472)
        Other, net............................................................     (8,908)        (190)      (3,313)
                                                                                ---------  -----------  -----------
          Net cash used by operating activities...............................    (56,649)     (22,701)     (94,450)
                                                                                ---------  -----------  -----------
  Cash flows from investing activities:
    Sales of fixed maturities:
        Available-for-sale....................................................    301,100    1,303,540    1,011,137
        Held-to-maturity......................................................     33,480                   262,355
    Maturities of fixed investments:
        Available-for-sale....................................................     92,451       89,173      149,831
        Held-to-maturity......................................................     71,588       64,097      113,031
    Sales of other long-term invested assets..................................     60,670       28,459      141,623
    Decrease (increase) in policy loans, net..................................     (4,396)      (3,528)       6,689
    Purchases of fixed maturities.............................................   (389,269)  (1,842,038)  (1,842,986)
    Purchases of other long-term invested assets..............................    (24,809)     (43,714)     (46,396)
    Purchase of subsidiaries, net of cash and short-term investments
     acquired.................................................................    (20,591)
                                                                                ---------  -----------  -----------
          Net cash provided (used) by investing activities....................    120,224     (404,011)    (204,716)
                                                                                ---------  -----------  -----------
  Cash flows from financing activities:
    Policyholder contract deposits............................................    458,737      384,738      577,005
    Policyholder contract withdrawals.........................................   (261,828)    (196,261)    (194,157)
    Proceeds from issuance of common stock....................................      1,942          408      187,086
    Costs related to common stock issuance....................................                     (30)     (12,215)
    Proceeds from notes payable...............................................     50,000                   160,000
    Proceeds from investment borrowings, net..................................                  63,786
    Principal repayments on investment borrowings.............................    (92,866)
    Principal payments on notes payable and indebtedness to related party.....    (60,573)      (3,822)    (265,025)
    Deferred loan costs related to notes payable and indebtedness to related
     party....................................................................                    (898)      (7,087)
    Cash dividends paid on common stock.......................................     (3,018)      (2,035)        (950)
    Redemption of preferred stock.............................................                             (121,983)
                                                                                ---------  -----------  -----------
          Net cash provided by financing activities...........................     92,394      245,886      322,674
                                                                                ---------  -----------  -----------
  Net increase (decrease) in cash and short-term investments..................    155,969     (180,826)      23,508
  Cash and short-term investments at beginning of year........................     41,715      222,541      199,033
                                                                                ---------  -----------  -----------
  Cash and short-term investments at end of year..............................  $ 197,684  $    41,715  $   222,541
                                                                                =========  ===========  ===========
  
  <FN>
                 The accompanying notes are an integral part of the
                         consolidated financial statements.
  </FN>
  </TABLE>
  
                                         23
  <PAGE>
  
  
  
                             LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (a)  PRINCIPLES OF CONSOLIDATION
  
      The  consolidated financial statements include the accounts of Life Partners
  Group, Inc. ("Life  Partners") and its  wholly-owned subsidiaries (together  the
  "Company")   from  the  date   of  acquisition.  The   subsidiaries  consist  of
  Philadelphia Life Insurance Company ("Philadelphia Life"), Massachusetts General
  Life Insurance Company ("Massachusetts  General"), Lamar Life Insurance  Company
  ("Lamar Life"), Wabash Life Insurance Company ("Wabash"), Independent Processing
  Services,  Inc. ("IPS"), Travel Partners  Group, Inc. ("TPG"), Philadelphia Life
  Asset Planning  Company ("PLAPCO"),  Stratford Capital  Group, Inc.  ("Stratford
  Capital"),  Lamar Life  International, Inc.  ("LLII"), Whitehall  Fund Managers,
  Inc. ("WFM"), Eagles National Corporation ("ENC"), and Partners Risk  Management
  Company ("PRMC").
  
      All significant  intercompany accounts and transactions have been eliminated
  in consolidation.
  
      (b)  BASIS OF PRESENTATION
  
      The Company's insurance  subsidiaries  maintain their accounts in conformity
  with accounting  practices prescribed or permitted by state insurance regulatory
  authorities.  In the accompanying  financial  statements such accounts have been
  adjusted to conform with generally accepted accounting  principles ("GAAP") (see
  Note 13).
  
      (c)  NATURE OF OPERATIONS
  
      Life  Partners  is an  insurance  holding  company  that,  through its three
  principal life insurance  subsidiaries,  sells a diverse  portfolio of universal
  life insurance and annuity  products to individuals.  The Company also maintains
  an existing block of traditional,  universal life and annuity business in force.
  The Company markets its life insurance  products through two separate  marketing
  systems;  the Client Company marketing system (including  affiliated  companies)
  and  the  Regional  Director  marketing  system.  While  both  systems  rely  on
  independent agents to consummate sales, the Client Company System further offers
  qualified  members  of  its  life  insurance  sales  force  the  opportunity  to
  participate  in and share in the  profitability  of an  agent-owned  reinsurance
  company.  Of the Company's total gross annualized premiums on new life insurance
  sales,  71.6%,  77.6%,  and 71.9% were generated by agents  participating in the
  Client Company marketing system during 1995, 1994 and 1993, respectively.
  
      (d)  INVESTMENTS
  
      Effective  December 31,  1993,  the Company  adopted  Statement of Financial
  Accounting  Standard No. 115,  ACCOUNTING  FOR CERTAIN  INVESTMENTS  IN DEBT AND
  EQUITY  SECURITIES  ("SFAS 115") issued by the  Financial  Accounting  Standards
  Board  ("FASB").  Under  SFAS  115,  fixed-maturity   securities  classified  as
  investments  held-to-maturity  are carried at amortized cost because the Company
  has the intent and the ability to hold such securities to maturity. Although the
  Company  has the  ability  and intent to hold  these  investments  to  maturity,
  infrequent and unusual  conditions  could occur under which certain  investments
  designated as held to maturity would be sold. Such conditions include unforeseen
  changes in asset quality,  significant changes in tax law affecting the taxation
  of securities, significant business acquisitions or dispositions, and changes in
  regulatory  capital  requirements or permissible  investments.  Fixed-maturities
  that  may  be  sold  prior  to   maturity   are   included   in  the   Company's
  available-for-sale  account at fair value. The  classification of investments is
  determined  at the date of purchase and is  reevaluated  at each  balance  sheet
  date.
  
      The effect of the adoption of SFAS 115 was to decrease  stockholders' equity
  by  approximately  $0.8 million.  This net decrease  consisted of an increase of
  approximately  $6.6 million from securities which were previously  classified as
  held-to-maturity  and  transferred  to  available-for-sale,  and a  decrease  of
  approximately  $7.4 million for securities  which were previously  classified as
  actively
  
  
                                         24
  <PAGE>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  managed  investments,  which were carried at fair value, and were transferred to
  held-to-maturity. The adoption of SFAS 115 had no effect on net earnings or cash
  flows. SFAS 115 prohibits restatement of prior years' financial statements.
  
      In November 1995, the Company  transferred  certain  securities  between the
  available-for-sale  and  held-to-maturity  classifications  as  permitted  by an
  implementation  guide issued by the Financial  Accounting  Standards  Board (See
  Note 4).
  
      Premiums and discounts on fixed maturity  investments are amortized over the
  term of the security,  or in the case of  mortgage-backed  securities,  over the
  estimated life of the security.  Such amortization is included in net investment
  income.
  
      Principal   prepayments   affect  the  cash  flow   pattern   and  yield  of
  mortgage-backed  securities.  The  amortization  of discounts and premiums takes
  into  consideration  actual  and future  estimated  principal  prepayments.  The
  Company utilizes estimated  prepayment speed information obtained from published
  sources or from estimates developed by its investment  advisors.  The effects on
  the yield of a security  from changes in principal  prepayments  are  recognized
  retrospectively,  except  for  interest  only or  residual  interest  structured
  securities which are recognized prospectively. The degree to which a security is
  susceptible to yield  adjustments  is influenced by the  difference  between its
  carrying value and par, the relative  sensitivity  of the  underlying  mortgages
  backing the assets to prepayment in a changing  interest rate  environment,  and
  the repayment priority for structured securities such as collateralized mortgage
  obligations.
  
      Mortgage loans are stated at the aggregate unpaid principal  balances,  less
  unamortized  discount and less allowance for possible  losses.  Real estate held
  for  investment is stated at cost,  less  allowances  for  depreciation  and, as
  appropriate,  provisions  for  possible  losses.  Real estate  acquired  through
  foreclosure is stated at lower of cost or market.
  
      Policy and  collateral  loans are stated at the aggregate  unpaid  principal
  balances.
  
      For  purposes  of  the  statements  of  cash  flows,   cash  and  short-term
  investments include commercial paper,  invested cash, and other investments with
  original maturities of three months or less, and are reflected at cost.
  
      Other invested  assets consist  primarily of limited  partnerships  acquired
  prior to 1995,  which are accounted for under the cost method.  Certain of these
  limited partnership investments are related party transactions (see Note 14).
  
      During 1995, 1994 and 1993, the Company owned certain derivative investments
  in the form of  interest  rate swap  agreements.  During the term of an interest
  rate swap, the net swap settlement  amount is accrued over the unexpired term as
  an adjustment of interest  income.  Gains or losses on termination  are deferred
  and amortized as an interest  adjustment over the remaining original life of the
  underlying financial instrument, or reflected in operations as appropriate.
  
      During 1994 the Company  entered into  certain  reverse  repurchase  finance
  agreements related to the purchase of certain mortgage-backed securities.  These
  financings were  collateralized by  mortgage-backed  securities with fair market
  values in excess of the loan  value.  Such  transactions  are  accounted  for as
  short-term collateralized borrowings and generally terminate within 120 days.
  
      Net realized  investment gains and losses are included in the  determination
  of net earnings  (loss).  Unrealized  investment  gains and losses on marketable
  equity  securities and fixed  maturity  investments  available-for-sale,  net of
  amortization  of deferred  policy  acquisition  costs,  deferred policy fees and
  related  deferred  tax  effect,  if any,  are  charged or  credited  directly to
  stockholders' equity and do
  
                                         25
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  not  affect  net  earnings  (loss).  If a  decline  in the  market  value  of an
  individual  investment is considered to be other than temporary,  the difference
  between  amortized book value and net realizable value is recorded as a realized
  investment  loss.  Net  realizable  value is based on  quoted  market  prices or
  discounted  cash  flows in the  absence  of quoted  market  prices.  The cost of
  investments sold is determined on a specific identification basis (see Note 4).
  
      Changes in the interest rate  environment  have a direct,  inverse impact on
  the market value of fixed income  investments.  It is  reasonably  possible that
  changes in  interest  rates  will  occur in the near term and that such  changes
  could have a material effect on the carrying value of  available-for-sale  fixed
  maturity  and equity  securities,  with an  offsetting  effect to  stockholders'
  equity,  net of the  related  effects  on  deferred  policy  acquisition  costs,
  deferred policy fees,  costs of insurance  acquired and related  deferred income
  taxes.  The impact of the  adjustment  to  investments  carried at market  value
  resulting  from  interest rate  fluctuations  and related  adjustments  to other
  accounts do not have a direct impact on the Company's results of operations.
  
      During 1995, the FASB issued Statement of Financial Accounting Standards No.
  121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF LONG  LIVED  ASSETS AND FOR LONG LIVED
  ASSETS TO BE DISPOSED  OF ("SFAS  121"),  which is  effective  for fiscal  years
  beginning  after  December  15,  1995.  The Company  does not  believe  that the
  application  of the  provisions  of SFAS 121 will have a material  effect on its
  financial condition or results of operations.
  
      (e)  DEFERRED POLICY ACQUISITION COSTS
  
      Costs which vary with and are primarily  related to the  acquisition  of new
  business have been deferred to the extent that such costs are deemed recoverable
  through  future  revenues.  These costs  include  commissions,  certain costs of
  policy issuance and underwriting,  and certain variable agency selling expenses.
  For traditional  life products,  deferred costs are amortized with interest over
  the premium paying period in proportion to the ratio of annual  premium  revenue
  to the anticipated  total premium  revenue.  Deferred policy  acquisition  costs
  related to universal  life,  interest-sensitive  life, and annuity  products are
  amortized  with  interest in relation  to the present  value,  using the assumed
  crediting  rate, of expected  positive  gross  profits on the  products,  with a
  provision  during  earlier  profitable  periods for losses  occurring  in latter
  periods. Retrospective adjustments of these amounts are made when the Company
  revises its estimates of current or future gross  profits and losses,  including
  investment  gains and losses  related to changes in market  interest rates to be
  realized from a group of policies.  Anticipated  investment income is considered
  in the determination of recoverability of deferred policy acquisition costs.
  
  <TABLE>
  <CAPTION>
  
      Changes in deferred policy acquisitions costs are as follows (in thousands):
  
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  
  <S>                                                                          <C>          <C>          <C>
  Balance, beginning of year.................................................  $   276,938  $   200,475  $   144,307
  Capitalization of costs incurred...........................................      103,717       89,776       92,014
  Interest accretion.........................................................       16,982       14,322       11,205
  Adjustment for unrealized gains and losses on fixed maturity investments
   available-for-sale........................................................      (17,641)      11,551       (5,420)
  Amortization...............................................................     (141,260)     (39,186)     (41,631)
                                                                               -----------  -----------  -----------
  Balance, end of year.......................................................  $   238,736  $   276,938  $   200,475
                                                                               ===========  ===========  ===========
  
  </TABLE>
  
      The  determination  of expected  future gross profits and losses is based on
  historical  gross profits and management's  estimates and assumptions  regarding
  future investment spreads,  maintenance  expenses,  mortality and persistency of
  the block of business. The accuracy of the estimates and
  
                                         26
  <PAGE>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  assumptions  are  impacted by several  factors,  including  factors  outside the
  control of  management  such as movements in interest  rates.  It is  reasonably
  possible that conditions impacting the estimates and assumptions will change and
  that changes may result in future  adjustments  to deferred  policy  acquisition
  costs. At December 31, 1995, the Company  reassessed its  expectations of future
  gross  profits  and losses  resulting  in an  additional  net change in deferred
  acquisition  costs,  deferred  policy  fees and  provision  for  losses of $66.6
  million.  This change in estimate  related to deferred  expenses  and fees,  and
  provision  for  losses  was  included  as an  expense  in the 1995  Consolidated
  Statement of Operations.
  
      (f)  COST OF INSURANCE ACQUIRED
  
      A  portion  of  the  purchase   price  paid  for  the  Company's   insurance
  subsidiaries  was  allocated  to the  cost of  insurance  acquired  based on the
  actuarially  determined  future profits from policies acquired with the purchase
  of the  insurance  subsidiaries.  The  portion  of  the  asset  relating  to the
  acquisition of subsidiaries in 1990 is amortized without interest in relation to
  expected   future  gross  profits,   adjusted   prospectively   for  changes  in
  assumptions,  including  direct  charge-offs  for any excess of the  unamortized
  asset over the present value of projected future profits.
  
      Additionally,  the Company  assumed a block of annuity  business in 1993 and
  consummated  the Lamar Life  acquisition in 1995 (See Note 2), of which portions
  of the  respective  purchase  prices were  allocated to the cost of the policies
  acquired. These assets are amortized with interest in relation to expected gross
  profits, using the assumed crediting interest rate, including direct charge-offs
  for any excess of the unamortized asset over the present value of expected gross
  profits.  Retrospective  adjustments of the amounts related to the 1993 and 1995
  business  acquired are made when the Company  revises its  estimates of expected
  future gross profits and losses with respect to the policies acquired.
  
      The  estimation  of future gross  profits and losses with respect to cost of
  insurance  acquired is subject to the same estimation process and is impacted by
  the same factors as discussed above under deferred policy acquisition costs.
  
  
                                         27
  <PAGE>
  
  <TABLE>
  <CAPTION>
  
      Changes in the cost of insurance acquired are as follows (in thousands):
  
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  
  <S>                                                                          <C>          <C>          <C>
  Balance, beginning of year.................................................  $   234,471  $   260,037  $   272,543
  Additional cost of insurance acquired......................................      127,377                    15,363
  Interest accretion.........................................................        5,695          614          414
  Adjustment for unrealized gains and losses on fixed maturity investments
   available for sale........................................................      (14,427)
  Amortization...............................................................      (47,101)     (26,180)     (28,283)
                                                                               -----------  -----------  -----------
  Balance, end of year.......................................................  $   306,015  $   234,471  $   260,037
                                                                               ===========  ===========  ===========
  </TABLE>
  
      Future  amortization  is estimated at $47.8 million,  $41.3  million,  $36.4
  million,  $30.9 million, and $26.5 million for the years 1996, 1997, 1998, 1999,
  and 2000, respectively.  Due to changes in estimates of future gross profits and
  losses, the estimated future amortization is expected to increase as compared to
  prior year estimates.
  
      (g)  GOODWILL
  
      Goodwill is  amortized  on the  straight-line  basis over a 40 year  period.
  Accumulated  amortization  of goodwill  was $13.8  million and $11.1  million at
  December  31, 1995 and 1994,  respectively.  The Company  continually  evaluates
  whether current events and circumstances warrant adjustments to
  
                                         28
  
  <PAGE>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  the carrying  value  and/or the  estimated  amortization  period of goodwill and
  other intangibles. An adjustment to the carrying value or amortization period is
  based on future undiscounted cash flows. At this time, the Company believes that
  no significant impairment of the goodwill and other intangibles has occurred and
  that no reduction of the estimated amortization period is warranted.
  
      (h)  FUTURE POLICY BENEFITS AND CLAIMS
  
      The liability for future policy  benefits of  traditional  life products has
  been  computed  by the net  level  premium  method  based  on  estimated  future
  investment  yield,  mortality,  and  withdrawal  experience.   Reserve  interest
  assumptions  are graded to rates between 7.25% and 8.5%.  Mortality  assumptions
  are based on the 1965-70 Basic Experience Table.  Withdrawal assumptions vary by
  year of  issue,  age of the  insured,  and  type  of  insurance.  Mortality  and
  withdrawal assumptions are based on actual experience,  modified as necessary to
  reflect  anticipated trends and to include  provisions for possible  unfavorable
  deviations.  The  assumptions  vary  by  plan,  year  of  issue,  and  duration.
  Substantially  all of the  traditional  life products were issued prior to 1984.
  The  future  policy  benefit  reserves  include  a  provision  for  policyholder
  dividends based upon dividend scales assumed at the date of purchase of acquired
  companies or as presently contemplated.
  
      Policy and contract claims include provisions for reported claims in process
  of settlement,  valued in accordance with the terms of the related  policies and
  contracts,  as well as provisions for claims  incurred and  unreported  based on
  prior experience of the Company.
  
      Future policy benefits and claims are calculated using numerous  assumptions
  and estimates  including  interest rates,  mortality and persistency,  which are
  intended to estimate the timing of payment of policyholder benefits and claims.
  Actual results could differ from these estimates.
  
      (i)  POLICYHOLDER ACCOUNT BALANCES
  
      Benefit  reserves for  universal  life,  including  both  variable and fixed
  premium products,  and annuity products are determined using the  "retrospective
  deposit"  method  and  consist of policy  account  values  before any  surrender
  charges.
  
      (j)  DEFERRED POLICY FEES
  
      Certain  front-end fees assessed  against  policyholder  account balances on
  universal life contracts are deferred and amortized with interest in relation to
  the present value of expected gross profits on the product. Such amortization is
  in direct proportion to amortization of deferred policy  acquisition costs for a
  given policy form and is netted with amortization of deferred policy acquisition
  costs in the Consolidated Statements of Operations.
  
                                         29
  <PAGE>
  <TABLE>
  <CAPTION>
  
      Changes in deferred policy fees are as follows (in thousands):
                                                                                    1995       1994       1993
                                                                                   ---------  ---------  ---------
  
  <S>                                                                              <C>        <C>        <C>   
  Balance, beginning of year.....................................................  $  78,700  $  59,058  $  46,142
  Capitalization.................................................................     21,348     22,241     19,850
  Interest accretion.............................................................      4,867      4,133      3,569
  Adjustment for unrealized gains and losses on fixed maturity investments
   available-for-sale............................................................     (2,433)     1,607       (659)
  Amortization...................................................................    (21,892)    (8,339)    (9,844)
                                                                                   ---------  ---------  ---------
  Balance, end of year...........................................................  $  80,590  $  78,700  $  59,058
                                                                                   =========  =========  =========
  
  </TABLE>
  
      At December 31, 1995, the Company  reassessed its expectations  future gross
  profits and losses resulting in additional  amortization of Deferred Policy Fees
  (See Note 1(e)).
  
  
                                         30
  <PAGE>
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
      (k)  LIABILITY FOR GUARANTY FUND ASSESSMENTS
  
      Assessments  are levied on the Company  from time to time by  guaranty  fund
  associations of states in which it is licensed to provide for payment of covered
  claims or to meet other insurance obligations,  subject to prescribed limits, of
  insolvent insurance  enterprises.  Assessments are allocated to an insurer based
  on the ratio of premiums  written by an insurer to total premiums written in the
  state. The term of the assessments  depend on how each guaranty fund association
  elects to fund its  obligation.  Assessments  levied by  certain  states  may be
  recoverable  through a reduction in future premium taxes. The Company provides a
  liability,  net of discount and  estimated  premium tax offsets,  for  estimated
  future  assessments of known  insolvencies.  Such liability was $2.7 million and
  $0.5 million at December 31, 1995 and 1994, respectively. The Company determines
  the liability utilizing a report prepared annually by the National  Organization
  of Life, Health and Accident Guaranty  Associations  which provides estimates of
  assessments  by  insolvency.  Although  management  believes the  provision  for
  guaranty fund assessments is adequate for all known  insolvencies,  and does not
  currently  anticipate  the need for any  material  additions  to the reserve for
  known  insolvencies,  it is reasonably  possible that the estimates on which the
  provision  is based  will  change  and that such  changes  may  result in future
  adjustments.
  
      (l)  RECOGNITION OF PREMIUM REVENUE AND RELATED EXPENSES
  
      Premium  revenue  for  traditional  life  insurance  products is reported as
  earned when due. Benefits and expenses are associated with earned premiums so as
  to result in  recognition  of  profits  over the  premium  paying  period.  This
  association  is  accomplished  by means of a provision for future policy benefit
  reserves and the amortization of deferred policy acquisition costs. Revenues for
  universal life policies and annuity  products  consist of policy charges for the
  cost  of  insurance,  policy  administration  charges,  amortization  of  policy
  initiation  fees,  and surrender  charges.  Expenses  related to these  products
  include interest credited to policy account balances and benefit claims incurred
  in excess of policy  account  balances.  Premiums  earned on group  accident and
  health  insurance  business  are  recorded as fees net of ceded  commissions  in
  accident and health insurance premiums, net.
  
      (m)  EARNINGS PER SHARE
  
      Net  earnings per common  share is based  on the weighted  average number of
  common and common equivalent shares outstanding during the periods. Net loss per
  common  share  is  based  on  the  weighted  average  number  of  common  shares
  outstanding.  Pursuant to Securities and Exchange  Commission  Staff  Accounting
  Bulletin No. 83, all common  shares  issued and options and warrants  granted by
  the Company during the twelve months  preceding  March 23, 1993, the date of the
  Company's  initial  public  offering,  except those  issued to General  Electric
  Capital  Corporation  ("GE Capital")  upon exercise of the GE Capital  warrants,
  have been included in the  calculation  of common and common  equivalent  shares
  outstanding as if they were  outstanding  for all periods  presented  (using the
  treasury stock method and a public offering price of $17.00 per share).
  
      (n)  POSTRETIREMENT BENEFITS
  
      The Company has no material  liabilities for  postretirement  benefits.  The
  liabilities for certain individuals who were vested in the prior owner's plan or
  in the prior Lamar Life plan are accounted for in accordance  with  Statement of
  Financial Accounting Standards No. 106.
  
  
                                         31
  <PAGE>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
      (o)  ESTIMATES
  
      The  preparation  of  financial  statements  in  conformity  with  generally
  accepted  accounting  principles  requires  management  to  make  estimates  and
  assumptions  that affect the  reported  amounts of assets and  liabilities,  the
  disclosure of  contingent  assets and  liabilities  at the date of the financial
  statements,  and the  reported  amounts  of  revenues  and  expenses  during the
  reporting period. Actual results could differ from those estimates.
  
      (p)  RECLASSIFICATIONS
  
      The  Company has  reclassified  the  presentation  of certain  prior  period
  information to conform with the 1995 presentation.  The reclassifications had no
  effect on the  financial  position,  results of  operations or cash flows of the
  Company.
  
  2.  ACQUISITION
      On April  28, 1995,  Life Partners  Group, Inc.  finalized an  agreement  to
  acquire   Lamar  Financial  Group,   Inc.  ("Lamar"),  together   with  all  its
  subsidiaries, including Lamar  Life Insurance Company  of Jackson,  Mississippi,
  for a purchase price of $77 million.
  <TABLE>
  <CAPTION>
  
      The acquisition is summarized as follows (in millions):
  
  
  <S>                                                          <C>   
  
  Assets acquired:
    Investments:
      Fixed maturities.......................................  $     666
      Others.................................................        166
                                                               ---------
                                                                     832
    Cost of insurance acquired...............................        126
    Goodwill.................................................         19
    All other................................................        233
                                                               ---------
                                                                   1,210
                                                               ---------
  Liabilities assumed:
    Future policy benefits...................................         84
    Policyholder account balances............................        857
    Debt.....................................................         46
    All other................................................        146
                                                               ---------
                                                                   1,133
                                                               ---------
  Net assets acquired........................................  $      77
                                                               =========
  Financed by:
  Borrowings under bank credit facility......................  $      36
  Common stock (2,010,645 shares)............................         39
  Cash.......................................................          2
                                                               ---------
                                                               $      77
                                                               =========
  </TABLE>
  
      The acquisition was accounted for using the purchase method, and the results
  of operations of Lamar were included in the consolidated statement of operations
  from the date of  acquisition.  Also  included in the results of operations is a
  one time charge of $0.5 million for interest expense on the acquisition purchase
  price.  The fair value of assets and  liabilities of Lamar were reflected in the
  Company's consolidated balance sheet as of April 28, 1995, and goodwill recorded
  as a result of the acquisition was increased by  approximately  $4.8 million due
  to further evaluation of the fair values of
  
                                         32
  
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  2.  ACQUISITION (CONTINUED)
  
  the  acquired  assets and  liabilities.  Evaluation  of fair values for acquired
  assets and liabilities,  including investments, cost of insurance purchased, and
  insurance and annuity  liabilities  is continuing and allocation of the purchase
  price may be further adjusted.
  
      As of December 31, 1995, the Company had substantially completed the move of
  the primary life, annuity and corporate  functions of Lamar from its location in
  Jackson,  Mississippi, to the Company's headquarters in Englewood,  Colorado. In
  connection  with this move,  the Company has  incurred and  anticipates  certain
  additional  closing  and  moving  costs,  costs to  involuntarily  terminate  or
  relocate employees,  and terminate or renegotiate certain contracts.  Management
  has estimated these costs to total approximately $3.8 million,  and has included
  such estimated costs in the allocation of the acquired net assets of Lamar. Such
  costs may be revised in future  periods if actual  costs  deviate  significantly
  from the estimates.
  
      The following  unaudited  pro forma  information  presents the  consolidated
  results of operations of the Company and Lamar as if the  acquisitions  had been
  effective at the  beginning  of the periods  presented,  after giving  effect to
  adjustments to reflect the acquisition and the financing related thereto.
  <TABLE>
  <CAPTION>
  
                                                                                  PRO FORMA
                                                                           YEAR ENDED DECEMBER 31,
                                                                        ------------------------------
                                                                             1995            1994
                                                                        --------------  --------------
                                                                         (IN THOUSANDS, EXCEPT SHARE
                                                                             AND PER SHARE DATA)
  <S>                                                                   <C>             <C>
  Revenues............................................................  $      598,313  $      530,641
  Earnings (loss) before income taxes and extraordinary item..........         (14,919)         67,356
  Earnings (loss) before extraordinary item...........................         (12,289)         43,419
  Net earnings (loss).................................................         (12,289)         40,861
  
  Earnings (loss) per share before extraordinary item.................  $        (0.44) $         1.54
  Net earnings (loss) per share.......................................  $        (0.44) $         1.45
  Weighted average common shares and common equivalent shares
   outstanding........................................................      27,777,188      28,121,677
  </TABLE>
  
      The above  unaudited  pro forma  information  is intended for  informational
  purposes only and may not  necessarily  be  indicative  of the Company's  future
  results of operations.
  
  3.  NOTES PAYABLE
      Notes payable at December 31, 1995,  and December 31, 1994,  are  summarized
  below (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                     AMOUNT OUTSTANDING
                                                                                     NET OF UNAMORTIZED
                                                           AMOUNT OUTSTANDING          ISSUANCE COSTS
                                                        ------------------------  ------------------------
                                                           1995         1994         1995         1994
                                                        -----------  -----------  -----------  -----------
  <S>                                                   <C>          <C>          <C>           <C>    
  Borrowings under bank credit facility (A)...........  $   156,178  $   121,178  $   155,581   $  120,370
  12 3/4% Senior Subordinated Notes Due 2002 (B)......       95,100       95,100       90,502       90,090
                                                        -----------  -----------  -----------  -----------
                                                        $   251,278  $   216,278  $   246,083  $   210,460
                                                        ===========  ===========  ===========  ===========
  </TABLE>
  
  (A) On August 12, 1994, the unsecured syndicated credit facility was amended and
      restated  to include a $50 million  revolving  credit  facility  and various
      other modifications.  On April 28, 1995, the Company utilized $36 million of
      the revolving credit facility in the acquisition of Lamar Financial
  
                                         33
  
  
  <PAGE>
  
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  3.  NOTES PAYABLE (CONTINUED)
  
      Group,  Inc.  (See Note 2). On December 28, 1995,  the Company  utilized the
      remaining $14 million of the facility.  According to the amended  agreement,
      the $50 million outstanding  principal will convert to a term loan effective
      January 1, 1997,  payable in quarterly  installments  through  September 30,
      1999. The  outstanding  principal under the existing term loan is payable in
      quarterly installments through September 30, 1999. Both the outstanding term
      loan principal and outstanding revolving loan principal may be designated as
      a "base rate loan",  a "eurodollar  loan",  or a combination  of both at the
      Company's option on a periodic basis.
  
      Any principal  portion  designated  as a base rate loan bears  interest at a
      rate per annum  equal to the higher of (a) the  Federal  Funds Rate for such
      day plus 1/2 of 1%,  or (b) the  Prime  rate for  such  day.  Any  principal
      portion  designated as a eurodollar  loan bears interest at a rate per annum
      based upon the one, two, three, or six month LIBOR rate, plus a 1.0% margin.
      At December 31, 1995, the entire  outstanding  term loan principal amount of
      $106.2 million was designated by the Company as a eurodollar  loan,  bearing
      interest  based  upon the six month  LIBOR  rate of 6.75%.  The  outstanding
      revolving  loan principal  amount of $50 million was also  designated by the
      Company as a eurodollar  loan. Of the outstanding  revolving loan principal,
      $36.0 million bears interest based on the six month LIBOR rate of 6.88%, and
      $14.0 million bears interest based upon the three month LIBOR rate of 6.69%.
      The loan agreement under the bank credit facility  contains  covenants,  the
      most restrictive of which limits payments by the Company for dividends to 3%
      of net worth as defined in the agreement.
  
  (B) On July 30, 1992, Life Partners  completed a public offering of $100 million
      of unsecured senior  subordinated notes. The notes bear interest at the rate
      of 12 3/4%  (payable  semi-annually  on  January  15 and July  15),  and the
      principal  of the notes is payable in a single  installment  at  maturity on
      July 15, 2002. The notes are redeemable at Life Partners' option at any time
      after July 15, 1997, and there are no sinking fund  requirements.  The notes
      may be  redeemed  by Life  Partners at  redemption  prices of  103.643%  and
      101.831%  of the  outstanding  principal  balances in the  12-month  periods
      commencing July 15, 1997 and 1998, respectively,  or at 100% thereafter. One
      of Life Partners' subsidiaries purchased $4.9 million of the notes in 1993.
  
      The  following  summary sets forth the  principal  balance of  maturities of
  notes payable during each of the next five years (in thousands):
  <TABLE>
  <CAPTION>
  
  <S>                                                        <C>
  
  1996.....................................................  $  15,000
  1997.....................................................     38,182
  1998.....................................................     48,182
  1999.....................................................     54,814
  2000 and thereafter......................................     95,100
                                                             ---------
                                                             $ 251,278
                                                             =========
  </TABLE>
  
      The  components  of interest  expense  associated  with notes payable are as
  follows (in thousands):
  <TABLE>
  <CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  
  <S>                                                                    <C>        <C>        <C>    
  Notes payable........................................................  $  23,225  $  20,728  $  23,584
  Indebtedness to related party........................................                            2,396
                                                                         ---------  ---------  ---------
      Total............................................................  $  23,225  $  20,728  $  25,980
                                                                         =========  =========  =========
  </TABLE>
  
                                         34
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  3.   NOTES PAYABLE (CONTINUED)
  
      Interest  expense for the year ended  December 31, 1995,  as reported in the
  consolidated statement of operations,  also includes interest paid or accrued to
  the Internal  Revenue Service relating to assessments on prior tax years of $4.2
  million  (See Note 12), and interest  expense of $0.5  million  associated  with
  purchase accounting of Lamar (See Note 2).
  
      To  the  extent  that  loans  were  payable  to  GE  Capital,   which  owned
  approximately 40% of the outstanding common stock of Life Partners at January 1,
  1993, under the Senior Loan Agreement,  they were classified as "Indebtedness to
  related  party." To the  extent  that loans are  payable to  unaffiliated  third
  parties, they are classified as "Notes payable" (see Note 9).
  
      The interest and principal  payment terms of surplus  debentures  payable by
  Wabash to Life Partners are structured, subject to certain surplus restrictions,
  to provide  sufficient  cash to meet all payment terms on these loan  agreements
  (see Note 7).
  
  4.  INVESTMENTS
      Investment income by type of investment was as follows (in thousands):
  
  <TABLE>
  <CAPTION>
  
                                                                          YEAR ENDED DECEMBER 31,
                                                                   -------------------------------------
                                                                      1995         1994         1993
                                                                   -----------  -----------  -----------
  
  <S>                                                              <C>          <C>          <C>
  Gross investment income:
    Fixed maturities.............................................  $   251,403  $   211,318  $   199,164
    Policy loans.................................................       14,732       12,212       12,691
    Short-term investments.......................................        6,583        4,277        4,848
    Other invested assets........................................        5,360        4,179        4,877
    Mortgage loans...............................................        9,445        3,041        4,043
    Equity securities............................................        1,866        1,336        1,113
    Collateral loans.............................................          214          106          118
    Investment real estate.......................................        1,506          337          246
                                                                   -----------  -----------  -----------
      Gross investment income....................................      291,109      236,806      227,100
                                                                   -----------  -----------  -----------
  Less: Investment expenses......................................        6,060        6,293        5,969
        Interest expense on investment borrowings................        7,981        5,135
                                                                   -----------  -----------  -----------
  Net investment income..........................................  $   277,068  $   225,378  $   221,131
                                                                   ===========  ===========  ===========
  </TABLE>
  
      Following is an analysis of net realized gains  (losses) on investments  (in
  thousands):
  <TABLE>
  <CAPTION>
  
                                                                          YEAR ENDED DECEMBER 31,
                                                                     ---------------------------------
                                                                       1995        1994        1993
                                                                     ---------  ----------  ----------
  <S>                                                                <C>          <C>         <C>
  Fixed maturities.................................................  $   1,253    $(10,122)   $(13,063)
  Equity securities................................................     14,577      (1,126)     33,845
  Other............................................................        (45)     (8,404)     (2,378)
                                                                     ---------  ----------  ----------
                                                                     $  15,785    $(19,652)    $18,404
                                                                     =========  ==========  ==========
  </TABLE>
  
      Realized investment gains (losses) resulted in (decelerated) accelerated net
  amortization expense for deferred policy acquisition and deferred policy fees of
  $(8,039,000),  $12,000 and $4,773,000  during the years ended December 31, 1995,
  1994 and 1993, respectively.
  
      Realized  investment losses for other than temporary  declines in the market
  values of debt securities totaled $9.2 million,  $7.1 million, and $54.5 million
  in 1995, 1994, and 1993, respectively.
  
                                         35
  
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      During 1995,  the Company sold $35.1 million of fixed  maturity  investments
  which were previously classified as held-to-maturity.  Such sales were primarily
  the result of  significant  deterioration  of  creditworthiness  of the issuers.
  Based  upon  available   information,   the  Company   concluded  that,  in  all
  probability,  substantial  amounts due would not be  collected or there would be
  delay in collection,  causing the Company to sell these securities.  As a result
  of such sales, the Company realized net losses of $1.6 million in 1995.
  
      The cost and estimated  fair values of equity  securities are as follows (in
  thousands):
  <TABLE>
  <CAPTION>
  
                                                                        GROSS        GROSS     ESTIMATED
                                                                     UNREALIZED   UNREALIZED     FAIR
                                                            COST        GAINS       LOSSES       VALUE
                                                          ---------  -----------  -----------  ---------
  
  <S>                                                     <C>         <C>          <C>         <C>
  December 31, 1995:
  Preferred stock.......................................  $  18,984   $   1,123    $     502   $  19,605
  Common stock..........................................      1,945       2,271          100       4,116
                                                          ---------  ----------   ----------   ---------
      Totals............................................  $  20,929   $   3,394    $     602   $  23,721
                                                          =========  ==========   ==========   =========
  December 31, 1994:
  Preferred stock.......................................  $   8,760   $     231    $   1,134   $   7,857
  Common stock..........................................      5,745      14,057          149      19,653
                                                          ---------  ----------   ----------   ---------
      Totals............................................  $  14,505   $  14,288    $   1,283   $  27,510
                                                          =========  ==========   ==========   =========
  </TABLE>
  
      The amortized cost and estimated fair values of debt  securities  classified
  as fixed maturity investments held-to-maturity are as follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                   GROSS        GROSS                  
                                                                    AMORTIZED   UNREALIZED   UNREALIZED    ESTIMATED
                                                                      COST         GAINS       LOSSES     FAIR VALUE
                                                                   -----------  -----------  -----------  -----------
  <S>                                                              <C>           <C>          <C>          <C>
  December 31, 1995:
  United States treasury securities and obligations of United
   States government corporations and agencies...................  $     2,024   $      44                $     2,068
  Obligations of states and political subdivisions...............        2,420         307                      2,727
  Debt securities issued by foreign government...................       16,272       1,014                     17,286
  Corporate securities...........................................      533,110      36,273    $   4,280       565,103
  Mortgage-backed securities.....................................       74,470       4,959          107        79,322
  Other debt securities..........................................       50,530       4,641          301        54,870
                                                                   -----------   ----------   ---------   -----------
      Totals.....................................................  $   678,826   $  47,238    $   4,688   $   721,376
                                                                   ===========   =========    =========   ===========
  </TABLE>
  
                                         36
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  <TABLE>
  <CAPTION>
  
                                                                                GROSS        GROSS
                                                                AMORTIZED    UNREALIZED   UNREALIZED     ESTIMATED
                                                                  COST          GAINS       LOSSES      FAIR VALUE
                                                              -------------  -----------  -----------  -------------
  <S>                                                         <C>             <C>         <C>           <C>
  December 31, 1994:
  United States treasury securities and obligations of
   United States government corporations and agencies.......  $      32,725   $      44   $     1,964  $      30,805
  Obligations of states and political subdivisions..........            757          88                          845
  Debt securities issued by foreign governments.............         19,077                     2,851         16,226
  Corporate securities......................................      1,047,684       7,991        71,981        983,694
  Mortgage-backed securities................................        226,205          55        12,814        213,446
  Other debt securities.....................................        243,586         456        20,807        223,235
                                                              -------------  ----------   ----------   -------------
      Totals................................................  $   1,570,034   $   8,634   $   110,417   $  1,468,251
                                                              =============  ==========   ===========  =============
  </TABLE>
  
      The amortized cost and estimated fair values of debt  securities  classified
  as investments available-for-sale are as follows (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                               GROSS        GROSS
                                                                AMORTIZED    UNREALIZED   UNREALIZED    ESTIMATED
                                                                  COST          GAINS       LOSSES      FAIR VALUE
                                                              -------------  -----------  -----------  -------------
  <S>                                                         <C>            <C>            <C>         <C>
  December 31, 1995:
  United States treasury securities and obligations of
   United States government corporations and agencies.......  $      93,368  $     4,620   $     110   $      97,878
  Obligations of states and political subdivisions..........          8,443          273                       8,716
  Debt securities issued by foreign governments.............         18,440          673          66          19,047
  Corporate securities......................................      1,044,051       52,822      11,965       1,084,908
  Mortgage-backed securities................................      1,147,848       52,606       1,345       1,199,109
  Other debt securities.....................................        249,325       14,584       1,202         262,707
                                                              -------------  -----------   ---------   -------------
      Totals................................................  $   2,561,475  $   125,578   $  14,688   $   2,672,365
                                                              =============  ===========   =========   =============
  </TABLE>
  
  
  <TABLE>
  <CAPTION>
  
                                                                                 GROSS        GROSS
                                                                 AMORTIZED    UNREALIZED   UNREALIZED     ESTIMATED
                                                                   COST          GAINS       LOSSES      FAIR VALUE
                                                               -------------  -----------  -----------  -------------
  <S>                                                          <C>             <C>          <C>         <C>
  December 31, 1994:
  United States treasury securities and obligations of United
   States government corporations and agencies...............  $      94,245   $     238    $   5,629   $      88,854
  Obligations of states and political subdivisions...........          1,427                       79           1,348
  Debt securities issued by foreign government...............          4,859                      615           4,244
  Corporate securities.......................................        389,856       3,794       20,066         373,584
  Mortgage-backed securities.................................        575,181       3,272       30,974         547,479
  Other debt securities......................................         47,218         365        4,382          43,201
                                                               -------------   ---------    ---------   -------------
      Totals.................................................  $   1,112,786   $   7,669    $  61,745   $   1,058,710
                                                               =============   =========    =========   =============
  </TABLE>
  
                                         37
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      The amortized cost and estimated  fair value of debt  securities at December
  31, 1995, by contractual  maturity,  are shown below.  Expected  maturities will
  differ from contractual  maturities because borrowers may have the right to call
  or prepay obligations with or without call or prepayment penalties.
  
      Held-to-Maturity:
  <TABLE>
  <CAPTION>
  
  
  
                                                                              AMORTIZED    ESTIMATED
                                                                                COST      FAIR VALUE
                                                                             -----------  -----------
                                                                                  (IN THOUSANDS)
  
  <S>                                                                        <C>          <C>
  Due in one year or less..................................................  $       990  $       983
  Due after one year through five years....................................       75,968       77,322
  Due after five years through ten years...................................      214,310      225,881
  Due after ten years......................................................      313,088      337,868
                                                                             -----------  -----------
                                                                                 604,356      642,054
  Mortgage-backed securities...............................................       74,470       79,322
                                                                             -----------  -----------
                                                                             $   678,826  $   721,376
                                                                             ===========  ===========
  </TABLE>
  
      Available-for-Sale:
  <TABLE>
  <CAPTION>
                                                                           AMORTIZED      ESTIMATED
                                                                             COST        FAIR VALUE
                                                                         -------------  -------------
                                                                                (IN THOUSANDS)
  <S>                                                                    <C>            <C>
  Due in one year or less..............................................  $      26,400  $      26,599
  Due after one year through five years................................        240,530        249,527
  Due after five years through ten years...............................        547,760        573,534
  Due after ten years..................................................        598,937        623,596
                                                                         -------------  -------------
                                                                             1,413,627      1,473,256
  Mortgage-back securities.............................................      1,147,848      1,199,109
                                                                         -------------  -------------
                                                                         $   2,561,475  $   2,672,365
                                                                         =============  =============
  </TABLE>
  
      In November 1995, the Financial  Accounting  Standards Board issued "A GUIDE
  TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
  AND  EQUITY   SECURITIES"  which  permitted  a  one-time   reassessment  of  the
  appropriateness  of  the  classifications  of  all  securities.  Based  on  such
  reassessment,    the   Company   transferred   certain   securities   from   the
  held-to-maturity portfolio to the available-for-sale portfolio in November 1995.
  The  transferred  securities  had an amortized  cost of  approximately  $1,201.4
  million and net unrealized  gains of approximately  $52.1 million.  The transfer
  resulted in an increase of approximately $26.4 million to shareholders'  equity.
  Such  reassessment  does not  change  management's  intent  to hold  other  debt
  securities to maturity.
  
      Gross gains of $25.3 million and gross losses of $14.8 million were realized
  in 1995 from the sale of  investments in debt  securities;  gross gains of $19.0
  million and gross losses of $22.0 million were realized in 1994; and gross gains
  of $47.6 million and gross losses of $6.2 million were realized in 1993.
  
      At December 31, 1995,  the Company held cash and  short-term  investments of
  Dreyfus  Treasury Cash  Management Fund with a carrying amount of $58.7 million,
  which was greater than 10% of stockholders' equity at December 31, 1995.
  
                                         38
  <PAGE>
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      At December 31, 1994, the carrying amount, fair value and effective yield of
  high-risk  collateralized mortgage obligations included in fixed maturities were
  $11.6 million, $10.7 million and 14.8%, respectively.  At December 31, 1995, the
  Company  did not hold any  collateralized  mortgage  obligations  which would be
  considered high-risk.
  
      The carrying  value of investments  that have produced no investment  income
  for the three years ended  December 31,  1995,  1994 or 1993 was not material to
  the Company's consolidated financial position.
  
      The  Company  has  only  limited   involvement  with  derivative   financial
  instruments and does not use them for trading purposes.  They are used to manage
  well-defined  interest rate risks.  The Company  entered into interest rate swap
  agreements  during  1991 and 1993 for the  purpose  of  minimizing  exposure  to
  fluctuations  in interest  rates of specific  assets  held by the  Company.  The
  notional amount of such matched swaps outstanding at December 31, 1994 and 1993,
  was $20 million, and $120 million, respectively. During 1994, certain swaps were
  terminated resulting in an aggregate loss of approximately $6.8 million.  During
  the first quarter of 1995,  the Company  terminated  its  remaining  swaps which
  resulted in an aggregate loss of approximately $116,000.
  
      Following is an analysis of the components of net unrealized gains (losses),
  net of tax on investments (in thousands):
  <TABLE>
  <CAPTION>
  
                                                                                   DECEMBER 31,
                                                                              -----------------------
                                                                                 1995         1994
                                                                              -----------  ----------
  
  <S>                                                                         <C>          <C>
  Investments carried at estimated fair value:
    Available-for-sale fixed maturities.....................................  $   110,890  $  (54,076)
    Equity securities.......................................................        2,792      13,005
                                                                              -----------  ----------
                                                                                  113,682     (41,071)
  Less effect on other balance sheet accounts:
    Deferred policy acquisition costs.......................................      (11,510)      6,131
    Cost of insurance acquired..............................................      (14,427)
    Deferred policy fees....................................................        1,485        (244)
    Deferred income taxes...................................................      (31,140)     12,535
    Other...................................................................          179        (134)
                                                                              -----------  ----------
    Net unrealized gains (losses) on investments............................  $    58,269  $  (22,783)
                                                                              ===========  ==========
  </TABLE>
  
  5.  CONCENTRATIONS OF CREDIT RISK
  
      The Company held unrated or non-investment  grade corporate debt securities,
  excluding senior secured debt securities and mezzanine financing securities,  as
  follows (in millions):
  <TABLE>
  <CAPTION>
  
                                                                                      DECEMBER 31,
                                                                                  --------------------
                                                                                    1995       1994
                                                                                  ---------  ---------
  <S>                                                                             <C>        <C>
  Carrying value, net of loss reserves..........................................  $   146.2  $   101.9
  Market value..................................................................      150.0      100.8
  Percentage of fixed maturity investments......................................          4%         4%
  Percentage of total cash and invested assets..................................          4%         3%
  Number of issuers.............................................................         74         77
  </TABLE>
  
  
                                         39
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  5.  CONCENTRATIONS OF CREDIT RISK (CONTINUED)
  
      Additionally,  the Company held investments in  non-investment  grade senior
  secured  debt  securities  and  mezzanine  financing  securities  as follows (in
  millions):
  <TABLE>
  <CAPTION>
  
                                                                             DECEMBER 31,
                                                                         --------------------
                                                                           1995       1994
                                                                         ---------  ---------
  <S>                                                                    <C>        <C>
  Carrying value.......................................................  $    61.8  $    68.3
  Market value.........................................................       61.3       68.3
  Percentage of fixed maturity investments.............................          2%         3%
  Percentage of total cash and invested assets.........................          2%         2%
  Numbers of issuers...................................................         20         24
  </TABLE>
  
  6.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
  
      The following  methods and assumptions  were used to estimate the fair value
  of each  class of  financial  instrument  required  to be valued by SFAS 107 for
  which  it  is  practicable  to  estimate  that  value.  None  of  the  financial
  instruments are held for trading purposes.
  
      (a)  FIXED MATURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE
  
      For those securities  held-to-maturity  and  available-for-sale,  fair value
  equals  quoted  market  price,  if  available.  If a quoted  market price is not
  available,  fair value is  estimated  using  quoted  market  prices for  similar
  securities or discounted future cash flows.
  
      (b)  EQUITY SECURITIES
  
      For equity securities,  fair value equals quoted market price, if available.
  If a quoted market price is not available,  fair value is estimated using quoted
  market prices for similar securities.
  
      (c)  MORTGAGE LOANS ON REAL ESTATE
  
      Fair  value  is  estimated  by  grouping  mortgage  loans  into  homogeneous
  categories  and using  quoted  market  prices for  securities  backed by similar
  loans, adjusted for differences in loan characteristics.
  
      (d)  SHORT-TERM INVESTMENTS
  
      For short-term instruments,  the carrying amount is a reasonable estimate of
  fair value.
  
      (e)  INVESTMENT CONTRACT LIABILITIES
  
      For annuity contracts which do not possess significant insurance risks, cash
  surrender value is a reasonable estimate of fair value.
  
      (f)  NOTES PAYABLE
  
      For borrowings under the senior loan agreement and the bank credit facility,
  which are subject to floating rates of interest,  the  outstanding  balance is a
  reasonable  estimate of fair value.  Fair value of  borrowings  under the senior
  subordinated notes due in 2002 equals quoted market price at the reporting date.
  
      (g)  INTEREST RATE SWAP AGREEMENTS
  
      The fair value of  interest  rate  swaps is the  estimated  amount  that the
  Company would  receive or pay to terminate the swap  agreements at the reporting
  date,   taking   into   account   current   interest   rates  and  the   current
  creditworthiness of the swap counterparties.
  
                                         40
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  6.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
      (h)  NOTES AND ACCOUNTS RECEIVABLE AND UNCOLLECTED PREMIUMS
  
      Notes  and  accounts  receivable  and  uncollected  premiums  are  primarily
  insurance  contract  related  receivables  which are  determined  based upon the
  underlying  insurance  liabilities and related reinsurance amounts, and thus are
  excluded for the purpose of fair value disclosure by paragraph 8(c) of SFAS 107.
  
      The estimated fair values of the Company's financial instruments required to
  be valued by SFAS 107 are as follows as of December 31 (in thousands):
  <TABLE>
  <CAPTION>
  
  
  
                                                                     1995                          1994
                                                         ----------------------------  ----------------------------
                                                           CARRYING       ESTIMATED      CARRYING       ESTIMATED
                                                            AMOUNT       FAIR VALUE       AMOUNT        FAIR VALUE
                                                         -------------  -------------  -------------  -------------
  <S>                                                    <C>            <C>            <C>            <C>
  Financial assets:
    Fixed maturities:
      Held-to-maturity.................................  $     678,826  $     721,376  $   1,570,034  $   1,468,251
      Available-for-sale...............................      2,672,365      2,672,365      1,058,710      1,058,710
    Equity securities..................................         23,721         23,721         27,510         27,510
    Mortgage loans on real estate......................        110,214        100,003         34,177         34,184
    Policy loans (A)...................................        226,212                       192,909
    Short-term investments.............................         71,744         71,744          5,537          5,537
    Other invested assets (B)..........................         59,593                        56,039
  
  Financial liabilities:  
    Investment contract liabilities....................      1,246,807      1,152,950        888,514        810,187
    Notes payable:
      Senior subordinated notes due 2002...............         90,502        101,548         90,090        101,282
      Bank credit facility.............................        155,581        155,581        120,370        120,370
  Unrecognized financial instruments:
    Interest rate swaps in a net receivable position
     (C)...............................................                                           76           (219)
  
  </TABLE>
  
  (A) It is not  practicable  to estimate  the fair value of policy  loans as they
      have no stated maturity and their rates are set at a fixed spread to related
      policy  liability  rates.  Policy loans are carried at the aggregate  unpaid
      principal balances in the consolidated  balance sheets, and earn interest at
      rates  ranging from 4% to 9%.  Individual  policy  liabilities  in all cases
      equal or exceed outstanding policy loan balances.
  
  (B) Other invested assets consist primarily of limited  partnership  investments
      acquired prior to 1995 and carried at cost, for which the  determination  of
      fair value is not  practicable.  The carrying  value of limited  partnership
      investments  were $42.1  million and $45.8  million at December 31, 1995 and
      1994, respectively.
  
  (C) The amount shown under "carrying amount"  represents accrued interest on the
      unrecognized notional amounts of interest rate swaps.
  
  7.  STOCKHOLDERS' EQUITY AND RESTRICTIONS
  
      At  December  31,  1995  and  1994,   substantially   all  of   consolidated
  stockholders'  equity  represented  net assets of  insurance  subsidiaries  that
  cannot be  transferred  to Life  Partners in the form of  dividends,  loans,  or
  advances without prior regulatory approval. Funds are transferred from Wabash to
  Life  Partners in the form of  interest  and  principal  payments on the surplus
  debentures (see Note 3).
  
                                         41
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  7.  STOCKHOLDERS' EQUITY AND RESTRICTIONS (CONTINUED)
  
  Generally,  the net assets of the other  insurance  subsidiaries  available  for
  transfer  to Wabash are  limited  to the  greater  of the  respective  insurance
  subsidiary's  net gain from  operations  during the preceding year or 10% of the
  respective  subsidiary's  net surplus as of the end of the  preceding  year,  as
  determined in accordance  with accounting  practices  prescribed or permitted by
  insurance regulatory authorities. Payment of dividends in excess of such amounts
  would generally  require  approval by the regulatory  authorities.  During 1996,
  $37.7 million is available for payment of dividends by insurance subsidiaries to
  Wabash without prior approval.
  
  8.  PREFERRED STOCK
  
      At December  31, 1995 and 1994,  Life  Partners  has  10,000,000  authorized
  shares of Series Life Partners  Series  Preferred  Stock with $.01 par value and
  $1,000 per share stated  value,  250,000  shares of which are  designated as 15%
  Series A Exchangeable Preferred Stock.
  
      On March 31, 1993,  as a result of the receipt of proceeds from the issuance
  of common stock through an initial public  offering,  all outstanding  shares of
  Series A Exchangeable  Preferred  Stock and accrued PIK Dividends were redeemed.
  There were no outstanding shares at December 31, 1995 and 1994 (See Note 9).
  
  9.  COMMON STOCK
  
      On March 23, 1993, the Company amended its certificate of incorporation  to,
  among  other  things,  change its  authorized  Class A Common  Stock and Class B
  Common Stock into one class of stock of the Company  designated as Common Stock.
  Upon the  effectiveness  of such  amendment,  each of the 13,150,749  issued and
  outstanding  shares of Class A Common Stock and 1,234,675 issued and outstanding
  shares of Class B Common Stock were  automatically  converted  into one share of
  Common Stock. During 1995 and 1994 the Company paid approximately $3,018,192, or
  $0.11 per share,  and  $2,035,000,  or $0.08 per share, in cash dividends on the
  Common Stock, respectively.
  
      On March 31, 1993, the Company issued  11,000,000  shares of $.001 par value
  Common  Stock  through an initial  public  offering at a price of $17 per share.
  Also included in the offering were 5,806,440  shares of Common Stock  previously
  owned by GE Capital.  The Company did not receive any proceeds  from the sale of
  the GE Capital  shares.  The net proceeds to the Company from the offering  were
  used to redeem all outstanding  shares of Series A Exchangeable  Preferred Stock
  and accrued PIK Dividends for $122.0  million and to prepay $51.7 million on the
  notes payable.
  
      At December 31, 1993,  there were 37,719 shares of Common Stock reserved for
  issuance to three  directors  pursuant to warrants  issued during 1991 and 1992.
  During 1994, two of the directors  exercised their warrants and were each issued
  12,573  shares of Common  stock at an  exercise  price of $3.98 per  share.  The
  remaining  warrant  has an  exercise  price of $3.98  per  share,  is  currently
  exercisable  by the holder,  and, if  unexercised,  will expire on November  12,
  1996. The option price was determined by the Compensation Committee of the Board
  of Directors in February  1991 and  represented  a 25% premium over the previous
  sale of stock in March 1990.  In August 1993,  the Board of  Directors  formally
  granted  options to a director to purchase  10,000  shares of Common Stock at an
  exercise  price of $21.00 per share.  The options vest in equal amounts in 1994,
  1995, and 1996, and expire in 2003.
  
      At December 31, 1995,  and 1994,  there were 352,941  shares of Common Stock
  reserved for  issuance  pursuant to an option which was granted to an officer in
  1991 at an exercise price of $5.31 per share.  The option vested in October 1992
  and  expires on November 1, 2001.  Upon  issuance  the shares will be subject to
  transfer and voting restrictions imposed under an agreement among Life Partners
  
                                         42
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
  and its  stockholders.  At issuance,  the option price was greater than the fair
  value of the stock,  based on the value  negotiations with the option holder and
  the  restrictions  placed on the sale of the  stock by virtue of a pledge  and a
  stockholders agreement.
  
      On November 30, 1994 the Company granted options to purchase  250,000 shares
  of Common  Stock to the  Company's  chief  executive  officer.  The  options are
  exercisable  at $20.25 per share,  vest  equally  over a five year  period,  and
  expire in 2003.
  
      In addition,  Life Partners has reserved  800,000 shares of Common Stock for
  future  issuance  pursuant  to a stock  option  plan which is for the benefit of
  officers  and  key  employees.  Stock  options  were  formally  granted  by  the
  Compensation  Committee of the Life  Partners  Board of Directors at a price not
  less than market value on the date of grant.  They are exercisable for up to ten
  years from the date of grant and vest equally over a three or five year period.
  
      Options outstanding under this stock option plan are as follows:
  <TABLE>
  <CAPTION>
  
                                                                                                NUMBER OF SHARES
                                                                                       ----------------------------------
                                                               OPTION PRICE               1995        1994        1993
                                                      -------------------------------  -----------  ---------  ----------
  <S>                                                    <C>            <C>    <C>         <C>        <C>         <C>
  Outstanding at January 1..........................     $ 3.28         to     $20.25      612,101    606,134     606,400
  Granted during the year...........................     $19.13         to     $20.25                              84,400
                                                         $16.75                                       100,800
                                                         $12.62         to     $18.50      685,600
  Exercised during the year.........................     $ 3.28         to     $20.25     (370,872)   (93,766)    (25,998)
  Forfeited during the year.........................                                       (53,734)    (1,067)    (58,668)
  Transferred into plan.............................                                       250,000
                                                      ---------             ---------  -----------  ---------  ----------
  Outstanding at December 31........................     $ 3.28         to     $20.25    1,123,095    612,101     606,134
                                                                                       ===========  =========  ==========
  Portion thereof that is exercisable at
    December 31.....................................     $ 3.28         to     $20.25      202,022    278,469     166,512
                                                                                       ===========  =========  ==========
  Available for future grant........................                                       186,269     68,135     167,868
                                                                                       ===========  =========  ==========
  </TABLE>
  
                                         43
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
      Capital stock activity for the years 1995, 1994, and 1993 was as follows:
  <TABLE>
  <CAPTION>
  
  
  
                                                                                      NUMBER OF SHARES
                                                           AUTHORIZED   --------------------------------------------
                                                           PER SERIES       1995           1994            1993
                                                           -----------  -------------  -------------  --------------
  <S>                                                         <C>       <C>            <C>            <C>
  Preferred stock (authorized 10,000,000 shares):
    15% Series A Exchangeable Preferred Stock............     250,000
    Balance, beginning of year...........................                                                    118,005
    Preferred stock dividends in kind....................                                                      3,978
    Redemption of preferred stock........................                                                   (121,983)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock Class A (authorized 50,000,000 shares):
    Balance, beginning of year...........................                                                 13,150,749
    Conversion of Class A Common Stock to
      Common Stock.......................................                                                (13,150,749)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock, Class B (authorized 2,000,000 shares):
    Balance, beginning of year...........................                                                  1,234,675
    Conversion of Class B Common Stock to
      Common Stock.......................................                                                 (1,234,675)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock (authorized 50,000,000 shares):
    Balance, beginning of year...........................                  25,530,334     25,411,422
    Common Stock issued in initial public
      offering...........................................                                                 11,000,000
    Common Stock issued in acquisition of
      subsidiaries.......................................                   2,010,645
    Exercise of stock options to
      purchase Common Stock..............................                     370,872         93,766          25,998
    Exercise of stock warrants to purchase
      common stock.......................................                                     25,146
    Conversion of Class A Common Stock to
      Common Stock.......................................                                                 13,150,749
    Conversion of Class B Common Stock to
      Common Stock.......................................                                                  1,234,675
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                  27,911,851     25,530,334      25,411,422
                                                                        =============  =============  ==============
  </TABLE>
  
      In October 1995, the Financial  Accounting  Standards Board issued Statement
  of  Financial   Accounting   Standards  No.  123,   ACCOUNTING  FOR  STOCK-BASED
  COMPENSATION  ("SFAS 123"). SFAS 123 establishes fair value based accounting and
  reporting  standards for all  transactions in which a company  acquires goods or
  services by issuing equity securities, including stock-based compensation plans.
  Under SFAS 123,  compensation  cost is  measured  at the grant date based on the
  value of the award and is recognized over the service period, which is usually
  the vesting period. The fair value of
  
                                         44
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
  stock  options is  determined  using an  option-pricing  model.  This  statement
  encourages, but does not require, companies to adopt the fair value based method
  of accounting to recognize  compensation expense for employee stock compensation
  plans.  However,  it does  require  a  company  to  comply  with the  disclosure
  requirements  set forth in the  statement.  The  Company  expects to continue to
  utilize the accounting in Accounting Principles Board Opinion No. 25, ACCOUNTING
  FOR STOCK ISSUED TO EMPLOYEES, and in 1996, and thereafter,  expects to make pro
  forma  disclosures of net income as if the fair value based method of accounting
  defined in SFAS 123 had been applied.
  
  10. REINSURANCE
  
      The life insurance subsidiaries have retention limits for acceptance of risk
  on life  insurance  policies at various  levels up to $1 million,  for  business
  issued prior to 1987.  Effective  January 1, 1987,  the retention  limit for new
  policy  issues  has  been  set at  various  levels  up to  $500,000.  There  are
  reinsurance agreements with various companies whereby insurance in excess of the
  respective  subsidiaries'  retention  limits is  reinsured.  To the extent  that
  reinsuring  companies  become  unable  to meet  their  obligations  under  these
  agreements,  the subsidiaries  remain  contingently  liable.  Insurance in force
  ceded at December  31,  1995 and 1994 under risk  sharing  arrangements  totaled
  approximately $16.4 billion and $11.0 billion,  respectively.  The liability for
  future policy  benefits is stated  exclusive of amounts  applicable to such risk
  sharing reinsurance ceded as of December 31, 1995, and 1994 of $86.5 million and
  $75.2 million,  respectively.  Policyholder  benefits  reflects the reduction of
  death and accident and health  claims by amounts  recovered  from  reinsurers of
  $114.3 million, $42.9 million and $41.4 million for the years ended December 31,
  1995, 1994, and 1993, respectively.
  
      Accident and health  premiums are net of assumed  premiums of $41.4  million
  and ceded  premiums of $71.4 million for the year ended  December 31, 1995.  The
  Company did not have material reinsurance for accident and health business prior
  to the Lamar acquisition in 1995.
  
      Massachusetts  General has ceded a block of  insurance  under a  coinsurance
  agreement  generally  known as "financial  reinsurance."  Net statutory  surplus
  provided by this treaty was $1.3  million and $2.9  million at December 31, 1995
  and 1994,  respectively.  Lamar Life has also ceded a block of insurance under a
  coinsurance  agreement  that is considered  financial  reinsurance.  Net surplus
  provided by this treaty was $8.2 million at December 31, 1995. These reinsurance
  agreements represent financing arrangements and, in accordance with generally
  accepted  accounting  principles,  are  not  reflected  as  reinsurance  in  the
  accompanying  financial  statements except for the risk fees paid to or received
  from the reinsurers.
  
      The Company held assets and  reserves of  approximately  $192.0  million and
  $161.6  million at December  31,  1995 and 1994,  respectively,  under  modified
  coinsurance  agreements  with  reinsurance  companies  owned by  certain  of the
  Company's agents.
  
      During July 1993 the Company  entered into a coinsurance  agreement  whereby
  the  Company  received  $140.1  million in cash and  assumed  $154.6  million in
  annuity fund liabilities,  which were subject to surrender penalties aggregating
  $17.2 million.
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES
  
      IPS leases  office  facilities  in Englewood,  Colorado.  In July,  1994 the
  Company  renegotiated  certain  provisions  of the master lease  agreement.  The
  minimum rental commitment under the revised  noncancelable lease is $1.1 million
  per year  through  June,  2014 and $2.6  million  per  year  through  the  lease
  expiration date in July,  2016. The Company has no other  significant  long-term
  leases. Rental expense for the years 1995, 1994, and 1993 was approximately $1.9
  million, $2.0 million, and $2.7 million, respectively.
  
                                         45
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES (CONTINUED)
  
      Wabash and Life Partners, as guarantor of the obligations of Wabash, entered
  into an  agreement  with Perot  Systems  Corporation  ("Perot")  to provide data
  processing  services  to the  Company  through  February,  2001.  Fees under the
  servicing  agreement  are based upon  usage,  with  minimum  annual fees of $3.6
  million.  The agreement is subject to an option available in 1996 whereby Wabash
  could pay a fee of  approximately  $4 million to terminate  the  agreement.  The
  Company is negotiating  with Perot  regarding this option as part of a review of
  its data processing arrangements.
  
      At December  31,  1994,  Philadelphia  Life and  Massachusetts  General were
  defendants  in a class  action  originally  instituted  by a  former  agent  and
  policyholder of Philadelphia Life. In the case, the plaintiff alleged that these
  companies  breached the terms of certain  universal  life policies by increasing
  the  cost of  insurance  rates  to pass on a  portion  of  their  increased  tax
  liability resulting from the passage of the Revenue  Reconciliation Act in 1990,
  which act contained  provisions  requiring the  recognition of taxable income by
  the insurer on a percentage of actual premium  received on existing,  as well as
  subsequently  written,  individual  life policies (the so called "DAC tax").  On
  July 31, 1995 the Federal District Court in California  approved a settlement of
  this  action  following  notice to members of the class.  The  recording  of the
  liability  associated with this settlement and other related litigation resulted
  in a pre-tax expense of $14.2 million for the year ended December 31, 1995.
  
      In  addition,  various  other  lawsuits  and claims are pending  against the
  Company.  The Company has established a liability of approximately $1 million in
  its financial statements, as of December 31, 1995, for litigation contingencies.
  While this provision was established based upon management's  judgment as to the
  probable exposure  associated with the disposition of these lawsuits,  there can
  be no assurance  that the Company's  ultimate  liability,  if any, in connection
  with such lawsuits will not exceed the provisions established therefor.
  
      In  connection  with the Company's  acquisition  of certain of its insurance
  subsidiaries,  the seller, I.C.H. Corporation ("I.C.H.") agreed to indemnify the
  Company  relative to various matters  pertaining to the Internal Revenue Service
  ("IRS")  examination  for periods  prior to the  acquisition  of said  insurance
  subsidiaries.  To the extent the IRS  examination  of  preacquisition  tax years
  results  in an  increase  in  the  Company's  tax  in  years  subsequent  to the
  examination,  I.C.H.  has  contractually  agreed to  reimburse  the  Company for
  certain disallowed  deductions  relating to Philadelphia Life. In addition,  the
  Company believes that I.C.H. is liable for damages in postacquisition tax years
  with respect to Massachusetts General and other insurance subsidiaries resulting
  from I.C.H.'s  failure to satisfy  certain  contractual  covenants in connection
  with  such  tax   examinations.   Philadelphia  Life  is  also  a  party  to  an
  indemnification  agreement between Tenneco Inc.  ("Tenneco"),  I.C.H. and others
  included  in  the  acquisition  agreement  pursuant  to  which  I.C.H.  acquired
  Philadelphia  Life and other insurance  companies from Tenneco pursuant to which
  Tenneco agreed to indemnify Phliadelphia Life for certain lost deductions.
  
      On  October  10,  1995,  I.C.H.   filed  under  Chapter  11  for  bankruptcy
  protection.  I.C.H.,  in  publicly  released  documents,  has stated that it has
  reached a tentative  agreement  with the IRS for tax years  through 1989 whereby
  I.C.H.'s insurance subsidiaries would be subject to approximately $68 million of
  federal  income tax  liability  and interest  for years in which  certain of the
  Company's  insurance  subsidiaries were members of the consolidated  federal tax
  group to which such tax liability  related.  All members of a consolidated group
  of companies  may be, under federal law,  jointly and  severally  liable for tax
  deficiencies  related to such group.  The Company has been  informed that I.C.H.
  has made  payment to the IRS for the tax  liability  and  interest.  I.C.H.  has
  orally  advised  the  Company  of an  intention  to file  suit  against  certain
  subsidiaries of the Company for contribution of their respective  shares of such
  tax deficiency. Based upon the indemnification provisions and other relevant
  documents,  the Company  does not  believe  that it will be  responsible  for an
  allocable share of said taxes.
  
                                         46
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES (CONTINUED)
  
      The Company has received a determination from an IRS examination of  certain
  agent compensation practices in certain of its life insurance subsidiaries.  The
  Company has  protested  and appealed  the  assessment.  It is possible  that the
  ultimate  resolution of this examination  could result in additional  employment
  taxes,  interest  and  penalties  for the period under  examination,  as well as
  future periods which are subject to  examination.  The Company  believes that it
  has made adequate provision for the potential outcome of the appeal.
  
  12. FEDERAL INCOME TAXES
  
      Life Partners and its direct non-life  subsidiary  companies acquired in the
  Lamar  acquisition file a consolidated  non-life federal income tax return.  The
  life insurance  subsidiaries file a consolidated life federal income tax return.
  Non-life  subsidiaries of the insurance  companies each file a separate  federal
  income tax return.
  
      The  components  of the  provision  (benefit)  for income taxes on operating
  earnings (loss) before income taxes and  extraordinary  items are as follows (in
  thousands):
  <TABLE>
  <CAPTION>
  
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  <S>                                                                    <C>        <C>        <C>
  Current tax provision................................................  $  19,268  $   2,097  $  39,971
  Deferred tax provision (benefit).....................................    (22,539)    19,168    (10,103)
                                                                         ---------  ---------  ---------
      Total income tax provision (benefit).............................  $  (3,271) $  21,265  $  29,868
                                                                         =========  =========  =========
  </TABLE>
  
      A  reconciliation  of  the  income  tax  provision  (benefit)  based  on the
  prevailing  corporate  tax  rate  of  35%  to  the  provision  reflected  in the
  consolidated financial statements is as follows (in thousands):
  <TABLE>
  <CAPTION>
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  <S>                                                                    <C>        <C>        <C>
  Computed expected income tax expense (benefit) at statutory regular
   tax rate............................................................  $  (5,829) $  20,465  $  28,651
  Amortization of goodwill.............................................        961        835        813
  Dividends received deduction.........................................       (379)       (93)       (91)
  Change in corporate tax rate.........................................                              479
  Other................................................................      1,976         58         16
                                                                         ---------  ---------  ---------
      Total income tax provision (benefit).............................  $  (3,271) $  21,265  $  29,868
                                                                         =========  =========  =========
  </TABLE>
  
      The  Company  recorded a general  provision  for tax  contingencies  of $2.0
  million at December 31, 1995.  The result of this  provision was to decrease the
  Company's 1995 effective tax rate by 12%.
  
                                         47
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  12. FEDERAL INCOME TAXES (CONTINUED)
  
      The temporary differences that give rise to a deferred tax asset (liability)
  at December 31, 1995 and 1994, relate to the following (in thousands):
  <TABLE>
  <CAPTION>
  
  
  
                                                                                    DECEMBER 31,
                                                                             --------------------------
                                                                                 1995          1994
                                                                             ------------  ------------
  <S>                                                                        <C>           <C>
  Investments..............................................................  $    (24,696) $     13,862
  Deferred policy acquisition costs and cost of insurance acquired.........      (216,668)     (181,267)
  Future policy benefits and policyholder account balances.................       173,940       117,797
  Policy acquisition expenses..............................................        37,280        26,087
  Net operating loss carryforwards.........................................         3,103         6,672
  Other....................................................................         3,259         2,960
                                                                             ------------  ------------
  Deferred tax liability...................................................       (23,782)      (13,889)
  Valuation allowance......................................................        (2,030)
                                                                             ------------  ------------
  Deferred tax liability -- net of valuation allowance.....................  $    (25,812) $    (13,889)
                                                                             ============  ============
  </TABLE>
  
      As of December  31,  1995,  Life  Partners  has $8.9  million in federal net
  operating loss carryforwards which have expiration dates from 2006 through 2009.
  
      A  valuation  allowance  of $2.0  million  has  been  established  as of the
  purchase date for certain operating loss carryforwards and temporary differences
  of non-life companies acquired in the Lamar acquisition. The valuation allowance
  against  deferred tax assets will be continually  evaluated and any  adjustments
  will be allocated to reduce goodwill or other  noncurrent  intangible  assets of
  the acquired companies.
  
      Included in interest expense in the consolidated statement of operations for
  the year ended December 31, 1995, is a provision for interest of $4.2 million on
  federal income tax deficiencies relating to prior year taxes. I.C.H. has reached
  a  settlement  agreement  with the IRS  whereby  certain  of the  Company's  tax
  deductions which relate to amortization of purchased intangibles have been
  disallowed.  The  provision  for interest  includes the interest cost related to
  these  lost  deductions.  As a result  of the IRS  settlement,  the tax basis of
  certain assets of Philadelphia  Life was increased.  The effect of this increase
  will result in a refund of federal  income taxes paid in years these assets were
  sold  with  a  corresponding   receipt  of  interest.  No  receivable  has  been
  established  for the  interest  attributable  to the  refund of taxes  since the
  amount and timing are uncertain at this time.
  
      The IRS has examined  federal  income tax returns of certain  Life  Partners
  companies  through  the 1991 tax year.  An  examination  was also  performed  on
  certain Lamar Financial Group subsidiary returns through the 1994 preacquisition
  tax years.  In addition,  the Company has been  informed that the IRS intends to
  begin an examination of certain Life Partners' insurance subsidiaries income tax
  returns for 1992,  1993, and 1994 tax years. The Company does not anticipate any
  significant  adjustments which would materially affect the financial position or
  results of operations of the Company.
  
      Under previous life  insurance  company tax laws, a portion of the Company's
  gain from  operations  which was not  subject to  current  income  taxation  was
  accumulated for tax purposes as Policyholders'  Surplus Accounts.  The aggregate
  accumulation in this account was approximately $7.6 million at December 31,
  1995.  Should the  accumulation in the  Policyholders'  Surplus  Accounts exceed
  certain stated  maximums,  or if certain other events occur, all or a portion of
  the  amount may be  subject  to  federal  income  taxes at rates then in effect.
  Deferred taxes have not been established for such amounts since the Company does
  not anticipate paying taxes on the Policyholders' Surplus Accounts.
  
                                         48
  
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  13.PERMITTED STATUTORY ACCOUNTING PRACTICES AND SUPPLEMENTAL STATUTORY FINANCIAL
     INFORMATION
  
      Life Partners'  insurance  subsidiaries  prepare their  statutory  financial
  statements in accordance  with accounting  practices  prescribed or permitted by
  their respective state insurance  departments.  Prescribed  statutory accounting
  practices  include a variety of  publications  of the  National  Association  of
  Insurance Commissioners (NAIC), as well as state laws, regulations,  and general
  administrative  rules.  Permitted statutory  accounting  practices encompass all
  accounting practices not so prescribed.
  
      Wabash received  written  approval from Kentucky  Department of Insurance to
  acquire  certain Life Partners  insurance  subsidiaries as of March 30, 1990 and
  further  received  permission for the acquisition of Lamar as of April 28, 1995.
  Investment  practices  prescribed  by the  Commonwealth  of Kentucky  limit such
  investments in subsidiaries to 50% of the excess of capital and surplus over the
  minimum required capital and surplus of $1 million, or such higher percentage of
  the excess as may be  approved.  At December 31, 1995,  Wabash's  investment  in
  affiliates  exceeded the 50% limitation by $108.1  million,  as permitted by the
  Kentucky Department of Insurance.
  
      Combined  statutory  surplus for Life Partner's  insurance  subsidiaries  at
  December 31, 1995 and 1994 was $153.6 million and $127.9 million,  respectively,
  and combined  statutory net income for the years ended  December 31, 1995,  1994
  and 1993 was $36.7  million,  $15.4  million  and $38.5  million,  respectively.
  Combined  statutory  operating  earnings,  excluding  income  tax  and  interest
  expense, was $78.1 million, $75.8 million, and $83.5 million for the years ended
  December 31, 1995, 1994 and 1993, respectively.
  
  14. RELATED PARTY TRANSACTIONS
  
      In connection with the purchase of the life insurance  subsidiaries on March
  30,  1990,  Wabash  entered  into a financial  advisory  agreement  with certain
  shareholders  pursuant to which certain  shareholders provide financial advisory
  services to Wabash and the other insurance  subsidiaries for an annual fee. This
  fee was $0.5 million for 1993 and 1994.  The  financial  advisory  agreement was
  terminated on December 31, 1994.  During 1994, the Company  entered into another
  agreement with these  shareholders  in which the Company agreed to pay a fee for
  services  rendered in connection  with the  acquisition  of Lamar Life Insurance
  Company.  The fee  agreed  upon is 1% of the  aggregate  consideration  paid and
  amounted  to  $1.3  million.  The  Company  anticipates  entering  into  similar
  agreements with the shareholders regarding future acquisitions.
  
      In August 1990,  the Company  committed to invest $10 million,  as a limited
  partner,  in acquisition  transactions in which an affiliate of a stockholder is
  the ultimate managing partner.  In 1993, the Company increased its commitment in
  these  transactions  by an additional  $10 million.  As of December 31, 1994 and
  1995, the Company had invested  approximately $17.4 million and $23.4 million as
  a limited partner in twelve acquisitions.  During 1995, the Company committed to
  invest an aggregate of $4.5  million in two limited  partnerships  in which this
  affiliate  is also the  ultimate  managing  partner.  Of this  commitment,  $1.4
  million is on a standby  basis and is subject to increase by $0.8  million  upon
  the  occurrence of certain  contingencies.  As of December 31, 1995, the Company
  had invested $1.2 million in these limited partnerships.  In 1993, a senior term
  loan and approximately $5 million of senior  subordinated  notes the Company had
  previously loaned to certain of the companies acquired were repaid. During 1993,
  the remaining senior subordinated notes were written off.
  
      In June 1990,  the Company  committed  to invest $10  million,  as a limited
  partner, in acquisition  transactions in which another stockholder serves as the
  ultimate general partner.  During 1992, the Company's  previous  investment as a
  limited  partner in three  acquisitions  totaling  $7.1 million was converted to
  common  stock of the acquired  companies.  All of the stock was sold during 1993
  and 1994.
  
                                         49
  
  
  <PAGE>
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  14. RELATED PARTY TRANSACTIONS (CONTINUED)
  
  During 1993, the Company's previous  investment as a limited partner in a fourth
  acquisition  of $2.9  million  was  converted  to common  stock of the  acquired
  company. All of the stock was sold during 1994 and 1995.
  
      During 1992 and 1993,  the Company  committed  to invest an aggregate of $10
  million, as a limited partner, in real estate transactions in which an affiliate
  of a stockholder is the ultimate managing  partner.  As of December 31, 1994 and
  1995, the Company had invested $9.1 million and $13.9 million,  respectively, in
  this limited partnership. As of December 31, 1993, the Company had invested $2.5
  million  in another  limited  partnership  controlled  by an  affiliate  of this
  stockholder.  During 1994,  the Company  committed to invest an additional  $5.0
  million in the limited  partnership.  As of December  31,  1995,  the  Company's
  investment in this limited partnership totaled $6.5 million.
  
      As of December 31, 1995 and 1994, the Company had invested $2 million,  as a
  limited  partner in an acquisition in which an affiliate of a stockholder is the
  managing partner. In addition, as of December 31, 1993, the Company had invested
  $7.1 million, in a Senior Loan of the company acquired. The loan was paid off in
  March 1994. During 1994, the Company committed to invest $1.0 million in another
  acquisition  sponsored by an affiliate of this  stockholder.  As of December 31,
  1995, no investment had been made in this acquisition.
  
      During 1993,  the Company  invested $4.0 million as a limited  partner in an
  investment  transaction  in which  another  stockholder  serves as the  ultimate
  general partner.
  
      In 1993, the Company paid GE Capital a quarterly  agency fee of $100,000 and
  a loan administration fee of $221,000 for its capacity as agent under the Senior
  Loan  Agreement.  Additionally,  GE Capital was paid $1.1 million in Senior Loan
  consent fees in connection with the March 1993 public offering.
  
                                         50
  
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  15. LINES OF BUSINESS
  
      The Company operates  principally in the individual life insurance,  annuity
  and accident and health lines of business.  Assets and related investment income
  are allocated to the lines of business on their  respective  liabilities  and to
  corporate based on the total capital structure.  Information as to the Company's
  lines of business is as follows (in thousands):
  <TABLE>
  <CAPTION>
  
  
  
                                                                                      YEAR ENDED DECEMBER 31,
                                                                               -------------------------------------
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  <S>                                                                          <C>          <C>          <C>
  Revenues:
    Individual life..........................................................  $   411,043  $   332,131  $   329,960
    Annuity products.........................................................       83,414       69,715       56,629
    Accident and health......................................................       25,377        6,497        6,827
    Corporate................................................................       40,497       39,552       43,912
    Net realized gains (losses)..............................................       15,785      (19,652)      18,404
                                                                               -----------  -----------  -----------
      Total revenues.........................................................  $   576,116  $   428,243  $   455,732
                                                                               ===========  ===========  ===========
    Individual life..........................................................  $   (63,070) $    64,825  $    40,486
    Annuity products.........................................................        3,855       (4,594)      10,348
    Accident and health......................................................        8,846        1,468        1,746
    Corporate................................................................       40,497       39,552       43,912
    Net realized gains (losses)..............................................       15,785      (19,652)      18,404
    Amortization related to individual life realized gains (losses)..........         (289)                     (476)
    Amortization related to annuity products realized gains (losses).........        8,327          (12)      (4,257)
    Amortization of goodwill.................................................       (2,745)      (2,388)      (2,323)
    Interest expense.........................................................      (27,861)     (20,728)     (25,980)
                                                                               -----------  -----------  -----------
      Earnings (loss) before income taxes and extraordinary item.............  $   (16,655) $    58,471  $    81,860
                                                                               ===========  ===========  ===========
  </TABLE>
  
      Earnings on the  individual  life and annuity  lines  include net charges of
  $58.5  million  and $8.1  million,  respectively,  relating  to the  revision of
  estimated  future gross  profits used to amortize  deferred  policy  acquisition
  costs and deferred policy fees (See Note 1).
  
  16. SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
  
      Cash payments for  interest expense  and income  taxes were  as follows  (in
  thousands):
  <TABLE>
  <CAPTION>
  
                                                                             YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  <S>                                                                    <C>        <C>        <C>
  Interest expense.....................................................  $  23,862  $  18,628  $  23,263
  Income taxes.........................................................     18,229     14,500     44,380
  </TABLE>
  
      Noncash financing activities include and the payment of dividends in kind on
  the preferred stock (see Note 8).
  
      Purchases of fixed maturities  available-for-sale  and  held-to-maturity  in
  1995, totaled $376.0 million and $13.3 million, respectively. Purchases of fixed
  maturities  available-for-sale  and  held-to-maturity  in  1994  totaled  $853.2
  million and $988.8 million, respectively.
  
                                         51
  
  
  <PAGE>
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  16. SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
  
      In connection  with the  acquisition of Lamar,  liabilities  were assumed as
  follows (in thousands):
  <TABLE>
  <CAPTION>
  
  <S>                                                      <C>
  Fair value of assets acquired..........................  $1,004,182
  Cash paid..............................................     (37,937)
  Common stock issued....................................     (39,459)
                                                           ----------
  Fair value of liabilities assumed......................  $  926,786
                                                           ==========
  </TABLE>
  
  17. EXTRAORDINARY LOSS
  
      In 1993, the Company realized  extraordinary losses in the aggregate of $7.3
  million resulting from the extinguishment of debt. The extraordinary  losses are
  reflected net of the estimated tax effect of $2.5 million.
  
      An  extraordinary  loss in the amount of $3.9  million  was  realized by the
  Company in 1994 due to the amendment and restatement of the borrowings under the
  bank credit facility, and is reflected net of $1.4 million in estimated taxes.
  
  18. QUARTERLY FINANCIAL DATA (UNAUDITED)
  
      Earnings (loss) per common share for each quarter are computed independently
  of  earnings  per share  for the year.  Due to the  transactions  affecting  the
  weighted  average  number of shares  outstanding  in each quarter and due to the
  uneven  distribution  of  earnings  during  the year,  the sum of the  quarterly
  earnings  (loss) per share may not equal the  earnings  (loss) per share for the
  year.
  <TABLE>
  <CAPTION>
                                                                                                    1995
                                                                              ------------------------------------------------
                                                                               1ST QTR.     2ND QTR.     3RD QTR.    4TH QTR.
                                                                              -----------  -----------  -----------  ---------
                                                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
  
  <S>                                                                          <C>          <C>          <C>         <C>    
  Total premium income and other considerations.............................   $    55.8    $    73.6    $    75.2   $   75.5
  Earnings (loss) before income taxes.......................................        10.9          6.7         23.2      (57.5)
  Net earnings (loss) applicable to common stock............................         6.9          4.4         14.8      (39.5)
  Net earnings (loss) per common share and common equivalent share..........   $    0.26    $    0.16    $    0.53   $  (1.42)
  </TABLE>
  
  
  <TABLE>
  <CAPTION>
                                                                                                    1994
                                                                              ------------------------------------------------
                                                                               1ST QTR.     2ND QTR.     3RD QTR.     4TH QTR.
                                                                              -----------  -----------  -----------  ---------
                                                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
  <S>                                                                          <C>          <C>          <C>         <C>   
  Total premium income and other considerations.............................   $    54.1    $    54.1    $    55.3   $    54.4
  Earnings (loss) before income taxes and extraordinary item................        20.5         17.9         20.4        (0.3)
  Net earnings (loss) applicable to common stock............................        13.2         11.4         10.4        (0.4)
  
  Earnings (loss) per common share and common equivalent share:
    Earnings (loss) before extraordinary item...............................   $    0.51    $    0.44    $    0.50   $   (0.01)
    Extraordinary loss......................................................                                 (0.10)
                                                                               ---------    ---------    ---------   ---------
      Net earnings (loss)...................................................   $    0.51    $    0.44    $    0.40   $   (0.01)
                                                                               =========    =========    =========   =========   
  </TABLE>
  
      Quarterly results of operations are based on numerous estimates, principally
  related to policy reserves, the amortization of cost of policies purchased,  the
  amortization of cost of policies  produced and income taxes.  Such estimates are
  revised  quarterly and are ultimately  adjusted to year-end  amounts.  When such
  revisions are determined, they are reported as part of operations of the current
  quarter. During the fourth quarter of 1995, the Company reassessed its estimates
  relating to deferred
  
                                         52
  
  <PAGE>
  
  
  
                             LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  18. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
  
  policy acquisition costs and deferred policy fees,  resulting in a $66.6 million
  net reduction in such  balances (See Note 1). Also during the fourth  quarter of
  1995,  the  Company  revised  its  liability  for  guarantee  fund  assessments,
  resulting in a $1.9 million increase in the liability (See Note 1).
  
  19. SUBSEQUENT EVENT
  
      On March 11, 1996, the Company and Conseco, Inc. ("Conseco") jointly entered
  into a definitive merger agreement providing for all shareholders of the Company
  to receive Conseco stock for each of their shares through a share exchange based
  upon a value of $21.00 per share for Life Partners stockholders. The total value
  of the transaction would be approximately  $840 million,  including $600 million
  to purchase the Company's  outstanding common stock and $240 million of existing
  debt to be assumed by Conseco.  Under the merger agreement,  Life Partners would
  become a wholly  owned  subsidiary  of  Conseco.  Consummation  of the merger is
  subject  to  customary  terms and  conditions,  including  approval  by both the
  stockholders  of  the  Company  and  Conseco  and  regulatory   authorities.   A
  termination fee of $20 million is payable under certain  circumstances by either
  party if its shareholders do not approve the transaction.
  
                                         53
  <PAGE>
  
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  ITEM 7(b).     Financial Statements and Exhibits, continued
  
                 (b) Pro forma consolidated  financial statements of Conseco, Inc.
                 and subsidiaries.
  
  
  
                                         54
  
  <PAGE>
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
                PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
           The  unaudited  pro  forma  consolidated  statement  of  operations  of
  Conseco,  Inc. ("Conseco") for the year ended December 31, 1995, and for the six
  months  ended June 30,  1996,  present the  consolidated  operating  results for
  Conseco  as if the  acquisition  of  Life  Partners  Group,  Inc.  ("LPG")  (the
  "Merger") had occurred on January 1, 1995.
  
           The pro forma consolidated statement of operations data for Conseco for
  the year  ended  December  31,  1995,  set  forth  in the  unaudited  pro  forma
  consolidated  statement of operations under the column "Pro forma Conseco before
  the Merger" reflect the prior  application of certain pro forma  adjustments for
  the  following  transactions,  all of which have  already  occurred,  as if such
  transactions  had occurred on January 1, 1995: (i) the acquisition of all of the
  outstanding common stock of CCP Insurance,  Inc. ("CCP") not previously owned by
  Conseco  and  related  transactions  (including  the  repayment  of the a $250.0
  million revolving credit agreement); (ii) the increase of Conseco's ownership in
  Bankers Life Holding Corporation (BLH) to 90.5 percent, as a result of purchases
  of common  shares of BLH by  Conseco  and BLH  during  1995 and the first  three
  months  of  1996;  (iii)  the  issuance  of 4.37  million  shares  of  Preferred
  Redeemable  Increased  Dividend Equity  Securities  Convertible  Preferred Stock
  ("PRIDES") of Conseco in January 1996;  (iv) the BLH tender offer and repurchase
  of its 13% Senior  Subordinated  Notes due 2002 (the "13%  Notes")  and  related
  financing  transactions  completed in March 1996; and (v) the debt restructuring
  of American Life Holdings,  Inc. ("AGP") in the fourth quarter of 1995. Such pro
  forma  adjustments  are set forth in Exhibit 99.1 included in Conseco's Form 8-K
  dated April 10, 1996.
  
           The pro forma consolidated statement of operations data for Conseco for
  the six  months  ended  June 30,  1996,  set  forth in the  unaudited  pro forma
  consolidated  statement of operations under the column "Pro Forma Conseco before
  the Merger" reflect the prior  application of certain pro forma  adjustments for
  the  following  transactions,  all of which have  already  occurred,  as if such
  transactions  had occurred on January 1, 1995:  (i) the issuance of 4.37 million
  shares  of  PRIDES  in  January  1996;  and (ii) the BLH  tender  offer  for and
  repurchase  of the 13% Notes and related  financing  transactions  completed  in
  March 1996. Such pro forma adjustments are set forth in Exhibit 99.1 included in
  Conseco's Form 10-Q for the quarterly period ended June 30, 1996.
  
           The unaudited pro forma consolidated balance sheet as of June 30, 1996,
  gives effect to the Merger as if it had occurred on June 30, 1996.
  
           The unaudited pro forma  consolidated  statement of operations  data of
  LPG for the year ended  December 31, 1995, set forth under the column "Pro forma
  LPG  before  the  Merger"  reflect  the  prior  application  of  the  pro  forma
  adjustments  for the acquisition of Lamar Life Insurance  Company  (completed on
  April 28, 1995) as if such acquisition had occurred on January 1, 1995. Such pro
  forma adjustments are set forth in Exhibit 99.1 included in LPG's Form 8-K dated
  April 10, 1996.
  
           The pro  forma  consolidated  financial  statements  are  based  on the
  historical  financial  statements  of  Conseco  and  LPG and  should  be read in
  conjunction with their respective  financial statements and notes. The pro forma
  data are not  necessarily  indicative  of the results of operations or financial
  condition of Conseco had these transactions occurred on January 1, 1995, nor the
  results of future  operations.  Conseco  anticipates cost savings and additional
  benefits  as a result of certain  of the  transactions  contemplated  in the pro
  forma financial statements.  Such benefits and any other changes that might have
  resulted  from  management of the combined  companies  have not been included as
  adjustments to the pro forma consolidated financial statements.  Certain amounts
  from the  prior  periods  have  been  reclassified  to  conform  to the  current
  presentation.
  
           The unaudited pro forma consolidated  financial statements reflect cost
  allocations  for the  Merger  based  on:  (i) the  values  of LPG's  assets  and
  liabilities  as of the assumed dates of Merger;  and (ii)  appraisals  and other
  studies, which are not yet complete.  Accordingly, the final allocations will be
  different from the amounts included in the  accompanying pro forma  consolidated
  financial statements.  Although the final allocations will differ, the pro forma
  consolidated  financial  statements reflect  management's best estimate based on
  currently  available  information  as if the Merger had  occurred on the assumed
  dates of Merger.
  
  
  
                                         55
  
  <PAGE>
  
  
  
                                    CONSECO, INC.
                   PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                        for the year ended December 31, 1995
                   (Amounts in millions, except per share amounts)
                                     (unaudited)
  <TABLE>
  <CAPTION>
  
  
                                                        Pro forma          Pro forma            Pro forma          Pro forma
                                                         Conseco              LPG              adjustments          Conseco
                                                       before the         before the           relating to      reflecting the
                                                         Merger             Merger             the Merger           Merger
                                                       ----------         ----------          ------------      ---------------      
  <S>                                                 <C>                   <C>             <C>                  <C>    
  Revenues:
     Insurance policy income                            $1,464.9              $287.9          $     -              $1,752.8
     Investment activity:
       Net investment income                             1,138.5               299.4              16.0  (1)         1,457.8
                                                                                                  (0.3) (2)
                                                                                                   4.8  (3)
                                                                                                  (0.6) (4)
       Net trading income                                    2.5                 -                  -                   2.5
       Net realized gains                                  185.7                15.8               2.4  (1)           203.9
     Fee revenue                                            33.9                 -                  -                  33.9
     Restructuring income                                   15.2                 -                  -                  15.2
     Other income                                            9.4                 3.2                -                  12.6
                                                        --------           ---------           ---------            -------
  
           Total revenues                                2,850.1               606.3              22.3              3,478.7
                                                        --------           ---------           ---------            -------
  
  Benefits and expenses:
     Insurance policy benefits and change
       in future policy benefits                         1,106.4               155.0                -               1,261.4
     Interest expense on annuities and financial products  585.2               173.3                -                 758.5
     Interest expense on notes payable                     110.7                28.1              (0.6)  (4)          132.9
                                                                                                  (1.1)  (5)
                                                                                                  (4.2)  (6)
     Interest expense on investment borrowings              22.2                 8.0               -                   30.2
     Amortization related to operations                    207.8               165.0              (75.5) (7)          308.8
                                                                                                   11.5  (8)
     Amortization related to realized gains                126.0                (8.0)              15.6  (9)          133.6
     Other operating costs and expenses                    272.4                99.8              (15.8) (6)          356.4
                                                       ---------          ----------          ----------           --------
  
         Total benefits and expenses                     2,430.7               621.2              (70.1)            2,981.8
                                                       ---------          ----------          ----------           --------
  
         Income (loss) before income taxes,
           minority interest and extraordinary charge      419.4              (14.9)               92.4               496.9
  Income tax expense (benefit)                             163.3               (2.6)               (2.5)  (6)         193.4
                                                                                                   35.2  (11)
                                                       ---------          ----------          ----------           --------
         Income (loss) before minority interest and
           extraordinary charge                            256.1              (12.3)               59.7               303.5
  
  Minority interest                                         72.5                -                   -                  72.5
                                                       ---------          ----------          ----------           --------
  
         Income (loss) before extraordinary charge     $   183.6           $ (12.3)             $ 59.7              $ 231.0
                                                       =========          ==========            =======            ========
  
  Earnings per common shares and common equivalent share:
     Primary:
       Weighted average shares outstanding                  50.5                                  16.3  (12)             66.8
                                                           =====                                  ====                  =====
       Income before extraordinary charge                  $3.27                                                        $3.18
                                                           =====                                                        =====
  
     Fully diluted:
       Weighted average shares outstanding                  59.7                                  16.3  (12)             76.0
                                                           =====                                  ====                  =====
       Income before extraordinary charge                  $3.07                                                        $3.04
                                                           =====                                                        =====
  <FN>
  
                       The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  
  </FN>
  </TABLE>
                                         56
  
  <PAGE>
  
  
  
                                    CONSECO, INC.
                   PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                       for the six months ended June 30, 1996
                   (Amounts in millions, except per share amounts)
                                     (unaudited)
  <TABLE>
  <CAPTION>
  
                                                         Pro forma                              Pro forma          Pro forma
                                                          Conseco                              adjustments          Conseco
                                                        before the            LPG              relating to      reflecting the
                                                          Merger          historical           the Merger           Merger
                                                       ----------         ----------          ------------      ---------------      
  <S>                                                 <C>                   <C>             <C>                  <C>    
  Revenues:
     Insurance policy income                            $  741.4              $155.8            $   -             $   897.2
     Investment activity:
       Net investment income                               561.9               148.3               7.4  (1)           719.0
                                                                                                  (0.2) (2)
                                                                                                   2.2  (3)
                                                                                                  (0.6) (4)
       Net trading losses                                   (7.3)                -                  -                  (7.3)
       Net realized gains                                   10.2                 2.3               1.9  (1)            14.4
     Fee revenue                                            20.1                 -                  -                  20.1
     Restructuring income                                   30.4                 -                  -                  30.4
     Other income                                            7.6                 2.6                -                  10.2
                                                         -------              ------            ------             --------
  
  
         Total revenues                                  1,364.3               309.0              10.7              1,684.0
                                                        --------              ------             -----            --------- 
  
  Benefits and expenses:
     Insurance policy benefits and change in
       future policy benefits                              556.5                69.5                -                 626.0
     Interest expense on annuities and financial products  289.7                88.6                -                 378.3
     Interest expense on notes payable                      51.4                11.8              (0.6)  (4)           62.2
                                                                                                  (0.4)  (5)
     Interest expense on investment borrowings               8.6                 2.1                -                  10.7
     Amortization related to operations                     99.5                65.6              (2.4)  (7)          168.3
                                                                                                   5.6   (8)
     Amortization related to realized gains                 12.3                 0.1               1.8   (9)           14.2
     Acquisition and merger expenses                         -                   7.9              (7.9)  (10)            -
     Other operating costs and expenses                    122.0                35.9                -                 157.9
                                                          ------              ------            -------            --------
  
         Total benefits and expenses                     1,140.0               281.5              (3.9)             1,417.6
                                                         -------              ------            -------            --------
  
         Income before income taxes, minority interest
           and extraordinary charge                        224.3                27.5              14.6                266.4
  Income tax expense                                        85.3                11.6               5.5  (11)          102.4
                                                         -------              ------             -------           --------
  
         Income before minority interest and
           extraordinary charge                            139.0                15.9               9.1                164.0
  
  Minority interest                                         23.5                  -                 -                  23.5
                                                         -------              ------             ------            --------
  
         Income before extraordinary charge             $  115.5              $ 15.9              $ 9.1             $ 140.5
                                                        ========              ======             ======            ========
  
  Earnings per common share and common equivalent share:
       Primary:
         Weighted average shares outstanding                52.0                                  16.3 (12)            68.3
                                                          ======                                  ====                 ====
         Income before extraordinary charge                $2.05                                                      $1.93
                                                           =====                                                      =====
  
       Fully diluted:
         Weighted average shares outstanding                61.5                                  16.3 (12)            77.8
                                                           ======                                 ====                =====
         Income before extraordinary charge                $1.88                                                      $1.81
                                                           =====                                                      =====
  <FN>
  
                       The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  </FN>
  </TABLE>
  
                                         57
  
  <PAGE>
  
  
  
  
                                    CONSECO, INC.
                        PRO FORMA CONSOLIDATED BALANCE SHEET
                                    June 30, 1996
                                (Dollars in millions)
                                     (unaudited)
  
  
  <TABLE>
  <CAPTION>
                                                                                                Pro forma         Pro forma
                                                                                                adjustments        Conseco
                                                           Conseco             LPG              relating to      reflecting the
                                                          historical        historical          the Merger         Merger
                                                          ----------         ----------        ------------      ---------------     
  <S>                                                   <C>                   <C>               <C>                  <C>    
  
  Assets
     Investments:
       Actively managed fixed maturity securities
         at fair value                                     $12,500.8          $2,731.2          $661.2  (13)      $15,872.3
                                                                                                  15.0  (14)
                                                                                                 (35.9) (15)
       Held-to-maturity fixed maturity securities                -               661.2          (661.2) (13)             -
       Equity securities at fair value                          82.3              23.8            (6.5) (16)           99.6
       Mortgage loans                                          311.0             103.2           (10.0) (14)          404.2
       Credit-tenant loans                                     309.7               -                -                 309.7
       Policy loans                                            301.2             227.5              -                 528.7
       Other invested assets                                   113.5              78.2              -                 191.7
       Short-term investments                                  146.7              79.1            (8.5) (17)          217.3
       Assets held in separate accounts                        271.6                -               -                 271.6
                                                           ---------            --------       ----------          --------
  
           Total investments                                14,036.8            3,904.2          (45.9)            17,895.1
  
     Accrued investment income                                 228.1               56.0             -                 284.1
     Cost of policies purchased                              1,209.5              300.9         (300.9) (18)        1,794.8
                                                                                                 585.3  (18)
     Cost of policies produced                                 561.2              265.4         (265.4) (19)          561.2
     Reinsurance receivables                                    95.0              279.6             -                 374.6
     Income taxes                                               74.9                9.7          127.4  (20)          212.0
     Goodwill                                                  908.3               99.5          (99.5) (21)        1,508.0
                                                                                                 599.7  (21)
     Property and equipment                                     89.0                 -              -                  89.0
     Securities segregated for future redemption
       of redeemable preferred stock of a
       Partnership II entity                                    40.7                 -              -                  40.7
     Other assets                                              182.8               59.4           (8.0) (22)          234.2
                                                           ---------            -------        -------            ---------
  
           Total assets                                    $17,426.3           $4,974.7         $592.7            $22,993.7
                                                          ==========           ========       =========          =========        
  
  
  
  
  
                          (continued on the following page)
  
  
  
  
  
  <FN>
  
  
                       The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  
  </FN>
  </TABLE>
  
  
                                                              58
  
  <PAGE>
  
  
  
                                    CONSECO, INC.
                   PRO FORMA CONSOLIDATED BALANCE SHEET, continued
                                    June 30, 1996
                                (Dollars in millions)
                                     (unaudited)
  
  <TABLE>
  <CAPTION>
                                                                                                Pro forma         Pro forma
                                                                                                adjustments        Conseco
                                                           Conseco             LPG              relating to      reflecting the
                                                          historical        historical          the Merger         Merger
                                                          ----------         ----------        ------------      ---------------   
  <S>                                                   <C>                   <C>               <C>               <C>    
  
  Liabilities:
     Insurance liabilities                                 $13,546.9          $4,243.7          $342.6  (23)      $18,133.2
     Income tax liabilities                                      -                 5.1            (5.1) (20)             -
     Investment borrowings                                     445.0              71.6              -                 516.6
     Other liabilities                                         344.1              63.8            50.0  (24)          457.9
     Liabilities related to separate accounts                  271.6                -               -                 271.6
     Notes payable of Conseco                                  670.0             238.9            10.6  (25)          888.7
                                                                                                 (30.8) (15)
     Notes payable of Bankers Life Holding
       Corporation, not direct obligations of Conseco          297.9                -               -                 297.9
     Notes payable of Partnership II entities, not direct
       obligations of Conseco                                  281.6                -             (4.5)  (15)         277.1
                                                           ---------           -------        ---------            --------
  
           Total liabilities                                15,857.1           4,623.1           362.8             20,843.0
                                                           ---------           -------        --------            ---------
  
  
  Minority interest                                            292.3                -             (6.5) (16)          285.8
                                                           ---------           --------       --------             --------
  
  
  Shareholders' equity:
     Preferred stock                                           536.5                -               -                 536.5
     Common stock and additional paid-in capital               183.4             286.6          (286.6) (26)          771.8
                                                                                                 588.4  (26)
     Unrealized appreciation (depreciation) of securities      (55.7)             (3.5)            (.4) (15)          (56.1)
                                                                                                   3.5  (26)
     Retained earnings                                         612.7              68.5           (68.5) (26)          612.7
                                                           ---------            -------        -------             --------
  
           Total shareholders' equity                        1,276.9             351.6           236.4              1,864.9
                                                           ---------          --------         -------             --------
  
           Total liabilities and shareholders' equity      $17,426.3          $4,974.7          $592.7            $22,993.7
                                                           =========          ========         =======            =========
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  
  <FN>
  
  
  
                       The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  
  </FN>
  </TABLE>
  
                                         59
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       PRO FORMA ADJUSTMENTS
  
       Allocation of Cost to Acquire LPG
  
       The  acquisition of LPG will be accounted for under the purchase  method of
  accounting.  Under this method,  the total cost to acquire LPG will be allocated
  to the assets and liabilities acquired based on their fair values as of the date
  of the Merger, with any excess of the total purchase cost over the fair value of
  the assets acquired less the fair value of the liabilities  assumed  recorded as
  goodwill.  In the  Merger,  each  outstanding  share  of LPG  common  stock  was
  converted  into .5833 shares of Conseco  common  stock.  A total of 16.3 million
  shares of Conseco  common  stock (or  equivalent  shares) with a value of $588.4
  million were issued to complete the Merger.
  
  The cost to acquire LPG is allocated as follows (dollars in millions):
  
  <TABLE>
  <CAPTION>
  
  <S>                                                                                      <C>  
  
  Net assets acquired based on assumed date of the
       Merger (June 30, 1996) ............................................................    $357.6
  
  Increase (decrease) in LPG's net asset value to reflect estimated fair value and
       asset reclassifications at the assumed date of the Merger:
          Actively managed fixed maturity securities......................................     676.2
          Held-to-maturity fixed maturity securities......................................    (661.2)
          Mortgage loans..................................................................     (10.0)
          Cost of policies purchased (historical).........................................    (300.9)
          Cost of policies purchased (related to the Merger)..............................     585.3
          Cost of policies produced.......................................................    (265.4)
          Goodwill (historical)...........................................................     (99.5)
          Goodwill (related to the Merger)................................................     587.2
          Insurance liabilities ..........................................................    (342.6)
          Notes payable...................................................................     (10.6)
          Other...........................................................................      88.8
                                                                                             --------
  
               Total estimated fair value adjustments.....................................     247.3
                                                                                             -------
  
  Net assets acquired.....................................................................     604.9
  
  Notes payable of LPG at acquisition.....................................................     249.5
                                                                                             -------
  
       Total cost to acquire LPG..........................................................    $854.4
                                                                                              ======
  </TABLE>
  
       Adjustments to the pro forma  consolidated  statement of operations to give
  effect to the Merger as of January 1, 1995, are summarized below:
  
       (1)   Net  investment  income and net realized gains of LPG are adjusted to
             include the effect of adjustments to restate the amortized cost basis
             of fixed maturity  securities  and mortgage loans to their  estimated
             fair value.
  
       (2)   Net  investment  income is reduced for the lost interest  income on 
             cash used to pay expenses incurred to complete the Merger.
  
       (3)   After the Merger,  a subsidiary  of Conseco  will provide  investment
             advisory  services to LPG.  Investment  advisory fees incurred by LPG
             prior to the Merger are  eliminated.  LPG's pro forma net  investment
             income is not reduced to reflect the  advisory  fees to be paid under
             agreements  with the subsidiary of Conseco since,  in accordance with
             generally accepted accounting principles,  such intercompany fees are
             eliminated  in  consolidation  and the  subsidiary  of  Conseco  will
             provide such services without incurring additional costs.
  
  
                                         60
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       (4)   Net  investment  income and  interest  expense on notes  payable  are
             adjusted to reflect the  following  items which will be eliminated in
             consolidation  after the Merger:  (i) actively managed fixed maturity
             securities  of Conseco  include $6.3  million of LPG notes;  and (ii)
             actively  managed  fixed  maturity  securities  of LPG include  $25.1
             million of Conseco notes and $4.5 million of notes of a subsidiary of
             Conseco.
  
       (5)   Interest  expense on notes  payable of LPG is adjusted as a result of
             restating  notes payable of LPG to their estimated fair value and the
             anticipated repayment of LPG's bank debt, using additional borrowings
             from Conseco's credit facility (the "Conseco Credit Agreement").
  
       (6)   At the assumed Merger date, certain contingent liabilities related to
             potential  losses for tax  examinations  and a class  action  lawsuit
             existed. Expenses incurred in 1995 with respect to such contingencies
             are  eliminated,  since such amounts are considered in the accounting
             for the Merger.
  
       (7)   Amortization of the cost of policies produced, the historical cost of
             policies  purchased  and deferred  revenues for policies  sold by LPG
             prior to January 1, 1995, are replaced with the  amortization  of the
             cost of  policies  purchased  (amortized  in  relation  to  estimated
             profits on the policies purchased with interest equal to the contract
             rates primarily ranging from 4.0 percent to 7.0 percent).
  
       (8)   LPG's historical  amortization of goodwill is eliminated and replaced
             with the  amortization  of goodwill  recognized  in the Merger.  Such
             amortization  is recognized  over a 40-year period on a straight-line
             basis.
  
       (9)   Anticipated  returns,  including realized gains and losses,  from the
             investment of policyholder balances are considered in determining the
             amortization of the cost of policies  purchased.  Amortization of the
             cost of  policies  purchased  is  adjusted  to  reflect  amortization
             related to the pro forma net realized gains of LPG during 1995.
  
       (10)  Acquisition  and merger  expenses are reduced to eliminate the merger
             costs  incurred by LPG during the six months ended June 30, 1996,  in
             connection with the Merger.
  
       (11)  Reflects  the  tax  adjustments  for  all  applicable  pro  forma
             adjustments at the appropriate rate for the specific item.
  
       (12)  Common shares outstanding are increased to reflect the shares issued
             in the Merger.
  
       Adjustments to the pro forma  consolidated  balance sheet to give effect to
  the Merger as of June 30, 1996, are summarized below:
  
       (13)  After the Merger, all held-to-maturity  fixed maturity securities are
             classified as actively managed fixed maturity  securities  consistent
             with the intention of the new management.
  
       (14)  LPG's  held-to-maturity  fixed maturity  securities and mortgage 
             loans are restated to estimated fair value.
  
       (15)  Actively  managed fixed maturity  securities of Conseco  include $6.3
             million of LPG notes which will be eliminated in consolidation  after
             the Merger. Actively managed fixed maturity securities of LPG include
             $25.1  million of Conseco  notes and $4.5 million of  Partnership  II
             notes,  both of which will be eliminated in  consolidation  after the
             Merger.  Unrealized  appreciation  (depreciation) is adjusted for the
             unrealized gains related to these investments.
  
       (16)  Equity securities of LPG include $6.5 million of preferred stock of 
             a subsidiary of Partnership II which will be eliminated after the 
             Merger.
  
       (17)  Cash is reduced for expenses incurred to complete the Merger.
  
       (18)  LPG's  historical  cost  of  policies  purchased  is  eliminated  and
             replaced  with  the  cost of  policies  purchased  recognized  in the
             Merger.  Cost of policies purchased reflects the estimated fair value
             of LPG's  business in force and represents the portion of the cost to
             acquire  LPG that is  allocated  to the value of the right to receive
             future cash flows from insurance contracts existing at June 30, 1996.
             Such  value  is  the  present  value  of the  actuarially  determined
             projected cash flows from the acquired policies.
  
  
                                         61
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
             The 18 percent discount rate used to determine such value is the rate
             of  return  required  by  Conseco  to invest  in the  business  being
             acquired.  In determining such rate of return,  the following factors
             are considered:
  
             -    The magnitude of the risks associated with each of the actuarial
                  assumptions used in determining the expected cash flows.
  
             -    Cost of capital available to fund the acquisition.
  
             -    The perceived likelihood of changes in insurance regulations and
                  tax laws.
  
             -    Complexity of the acquired company.
  
             -    Prices paid (i.e., discount rates used in determining valua-
                  tions) on similar blocks of business sold recently.
  
             The value  allocated to the cost of policies  purchased is based on a
             preliminary valuation;  accordingly,  this allocation may be adjusted
             upon final  determination of such value.  Expected gross amortization
             of such value using  current  assumptions  and  accretion of interest
             based on an interest  rate equal to the  liability  or contract  rate
             (such rates  primarily  ranging  from 4.0 percent to 7.0 percent) for
             each of the years in the five-year  period ending June 30, 2001,  are
             as follows (dollars in millions):
  <TABLE>
  <CAPTION>
  
                   Year ending                 Beginning          Gross           Accretion           Net             Ending
                    June 30,                    balance       amortization       of interest     amortization         balance
                   -----------                ----------      ------------       -----------    -------------       ----------
                     <S>                      <C>               <C>               <C>             <C>               <C>  
  
                      1997                      $585.3           $109.8             $32.4           $77.4             $507.9
                      1998                       507.9             98.0              28.7            69.3              438.6
                      1999                       438.6             83.0              24.7            58.3              380.3
                      2000                       380.3             71.9              21.5            50.4              329.9
                      2001                       329.9             61.9              18.4            43.5              286.4
  </TABLE>
  
       (19)  LPG's cost of policies produced is eliminated since such amounts are
             reflected in the determination of the cost of policies purchased.
  
       (20)  Reflects the tax adjustment for all applicable pro forma adjustments
             at the appropriate  rate for the specific item. In addition, deferred
             tax  liabilities  of LPG are netted against the deferred tax assets 
             of Conseco.
  
       (21)  LPG's  historical  goodwill is eliminated  and replaced with goodwill
             determined for the Merger.  Such goodwill  reflects the excess of the
             cost to acquire LPG over the net assets acquired.
  
       (22)  Other assets of Conseco are reduced to eliminate common stock of LPG
             acquired by Conseco prior to the Merger.
  
       (23)  Deferred  revenues on certain life insurance and annuity  policies of
             LPG  are  eliminated,   since  such  amounts  are  reflected  in  the
             determination of the cost of policies purchased. Additional insurance
             liabilities are recognized to reflect future losses expected to occur
             on certain  products.  Such additional  liabilities were reflected in
             the determination of the cost of policies purchased.
  
       (24)  A  liability  is  established  for  various  expenses   incurred  and
             liabilities  assumed  in  conjunction  with  Merger,  including:  (i)
             liabilities assumed related to unfavorable contracts and leases; (ii)
             direct acquisition  costs;  (iii) involuntary  termination costs; and
             (iv) relocation costs.
  
       (25)  Notes payable are adjusted to reflect their estimated fair value.
  
       (26)  The prior  shareholders'  equity of LPG is eliminated in  conjunction
             with the  Merger.  Other  assets are reduced to  eliminate  Conseco's
             investment in LPG common stock purchased prior to the Merger.  Common
             stock and  additional  paid-in  capital is  increased by the value of
             Conseco common stock issued in the Merger.
  
                                         62
  
  <PAGE>
  
  
  
                           CONSECO, INC. AND SUBSIDIARIES
  
  
  
  
  ITEM 7(c).     EXHIBITS.
  
                 (c) Exhibits
  
  
                     2.5    Agreement and Plan of Merger dated March 11, 1996*
  
  
  
  
  
                     * Previously filed with Form 8-K dated March 11, 1996.
  
                                                              63
  
  <PAGE>
  
  
  
  
  
                                      SIGNATURE
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the  Registrant  has duly  caused  this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
  
  
  Date: August 16, 1996
  
  
                                    CONSECO, INC.
  
  
  
                                           By:     /s/ ROLLIN M. DICK
                                                   -----------------------------
  
                                                    Rollin M. Dick
                                                    Executive Vice President
                                                      and Chief Financial Officer
  
  
  
  
  
  
                                         64
metadata_documents: [{"type": "8-K", "sequence": "1", "description": "FORM 8-K OF CONSECO, INC.", "secsgml_size_bytes": 254185}]
metadata_filer: {"company-data": {"conformed-name": "CONSECO INC ET AL", "cik": "0000719241", "assigned-sic": "6321", "irs-number": "351468632", "state-of-incorporation": "IN", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-09250", "film-number": "96617459"}, "business-address": {"street1": "11825 N PENNSYLVANIA ST", "city": "CARMEL", "state": "IN", "zip": "46032", "phone": "3175736100"}, "mail-address": {"street1": "11825 N PENNSYLVANIA ST", "city": "CARMEL", "state": "IN", "zip": "46032"}, "former-company": {"former-conformed-name": "SECURITY NATIONAL OF INDIANA CORP", "date-changed": "19840207"}}
text: SECURITIES AND EXCHANGE COMMISSION
                               Washington, D.C. 20549
  
                                      FORM 8-K
  
                Current Report Pursuant to Section 13 or 15(d) of the
                           Securities Exchange Act of 1934
  
                           Date of Report: August 2, 1996
  
                                    CONSECO, INC.
  
                               State of Incorporation:
                                       Indiana
  
        Commission File Number                           IRS Employer Id. Number
              No. 1-9250                                      No. 35-1468632
  
                       Address of Principal Executive Offices:
                           11825 North Pennsylvania Street
                                Carmel, Indiana 46032
  
                                    Telephone No.
                                   (317) 817-6100
  CONSECO, INC. AND SUBSIDIARIES
  
                                                         INDEX
  Page
  Item 2.   Acquisition or Disposition of Assets.........................................................   3
  
  Item 7.   Financial Statements and Exhibits
            (a)  Life Partners Group, Inc. and Subsidiaries Unaudited
                 Consolidated Financial Statements as of June 30, 1996,
                 and for the six months ended June 30, 1996 and 1995
                    Consolidated Balance Sheet...........................................................   5
                    Consolidated Statement of Operations.................................................   7
                    Consolidated Statement of Stockholders' Equity.......................................   8
                    Consolidated Statement of Cash Flows.................................................   9
                    Notes to Consolidated Financial Statements...........................................   10
  
                 Life Partners Group, Inc. and Subsidiaries Audited
                 Consolidated Financial Statements as of December 31,
                 1995 and 1994, and for each of the three years ended
                 December 31, 1995
                    Report of Independent Accountants....................................................   18
                    Consolidated Balance Sheet...........................................................   19
                    Consolidated Statement of Operations.................................................   20
                    Consolidated Statement of Stockholders' Equity.......................................   21
                    Consolidated Statement of Cash Flows.................................................   23
                    Notes to Consolidated Financial Statements...........................................   24
  
            (b)  Pro Forma Consolidated Financial Information of Conseco, Inc. and Subsidiaries..........   55
                    Pro forma Consolidated Statement of Operations for the year ended
                       December 31, 1995.................................................................   56
                    Pro forma Consolidated Statement of Operations for the six months
                       ended June 30, 1996...............................................................   57
                    Pro Forma Consolidated Balance Sheet as of June 30, 1996.............................   58
                    Notes to Pro Forma Consolidated Financial Statements.................................   60
  
            (c)  Exhibits
  
                    2.5    Agreement and Plan of Merger dated as of March 11, 1996
  2
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.
  
         On August 2, 1996, Conseco,  Inc.  ("Conseco")  completed its merger with
  Life Partners Group, Inc. ("LPG"), in a transaction pursuant to which LPG became
  a wholly owned subsidiary of Conseco (the "Merger").  The Merger was consummated
  pursuant to an Agreement and Plan of Merger dated March 11, 1996. In the Merger,
  each of the issued and outstanding shares of LPG common stock was converted into
   .5833 of a share of Conseco's  common stock.  A total of 16.3 million  shares of
  the Conseco common stock (or  equivalent  shares) with a value of $588.4 million
  were issued.
  
         The acquisition of LPG will be accounted for under the purchase method of
  accounting in the third quarter of 1996. Under this method,  the cost to acquire
  LPG will be  allocated  to the assets  and  liabilities  acquired  based on fair
  values as of the date of the Merger,  with the excess of the total purchase cost
  over the  fair  value  of the  assets  acquired  less  the  fair  values  of the
  liabilities assumed recorded as goodwill.
  
                                          3
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(a).     Financial Statements and Exhibits
  
                 (a)  Life  Partners  Group,   Inc.  and  Subsidiaries   Unaudited
                      Consolidated  Financial  Statements as of June 30, 1996, and
                      for the six months ended June 30, 1996 and 1995.
  
                                          4
  LIFE PARTNERS GROUP, INC.
  
                             CONSOLIDATED BALANCE SHEET
                               (Dollars in thousands)
  
                                       ASSETS
  
                                                                                                           June 30,      December 31,
                                                                                                             1996            1995
                                                                                                             ----            ----
                                                                                                          (unaudited)      (audited)
  Investments:
     Fixed maturities:
       Held-to-maturity, at amortized cost...........................................................     $  661,193     $  678,826
       Available-for-sale, at fair value.............................................................      2,731,180      2,672,365
     Equity securities, at fair value................................................................         23,818         23,721
     Mortgage loans on real estate, at amortized cost................................................        103,222        110,214
     Investment in real estate, at cost, net of accumulated depreciation.............................          4,564          4,921
     Policy loans....................................................................................        227,439        226,212
     Collateral loans................................................................................          4,686          4,373
     Cash and short-term investments.................................................................         79,121        197,684
     Other invested assets...........................................................................         68,945         59,593
                                                                                                          ----------     ----------
  
         Total investments...........................................................................      3,904,168      3,977,909
  
  Notes and accounts receivable and uncollected premiums.............................................         31,228         29,303
  Receivable from reinsurers.........................................................................        279,640        244,828
  Accrued investment income..........................................................................         55,980         54,785
  Deferred policy acquisition costs, net.............................................................        265,416        238,736
  Cost of insurance acquired.........................................................................        300,893        306,015
  Goodwill, net of accumulated amortization..........................................................         99,501        100,470
  Deferred income taxes..............................................................................          9,716            -
  Other assets.......................................................................................         28,147         28,819
                                                                                                          ----------     ----------
         Total assets................................................................................     $4,974,689     $4,980,865
                                                                                                          ==========     ==========
  
                              (continued on next page)
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  5
  LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED BALANCE SHEET, continued
                   (Dollars in thousands, except per share amount)
  
                        LIABILITIES AND STOCKHOLDERS' EQUITY
  
                                                                                                           June 30,      December 31,
                                                                                                             1996            1995
                                                                                                             ----            ----
                                                                                                          (unaudited)      (audited)
  Future policy benefits and claims..................................................................   $  737,116      $   708,226
  Dividends, endowments and other policyholder funds.................................................       89,531           86,162
  Policyholder account balances......................................................................    3,331,094        3,271,906
  Deferred policy fees...............................................................................       85,938           80,590
  Investment borrowings..............................................................................       71,547           73,585
  Notes payable:
     Due within one year.............................................................................       26,591           15,000
     Due after one year..............................................................................      212,332          231,083
  Federal income taxes payable:
     Current.........................................................................................        5,110           13,444
     Deferred........................................................................................           -            25,812
  Other liabilities..................................................................................       63,814           74,548
                                                                                                        ----------       ----------
  
         Total liabilities...........................................................................    4,623,073        4,580,356
                                                                                                        ----------       ----------
  
  Commitments and contingencies
  
  Stockholders' equity:
     Common stock, $.001 par value;  50,000,000 shares authorized;  28,189,593 and 27,911,851 shares
       issued and outstanding at June 30, 1996 and December 31, 1995, respectively...................           28               28
     Additional paid-in capital......................................................................      286,572          287,863
     Net unrealized investment gains (losses)........................................................       (3,517)          58,269
     Retained earnings...............................................................................       68,533           54,349
                                                                                                        ----------       ----------
  
         Total stockholders' equity..................................................................      351,616          400,509
                                                                                                        ----------       ----------
  
         Total liabilities and stockholders' equity..................................................   $4,974,689       $4,980,865
                                                                                                        ==========       ==========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  6
  LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED STATEMENT OF OPERATIONS
                    (Dollars in thousands, except per share data)
                                     (unaudited)
  
                                                                              Three months ended             Six months ended
                                                                                   June 30,                       June 30,
                                                                             -------------------            ------------------
                                                                             1996           1995            1996          1995
                                                                             ----           ----            ----          ----
  Revenues:
     Universal life and investment product charges...............        $   70,280      $  64,970      $ 139,962     $ 118,379
     Universal life charges ceded to client companies............            (6,867)        (7,575)       (14,355)      (14,679)
     Universal life and investment product surrender
       charges, net..............................................             5,162          4,916          9,203         8,178
     Traditional life and annuity premiums.......................            14,223         15,272         28,206        28,113
     Traditional reinsurance premiums............................           (11,415)       (11,089)       (22,096)      (19,022)
     Accident and health insurance premiums, net.................             6,990          7,083         14,818         8,478
                                                                         ----------      ----------     ---------     ---------
  
       Total premium income and other considerations.............            78,373         73,577        155,738       129,447
     Net investment income.......................................            72,665         73,932        146,225       134,948
     Net realized gains (losses).................................               408           (143)         2,296         2,418
     Other income................................................             1,429            917          2,619         1,824
                                                                         ----------      ---------      ---------     ---------
  
       Total revenues............................................           152,875        148,283        306,878       268,637
                                                                         ----------      ---------      ---------     ---------
  
  Benefits and expenses:
     Policyholder benefits.......................................            34,906         46,569         69,486        76,829
     Interest credited to policyholders..........................            44,622         43,907         88,574        78,189
     Amortization of deferred policy acquisition costs,
       costs of insurance acquired and deferred policy fees......            32,024         20,300         64,317        32,472
     Other operating expenses....................................            18,009         23,493         35,870        50,243
     Acquisition and merger expenses.............................             7,091             -           7,891            -
     Amortization of goodwill....................................               722            687          1,439         1,284
     Interest expense............................................             5,839          6,600         11,812        11,977
                                                                         ----------      ---------      ---------     ---------
  
       Total expenses............................................           143,213        141,556        279,389       250,994
                                                                         ----------      ---------      ---------     ---------
  
  Earnings before income taxes...................................             9,662          6,727         27,489        17,643
     Federal income tax expense..................................             5,174          2,361         11,622         6,378
                                                                         ----------      ---------      ---------     ---------
  
  Net earnings...................................................        $    4,488      $   4,366      $  15,867     $  11,265
                                                                         ==========      =========      =========     =========
  
  Weighted average common shares and common
     equivalent shares outstanding...............................        28,441,048     27,542,276     28,400,337    26,845,898
                                                                         ==========     ==========     ==========    ==========
  
  Net earnings per common share and common
     equivalent share outstanding................................             $0.16          $0.16          $0.56         $0.42
                                                                              =====          =====          =====         =====
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  7
  LIFE PARTNERS GROUP, INC.
  
                   CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                               (Dollars in thousands)
                                     (unaudited)
  
                                                                                           Net
                                                                        Additional     unrealized                        Total
                                                              Common      paid-in      investment        Retained    stockholders'
                                                               stock      capital    gains (losses)      earnings       equity
                                                               -----      -------    --------------      --------       ------
  Balance at January 1, 1995............................       $26        $245,652      $(22,783)       $70,751        $293,646
  
     Common stock issued for cash.......................         -           1,942            -               -           1,942
     Common stock issued in acquisition of
       subsidiaries.....................................         2          39,457            -               -          39,459
     Cash dividends paid on common stock................         -               -            -          (3,018)         (3,018)
     Compensation for management options................         -             812            -               -             812
     Change in unrealized gains (losses), net...........         -               -        81,052             -           81,052
     Net loss...........................................         -               -            -         (13,384)        (13,384)
                                                               ---        --------      ---------       -------        --------
  
  Balance at December 31, 1995..........................        28         287,863        58,269         54,349         400,509
  
     Common stock issued for cash.......................         -             528             -              -             528
     Common stock retained in lieu of cash
       on exercise of stock options.....................         -          (1,819)            -              -          (1,819)
     Cash dividends paid on common stock................         -               -             -         (1,683)         (1,683)
     Change in unrealized gains (losses), net...........         -               -       (61,786)             -         (61,786)
     Net earnings.......................................         -               -             -         15,867          15,867
                                                               ---        --------      ---------       -------        --------
  
  Balance at June 30, 1996..............................       $28        $286,572      $ (3,517)       $68,533        $351,616
                                                               ===        ========      =========       =======        ========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  8
  LIFE PARTNERS GROUP, INC.
  
                        CONSOLIDATED STATEMENT OF CASH FLOWS
                               (Dollars in thousands)
                                     (unaudited)
                                                                                                              Six months ended
                                                                                                                  June 30,
                                                                                                           ----------------------
                                                                                                           1996              1995
                                                                                                           ----              ----
  Cash flows from operating activities:
     Net earnings..................................................................................     $  15,867        $  11,265
     Adjustments to reconcile net earnings to net cash used by operating activities:
       Realized gains..............................................................................        (2,296)          (2,418)
       Adjustments relating to universal life and annuity products:
         Interest credited to account balances.....................................................        75,074           63,930
         Charges for mortality and administration..................................................      (125,607)        (103,700)
       Depreciation and amortization...............................................................         3,055            2,831
       Decrease in future policy benefits..........................................................       (10,106)         (11,972)
       Increase in reserve liability on modified coinsurance agreements............................        12,570            5,587
       Increase in deferred policy acquisition costs...............................................       (15,019)         (26,651)
       Amortization of cost of insurance acquired, net.............................................        21,689           14,657
       Amortization of deferred policy fees........................................................        (8,818)          (5,898)
       Decrease in currently payable taxes.........................................................        (8,334)          (1,520)
       Deferred tax (benefit) expense..............................................................        (1,872)           6,755
       (Decrease) increase in policy liabilities, other policyholder funds, and other liabilities..        (7,878)          20,635
       Increase in notes and accounts receivable and accrued investment income.....................        (3,120)            (112)
       Amortization of bond and mortgage loan discount and premium, net............................          (719)              29
       Other, net..................................................................................        (5,365)         (12,317)
                                                                                                        ---------        ---------
  
            Net cash used by operating activities..................................................       (60,879)         (38,899)
                                                                                                        ---------        ---------
  
  Cash flows from investing activities:
     Sales of fixed maturities:
       Available-for-sale..........................................................................        59,895          153,574
       Held-to-maturity............................................................................         2,307            9,802
     Maturities of fixed maturities:
       Available-for-sale..........................................................................        86,400           40,393
       Held-to-maturity............................................................................        18,193           34,045
     Sales of other long-term invested assets......................................................        21,157           22,643
     (Increase) decrease in policy loans, net......................................................        (1,227)             122
     Purchases of fixed maturities.................................................................      (325,990)        (209,921)
     Purchases of other long-tem invested assets...................................................       (24,441)         (11,369)
     Purchase of subsidiaries, net of cash and short-term investments acquired.....................           -            (20,591)
                                                                                                        ---------        ---------
  
            Net cash provided (used) by investing activities.......................................      (163,706)          18,698 
                                                                                                        ---------        ---------
  
  Cash flows from financing activities:
     Policyholder contract deposits................................................................       265,151          226,515
     Policyholder contract withdrawals.............................................................      (148,436)        (138,890)
     Proceeds from issuance of common stock........................................................           528            1,653
     Change in principal of investment borrowings..................................................        (2,038)         (12,030)
     Proceeds from notes payable...................................................................           -             36,000
     Principal repayments on notes payable.........................................................        (7,500)         (53,073)
     Cash dividends paid on common stock...........................................................        (1,683)          (1,346)
                                                                                                        ---------        ---------
  
            Net cash provided by financing activities..............................................       106,022           58,829
                                                                                                        ---------        ---------
  
            Net (decrease) increase in cash and short-term investments.............................      (118,563)          38,628
  
  Cash and short-term investments at beginning of period...........................................       197,684           41,715
                                                                                                        ---------         --------
  
  Cash and short-term investments at end of period.................................................     $  79,121         $ 80,343
                                                                                                        =========         ========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  9
  LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       The following  notes to the  unaudited  consolidated  financial  statements
  should  be  read  in  conjunction  with  the  notes  to  consolidated  financial
  statements  contained in the 1995 Form 10-K of Life Partners Group,  Inc. ("Life
  Partners").  Life Partners and its  consolidated  subsidiaries  are collectively
  referred to as the "Company."
  
       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
       The unaudited  consolidated  financial  statements as of June 30, 1996, and
  for the quarters ended June 30, 1996 and 1995, and for the six months ended June
  30,  1996 and  1995,  reflect  all  adjustments,  consisting  solely  of  normal
  recurring  items,  which are  necessary  for a fair  presentation  of  financial
  position,  results of operations and cash flows on a basis  consistent with that
  of the prior audited consolidated financial statements.
  
       The Company has reclassified certain prior period information to conform to
  the 1996 presentation.
  
       ACQUISITIONS
  
       On April 28, 1995,  Life Partners  Group,  Inc.  acquired  Lamar  Financial
  Group, Inc. ("Lamar"), together with all its subsidiaries,  including Lamar Life
  Insurance Company of Jackson,  Mississippi, for a purchase price of $77 million.
  The acquisition was accounted for using the purchase method,  and the results of
  operations  of Lamar were included in the  consolidated  statement of operations
  from the date of acquisition.
  
       The following  unaudited pro forma  information  presents the  consolidated
  results of operations of the Company and Lamar as if the  acquisitions  had been
  effective at the  beginning  of the period  presented,  after  giving  effect to
  adjustments to reflect the acquisition and the financing related thereto.
  Pro forma
                                                                             six months
                                                                                ended
                                                                            June 30, 1995
                                                                            -------------
                                                                           (in thousands,
                                                                         except share data)
  Revenues............................................................       $306,644
  Earnings before income taxes........................................         19,385
  Net earnings........................................................         12,366
  
  Net earnings per share..............................................          $0.44
  
  Weighted average common shares and common
     equivalent shares outstanding....................................     28,156,705
  The  above  unaudited  pro forma information was intended  for informational
  purposes only.
                                         10
  LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       CHANGES IN STOCKHOLDERS' EQUITY
  
       During the six months ended June 30, 1996, 432,083 option shares previously
  granted under the Company's incentive stock option plan were exercised and 5,858
  options were forfeited. Included in the options exercised during the period were
  352,941 options exercised by the former chairman of the Company,  net of 166,914
  shares  remitted to the Company in lieu of cash.  Also  during  1996,  the Stock
  Option  Committee of the Life  Partners  Board of Directors  granted  additional
  options to purchase  157,400 shares of common stock reserved under the Company's
  stock  option  plan to certain  key  employees  and  executive  officers  of the
  Company. The options are exercisable at prices ranging from $13.50 to $13.75 per
  share,  vest equally  over three or five year  periods,  and expire in 2006.  In
  addition,  on February  14,  1996,  the Company  repriced  certain  common stock
  options to reflect the market value of the Company's common stock on the date of
  repricing.  Such  repricing  reduced the  exercise  price of certain  previously
  granted  shares to $13.50 per share from previous  prices ranging from $16.75 to
  $20.25.  In exchange for the  reduction in exercise  price,  the number of stock
  options  previously  granted  was reduced by a ratio of the new  exercise  price
  divided by the original  exercise price. A total of 856,800  previously  granted
  option shares were subject to the repricing,  which correspondingly  reduced the
  total number of option shares outstanding by 237,673.  At June 30, 1996, 957,822
  options were unexercised and outstanding.
  
       In  addition,  warrants to purchase  12,573  shares were  exercised  by the
  former  chairman of the Company  during the six months  ended June 30, 1996 at a
  price  of  $3.98  per  share.  At  June  30,  1996,  no  further  warrants  were
  outstanding.
  
       In October 1995, the Financial  Accounting Standards Board issued Statement
  of  Financial   Accounting   Standards  No.  123,   Accounting  for  Stock-Based
  Compensation  ("SFAS 123"). SFAS 123 establishes fair value based accounting and
  reporting  standards for all  transactions in which a company  acquires goods or
  services by issuing equity securities, including stock-based compensation plans.
  Under SFAS 123,  compensation  cost is  measured  at the grant date based on the
  value of the award and is recognized over the service  period,  which is usually
  the  vesting  period.  The fair value of stock  options is  determined  using an
  option-pricing model. This statement encourages, but does not require, companies
  to adopt the fair value based method of  accounting  to  recognize  compensation
  expense for  employee  stock  compensation  plans.  However,  it does  require a
  company to comply with the disclosure  requirements  set forth in the statement.
  The Company  continues to utilize the accounting in Accounting  Principles Board
  Opinion No. 25,  Accounting  for Stock Issued to Employees,  and beginning  with
  year end 1996,  and  thereafter,  expects to make pro forma  disclosures  of net
  income as if the fair value based method of  accounting  defined in SFAS 123 had
  been applied.
  
       NOTES PAYABLE
  
       Notes payable at  June 30, 1996 and December 31, 1995 are summarized as
  follows (in thousands):
  Amount outstanding
                                                                               Face amount            net of unamortized
                                                                               outstanding              issuance costs
                                                                        -----------------------    -------------------------
                                                                        June 30,   December 31,    June 30,     December 31,
                                                                          1996         1995          1996           1995
                                                                          ----         ----          ----           ----
  Borrowings under Bank Credit Facility............................     $148,678     $156,178      $148,194       $155,581
  12-3/4% senior subordinated notes due 2002.......................       95,100       95,100        90,729         90,502
                                                                        --------     --------      --------       --------
  
                                                                        $243,778     $251,278      $238,923       $246,083
                                                                        ========     ========      ========       ========
  Wabash  has  certain  surplus  debentures  outstanding  to  Life  Partners.
  Payments made by Wabash on these surplus debentures are used by Life Partners to
  pay principal and interest on Life  Partners'  notes payable.  Accordingly,  the
  principal and interest  payment terms of the surplus  debentures are structured,
  subject  to  certain  surplus  restrictions,  to  provide  essentially  all cash
  required to meet Life Partners'  obligations  under the bank credit facility and
  the senior subordinated notes.
  
                                         11
  LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       INVESTMENTS
  
       Investment income by type of investment was as follows (in thousands):
  Six months ended
                                                                                                       June 30,
                                                                                                  ------------------
                                                                                                  1996          1995
                                                                                                  ----          ----
  Gross investment income:
     Fixed maturities.......................................................................    $132,051      $120,238
     Short-term investments.................................................................       2,573         3,484
     Policy loans...........................................................................       7,353         7,194
     Other invested assets..................................................................       3,402         5,210
     Mortgage loans.........................................................................       5,147         3,619
     Equity securities......................................................................         715           939
     Collateral loans.......................................................................         136            53
     Investment real estate.................................................................         438           527
                                                                                                --------      --------
  
       Gross investment income..............................................................     151,815       141,264
  
  Less:
     Investment expenses....................................................................       3,476         2,311
     Interest expense on investment borrowings..............................................       2,114         4,005
                                                                                                --------      --------
  
       Net investment income................................................................    $146,225      $134,948
                                                                                                ========      ========
  Following is an analysis of net realized gains on investments (in thousands):
  Six months ended
                                                                                                         June 30,
                                                                                                    ------------------
                                                                                                    1996          1995
                                                                                                    ----          ----
  Fixed maturities..........................................................................     $  887        $   458
  Equity securities.........................................................................        118          1,874
  Other.....................................................................................      1,291             86
                                                                                                 ------         ------
  
                                                                                                 $2,296         $2,418
                                                                                                 ======         ======
  12
  LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       The cost and estimated fair values of equity  securities are as follows (in
  thousands):
  Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  June 30, 1996                                                          cost          gains        losses       fair value
  - -------------                                                          ----          -----        ------       ----------
  Preferred stock..................................................     $18,936         $1,333      $2,211          $18,058
  Common stock.....................................................       4,262          3,094       1,596            5,760
                                                                        -------         ------      ------          -------
  
     Totals........................................................     $23,198         $4,427      $3,807          $23,818
                                                                        =======         ======      ======          =======
  
  December 31, 1995
  - -----------------
  Preferred stock..................................................     $18,984         $1,123        $502          $19,605
  Common stock.....................................................       1,945          2,271         100            4,116
                                                                        -------         ------        ----          -------
  
     Totals........................................................     $20,929         $3,394        $602          $23,721
                                                                        =======         ======        ====          =======
  The amortized cost and estimated fair values of debt securities  classified
  as fixed maturity investments held-to-maturity are as follows (in thousands):
  Gross         Gross
                                                                       Amortized      unrealized    unrealized      Estimated
  June 30, 1996                                                          cost            gains        losses       fair value
  - -------------                                                          ----            -----        ------       ----------
  United States treasury securities and obligations of United
     States government corporations and agencies...................    $  1,950        $    76        $  -          $  2,026
  Obligations of states and political subdivisions.................       2,392            222           -             2,614
  Debt securities issued by foreign governments....................      16,256             68           459          15,865
  Corporate securities.............................................     514,233         21,911         9,205         526,939
  Mortgage-backed securities.......................................      71,992            564           779          71,777
  Other debt securities............................................      54,370          3,206           730          56,846
                                                                       --------        -------        -------       --------
  
     Totals........................................................    $661,193        $26,047        $11,173       $676,067
                                                                       ========        =======        =======       ========
  13
  LIFE PARTNERS GROUP, INC.
  
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  December 31, 1995                                                      cost          gains        losses       fair value
  - -----------------                                                      ----          -----        ------       ----------
  United States treasury securities and obligations of United
     States government corporations and agencies...................    $  2,024        $    44      $    -         $  2,068
  Obligations of states and political subdivisions.................       2,420            307           -            2,727
  Debt securities issued by foreign governments....................      16,272          1,014           -           17,286
  Corporate securities.............................................     533,110         36,273       4,280          565,103
  Mortgage-backed securities.......................................      74,470          4,959         107           79,322
  Other debt securities............................................      50,530          4,641         301           54,870
                                                                       --------        -------      ------         --------
  
     Totals........................................................    $678,826        $47,238      $4,688         $721,376
                                                                       ========        =======      ======         ========
  The amortized cost and estimated fair values of debt securities  classified
  as investments available-for-sale are as follows (in thousands):
  Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  June 30, 1996                                                          cost          gains        losses       fair value
  - -------------                                                          ----          -----        ------       ----------
  United States treasury securities and obligations of United
     States government corporations and agencies...................  $   88,188       $  1,412     $   886     $    88,714
  Obligations of states and political subdivisions.................       8,393            191         317           8,267
  Debt securities issued by foreign governments....................      18,429             31       1,010          17,450
  Corporate securities.............................................   1,230,876         25,898      30,573       1,226,201
  Mortgage-backed securities.......................................   1,140,482         16,464      15,275       1,141,671
  Other debt securities............................................     253,540          2,867       7,530         248,877
                                                                     ----------        -------     -------      ----------
  
     Totals........................................................  $2,739,908        $46,863     $55,591      $2,731,180
                                                                     ==========        =======     =======      ==========
  Gross         Gross
                                                                       Amortized    unrealized    unrealized      Estimated
  December 31, 1995                                                      cost          gains        losses       fair value
  - -----------------                                                      ----          -----        ------       ----------
  United States treasury securities and obligations of United
     States government corporations and agencies...................   $   93,368       $  4,620     $   110       $   97,878
  Obligations of states and political subdivisions.................        8,443            273          -             8,716
  Debt securities issued by foreign governments....................       18,440            673          66           19,047
  Corporate securities.............................................    1,044,051         52,822      11,965        1,084,908
  Mortgage-backed securities.......................................    1,147,848         52,606       1,345        1,199,109
  Other debt securities............................................      249,325         14,584       1,202          262,707
                                                                      ----------       --------     -------       ----------
  
     Totals........................................................   $2,561,475       $125,578     $14,688       $2,672,365
                                                                      ==========       ========     =======       ==========
  14
  LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       REINSURANCE
  
       Policyholder  benefits reflects the reduction of policy and contract claims
  by  amounts  recovered  from  reinsurers  of $65.5  million  and $41.4  million,
  including  accident and health claims recovered from reinsurers of $42.2 million
  and $16.6 million for the six months ended June 30, 1996 and 1995, respectively.
  Accident and health premiums are reported net of premiums ceded to reinsurers of
  $45.0 million and $20.1 million for the six months ended June 30, 1996 and 1995,
  respectively.
  
       FEDERAL INCOME TAXES
  
       Life Partners and its non-life insurance  subsidiaries each file a separate
  corporate  federal  income tax return.  The life insurance  subsidiaries  file a
  consolidated federal income tax return.
  
       The components of the provision for income taxes on operating  earnings are
  as follows (in thousands):
  Six months ended
                                                                                                         June 30,
                                                                                                   --------------------
                                                                                                   1996            1995
                                                                                                   ----            ----
  Current tax provision (benefit)...........................................................     $13,494          $  (377)
  Deferred tax provision (benefit)..........................................................      (1,872)           6,755
                                                                                                 -------           ------
  
     Total income tax provision.............................................................     $11,622           $6,378
                                                                                                 =======           ======
  SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
  
       Cash  payments  for  interest  expense and income taxes were as follows (in
  thousands):
  Six months ended
                                                                                                        June 30,
                                                                                                   -----------------
                                                                                                   1996         1995
                                                                                                   ----         ----
  Interest expense..........................................................................     $12,959       $10,925
  Income taxes..............................................................................      20,725         7,200
  In connection  with the acquisition of Lamar,  liabilities  were assumed as
  follows (in thousands):
  Fair value of assets acquired, including cash and short-term
     investments of $20,591 ............................................         $1,004,182
  Cash paid.............................................................            (37,937)
  Common stock issued...................................................            (39,459)
                                                                                 ----------
  
     Fair value of liabilities assumed..................................         $  926,786
                                                                                 ==========
  15
  LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       SUBSEQUENT EVENT
  
       On August 2, 1996,  the Company  completed  its merger with  Conseco,  Inc.
  ("Conseco").  As a result  of the  merger,  the  Company  became a wholly  owned
  subsidiary of Conseco.  In the merger, each of the issued and outstanding shares
  of LPG common stock was converted into .5833 of a share of Conseco common stock.
  A total of 16.3 million shares of Conseco  common stock (or  equivalent  shares)
  with a value of approximately $588 million were issued. As a result of Conseco's
  ownership of the Company, a new basis of accounting under the "push down" method
  will be adopted by the Company in the third quarter of 1996.  Under this method,
  the assets and  liabilities  of the Company will reflect  Conseco's  cost basis,
  which is based on the fair values of the Company's assets and liabilities at the
  effective date of the merger.
  
       As a  result  of the  merger,  Conseco  plans  to  relocate  the  Company's
  operations to Conseco's headquarters in Carmel, Indiana, by August 30, 1996.
  
       During the first six months of 1996, the Company  incurred costs related to
  the  Acquisition  of the Company by Conseco  totaling $7.9  million.  Such costs
  include but are not limited to, financial  advisory  services,  and attorney and
  accounting fees.
                                         16
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(a).     Financial Statements and Exhibits, continued
  
                 (a), continued
  
                      Life  Partners   Group,   Inc.  and   Subsidiaries   Audited
                      Consolidated  Financial  Statements  as of December 31, 1995
                      and 1994, and for each of the three years ended December 31,
                      1995.
  
                                         17
  REPORT OF INDEPENDENT ACCOUNTANTS
  
  To the Board of Directors and Stockholders
  Life Partners Group, Inc.
  
      We  have  audited  the  accompanying  consolidated  balance  sheets  of Life
  Partners Group,  Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
  related  consolidated  statements of operations,  stockholders'  equity and cash
  flows for each of the three years in the period ended  December 31, 1995.  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 in  accordance  with  generally  accepted  auditing
  standards.  Those standards require that we plan and perform the audit to obtain
  reasonable assurance about whether the financial statements are free of material
  misstatement.  An audit includes examining, on a test basis, evidence supporting
  the amounts and disclosures in the financial statements.  An audit also includes
  assessing the  accounting  principles  used and  significant  estimates  made by
  management,  as well as evaluating the overall financial statement presentation.
  We believe that our audits provide a reasonable basis for our opinion.
  
      In our opinion,  the financial  statements referred to above present fairly,
  in all material respects,  the consolidated  financial position of Life Partners
  Group,  Inc.  and  Subsidiaries  as of  December  31,  1995  and  1994,  and the
  consolidated  results of their  operations  and their cash flows for each of the
  three years in the period ended December 31, 1995, in conformity  with generally
  accepted accounting principles.
  
      As  more  fully  explained  in  Note  1(d)  to  the  consolidated  financial
  statements,  the Company adopted Statement of Financial  Accounting Standard No.
  115,  "Accounting  For  Certain  Investments  in Debt  and  Equity  Securities",
  effective December 31, 1993.
  
                                            Coopers & Lybrand L.L.P.
  
  Denver, Colorado
  March 27, 1996
  
                                         18
  LIFE PARTNERS GROUP, INC.
                            CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
  
                                       ASSETS
  
                                                                                             DECEMBER 31,
                                                                                     ----------------------------
                                                                                         1995           1994
                                                                                     -------------  -------------
  Investments:
    Fixed maturities:
      Held-to-maturity, at amortized cost..........................................  $     678,826  $   1,570,034
      Available-for-sale, at fair value............................................      2,672,365      1,058,710
    Equity securities, at fair value...............................................         23,721         27,510
    Mortgage loans on real estate, at amortized cost...............................        110,214         34,177
    Investment real estate, at cost, net of accumulated depreciation...............          4,921          2,796
    Policy loans...................................................................        226,212        192,909
    Collateral loans...............................................................          4,373          1,825
    Cash and short-term investments................................................        197,684         41,715
    Other invested assets..........................................................         59,593         56,039
                                                                                     -------------  -------------
      Total investments............................................................      3,977,909      2,985,715
  Notes and accounts receivable and uncollected premiums...........................         29,303         20,607
  Receivable from reinsurers.......................................................        244,828         78,176
  Federal income tax recoverable...................................................                         6,444
  Accrued investment income........................................................         54,785         46,340
  Deferred policy acquisition costs, net...........................................        238,736        276,938
  Cost of insurance acquired.......................................................        306,015        234,471
  Goodwill, net of accumulated amortization........................................        100,470         84,079
  Other assets.....................................................................         28,819         15,996
                                                                                     -------------  -------------
                                                                                     $   4,980,865  $   3,748,766
                                                                                     =============  =============
  
                                       LIABILITIES AND STOCKHOLDERS' EQUITY
  Future policy benefits and claims................................................  $     708,226  $     625,814
  Dividends, endowments and other policyholder funds...............................         86,162         64,479
  Policyholder account balances....................................................      3,271,906      2,354,169
  Deferred policy fees.............................................................         80,590         78,700
  Investment borrowings............................................................         73,585         63,786
  Notes payable:
    Due within one year............................................................         15,000         15,000
    Due after one year.............................................................        231,083        195,460
  Federal income taxes payable:
    Current........................................................................         13,444
    Deferred.......................................................................         25,812         13,889
  Other liabilities................................................................         74,548         43,823
                                                                                     -------------  -------------
                                                                                         4,580,356      3,455,120
                                                                                     -------------  -------------
  Commitments and contingencies
  Stockholders' equity:
  Common stock,  $.001 par value;  50,000,000  shares  authorized;  27,911,851 and
   25,530,334 shares issued and outstanding at December 31, 1995 and 1994,
   respectively....................................................................             28             26
  Additional paid-in capital.......................................................        287,863        245,652
  Net unrealized investment gains (losses).........................................         58,269        (22,783)
  Retained earnings................................................................         54,349         70,751
                                                                                     -------------  -------------
                                                                                           400,509        293,646
                                                                                     -------------  -------------
                                                                                     $   4,980,865  $   3,748,766
                                                                                     =============  =============
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  19
  LIFE PARTNERS GROUP, INC.
                       CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
  
                                                                                YEAR ENDED DECEMBER 31,
                                                                     ----------------------------------------------
                                                                          1995            1994            1993
                                                                     --------------  --------------  --------------
  Revenues:
    Universal life and investment product charges..................  $      252,925  $      199,512     $   180,013
    Universal life charges ceded to client companies...............         (29,564)        (22,275)        (15,861)
    Universal life and investment product surrender charges, net...          16,364          12,750          13,380
    Traditional life and annuity premiums..........................          56,593          50,501          54,658
    Traditional reinsurance premiums...............................         (40,416)        (28,109)        (27,551)
    Accident and health insurance premiums, net....................          24,178           5,512           6,125
                                                                     --------------  --------------  --------------
      Total premium income and other considerations................         280,080         217,891         210,764
    Net investment income..........................................         277,068         225,378         221,131
    Net realized gains (losses)....................................          15,785         (19,652)         18,404
    Other income...................................................           3,183           4,626           5,433
                                                                     --------------  --------------  --------------
      Total revenues...............................................         576,116         428,243         455,732
                                                                     --------------  --------------  --------------
  Benefits and expenses:
    Policyholder benefits..........................................         153,307         110,870         102,202
    Interest credited to policyholders.............................         165,415         136,853         139,442
    Amortization of deferred policy acquisition costs, costs of
     insurance acquired, and deferred policy fees..................         148,659          46,224          52,020
    Other operating expenses.......................................          94,784          52,709          51,905
    Amortization of goodwill.......................................           2,745           2,388           2,323
    Interest expense...............................................          27,861          20,728          25,980
                                                                     --------------  --------------  --------------
      Total expenses...............................................         592,771         369,772         373,872
                                                                     --------------  --------------  --------------
  Earnings (loss) before income taxes and extraordinary items......         (16,655)         58,471          81,860
    Federal income tax expense (benefit)...........................          (3,271)         21,265          29,868
                                                                     --------------  --------------  --------------
  Earnings (loss) before extraordinary items.......................         (13,384)         37,206          51,992
    Extraordinary loss, net of tax effect..........................                           2,558           4,776
                                                                     --------------  --------------  --------------
  Net earnings (loss)..............................................         (13,384)         34,648          47,216
    Less dividends in kind on preferred stock......................                                          (3,978)
                                                                     --------------  --------------  --------------
  Net earnings (loss) applicable to common stock...................  $      (13,384) $       34,648     $    43,238
                                                                     ==============  ==============  ==============
  Weighted average common shares and common equivalent share
   outstanding.....................................................      27,127,171      26,111,032      23,407,192
                                                                     ==============  ==============  ==============
  
  Earnings (loss) per common share and common equivalent share outstanding:
    Earnings (loss) before extraordinary items.....................  $        (0.49) $         1.43  $         2.05
    Extraordinary loss.............................................                           (0.10)          (0.20)
                                                                     --------------  --------------  --------------
      Net earnings (loss)..........................................  $        (0.49) $         1.33  $         1.85
                                                                     ==============  ==============  ==============
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  20
  LIFE PARTNERS GROUP, INC.
                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                   (IN THOUSANDS)
  
                                                                                                           NET
                                                                                                       UNREALIZED
                                                                CLASS A        CLASS B     ADDITIONAL  INVESTMENT    RETAINED
                                    PREFERRED     COMMON         COMMON         COMMON       PAID-IN      GAINS      EARNINGS
                                      STOCK        STOCK         STOCK          STOCK        CAPIAL     (LOSSES)     (DEFICIT)
                                    ---------  -------------  -----------  -------------  -----------  -----------  -----------
  Balance at January 1, 1993......  $ 118,005                  $      13     $       1     $  69,909    $  46,081   $  (4,150)
  Common stock issued for cash,
   net of related offering
   costs..........................               $      11                                   174,860
  Cash dividends paid on Common
   Stock..........................                                                                                        (950)
  Conversion of Class A and Class
   B Common Stock to Common
   Stock..........................                      14           (13)           (1)
  Preferred stock dividends in
   kind...........................      3,978                                                                           (3,978)
  Redemption of preferred stock...   (121,983)
  Compensation for management
   options........................                                                               163
  Change in unrealized gains
   (losses), net..................                                                                        (17,977)
  Net earnings....................                                                                                      47,216
                                    ---------          ---           ---            --    -----------  -----------  -----------
  Balance at December 31, 1993....          0           25             0             0       244,932       28,104       38,138
  
  Common stock issued for cash....                       1                                       377
  Cash dividends paid on Common
   Stock..........................                                                                                      (2,035)
  Compensation for and tax benefit
   of management options..........                                                               343
  Change in unrealized gains
   (losses), net..................                                                                        (50,887)
  Net earnings....................                                                                                      34,648
                                                                                   
                                    ---------          ---           ---            --    -----------  -----------  -----------
  Balance at December 31, 1994....          0           26             0             0       245,652      (22,783)      70,751
  
  Common Stock issued for cash....                                                             1,942
  Common Stock issued in
   acquisition of subsidiaries....                       2                                    39,457
  Cash dividends paid on Common
   Stock..........................                                                                                      (3,018)
  Tax benefit of management
   options exercised..............                                                               812
  Change in unrealized gains
   (losses), net..................                                                                         81,052
  Net earnings (loss).............                                                                                     (13,384)
                                                                                    --
                                    ---------          ---           ---                   ---------   ----------    ---------
  Balance at December 31, 1995....  $       0    $      28     $       0       $     0     $ 287,863     $ 58,269    $  54,349
                                    =========          ===           ====           ==     =========    =========    =========
  
                                    (Continued)
  
                                         21
  LIFE PARTNERS GROUP, INC.
             CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Continued)
                                   (IN THOUSANDS)
  
                                       TOTAL
                                    STOCKHOLDERS'
                                       EQUITY
                                    ------------
  Balance at January 1, 1993......   $  229,859
  Common stock issued for cash,
   net of related offering
   costs..........................      174,871
  Cash dividends paid on Common
   Stock..........................         (950)
  Conversion of Class A and Class
   B Common Stock to Common
   Stock..........................
  Preferred stock dividends in
   kind...........................
  Redemption of preferred stock...     (121,983)
  Compensation for management
   options........................          163
  Change in unrealized gains
   (losses), net..................      (17,977)
  Net earnings....................       47,216
  
                                    ------------
  Balance at December 31, 1993....      311,199
  Common stock issued for cash....          378
  Cash dividends paid on Common
   Stock..........................       (2,035)
  Compensation for and tax benefit
   of management options..........          343
  Change in unrealized gains
   (losses), net..................      (50,887)
  Net earnings....................       34,648
  
                                    ------------
  Balance at December 31, 1994....      293,646
  Common Stock issued for cash....        1,942
  Common Stock issued in
   acquisition of subsidiaries....       39,459
  Cash dividends paid on Common
   Stock..........................       (3,018)
  Tax benefit of management
   options exercised..............          812
  Change in unrealized gains
   (losses), net..................       81,052
  Net earnings (loss).............      (13,384)
  
                                    -----------
  Balance at December 31, 1995....   $  400,509
                                    ===========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  
                                         22
  LIFE PARTNERS GROUP, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (IN THOUSANDS)
  
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                -----------------------------------
                                                                                  1995        1994         1993
                                                                                ---------  -----------  -----------
  Cash flows from operating activities:
    Net earnings (loss).......................................................  $ (13,384) $    34,648  $    47,216
    Adjustments to reconcile net earnings (loss) to net cash used by operating
     activities:
        Extraordinary loss, net of tax effect.................................                   2,558        4,776
        Net realized (gains) losses...........................................    (15,785)      19,652      (18,404)
        Adjustments relating to universal life and annuity products:
          Interest credited to account balances...............................    138,465      110,946      114,294
          Charges for mortality and administration............................   (223,361)    (177,237)    (164,152)
        Depreciation and amortization.........................................      5,494        4,945        5,504
        Decrease in future policy benefits....................................    (13,253)      (3,470)     (20,591)
        Increase in reserve liability on modified coinsurance agreements......     17,571       12,534        5,471
        Decrease (increase) in deferred policy acquisition costs, net.........     20,561      (64,912)     (61,588)
        Amortization of cost of insurance acquired, net.......................     41,406       25,566       27,869
        Amortization of deferred policy fees..................................    (17,025)      (4,206)      (6,275)
        Increase (decrease) in currently payable taxes........................     19,888      (12,738)       6,683
        Deferred tax expense (benefit)........................................    (22,539)      19,168      (27,759)
        Increase in policy liabilities, other policyholder funds, and other
         liabilities..........................................................     14,959       13,601       15,693
        Increase in notes and accounts receivable and accrued investment
         income...............................................................     (1,311)      (2,903)     (10,402)
        Amortization of bond and mortgage loan discount and premium, net......        573         (663)      (9,472)
        Other, net............................................................     (8,908)        (190)      (3,313)
                                                                                ---------  -----------  -----------
          Net cash used by operating activities...............................    (56,649)     (22,701)     (94,450)
                                                                                ---------  -----------  -----------
  Cash flows from investing activities:
    Sales of fixed maturities:
        Available-for-sale....................................................    301,100    1,303,540    1,011,137
        Held-to-maturity......................................................     33,480                   262,355
    Maturities of fixed investments:
        Available-for-sale....................................................     92,451       89,173      149,831
        Held-to-maturity......................................................     71,588       64,097      113,031
    Sales of other long-term invested assets..................................     60,670       28,459      141,623
    Decrease (increase) in policy loans, net..................................     (4,396)      (3,528)       6,689
    Purchases of fixed maturities.............................................   (389,269)  (1,842,038)  (1,842,986)
    Purchases of other long-term invested assets..............................    (24,809)     (43,714)     (46,396)
    Purchase of subsidiaries, net of cash and short-term investments
     acquired.................................................................    (20,591)
                                                                                ---------  -----------  -----------
          Net cash provided (used) by investing activities....................    120,224     (404,011)    (204,716)
                                                                                ---------  -----------  -----------
  Cash flows from financing activities:
    Policyholder contract deposits............................................    458,737      384,738      577,005
    Policyholder contract withdrawals.........................................   (261,828)    (196,261)    (194,157)
    Proceeds from issuance of common stock....................................      1,942          408      187,086
    Costs related to common stock issuance....................................                     (30)     (12,215)
    Proceeds from notes payable...............................................     50,000                   160,000
    Proceeds from investment borrowings, net..................................                  63,786
    Principal repayments on investment borrowings.............................    (92,866)
    Principal payments on notes payable and indebtedness to related party.....    (60,573)      (3,822)    (265,025)
    Deferred loan costs related to notes payable and indebtedness to related
     party....................................................................                    (898)      (7,087)
    Cash dividends paid on common stock.......................................     (3,018)      (2,035)        (950)
    Redemption of preferred stock.............................................                             (121,983)
                                                                                ---------  -----------  -----------
          Net cash provided by financing activities...........................     92,394      245,886      322,674
                                                                                ---------  -----------  -----------
  Net increase (decrease) in cash and short-term investments..................    155,969     (180,826)      23,508
  Cash and short-term investments at beginning of year........................     41,715      222,541      199,033
                                                                                ---------  -----------  -----------
  Cash and short-term investments at end of year..............................  $ 197,684  $    41,715  $   222,541
                                                                                =========  ===========  ===========
  The accompanying notes are an integral part of the
                         consolidated financial statements.
  23
  LIFE PARTNERS GROUP, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
      (a)  PRINCIPLES OF CONSOLIDATION
  
      The  consolidated financial statements include the accounts of Life Partners
  Group, Inc. ("Life  Partners") and its  wholly-owned subsidiaries (together  the
  "Company")   from  the  date   of  acquisition.  The   subsidiaries  consist  of
  Philadelphia Life Insurance Company ("Philadelphia Life"), Massachusetts General
  Life Insurance Company ("Massachusetts  General"), Lamar Life Insurance  Company
  ("Lamar Life"), Wabash Life Insurance Company ("Wabash"), Independent Processing
  Services,  Inc. ("IPS"), Travel Partners  Group, Inc. ("TPG"), Philadelphia Life
  Asset Planning  Company ("PLAPCO"),  Stratford Capital  Group, Inc.  ("Stratford
  Capital"),  Lamar Life  International, Inc.  ("LLII"), Whitehall  Fund Managers,
  Inc. ("WFM"), Eagles National Corporation ("ENC"), and Partners Risk  Management
  Company ("PRMC").
  
      All significant  intercompany accounts and transactions have been eliminated
  in consolidation.
  
      (b)  BASIS OF PRESENTATION
  
      The Company's insurance  subsidiaries  maintain their accounts in conformity
  with accounting  practices prescribed or permitted by state insurance regulatory
  authorities.  In the accompanying  financial  statements such accounts have been
  adjusted to conform with generally accepted accounting  principles ("GAAP") (see
  Note 13).
  
      (c)  NATURE OF OPERATIONS
  
      Life  Partners  is an  insurance  holding  company  that,  through its three
  principal life insurance  subsidiaries,  sells a diverse  portfolio of universal
  life insurance and annuity  products to individuals.  The Company also maintains
  an existing block of traditional,  universal life and annuity business in force.
  The Company markets its life insurance  products through two separate  marketing
  systems;  the Client Company marketing system (including  affiliated  companies)
  and  the  Regional  Director  marketing  system.  While  both  systems  rely  on
  independent agents to consummate sales, the Client Company System further offers
  qualified  members  of  its  life  insurance  sales  force  the  opportunity  to
  participate  in and share in the  profitability  of an  agent-owned  reinsurance
  company.  Of the Company's total gross annualized premiums on new life insurance
  sales,  71.6%,  77.6%,  and 71.9% were generated by agents  participating in the
  Client Company marketing system during 1995, 1994 and 1993, respectively.
  
      (d)  INVESTMENTS
  
      Effective  December 31,  1993,  the Company  adopted  Statement of Financial
  Accounting  Standard No. 115,  ACCOUNTING  FOR CERTAIN  INVESTMENTS  IN DEBT AND
  EQUITY  SECURITIES  ("SFAS 115") issued by the  Financial  Accounting  Standards
  Board  ("FASB").  Under  SFAS  115,  fixed-maturity   securities  classified  as
  investments  held-to-maturity  are carried at amortized cost because the Company
  has the intent and the ability to hold such securities to maturity. Although the
  Company  has the  ability  and intent to hold  these  investments  to  maturity,
  infrequent and unusual  conditions  could occur under which certain  investments
  designated as held to maturity would be sold. Such conditions include unforeseen
  changes in asset quality,  significant changes in tax law affecting the taxation
  of securities, significant business acquisitions or dispositions, and changes in
  regulatory  capital  requirements or permissible  investments.  Fixed-maturities
  that  may  be  sold  prior  to   maturity   are   included   in  the   Company's
  available-for-sale  account at fair value. The  classification of investments is
  determined  at the date of purchase and is  reevaluated  at each  balance  sheet
  date.
  
      The effect of the adoption of SFAS 115 was to decrease  stockholders' equity
  by  approximately  $0.8 million.  This net decrease  consisted of an increase of
  approximately  $6.6 million from securities which were previously  classified as
  held-to-maturity  and  transferred  to  available-for-sale,  and a  decrease  of
  approximately  $7.4 million for securities  which were previously  classified as
  actively
  
                                         24
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  managed  investments,  which were carried at fair value, and were transferred to
  held-to-maturity. The adoption of SFAS 115 had no effect on net earnings or cash
  flows. SFAS 115 prohibits restatement of prior years' financial statements.
  
      In November 1995, the Company  transferred  certain  securities  between the
  available-for-sale  and  held-to-maturity  classifications  as  permitted  by an
  implementation  guide issued by the Financial  Accounting  Standards  Board (See
  Note 4).
  
      Premiums and discounts on fixed maturity  investments are amortized over the
  term of the security,  or in the case of  mortgage-backed  securities,  over the
  estimated life of the security.  Such amortization is included in net investment
  income.
  
      Principal   prepayments   affect  the  cash  flow   pattern   and  yield  of
  mortgage-backed  securities.  The  amortization  of discounts and premiums takes
  into  consideration  actual  and future  estimated  principal  prepayments.  The
  Company utilizes estimated  prepayment speed information obtained from published
  sources or from estimates developed by its investment  advisors.  The effects on
  the yield of a security  from changes in principal  prepayments  are  recognized
  retrospectively,  except  for  interest  only or  residual  interest  structured
  securities which are recognized prospectively. The degree to which a security is
  susceptible to yield  adjustments  is influenced by the  difference  between its
  carrying value and par, the relative  sensitivity  of the  underlying  mortgages
  backing the assets to prepayment in a changing  interest rate  environment,  and
  the repayment priority for structured securities such as collateralized mortgage
  obligations.
  
      Mortgage loans are stated at the aggregate unpaid principal  balances,  less
  unamortized  discount and less allowance for possible  losses.  Real estate held
  for  investment is stated at cost,  less  allowances  for  depreciation  and, as
  appropriate,  provisions  for  possible  losses.  Real estate  acquired  through
  foreclosure is stated at lower of cost or market.
  
      Policy and  collateral  loans are stated at the aggregate  unpaid  principal
  balances.
  
      For  purposes  of  the  statements  of  cash  flows,   cash  and  short-term
  investments include commercial paper,  invested cash, and other investments with
  original maturities of three months or less, and are reflected at cost.
  
      Other invested  assets consist  primarily of limited  partnerships  acquired
  prior to 1995,  which are accounted for under the cost method.  Certain of these
  limited partnership investments are related party transactions (see Note 14).
  
      During 1995, 1994 and 1993, the Company owned certain derivative investments
  in the form of  interest  rate swap  agreements.  During the term of an interest
  rate swap, the net swap settlement  amount is accrued over the unexpired term as
  an adjustment of interest  income.  Gains or losses on termination  are deferred
  and amortized as an interest  adjustment over the remaining original life of the
  underlying financial instrument, or reflected in operations as appropriate.
  
      During 1994 the Company  entered into  certain  reverse  repurchase  finance
  agreements related to the purchase of certain mortgage-backed securities.  These
  financings were  collateralized by  mortgage-backed  securities with fair market
  values in excess of the loan  value.  Such  transactions  are  accounted  for as
  short-term collateralized borrowings and generally terminate within 120 days.
  
      Net realized  investment gains and losses are included in the  determination
  of net earnings  (loss).  Unrealized  investment  gains and losses on marketable
  equity  securities and fixed  maturity  investments  available-for-sale,  net of
  amortization  of deferred  policy  acquisition  costs,  deferred policy fees and
  related  deferred  tax  effect,  if any,  are  charged or  credited  directly to
  stockholders' equity and do
  
                                         25
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  not  affect  net  earnings  (loss).  If a  decline  in the  market  value  of an
  individual  investment is considered to be other than temporary,  the difference
  between  amortized book value and net realizable value is recorded as a realized
  investment  loss.  Net  realizable  value is based on  quoted  market  prices or
  discounted  cash  flows in the  absence  of quoted  market  prices.  The cost of
  investments sold is determined on a specific identification basis (see Note 4).
  
      Changes in the interest rate  environment  have a direct,  inverse impact on
  the market value of fixed income  investments.  It is  reasonably  possible that
  changes in  interest  rates  will  occur in the near term and that such  changes
  could have a material effect on the carrying value of  available-for-sale  fixed
  maturity  and equity  securities,  with an  offsetting  effect to  stockholders'
  equity,  net of the  related  effects  on  deferred  policy  acquisition  costs,
  deferred policy fees,  costs of insurance  acquired and related  deferred income
  taxes.  The impact of the  adjustment  to  investments  carried at market  value
  resulting  from  interest rate  fluctuations  and related  adjustments  to other
  accounts do not have a direct impact on the Company's results of operations.
  
      During 1995, the FASB issued Statement of Financial Accounting Standards No.
  121,  ACCOUNTING  FOR THE  IMPAIRMENT  OF LONG  LIVED  ASSETS AND FOR LONG LIVED
  ASSETS TO BE DISPOSED  OF ("SFAS  121"),  which is  effective  for fiscal  years
  beginning  after  December  15,  1995.  The Company  does not  believe  that the
  application  of the  provisions  of SFAS 121 will have a material  effect on its
  financial condition or results of operations.
  
      (e)  DEFERRED POLICY ACQUISITION COSTS
  
      Costs which vary with and are primarily  related to the  acquisition  of new
  business have been deferred to the extent that such costs are deemed recoverable
  through  future  revenues.  These costs  include  commissions,  certain costs of
  policy issuance and underwriting,  and certain variable agency selling expenses.
  For traditional  life products,  deferred costs are amortized with interest over
  the premium paying period in proportion to the ratio of annual  premium  revenue
  to the anticipated  total premium  revenue.  Deferred policy  acquisition  costs
  related to universal  life,  interest-sensitive  life, and annuity  products are
  amortized  with  interest in relation  to the present  value,  using the assumed
  crediting  rate, of expected  positive  gross  profits on the  products,  with a
  provision  during  earlier  profitable  periods for losses  occurring  in latter
  periods. Retrospective adjustments of these amounts are made when the Company
  revises its estimates of current or future gross  profits and losses,  including
  investment  gains and losses  related to changes in market  interest rates to be
  realized from a group of policies.  Anticipated  investment income is considered
  in the determination of recoverability of deferred policy acquisition costs.
  Changes in deferred policy acquisitions costs are as follows (in thousands):
  
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  Balance, beginning of year.................................................  $   276,938  $   200,475  $   144,307
  Capitalization of costs incurred...........................................      103,717       89,776       92,014
  Interest accretion.........................................................       16,982       14,322       11,205
  Adjustment for unrealized gains and losses on fixed maturity investments
   available-for-sale........................................................      (17,641)      11,551       (5,420)
  Amortization...............................................................     (141,260)     (39,186)     (41,631)
                                                                               -----------  -----------  -----------
  Balance, end of year.......................................................  $   238,736  $   276,938  $   200,475
                                                                               ===========  ===========  ===========
  The  determination  of expected  future gross profits and losses is based on
  historical  gross profits and management's  estimates and assumptions  regarding
  future investment spreads,  maintenance  expenses,  mortality and persistency of
  the block of business. The accuracy of the estimates and
  
                                         26
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  assumptions  are  impacted by several  factors,  including  factors  outside the
  control of  management  such as movements in interest  rates.  It is  reasonably
  possible that conditions impacting the estimates and assumptions will change and
  that changes may result in future  adjustments  to deferred  policy  acquisition
  costs. At December 31, 1995, the Company  reassessed its  expectations of future
  gross  profits  and losses  resulting  in an  additional  net change in deferred
  acquisition  costs,  deferred  policy  fees and  provision  for  losses of $66.6
  million.  This change in estimate  related to deferred  expenses  and fees,  and
  provision  for  losses  was  included  as an  expense  in the 1995  Consolidated
  Statement of Operations.
  
      (f)  COST OF INSURANCE ACQUIRED
  
      A  portion  of  the  purchase   price  paid  for  the  Company's   insurance
  subsidiaries  was  allocated  to the  cost of  insurance  acquired  based on the
  actuarially  determined  future profits from policies acquired with the purchase
  of the  insurance  subsidiaries.  The  portion  of  the  asset  relating  to the
  acquisition of subsidiaries in 1990 is amortized without interest in relation to
  expected   future  gross  profits,   adjusted   prospectively   for  changes  in
  assumptions,  including  direct  charge-offs  for any excess of the  unamortized
  asset over the present value of projected future profits.
  
      Additionally,  the Company  assumed a block of annuity  business in 1993 and
  consummated  the Lamar Life  acquisition in 1995 (See Note 2), of which portions
  of the  respective  purchase  prices were  allocated to the cost of the policies
  acquired. These assets are amortized with interest in relation to expected gross
  profits, using the assumed crediting interest rate, including direct charge-offs
  for any excess of the unamortized asset over the present value of expected gross
  profits.  Retrospective  adjustments of the amounts related to the 1993 and 1995
  business  acquired are made when the Company  revises its  estimates of expected
  future gross profits and losses with respect to the policies acquired.
  
      The  estimation  of future gross  profits and losses with respect to cost of
  insurance  acquired is subject to the same estimation process and is impacted by
  the same factors as discussed above under deferred policy acquisition costs.
  
                                         27
  Changes in the cost of insurance acquired are as follows (in thousands):
  
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  Balance, beginning of year.................................................  $   234,471  $   260,037  $   272,543
  Additional cost of insurance acquired......................................      127,377                    15,363
  Interest accretion.........................................................        5,695          614          414
  Adjustment for unrealized gains and losses on fixed maturity investments
   available for sale........................................................      (14,427)
  Amortization...............................................................      (47,101)     (26,180)     (28,283)
                                                                               -----------  -----------  -----------
  Balance, end of year.......................................................  $   306,015  $   234,471  $   260,037
                                                                               ===========  ===========  ===========
  Future  amortization  is estimated at $47.8 million,  $41.3  million,  $36.4
  million,  $30.9 million, and $26.5 million for the years 1996, 1997, 1998, 1999,
  and 2000, respectively.  Due to changes in estimates of future gross profits and
  losses, the estimated future amortization is expected to increase as compared to
  prior year estimates.
  
      (g)  GOODWILL
  
      Goodwill is  amortized  on the  straight-line  basis over a 40 year  period.
  Accumulated  amortization  of goodwill  was $13.8  million and $11.1  million at
  December  31, 1995 and 1994,  respectively.  The Company  continually  evaluates
  whether current events and circumstances warrant adjustments to
  
                                         28
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  
  the carrying  value  and/or the  estimated  amortization  period of goodwill and
  other intangibles. An adjustment to the carrying value or amortization period is
  based on future undiscounted cash flows. At this time, the Company believes that
  no significant impairment of the goodwill and other intangibles has occurred and
  that no reduction of the estimated amortization period is warranted.
  
      (h)  FUTURE POLICY BENEFITS AND CLAIMS
  
      The liability for future policy  benefits of  traditional  life products has
  been  computed  by the net  level  premium  method  based  on  estimated  future
  investment  yield,  mortality,  and  withdrawal  experience.   Reserve  interest
  assumptions  are graded to rates between 7.25% and 8.5%.  Mortality  assumptions
  are based on the 1965-70 Basic Experience Table.  Withdrawal assumptions vary by
  year of  issue,  age of the  insured,  and  type  of  insurance.  Mortality  and
  withdrawal assumptions are based on actual experience,  modified as necessary to
  reflect  anticipated trends and to include  provisions for possible  unfavorable
  deviations.  The  assumptions  vary  by  plan,  year  of  issue,  and  duration.
  Substantially  all of the  traditional  life products were issued prior to 1984.
  The  future  policy  benefit  reserves  include  a  provision  for  policyholder
  dividends based upon dividend scales assumed at the date of purchase of acquired
  companies or as presently contemplated.
  
      Policy and contract claims include provisions for reported claims in process
  of settlement,  valued in accordance with the terms of the related  policies and
  contracts,  as well as provisions for claims  incurred and  unreported  based on
  prior experience of the Company.
  
      Future policy benefits and claims are calculated using numerous  assumptions
  and estimates  including  interest rates,  mortality and persistency,  which are
  intended to estimate the timing of payment of policyholder benefits and claims.
  Actual results could differ from these estimates.
  
      (i)  POLICYHOLDER ACCOUNT BALANCES
  
      Benefit  reserves for  universal  life,  including  both  variable and fixed
  premium products,  and annuity products are determined using the  "retrospective
  deposit"  method  and  consist of policy  account  values  before any  surrender
  charges.
  
      (j)  DEFERRED POLICY FEES
  
      Certain  front-end fees assessed  against  policyholder  account balances on
  universal life contracts are deferred and amortized with interest in relation to
  the present value of expected gross profits on the product. Such amortization is
  in direct proportion to amortization of deferred policy  acquisition costs for a
  given policy form and is netted with amortization of deferred policy acquisition
  costs in the Consolidated Statements of Operations.
  
                                         29
  Changes in deferred policy fees are as follows (in thousands):
                                                                                    1995       1994       1993
                                                                                   ---------  ---------  ---------
  Balance, beginning of year.....................................................  $  78,700  $  59,058  $  46,142
  Capitalization.................................................................     21,348     22,241     19,850
  Interest accretion.............................................................      4,867      4,133      3,569
  Adjustment for unrealized gains and losses on fixed maturity investments
   available-for-sale............................................................     (2,433)     1,607       (659)
  Amortization...................................................................    (21,892)    (8,339)    (9,844)
                                                                                   ---------  ---------  ---------
  Balance, end of year...........................................................  $  80,590  $  78,700  $  59,058
                                                                                   =========  =========  =========
  At December 31, 1995, the Company  reassessed its expectations  future gross
  profits and losses resulting in additional  amortization of Deferred Policy Fees
  (See Note 1(e)).
  
                                         30
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
      (k)  LIABILITY FOR GUARANTY FUND ASSESSMENTS
  
      Assessments  are levied on the Company  from time to time by  guaranty  fund
  associations of states in which it is licensed to provide for payment of covered
  claims or to meet other insurance obligations,  subject to prescribed limits, of
  insolvent insurance  enterprises.  Assessments are allocated to an insurer based
  on the ratio of premiums  written by an insurer to total premiums written in the
  state. The term of the assessments  depend on how each guaranty fund association
  elects to fund its  obligation.  Assessments  levied by  certain  states  may be
  recoverable  through a reduction in future premium taxes. The Company provides a
  liability,  net of discount and  estimated  premium tax offsets,  for  estimated
  future  assessments of known  insolvencies.  Such liability was $2.7 million and
  $0.5 million at December 31, 1995 and 1994, respectively. The Company determines
  the liability utilizing a report prepared annually by the National  Organization
  of Life, Health and Accident Guaranty  Associations  which provides estimates of
  assessments  by  insolvency.  Although  management  believes the  provision  for
  guaranty fund assessments is adequate for all known  insolvencies,  and does not
  currently  anticipate  the need for any  material  additions  to the reserve for
  known  insolvencies,  it is reasonably  possible that the estimates on which the
  provision  is based  will  change  and that such  changes  may  result in future
  adjustments.
  
      (l)  RECOGNITION OF PREMIUM REVENUE AND RELATED EXPENSES
  
      Premium  revenue  for  traditional  life  insurance  products is reported as
  earned when due. Benefits and expenses are associated with earned premiums so as
  to result in  recognition  of  profits  over the  premium  paying  period.  This
  association  is  accomplished  by means of a provision for future policy benefit
  reserves and the amortization of deferred policy acquisition costs. Revenues for
  universal life policies and annuity  products  consist of policy charges for the
  cost  of  insurance,  policy  administration  charges,  amortization  of  policy
  initiation  fees,  and surrender  charges.  Expenses  related to these  products
  include interest credited to policy account balances and benefit claims incurred
  in excess of policy  account  balances.  Premiums  earned on group  accident and
  health  insurance  business  are  recorded as fees net of ceded  commissions  in
  accident and health insurance premiums, net.
  
      (m)  EARNINGS PER SHARE
  
      Net  earnings per common  share is based  on the weighted  average number of
  common and common equivalent shares outstanding during the periods. Net loss per
  common  share  is  based  on  the  weighted  average  number  of  common  shares
  outstanding.  Pursuant to Securities and Exchange  Commission  Staff  Accounting
  Bulletin No. 83, all common  shares  issued and options and warrants  granted by
  the Company during the twelve months  preceding  March 23, 1993, the date of the
  Company's  initial  public  offering,  except those  issued to General  Electric
  Capital  Corporation  ("GE Capital")  upon exercise of the GE Capital  warrants,
  have been included in the  calculation  of common and common  equivalent  shares
  outstanding as if they were  outstanding  for all periods  presented  (using the
  treasury stock method and a public offering price of $17.00 per share).
  
      (n)  POSTRETIREMENT BENEFITS
  
      The Company has no material  liabilities for  postretirement  benefits.  The
  liabilities for certain individuals who were vested in the prior owner's plan or
  in the prior Lamar Life plan are accounted for in accordance  with  Statement of
  Financial Accounting Standards No. 106.
  
                                         31
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
      (o)  ESTIMATES
  
      The  preparation  of  financial  statements  in  conformity  with  generally
  accepted  accounting  principles  requires  management  to  make  estimates  and
  assumptions  that affect the  reported  amounts of assets and  liabilities,  the
  disclosure of  contingent  assets and  liabilities  at the date of the financial
  statements,  and the  reported  amounts  of  revenues  and  expenses  during the
  reporting period. Actual results could differ from those estimates.
  
      (p)  RECLASSIFICATIONS
  
      The  Company has  reclassified  the  presentation  of certain  prior  period
  information to conform with the 1995 presentation.  The reclassifications had no
  effect on the  financial  position,  results of  operations or cash flows of the
  Company.
  
  2.  ACQUISITION
      On April  28, 1995,  Life Partners  Group, Inc.  finalized an  agreement  to
  acquire   Lamar  Financial  Group,   Inc.  ("Lamar"),  together   with  all  its
  subsidiaries, including Lamar  Life Insurance Company  of Jackson,  Mississippi,
  for a purchase price of $77 million.
  The acquisition is summarized as follows (in millions):
  Assets acquired:
    Investments:
      Fixed maturities.......................................  $     666
      Others.................................................        166
                                                               ---------
                                                                     832
    Cost of insurance acquired...............................        126
    Goodwill.................................................         19
    All other................................................        233
                                                               ---------
                                                                   1,210
                                                               ---------
  Liabilities assumed:
    Future policy benefits...................................         84
    Policyholder account balances............................        857
    Debt.....................................................         46
    All other................................................        146
                                                               ---------
                                                                   1,133
                                                               ---------
  Net assets acquired........................................  $      77
                                                               =========
  Financed by:
  Borrowings under bank credit facility......................  $      36
  Common stock (2,010,645 shares)............................         39
  Cash.......................................................          2
                                                               ---------
                                                               $      77
                                                               =========
  The acquisition was accounted for using the purchase method, and the results
  of operations of Lamar were included in the consolidated statement of operations
  from the date of  acquisition.  Also  included in the results of operations is a
  one time charge of $0.5 million for interest expense on the acquisition purchase
  price.  The fair value of assets and  liabilities of Lamar were reflected in the
  Company's consolidated balance sheet as of April 28, 1995, and goodwill recorded
  as a result of the acquisition was increased by  approximately  $4.8 million due
  to further evaluation of the fair values of
  
                                         32
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  2.  ACQUISITION (CONTINUED)
  
  the  acquired  assets and  liabilities.  Evaluation  of fair values for acquired
  assets and liabilities,  including investments, cost of insurance purchased, and
  insurance and annuity  liabilities  is continuing and allocation of the purchase
  price may be further adjusted.
  
      As of December 31, 1995, the Company had substantially completed the move of
  the primary life, annuity and corporate  functions of Lamar from its location in
  Jackson,  Mississippi, to the Company's headquarters in Englewood,  Colorado. In
  connection  with this move,  the Company has  incurred and  anticipates  certain
  additional  closing  and  moving  costs,  costs to  involuntarily  terminate  or
  relocate employees,  and terminate or renegotiate certain contracts.  Management
  has estimated these costs to total approximately $3.8 million,  and has included
  such estimated costs in the allocation of the acquired net assets of Lamar. Such
  costs may be revised in future  periods if actual  costs  deviate  significantly
  from the estimates.
  
      The following  unaudited  pro forma  information  presents the  consolidated
  results of operations of the Company and Lamar as if the  acquisitions  had been
  effective at the  beginning  of the periods  presented,  after giving  effect to
  adjustments to reflect the acquisition and the financing related thereto.
  PRO FORMA
                                                                           YEAR ENDED DECEMBER 31,
                                                                        ------------------------------
                                                                             1995            1994
                                                                        --------------  --------------
                                                                         (IN THOUSANDS, EXCEPT SHARE
                                                                             AND PER SHARE DATA)
  Revenues............................................................  $      598,313  $      530,641
  Earnings (loss) before income taxes and extraordinary item..........         (14,919)         67,356
  Earnings (loss) before extraordinary item...........................         (12,289)         43,419
  Net earnings (loss).................................................         (12,289)         40,861
  
  Earnings (loss) per share before extraordinary item.................  $        (0.44) $         1.54
  Net earnings (loss) per share.......................................  $        (0.44) $         1.45
  Weighted average common shares and common equivalent shares
   outstanding........................................................      27,777,188      28,121,677
  The above  unaudited  pro forma  information  is intended for  informational
  purposes only and may not  necessarily  be  indicative  of the Company's  future
  results of operations.
  
  3.  NOTES PAYABLE
      Notes payable at December 31, 1995,  and December 31, 1994,  are  summarized
  below (in thousands):
  AMOUNT OUTSTANDING
                                                                                     NET OF UNAMORTIZED
                                                           AMOUNT OUTSTANDING          ISSUANCE COSTS
                                                        ------------------------  ------------------------
                                                           1995         1994         1995         1994
                                                        -----------  -----------  -----------  -----------
  Borrowings under bank credit facility (A)...........  $   156,178  $   121,178  $   155,581   $  120,370
  12 3/4% Senior Subordinated Notes Due 2002 (B)......       95,100       95,100       90,502       90,090
                                                        -----------  -----------  -----------  -----------
                                                        $   251,278  $   216,278  $   246,083  $   210,460
                                                        ===========  ===========  ===========  ===========
  (A) On August 12, 1994, the unsecured syndicated credit facility was amended and
      restated  to include a $50 million  revolving  credit  facility  and various
      other modifications.  On April 28, 1995, the Company utilized $36 million of
      the revolving credit facility in the acquisition of Lamar Financial
  
                                         33
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  3.  NOTES PAYABLE (CONTINUED)
  
      Group,  Inc.  (See Note 2). On December 28, 1995,  the Company  utilized the
      remaining $14 million of the facility.  According to the amended  agreement,
      the $50 million outstanding  principal will convert to a term loan effective
      January 1, 1997,  payable in quarterly  installments  through  September 30,
      1999. The  outstanding  principal under the existing term loan is payable in
      quarterly installments through September 30, 1999. Both the outstanding term
      loan principal and outstanding revolving loan principal may be designated as
      a "base rate loan",  a "eurodollar  loan",  or a combination  of both at the
      Company's option on a periodic basis.
  
      Any principal  portion  designated  as a base rate loan bears  interest at a
      rate per annum  equal to the higher of (a) the  Federal  Funds Rate for such
      day plus 1/2 of 1%,  or (b) the  Prime  rate for  such  day.  Any  principal
      portion  designated as a eurodollar  loan bears interest at a rate per annum
      based upon the one, two, three, or six month LIBOR rate, plus a 1.0% margin.
      At December 31, 1995, the entire  outstanding  term loan principal amount of
      $106.2 million was designated by the Company as a eurodollar  loan,  bearing
      interest  based  upon the six month  LIBOR  rate of 6.75%.  The  outstanding
      revolving  loan principal  amount of $50 million was also  designated by the
      Company as a eurodollar  loan. Of the outstanding  revolving loan principal,
      $36.0 million bears interest based on the six month LIBOR rate of 6.88%, and
      $14.0 million bears interest based upon the three month LIBOR rate of 6.69%.
      The loan agreement under the bank credit facility  contains  covenants,  the
      most restrictive of which limits payments by the Company for dividends to 3%
      of net worth as defined in the agreement.
  
  (B) On July 30, 1992, Life Partners  completed a public offering of $100 million
      of unsecured senior  subordinated notes. The notes bear interest at the rate
      of 12 3/4%  (payable  semi-annually  on  January  15 and July  15),  and the
      principal  of the notes is payable in a single  installment  at  maturity on
      July 15, 2002. The notes are redeemable at Life Partners' option at any time
      after July 15, 1997, and there are no sinking fund  requirements.  The notes
      may be  redeemed  by Life  Partners at  redemption  prices of  103.643%  and
      101.831%  of the  outstanding  principal  balances in the  12-month  periods
      commencing July 15, 1997 and 1998, respectively,  or at 100% thereafter. One
      of Life Partners' subsidiaries purchased $4.9 million of the notes in 1993.
  
      The  following  summary sets forth the  principal  balance of  maturities of
  notes payable during each of the next five years (in thousands):
  1996.....................................................  $  15,000
  1997.....................................................     38,182
  1998.....................................................     48,182
  1999.....................................................     54,814
  2000 and thereafter......................................     95,100
                                                             ---------
                                                             $ 251,278
                                                             =========
  The  components  of interest  expense  associated  with notes payable are as
  follows (in thousands):
  YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  Notes payable........................................................  $  23,225  $  20,728  $  23,584
  Indebtedness to related party........................................                            2,396
                                                                         ---------  ---------  ---------
      Total............................................................  $  23,225  $  20,728  $  25,980
                                                                         =========  =========  =========
  34
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  3.   NOTES PAYABLE (CONTINUED)
  
      Interest  expense for the year ended  December 31, 1995,  as reported in the
  consolidated statement of operations,  also includes interest paid or accrued to
  the Internal  Revenue Service relating to assessments on prior tax years of $4.2
  million  (See Note 12), and interest  expense of $0.5  million  associated  with
  purchase accounting of Lamar (See Note 2).
  
      To  the  extent  that  loans  were  payable  to  GE  Capital,   which  owned
  approximately 40% of the outstanding common stock of Life Partners at January 1,
  1993, under the Senior Loan Agreement,  they were classified as "Indebtedness to
  related  party." To the  extent  that loans are  payable to  unaffiliated  third
  parties, they are classified as "Notes payable" (see Note 9).
  
      The interest and principal  payment terms of surplus  debentures  payable by
  Wabash to Life Partners are structured, subject to certain surplus restrictions,
  to provide  sufficient  cash to meet all payment terms on these loan  agreements
  (see Note 7).
  
  4.  INVESTMENTS
      Investment income by type of investment was as follows (in thousands):
  YEAR ENDED DECEMBER 31,
                                                                   -------------------------------------
                                                                      1995         1994         1993
                                                                   -----------  -----------  -----------
  Gross investment income:
    Fixed maturities.............................................  $   251,403  $   211,318  $   199,164
    Policy loans.................................................       14,732       12,212       12,691
    Short-term investments.......................................        6,583        4,277        4,848
    Other invested assets........................................        5,360        4,179        4,877
    Mortgage loans...............................................        9,445        3,041        4,043
    Equity securities............................................        1,866        1,336        1,113
    Collateral loans.............................................          214          106          118
    Investment real estate.......................................        1,506          337          246
                                                                   -----------  -----------  -----------
      Gross investment income....................................      291,109      236,806      227,100
                                                                   -----------  -----------  -----------
  Less: Investment expenses......................................        6,060        6,293        5,969
        Interest expense on investment borrowings................        7,981        5,135
                                                                   -----------  -----------  -----------
  Net investment income..........................................  $   277,068  $   225,378  $   221,131
                                                                   ===========  ===========  ===========
  Following is an analysis of net realized gains  (losses) on investments  (in
  thousands):
  YEAR ENDED DECEMBER 31,
                                                                     ---------------------------------
                                                                       1995        1994        1993
                                                                     ---------  ----------  ----------
  Fixed maturities.................................................  $   1,253    $(10,122)   $(13,063)
  Equity securities................................................     14,577      (1,126)     33,845
  Other............................................................        (45)     (8,404)     (2,378)
                                                                     ---------  ----------  ----------
                                                                     $  15,785    $(19,652)    $18,404
                                                                     =========  ==========  ==========
  Realized investment gains (losses) resulted in (decelerated) accelerated net
  amortization expense for deferred policy acquisition and deferred policy fees of
  $(8,039,000),  $12,000 and $4,773,000  during the years ended December 31, 1995,
  1994 and 1993, respectively.
  
      Realized  investment losses for other than temporary  declines in the market
  values of debt securities totaled $9.2 million,  $7.1 million, and $54.5 million
  in 1995, 1994, and 1993, respectively.
  
                                         35
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      During 1995,  the Company sold $35.1 million of fixed  maturity  investments
  which were previously classified as held-to-maturity.  Such sales were primarily
  the result of  significant  deterioration  of  creditworthiness  of the issuers.
  Based  upon  available   information,   the  Company   concluded  that,  in  all
  probability,  substantial  amounts due would not be  collected or there would be
  delay in collection,  causing the Company to sell these securities.  As a result
  of such sales, the Company realized net losses of $1.6 million in 1995.
  
      The cost and estimated  fair values of equity  securities are as follows (in
  thousands):
  GROSS        GROSS     ESTIMATED
                                                                     UNREALIZED   UNREALIZED     FAIR
                                                            COST        GAINS       LOSSES       VALUE
                                                          ---------  -----------  -----------  ---------
  December 31, 1995:
  Preferred stock.......................................  $  18,984   $   1,123    $     502   $  19,605
  Common stock..........................................      1,945       2,271          100       4,116
                                                          ---------  ----------   ----------   ---------
      Totals............................................  $  20,929   $   3,394    $     602   $  23,721
                                                          =========  ==========   ==========   =========
  December 31, 1994:
  Preferred stock.......................................  $   8,760   $     231    $   1,134   $   7,857
  Common stock..........................................      5,745      14,057          149      19,653
                                                          ---------  ----------   ----------   ---------
      Totals............................................  $  14,505   $  14,288    $   1,283   $  27,510
                                                          =========  ==========   ==========   =========
  The amortized cost and estimated fair values of debt  securities  classified
  as fixed maturity investments held-to-maturity are as follows (in thousands):
  GROSS        GROSS                  
                                                                    AMORTIZED   UNREALIZED   UNREALIZED    ESTIMATED
                                                                      COST         GAINS       LOSSES     FAIR VALUE
                                                                   -----------  -----------  -----------  -----------
  December 31, 1995:
  United States treasury securities and obligations of United
   States government corporations and agencies...................  $     2,024   $      44                $     2,068
  Obligations of states and political subdivisions...............        2,420         307                      2,727
  Debt securities issued by foreign government...................       16,272       1,014                     17,286
  Corporate securities...........................................      533,110      36,273    $   4,280       565,103
  Mortgage-backed securities.....................................       74,470       4,959          107        79,322
  Other debt securities..........................................       50,530       4,641          301        54,870
                                                                   -----------   ----------   ---------   -----------
      Totals.....................................................  $   678,826   $  47,238    $   4,688   $   721,376
                                                                   ===========   =========    =========   ===========
  36
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  GROSS        GROSS
                                                                AMORTIZED    UNREALIZED   UNREALIZED     ESTIMATED
                                                                  COST          GAINS       LOSSES      FAIR VALUE
                                                              -------------  -----------  -----------  -------------
  December 31, 1994:
  United States treasury securities and obligations of
   United States government corporations and agencies.......  $      32,725   $      44   $     1,964  $      30,805
  Obligations of states and political subdivisions..........            757          88                          845
  Debt securities issued by foreign governments.............         19,077                     2,851         16,226
  Corporate securities......................................      1,047,684       7,991        71,981        983,694
  Mortgage-backed securities................................        226,205          55        12,814        213,446
  Other debt securities.....................................        243,586         456        20,807        223,235
                                                              -------------  ----------   ----------   -------------
      Totals................................................  $   1,570,034   $   8,634   $   110,417   $  1,468,251
                                                              =============  ==========   ===========  =============
  The amortized cost and estimated fair values of debt  securities  classified
  as investments available-for-sale are as follows (in thousands):
  GROSS        GROSS
                                                                AMORTIZED    UNREALIZED   UNREALIZED    ESTIMATED
                                                                  COST          GAINS       LOSSES      FAIR VALUE
                                                              -------------  -----------  -----------  -------------
  December 31, 1995:
  United States treasury securities and obligations of
   United States government corporations and agencies.......  $      93,368  $     4,620   $     110   $      97,878
  Obligations of states and political subdivisions..........          8,443          273                       8,716
  Debt securities issued by foreign governments.............         18,440          673          66          19,047
  Corporate securities......................................      1,044,051       52,822      11,965       1,084,908
  Mortgage-backed securities................................      1,147,848       52,606       1,345       1,199,109
  Other debt securities.....................................        249,325       14,584       1,202         262,707
                                                              -------------  -----------   ---------   -------------
      Totals................................................  $   2,561,475  $   125,578   $  14,688   $   2,672,365
                                                              =============  ===========   =========   =============
  GROSS        GROSS
                                                                 AMORTIZED    UNREALIZED   UNREALIZED     ESTIMATED
                                                                   COST          GAINS       LOSSES      FAIR VALUE
                                                               -------------  -----------  -----------  -------------
  December 31, 1994:
  United States treasury securities and obligations of United
   States government corporations and agencies...............  $      94,245   $     238    $   5,629   $      88,854
  Obligations of states and political subdivisions...........          1,427                       79           1,348
  Debt securities issued by foreign government...............          4,859                      615           4,244
  Corporate securities.......................................        389,856       3,794       20,066         373,584
  Mortgage-backed securities.................................        575,181       3,272       30,974         547,479
  Other debt securities......................................         47,218         365        4,382          43,201
                                                               -------------   ---------    ---------   -------------
      Totals.................................................  $   1,112,786   $   7,669    $  61,745   $   1,058,710
                                                               =============   =========    =========   =============
  37
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      The amortized cost and estimated  fair value of debt  securities at December
  31, 1995, by contractual  maturity,  are shown below.  Expected  maturities will
  differ from contractual  maturities because borrowers may have the right to call
  or prepay obligations with or without call or prepayment penalties.
  
      Held-to-Maturity:
  AMORTIZED    ESTIMATED
                                                                                COST      FAIR VALUE
                                                                             -----------  -----------
                                                                                  (IN THOUSANDS)
  Due in one year or less..................................................  $       990  $       983
  Due after one year through five years....................................       75,968       77,322
  Due after five years through ten years...................................      214,310      225,881
  Due after ten years......................................................      313,088      337,868
                                                                             -----------  -----------
                                                                                 604,356      642,054
  Mortgage-backed securities...............................................       74,470       79,322
                                                                             -----------  -----------
                                                                             $   678,826  $   721,376
                                                                             ===========  ===========
  Available-for-Sale:
  AMORTIZED      ESTIMATED
                                                                             COST        FAIR VALUE
                                                                         -------------  -------------
                                                                                (IN THOUSANDS)
  Due in one year or less..............................................  $      26,400  $      26,599
  Due after one year through five years................................        240,530        249,527
  Due after five years through ten years...............................        547,760        573,534
  Due after ten years..................................................        598,937        623,596
                                                                         -------------  -------------
                                                                             1,413,627      1,473,256
  Mortgage-back securities.............................................      1,147,848      1,199,109
                                                                         -------------  -------------
                                                                         $   2,561,475  $   2,672,365
                                                                         =============  =============
  In November 1995, the Financial  Accounting  Standards Board issued "A GUIDE
  TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT
  AND  EQUITY   SECURITIES"  which  permitted  a  one-time   reassessment  of  the
  appropriateness  of  the  classifications  of  all  securities.  Based  on  such
  reassessment,    the   Company   transferred   certain   securities   from   the
  held-to-maturity portfolio to the available-for-sale portfolio in November 1995.
  The  transferred  securities  had an amortized  cost of  approximately  $1,201.4
  million and net unrealized  gains of approximately  $52.1 million.  The transfer
  resulted in an increase of approximately $26.4 million to shareholders'  equity.
  Such  reassessment  does not  change  management's  intent  to hold  other  debt
  securities to maturity.
  
      Gross gains of $25.3 million and gross losses of $14.8 million were realized
  in 1995 from the sale of  investments in debt  securities;  gross gains of $19.0
  million and gross losses of $22.0 million were realized in 1994; and gross gains
  of $47.6 million and gross losses of $6.2 million were realized in 1993.
  
      At December 31, 1995,  the Company held cash and  short-term  investments of
  Dreyfus  Treasury Cash  Management Fund with a carrying amount of $58.7 million,
  which was greater than 10% of stockholders' equity at December 31, 1995.
  
                                         38
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  4.  INVESTMENTS (CONTINUED)
  
      At December 31, 1994, the carrying amount, fair value and effective yield of
  high-risk  collateralized mortgage obligations included in fixed maturities were
  $11.6 million, $10.7 million and 14.8%, respectively.  At December 31, 1995, the
  Company  did not hold any  collateralized  mortgage  obligations  which would be
  considered high-risk.
  
      The carrying  value of investments  that have produced no investment  income
  for the three years ended  December 31,  1995,  1994 or 1993 was not material to
  the Company's consolidated financial position.
  
      The  Company  has  only  limited   involvement  with  derivative   financial
  instruments and does not use them for trading purposes.  They are used to manage
  well-defined  interest rate risks.  The Company  entered into interest rate swap
  agreements  during  1991 and 1993 for the  purpose  of  minimizing  exposure  to
  fluctuations  in interest  rates of specific  assets  held by the  Company.  The
  notional amount of such matched swaps outstanding at December 31, 1994 and 1993,
  was $20 million, and $120 million, respectively. During 1994, certain swaps were
  terminated resulting in an aggregate loss of approximately $6.8 million.  During
  the first quarter of 1995,  the Company  terminated  its  remaining  swaps which
  resulted in an aggregate loss of approximately $116,000.
  
      Following is an analysis of the components of net unrealized gains (losses),
  net of tax on investments (in thousands):
  DECEMBER 31,
                                                                              -----------------------
                                                                                 1995         1994
                                                                              -----------  ----------
  Investments carried at estimated fair value:
    Available-for-sale fixed maturities.....................................  $   110,890  $  (54,076)
    Equity securities.......................................................        2,792      13,005
                                                                              -----------  ----------
                                                                                  113,682     (41,071)
  Less effect on other balance sheet accounts:
    Deferred policy acquisition costs.......................................      (11,510)      6,131
    Cost of insurance acquired..............................................      (14,427)
    Deferred policy fees....................................................        1,485        (244)
    Deferred income taxes...................................................      (31,140)     12,535
    Other...................................................................          179        (134)
                                                                              -----------  ----------
    Net unrealized gains (losses) on investments............................  $    58,269  $  (22,783)
                                                                              ===========  ==========
  5.  CONCENTRATIONS OF CREDIT RISK
  
      The Company held unrated or non-investment  grade corporate debt securities,
  excluding senior secured debt securities and mezzanine financing securities,  as
  follows (in millions):
  DECEMBER 31,
                                                                                  --------------------
                                                                                    1995       1994
                                                                                  ---------  ---------
  Carrying value, net of loss reserves..........................................  $   146.2  $   101.9
  Market value..................................................................      150.0      100.8
  Percentage of fixed maturity investments......................................          4%         4%
  Percentage of total cash and invested assets..................................          4%         3%
  Number of issuers.............................................................         74         77
  39
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  5.  CONCENTRATIONS OF CREDIT RISK (CONTINUED)
  
      Additionally,  the Company held investments in  non-investment  grade senior
  secured  debt  securities  and  mezzanine  financing  securities  as follows (in
  millions):
  DECEMBER 31,
                                                                         --------------------
                                                                           1995       1994
                                                                         ---------  ---------
  Carrying value.......................................................  $    61.8  $    68.3
  Market value.........................................................       61.3       68.3
  Percentage of fixed maturity investments.............................          2%         3%
  Percentage of total cash and invested assets.........................          2%         2%
  Numbers of issuers...................................................         20         24
  6.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS
  
      The following  methods and assumptions  were used to estimate the fair value
  of each  class of  financial  instrument  required  to be valued by SFAS 107 for
  which  it  is  practicable  to  estimate  that  value.  None  of  the  financial
  instruments are held for trading purposes.
  
      (a)  FIXED MATURITIES HELD-TO-MATURITY AND AVAILABLE-FOR-SALE
  
      For those securities  held-to-maturity  and  available-for-sale,  fair value
  equals  quoted  market  price,  if  available.  If a quoted  market price is not
  available,  fair value is  estimated  using  quoted  market  prices for  similar
  securities or discounted future cash flows.
  
      (b)  EQUITY SECURITIES
  
      For equity securities,  fair value equals quoted market price, if available.
  If a quoted market price is not available,  fair value is estimated using quoted
  market prices for similar securities.
  
      (c)  MORTGAGE LOANS ON REAL ESTATE
  
      Fair  value  is  estimated  by  grouping  mortgage  loans  into  homogeneous
  categories  and using  quoted  market  prices for  securities  backed by similar
  loans, adjusted for differences in loan characteristics.
  
      (d)  SHORT-TERM INVESTMENTS
  
      For short-term instruments,  the carrying amount is a reasonable estimate of
  fair value.
  
      (e)  INVESTMENT CONTRACT LIABILITIES
  
      For annuity contracts which do not possess significant insurance risks, cash
  surrender value is a reasonable estimate of fair value.
  
      (f)  NOTES PAYABLE
  
      For borrowings under the senior loan agreement and the bank credit facility,
  which are subject to floating rates of interest,  the  outstanding  balance is a
  reasonable  estimate of fair value.  Fair value of  borrowings  under the senior
  subordinated notes due in 2002 equals quoted market price at the reporting date.
  
      (g)  INTEREST RATE SWAP AGREEMENTS
  
      The fair value of  interest  rate  swaps is the  estimated  amount  that the
  Company would  receive or pay to terminate the swap  agreements at the reporting
  date,   taking   into   account   current   interest   rates  and  the   current
  creditworthiness of the swap counterparties.
  
                                         40
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  6.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
      (h)  NOTES AND ACCOUNTS RECEIVABLE AND UNCOLLECTED PREMIUMS
  
      Notes  and  accounts  receivable  and  uncollected  premiums  are  primarily
  insurance  contract  related  receivables  which are  determined  based upon the
  underlying  insurance  liabilities and related reinsurance amounts, and thus are
  excluded for the purpose of fair value disclosure by paragraph 8(c) of SFAS 107.
  
      The estimated fair values of the Company's financial instruments required to
  be valued by SFAS 107 are as follows as of December 31 (in thousands):
  1995                          1994
                                                         ----------------------------  ----------------------------
                                                           CARRYING       ESTIMATED      CARRYING       ESTIMATED
                                                            AMOUNT       FAIR VALUE       AMOUNT        FAIR VALUE
                                                         -------------  -------------  -------------  -------------
  Financial assets:
    Fixed maturities:
      Held-to-maturity.................................  $     678,826  $     721,376  $   1,570,034  $   1,468,251
      Available-for-sale...............................      2,672,365      2,672,365      1,058,710      1,058,710
    Equity securities..................................         23,721         23,721         27,510         27,510
    Mortgage loans on real estate......................        110,214        100,003         34,177         34,184
    Policy loans (A)...................................        226,212                       192,909
    Short-term investments.............................         71,744         71,744          5,537          5,537
    Other invested assets (B)..........................         59,593                        56,039
  
  Financial liabilities:  
    Investment contract liabilities....................      1,246,807      1,152,950        888,514        810,187
    Notes payable:
      Senior subordinated notes due 2002...............         90,502        101,548         90,090        101,282
      Bank credit facility.............................        155,581        155,581        120,370        120,370
  Unrecognized financial instruments:
    Interest rate swaps in a net receivable position
     (C)...............................................                                           76           (219)
  (A) It is not  practicable  to estimate  the fair value of policy  loans as they
      have no stated maturity and their rates are set at a fixed spread to related
      policy  liability  rates.  Policy loans are carried at the aggregate  unpaid
      principal balances in the consolidated  balance sheets, and earn interest at
      rates  ranging from 4% to 9%.  Individual  policy  liabilities  in all cases
      equal or exceed outstanding policy loan balances.
  
  (B) Other invested assets consist primarily of limited  partnership  investments
      acquired prior to 1995 and carried at cost, for which the  determination  of
      fair value is not  practicable.  The carrying  value of limited  partnership
      investments  were $42.1  million and $45.8  million at December 31, 1995 and
      1994, respectively.
  
  (C) The amount shown under "carrying amount"  represents accrued interest on the
      unrecognized notional amounts of interest rate swaps.
  
  7.  STOCKHOLDERS' EQUITY AND RESTRICTIONS
  
      At  December  31,  1995  and  1994,   substantially   all  of   consolidated
  stockholders'  equity  represented  net assets of  insurance  subsidiaries  that
  cannot be  transferred  to Life  Partners in the form of  dividends,  loans,  or
  advances without prior regulatory approval. Funds are transferred from Wabash to
  Life  Partners in the form of  interest  and  principal  payments on the surplus
  debentures (see Note 3).
  
                                         41
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  7.  STOCKHOLDERS' EQUITY AND RESTRICTIONS (CONTINUED)
  
  Generally,  the net assets of the other  insurance  subsidiaries  available  for
  transfer  to Wabash are  limited  to the  greater  of the  respective  insurance
  subsidiary's  net gain from  operations  during the preceding year or 10% of the
  respective  subsidiary's  net surplus as of the end of the  preceding  year,  as
  determined in accordance  with accounting  practices  prescribed or permitted by
  insurance regulatory authorities. Payment of dividends in excess of such amounts
  would generally  require  approval by the regulatory  authorities.  During 1996,
  $37.7 million is available for payment of dividends by insurance subsidiaries to
  Wabash without prior approval.
  
  8.  PREFERRED STOCK
  
      At December  31, 1995 and 1994,  Life  Partners  has  10,000,000  authorized
  shares of Series Life Partners  Series  Preferred  Stock with $.01 par value and
  $1,000 per share stated  value,  250,000  shares of which are  designated as 15%
  Series A Exchangeable Preferred Stock.
  
      On March 31, 1993,  as a result of the receipt of proceeds from the issuance
  of common stock through an initial public  offering,  all outstanding  shares of
  Series A Exchangeable  Preferred  Stock and accrued PIK Dividends were redeemed.
  There were no outstanding shares at December 31, 1995 and 1994 (See Note 9).
  
  9.  COMMON STOCK
  
      On March 23, 1993, the Company amended its certificate of incorporation  to,
  among  other  things,  change its  authorized  Class A Common  Stock and Class B
  Common Stock into one class of stock of the Company  designated as Common Stock.
  Upon the  effectiveness  of such  amendment,  each of the 13,150,749  issued and
  outstanding  shares of Class A Common Stock and 1,234,675 issued and outstanding
  shares of Class B Common Stock were  automatically  converted  into one share of
  Common Stock. During 1995 and 1994 the Company paid approximately $3,018,192, or
  $0.11 per share,  and  $2,035,000,  or $0.08 per share, in cash dividends on the
  Common Stock, respectively.
  
      On March 31, 1993, the Company issued  11,000,000  shares of $.001 par value
  Common  Stock  through an initial  public  offering at a price of $17 per share.
  Also included in the offering were 5,806,440  shares of Common Stock  previously
  owned by GE Capital.  The Company did not receive any proceeds  from the sale of
  the GE Capital  shares.  The net proceeds to the Company from the offering  were
  used to redeem all outstanding  shares of Series A Exchangeable  Preferred Stock
  and accrued PIK Dividends for $122.0  million and to prepay $51.7 million on the
  notes payable.
  
      At December 31, 1993,  there were 37,719 shares of Common Stock reserved for
  issuance to three  directors  pursuant to warrants  issued during 1991 and 1992.
  During 1994, two of the directors  exercised their warrants and were each issued
  12,573  shares of Common  stock at an  exercise  price of $3.98 per  share.  The
  remaining  warrant  has an  exercise  price of $3.98  per  share,  is  currently
  exercisable  by the holder,  and, if  unexercised,  will expire on November  12,
  1996. The option price was determined by the Compensation Committee of the Board
  of Directors in February  1991 and  represented  a 25% premium over the previous
  sale of stock in March 1990.  In August 1993,  the Board of  Directors  formally
  granted  options to a director to purchase  10,000  shares of Common Stock at an
  exercise  price of $21.00 per share.  The options vest in equal amounts in 1994,
  1995, and 1996, and expire in 2003.
  
      At December 31, 1995,  and 1994,  there were 352,941  shares of Common Stock
  reserved for  issuance  pursuant to an option which was granted to an officer in
  1991 at an exercise price of $5.31 per share.  The option vested in October 1992
  and  expires on November 1, 2001.  Upon  issuance  the shares will be subject to
  transfer and voting restrictions imposed under an agreement among Life Partners
  
                                         42
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
  and its  stockholders.  At issuance,  the option price was greater than the fair
  value of the stock,  based on the value  negotiations with the option holder and
  the  restrictions  placed on the sale of the  stock by virtue of a pledge  and a
  stockholders agreement.
  
      On November 30, 1994 the Company granted options to purchase  250,000 shares
  of Common  Stock to the  Company's  chief  executive  officer.  The  options are
  exercisable  at $20.25 per share,  vest  equally  over a five year  period,  and
  expire in 2003.
  
      In addition,  Life Partners has reserved  800,000 shares of Common Stock for
  future  issuance  pursuant  to a stock  option  plan which is for the benefit of
  officers  and  key  employees.  Stock  options  were  formally  granted  by  the
  Compensation  Committee of the Life  Partners  Board of Directors at a price not
  less than market value on the date of grant.  They are exercisable for up to ten
  years from the date of grant and vest equally over a three or five year period.
  
      Options outstanding under this stock option plan are as follows:
  NUMBER OF SHARES
                                                                                       ----------------------------------
                                                               OPTION PRICE               1995        1994        1993
                                                      -------------------------------  -----------  ---------  ----------
  Outstanding at January 1..........................     $ 3.28         to     $20.25      612,101    606,134     606,400
  Granted during the year...........................     $19.13         to     $20.25                              84,400
                                                         $16.75                                       100,800
                                                         $12.62         to     $18.50      685,600
  Exercised during the year.........................     $ 3.28         to     $20.25     (370,872)   (93,766)    (25,998)
  Forfeited during the year.........................                                       (53,734)    (1,067)    (58,668)
  Transferred into plan.............................                                       250,000
                                                      ---------             ---------  -----------  ---------  ----------
  Outstanding at December 31........................     $ 3.28         to     $20.25    1,123,095    612,101     606,134
                                                                                       ===========  =========  ==========
  Portion thereof that is exercisable at
    December 31.....................................     $ 3.28         to     $20.25      202,022    278,469     166,512
                                                                                       ===========  =========  ==========
  Available for future grant........................                                       186,269     68,135     167,868
                                                                                       ===========  =========  ==========
  43
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
      Capital stock activity for the years 1995, 1994, and 1993 was as follows:
  NUMBER OF SHARES
                                                           AUTHORIZED   --------------------------------------------
                                                           PER SERIES       1995           1994            1993
                                                           -----------  -------------  -------------  --------------
  Preferred stock (authorized 10,000,000 shares):
    15% Series A Exchangeable Preferred Stock............     250,000
    Balance, beginning of year...........................                                                    118,005
    Preferred stock dividends in kind....................                                                      3,978
    Redemption of preferred stock........................                                                   (121,983)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock Class A (authorized 50,000,000 shares):
    Balance, beginning of year...........................                                                 13,150,749
    Conversion of Class A Common Stock to
      Common Stock.......................................                                                (13,150,749)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock, Class B (authorized 2,000,000 shares):
    Balance, beginning of year...........................                                                  1,234,675
    Conversion of Class B Common Stock to
      Common Stock.......................................                                                 (1,234,675)
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                                                          0
                                                                        =============  =============  ==============
  Common Stock (authorized 50,000,000 shares):
    Balance, beginning of year...........................                  25,530,334     25,411,422
    Common Stock issued in initial public
      offering...........................................                                                 11,000,000
    Common Stock issued in acquisition of
      subsidiaries.......................................                   2,010,645
    Exercise of stock options to
      purchase Common Stock..............................                     370,872         93,766          25,998
    Exercise of stock warrants to purchase
      common stock.......................................                                     25,146
    Conversion of Class A Common Stock to
      Common Stock.......................................                                                 13,150,749
    Conversion of Class B Common Stock to
      Common Stock.......................................                                                  1,234,675
                                                                        -------------  -------------  --------------
    Balance, end of year.................................                  27,911,851     25,530,334      25,411,422
                                                                        =============  =============  ==============
  In October 1995, the Financial  Accounting  Standards Board issued Statement
  of  Financial   Accounting   Standards  No.  123,   ACCOUNTING  FOR  STOCK-BASED
  COMPENSATION  ("SFAS 123"). SFAS 123 establishes fair value based accounting and
  reporting  standards for all  transactions in which a company  acquires goods or
  services by issuing equity securities, including stock-based compensation plans.
  Under SFAS 123,  compensation  cost is  measured  at the grant date based on the
  value of the award and is recognized over the service period, which is usually
  the vesting period. The fair value of
  
                                         44
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  9.  COMMON STOCK (CONTINUED)
  
  stock  options is  determined  using an  option-pricing  model.  This  statement
  encourages, but does not require, companies to adopt the fair value based method
  of accounting to recognize  compensation expense for employee stock compensation
  plans.  However,  it does  require  a  company  to  comply  with the  disclosure
  requirements  set forth in the  statement.  The  Company  expects to continue to
  utilize the accounting in Accounting Principles Board Opinion No. 25, ACCOUNTING
  FOR STOCK ISSUED TO EMPLOYEES, and in 1996, and thereafter,  expects to make pro
  forma  disclosures of net income as if the fair value based method of accounting
  defined in SFAS 123 had been applied.
  
  10. REINSURANCE
  
      The life insurance subsidiaries have retention limits for acceptance of risk
  on life  insurance  policies at various  levels up to $1 million,  for  business
  issued prior to 1987.  Effective  January 1, 1987,  the retention  limit for new
  policy  issues  has  been  set at  various  levels  up to  $500,000.  There  are
  reinsurance agreements with various companies whereby insurance in excess of the
  respective  subsidiaries'  retention  limits is  reinsured.  To the extent  that
  reinsuring  companies  become  unable  to meet  their  obligations  under  these
  agreements,  the subsidiaries  remain  contingently  liable.  Insurance in force
  ceded at December  31,  1995 and 1994 under risk  sharing  arrangements  totaled
  approximately $16.4 billion and $11.0 billion,  respectively.  The liability for
  future policy  benefits is stated  exclusive of amounts  applicable to such risk
  sharing reinsurance ceded as of December 31, 1995, and 1994 of $86.5 million and
  $75.2 million,  respectively.  Policyholder  benefits  reflects the reduction of
  death and accident and health  claims by amounts  recovered  from  reinsurers of
  $114.3 million, $42.9 million and $41.4 million for the years ended December 31,
  1995, 1994, and 1993, respectively.
  
      Accident and health  premiums are net of assumed  premiums of $41.4  million
  and ceded  premiums of $71.4 million for the year ended  December 31, 1995.  The
  Company did not have material reinsurance for accident and health business prior
  to the Lamar acquisition in 1995.
  
      Massachusetts  General has ceded a block of  insurance  under a  coinsurance
  agreement  generally  known as "financial  reinsurance."  Net statutory  surplus
  provided by this treaty was $1.3  million and $2.9  million at December 31, 1995
  and 1994,  respectively.  Lamar Life has also ceded a block of insurance under a
  coinsurance  agreement  that is considered  financial  reinsurance.  Net surplus
  provided by this treaty was $8.2 million at December 31, 1995. These reinsurance
  agreements represent financing arrangements and, in accordance with generally
  accepted  accounting  principles,  are  not  reflected  as  reinsurance  in  the
  accompanying  financial  statements except for the risk fees paid to or received
  from the reinsurers.
  
      The Company held assets and  reserves of  approximately  $192.0  million and
  $161.6  million at December  31,  1995 and 1994,  respectively,  under  modified
  coinsurance  agreements  with  reinsurance  companies  owned by  certain  of the
  Company's agents.
  
      During July 1993 the Company  entered into a coinsurance  agreement  whereby
  the  Company  received  $140.1  million in cash and  assumed  $154.6  million in
  annuity fund liabilities,  which were subject to surrender penalties aggregating
  $17.2 million.
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES
  
      IPS leases  office  facilities  in Englewood,  Colorado.  In July,  1994 the
  Company  renegotiated  certain  provisions  of the master lease  agreement.  The
  minimum rental commitment under the revised  noncancelable lease is $1.1 million
  per year  through  June,  2014 and $2.6  million  per  year  through  the  lease
  expiration date in July,  2016. The Company has no other  significant  long-term
  leases. Rental expense for the years 1995, 1994, and 1993 was approximately $1.9
  million, $2.0 million, and $2.7 million, respectively.
  
                                         45
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES (CONTINUED)
  
      Wabash and Life Partners, as guarantor of the obligations of Wabash, entered
  into an  agreement  with Perot  Systems  Corporation  ("Perot")  to provide data
  processing  services  to the  Company  through  February,  2001.  Fees under the
  servicing  agreement  are based upon  usage,  with  minimum  annual fees of $3.6
  million.  The agreement is subject to an option available in 1996 whereby Wabash
  could pay a fee of  approximately  $4 million to terminate  the  agreement.  The
  Company is negotiating  with Perot  regarding this option as part of a review of
  its data processing arrangements.
  
      At December  31,  1994,  Philadelphia  Life and  Massachusetts  General were
  defendants  in a class  action  originally  instituted  by a  former  agent  and
  policyholder of Philadelphia Life. In the case, the plaintiff alleged that these
  companies  breached the terms of certain  universal  life policies by increasing
  the  cost of  insurance  rates  to pass on a  portion  of  their  increased  tax
  liability resulting from the passage of the Revenue  Reconciliation Act in 1990,
  which act contained  provisions  requiring the  recognition of taxable income by
  the insurer on a percentage of actual premium  received on existing,  as well as
  subsequently  written,  individual  life policies (the so called "DAC tax").  On
  July 31, 1995 the Federal District Court in California  approved a settlement of
  this  action  following  notice to members of the class.  The  recording  of the
  liability  associated with this settlement and other related litigation resulted
  in a pre-tax expense of $14.2 million for the year ended December 31, 1995.
  
      In  addition,  various  other  lawsuits  and claims are pending  against the
  Company.  The Company has established a liability of approximately $1 million in
  its financial statements, as of December 31, 1995, for litigation contingencies.
  While this provision was established based upon management's  judgment as to the
  probable exposure  associated with the disposition of these lawsuits,  there can
  be no assurance  that the Company's  ultimate  liability,  if any, in connection
  with such lawsuits will not exceed the provisions established therefor.
  
      In  connection  with the Company's  acquisition  of certain of its insurance
  subsidiaries,  the seller, I.C.H. Corporation ("I.C.H.") agreed to indemnify the
  Company  relative to various matters  pertaining to the Internal Revenue Service
  ("IRS")  examination  for periods  prior to the  acquisition  of said  insurance
  subsidiaries.  To the extent the IRS  examination  of  preacquisition  tax years
  results  in an  increase  in  the  Company's  tax  in  years  subsequent  to the
  examination,  I.C.H.  has  contractually  agreed to  reimburse  the  Company for
  certain disallowed  deductions  relating to Philadelphia Life. In addition,  the
  Company believes that I.C.H. is liable for damages in postacquisition tax years
  with respect to Massachusetts General and other insurance subsidiaries resulting
  from I.C.H.'s  failure to satisfy  certain  contractual  covenants in connection
  with  such  tax   examinations.   Philadelphia  Life  is  also  a  party  to  an
  indemnification  agreement between Tenneco Inc.  ("Tenneco"),  I.C.H. and others
  included  in  the  acquisition  agreement  pursuant  to  which  I.C.H.  acquired
  Philadelphia  Life and other insurance  companies from Tenneco pursuant to which
  Tenneco agreed to indemnify Phliadelphia Life for certain lost deductions.
  
      On  October  10,  1995,  I.C.H.   filed  under  Chapter  11  for  bankruptcy
  protection.  I.C.H.,  in  publicly  released  documents,  has stated that it has
  reached a tentative  agreement  with the IRS for tax years  through 1989 whereby
  I.C.H.'s insurance subsidiaries would be subject to approximately $68 million of
  federal  income tax  liability  and interest  for years in which  certain of the
  Company's  insurance  subsidiaries were members of the consolidated  federal tax
  group to which such tax liability  related.  All members of a consolidated group
  of companies  may be, under federal law,  jointly and  severally  liable for tax
  deficiencies  related to such group.  The Company has been  informed that I.C.H.
  has made  payment to the IRS for the tax  liability  and  interest.  I.C.H.  has
  orally  advised  the  Company  of an  intention  to file  suit  against  certain
  subsidiaries of the Company for contribution of their respective  shares of such
  tax deficiency. Based upon the indemnification provisions and other relevant
  documents,  the Company  does not  believe  that it will be  responsible  for an
  allocable share of said taxes.
  
                                         46
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  11. COMMITMENTS, LITIGATION AND CONTINGENT LIABILITIES (CONTINUED)
  
      The Company has received a determination from an IRS examination of  certain
  agent compensation practices in certain of its life insurance subsidiaries.  The
  Company has  protested  and appealed  the  assessment.  It is possible  that the
  ultimate  resolution of this examination  could result in additional  employment
  taxes,  interest  and  penalties  for the period under  examination,  as well as
  future periods which are subject to  examination.  The Company  believes that it
  has made adequate provision for the potential outcome of the appeal.
  
  12. FEDERAL INCOME TAXES
  
      Life Partners and its direct non-life  subsidiary  companies acquired in the
  Lamar  acquisition file a consolidated  non-life federal income tax return.  The
  life insurance  subsidiaries file a consolidated life federal income tax return.
  Non-life  subsidiaries of the insurance  companies each file a separate  federal
  income tax return.
  
      The  components  of the  provision  (benefit)  for income taxes on operating
  earnings (loss) before income taxes and  extraordinary  items are as follows (in
  thousands):
  YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  Current tax provision................................................  $  19,268  $   2,097  $  39,971
  Deferred tax provision (benefit).....................................    (22,539)    19,168    (10,103)
                                                                         ---------  ---------  ---------
      Total income tax provision (benefit).............................  $  (3,271) $  21,265  $  29,868
                                                                         =========  =========  =========
  A  reconciliation  of  the  income  tax  provision  (benefit)  based  on the
  prevailing  corporate  tax  rate  of  35%  to  the  provision  reflected  in the
  consolidated financial statements is as follows (in thousands):
  YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  Computed expected income tax expense (benefit) at statutory regular
   tax rate............................................................  $  (5,829) $  20,465  $  28,651
  Amortization of goodwill.............................................        961        835        813
  Dividends received deduction.........................................       (379)       (93)       (91)
  Change in corporate tax rate.........................................                              479
  Other................................................................      1,976         58         16
                                                                         ---------  ---------  ---------
      Total income tax provision (benefit).............................  $  (3,271) $  21,265  $  29,868
                                                                         =========  =========  =========
  The  Company  recorded a general  provision  for tax  contingencies  of $2.0
  million at December 31, 1995.  The result of this  provision was to decrease the
  Company's 1995 effective tax rate by 12%.
  
                                         47
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  12. FEDERAL INCOME TAXES (CONTINUED)
  
      The temporary differences that give rise to a deferred tax asset (liability)
  at December 31, 1995 and 1994, relate to the following (in thousands):
  DECEMBER 31,
                                                                             --------------------------
                                                                                 1995          1994
                                                                             ------------  ------------
  Investments..............................................................  $    (24,696) $     13,862
  Deferred policy acquisition costs and cost of insurance acquired.........      (216,668)     (181,267)
  Future policy benefits and policyholder account balances.................       173,940       117,797
  Policy acquisition expenses..............................................        37,280        26,087
  Net operating loss carryforwards.........................................         3,103         6,672
  Other....................................................................         3,259         2,960
                                                                             ------------  ------------
  Deferred tax liability...................................................       (23,782)      (13,889)
  Valuation allowance......................................................        (2,030)
                                                                             ------------  ------------
  Deferred tax liability -- net of valuation allowance.....................  $    (25,812) $    (13,889)
                                                                             ============  ============
  As of December  31,  1995,  Life  Partners  has $8.9  million in federal net
  operating loss carryforwards which have expiration dates from 2006 through 2009.
  
      A  valuation  allowance  of $2.0  million  has  been  established  as of the
  purchase date for certain operating loss carryforwards and temporary differences
  of non-life companies acquired in the Lamar acquisition. The valuation allowance
  against  deferred tax assets will be continually  evaluated and any  adjustments
  will be allocated to reduce goodwill or other  noncurrent  intangible  assets of
  the acquired companies.
  
      Included in interest expense in the consolidated statement of operations for
  the year ended December 31, 1995, is a provision for interest of $4.2 million on
  federal income tax deficiencies relating to prior year taxes. I.C.H. has reached
  a  settlement  agreement  with the IRS  whereby  certain  of the  Company's  tax
  deductions which relate to amortization of purchased intangibles have been
  disallowed.  The  provision  for interest  includes the interest cost related to
  these  lost  deductions.  As a result  of the IRS  settlement,  the tax basis of
  certain assets of Philadelphia  Life was increased.  The effect of this increase
  will result in a refund of federal  income taxes paid in years these assets were
  sold  with  a  corresponding   receipt  of  interest.  No  receivable  has  been
  established  for the  interest  attributable  to the  refund of taxes  since the
  amount and timing are uncertain at this time.
  
      The IRS has examined  federal  income tax returns of certain  Life  Partners
  companies  through  the 1991 tax year.  An  examination  was also  performed  on
  certain Lamar Financial Group subsidiary returns through the 1994 preacquisition
  tax years.  In addition,  the Company has been  informed that the IRS intends to
  begin an examination of certain Life Partners' insurance subsidiaries income tax
  returns for 1992,  1993, and 1994 tax years. The Company does not anticipate any
  significant  adjustments which would materially affect the financial position or
  results of operations of the Company.
  
      Under previous life  insurance  company tax laws, a portion of the Company's
  gain from  operations  which was not  subject to  current  income  taxation  was
  accumulated for tax purposes as Policyholders'  Surplus Accounts.  The aggregate
  accumulation in this account was approximately $7.6 million at December 31,
  1995.  Should the  accumulation in the  Policyholders'  Surplus  Accounts exceed
  certain stated  maximums,  or if certain other events occur, all or a portion of
  the  amount may be  subject  to  federal  income  taxes at rates then in effect.
  Deferred taxes have not been established for such amounts since the Company does
  not anticipate paying taxes on the Policyholders' Surplus Accounts.
  
                                         48
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  13.PERMITTED STATUTORY ACCOUNTING PRACTICES AND SUPPLEMENTAL STATUTORY FINANCIAL
     INFORMATION
  
      Life Partners'  insurance  subsidiaries  prepare their  statutory  financial
  statements in accordance  with accounting  practices  prescribed or permitted by
  their respective state insurance  departments.  Prescribed  statutory accounting
  practices  include a variety of  publications  of the  National  Association  of
  Insurance Commissioners (NAIC), as well as state laws, regulations,  and general
  administrative  rules.  Permitted statutory  accounting  practices encompass all
  accounting practices not so prescribed.
  
      Wabash received  written  approval from Kentucky  Department of Insurance to
  acquire  certain Life Partners  insurance  subsidiaries as of March 30, 1990 and
  further  received  permission for the acquisition of Lamar as of April 28, 1995.
  Investment  practices  prescribed  by the  Commonwealth  of Kentucky  limit such
  investments in subsidiaries to 50% of the excess of capital and surplus over the
  minimum required capital and surplus of $1 million, or such higher percentage of
  the excess as may be  approved.  At December 31, 1995,  Wabash's  investment  in
  affiliates  exceeded the 50% limitation by $108.1  million,  as permitted by the
  Kentucky Department of Insurance.
  
      Combined  statutory  surplus for Life Partner's  insurance  subsidiaries  at
  December 31, 1995 and 1994 was $153.6 million and $127.9 million,  respectively,
  and combined  statutory net income for the years ended  December 31, 1995,  1994
  and 1993 was $36.7  million,  $15.4  million  and $38.5  million,  respectively.
  Combined  statutory  operating  earnings,  excluding  income  tax  and  interest
  expense, was $78.1 million, $75.8 million, and $83.5 million for the years ended
  December 31, 1995, 1994 and 1993, respectively.
  
  14. RELATED PARTY TRANSACTIONS
  
      In connection with the purchase of the life insurance  subsidiaries on March
  30,  1990,  Wabash  entered  into a financial  advisory  agreement  with certain
  shareholders  pursuant to which certain  shareholders provide financial advisory
  services to Wabash and the other insurance  subsidiaries for an annual fee. This
  fee was $0.5 million for 1993 and 1994.  The  financial  advisory  agreement was
  terminated on December 31, 1994.  During 1994, the Company  entered into another
  agreement with these  shareholders  in which the Company agreed to pay a fee for
  services  rendered in connection  with the  acquisition  of Lamar Life Insurance
  Company.  The fee  agreed  upon is 1% of the  aggregate  consideration  paid and
  amounted  to  $1.3  million.  The  Company  anticipates  entering  into  similar
  agreements with the shareholders regarding future acquisitions.
  
      In August 1990,  the Company  committed to invest $10 million,  as a limited
  partner,  in acquisition  transactions in which an affiliate of a stockholder is
  the ultimate managing partner.  In 1993, the Company increased its commitment in
  these  transactions  by an additional  $10 million.  As of December 31, 1994 and
  1995, the Company had invested  approximately $17.4 million and $23.4 million as
  a limited partner in twelve acquisitions.  During 1995, the Company committed to
  invest an aggregate of $4.5  million in two limited  partnerships  in which this
  affiliate  is also the  ultimate  managing  partner.  Of this  commitment,  $1.4
  million is on a standby  basis and is subject to increase by $0.8  million  upon
  the  occurrence of certain  contingencies.  As of December 31, 1995, the Company
  had invested $1.2 million in these limited partnerships.  In 1993, a senior term
  loan and approximately $5 million of senior  subordinated  notes the Company had
  previously loaned to certain of the companies acquired were repaid. During 1993,
  the remaining senior subordinated notes were written off.
  
      In June 1990,  the Company  committed  to invest $10  million,  as a limited
  partner, in acquisition  transactions in which another stockholder serves as the
  ultimate general partner.  During 1992, the Company's  previous  investment as a
  limited  partner in three  acquisitions  totaling  $7.1 million was converted to
  common  stock of the acquired  companies.  All of the stock was sold during 1993
  and 1994.
  
                                         49
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  14. RELATED PARTY TRANSACTIONS (CONTINUED)
  
  During 1993, the Company's previous  investment as a limited partner in a fourth
  acquisition  of $2.9  million  was  converted  to common  stock of the  acquired
  company. All of the stock was sold during 1994 and 1995.
  
      During 1992 and 1993,  the Company  committed  to invest an aggregate of $10
  million, as a limited partner, in real estate transactions in which an affiliate
  of a stockholder is the ultimate managing  partner.  As of December 31, 1994 and
  1995, the Company had invested $9.1 million and $13.9 million,  respectively, in
  this limited partnership. As of December 31, 1993, the Company had invested $2.5
  million  in another  limited  partnership  controlled  by an  affiliate  of this
  stockholder.  During 1994,  the Company  committed to invest an additional  $5.0
  million in the limited  partnership.  As of December  31,  1995,  the  Company's
  investment in this limited partnership totaled $6.5 million.
  
      As of December 31, 1995 and 1994, the Company had invested $2 million,  as a
  limited  partner in an acquisition in which an affiliate of a stockholder is the
  managing partner. In addition, as of December 31, 1993, the Company had invested
  $7.1 million, in a Senior Loan of the company acquired. The loan was paid off in
  March 1994. During 1994, the Company committed to invest $1.0 million in another
  acquisition  sponsored by an affiliate of this  stockholder.  As of December 31,
  1995, no investment had been made in this acquisition.
  
      During 1993,  the Company  invested $4.0 million as a limited  partner in an
  investment  transaction  in which  another  stockholder  serves as the  ultimate
  general partner.
  
      In 1993, the Company paid GE Capital a quarterly  agency fee of $100,000 and
  a loan administration fee of $221,000 for its capacity as agent under the Senior
  Loan  Agreement.  Additionally,  GE Capital was paid $1.1 million in Senior Loan
  consent fees in connection with the March 1993 public offering.
  
                                         50
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  15. LINES OF BUSINESS
  
      The Company operates  principally in the individual life insurance,  annuity
  and accident and health lines of business.  Assets and related investment income
  are allocated to the lines of business on their  respective  liabilities  and to
  corporate based on the total capital structure.  Information as to the Company's
  lines of business is as follows (in thousands):
  YEAR ENDED DECEMBER 31,
                                                                               -------------------------------------
                                                                                  1995         1994         1993
                                                                               -----------  -----------  -----------
  Revenues:
    Individual life..........................................................  $   411,043  $   332,131  $   329,960
    Annuity products.........................................................       83,414       69,715       56,629
    Accident and health......................................................       25,377        6,497        6,827
    Corporate................................................................       40,497       39,552       43,912
    Net realized gains (losses)..............................................       15,785      (19,652)      18,404
                                                                               -----------  -----------  -----------
      Total revenues.........................................................  $   576,116  $   428,243  $   455,732
                                                                               ===========  ===========  ===========
    Individual life..........................................................  $   (63,070) $    64,825  $    40,486
    Annuity products.........................................................        3,855       (4,594)      10,348
    Accident and health......................................................        8,846        1,468        1,746
    Corporate................................................................       40,497       39,552       43,912
    Net realized gains (losses)..............................................       15,785      (19,652)      18,404
    Amortization related to individual life realized gains (losses)..........         (289)                     (476)
    Amortization related to annuity products realized gains (losses).........        8,327          (12)      (4,257)
    Amortization of goodwill.................................................       (2,745)      (2,388)      (2,323)
    Interest expense.........................................................      (27,861)     (20,728)     (25,980)
                                                                               -----------  -----------  -----------
      Earnings (loss) before income taxes and extraordinary item.............  $   (16,655) $    58,471  $    81,860
                                                                               ===========  ===========  ===========
  Earnings on the  individual  life and annuity  lines  include net charges of
  $58.5  million  and $8.1  million,  respectively,  relating  to the  revision of
  estimated  future gross  profits used to amortize  deferred  policy  acquisition
  costs and deferred policy fees (See Note 1).
  
  16. SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS
  
      Cash payments for  interest expense  and income  taxes were  as follows  (in
  thousands):
  YEAR ENDED DECEMBER 31,
                                                                         -------------------------------
                                                                           1995       1994       1993
                                                                         ---------  ---------  ---------
  Interest expense.....................................................  $  23,862  $  18,628  $  23,263
  Income taxes.........................................................     18,229     14,500     44,380
  Noncash financing activities include and the payment of dividends in kind on
  the preferred stock (see Note 8).
  
      Purchases of fixed maturities  available-for-sale  and  held-to-maturity  in
  1995, totaled $376.0 million and $13.3 million, respectively. Purchases of fixed
  maturities  available-for-sale  and  held-to-maturity  in  1994  totaled  $853.2
  million and $988.8 million, respectively.
  
                                         51
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  16. SUPPLEMENTAL DATA TO CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
  
      In connection  with the  acquisition of Lamar,  liabilities  were assumed as
  follows (in thousands):
  Fair value of assets acquired..........................  $1,004,182
  Cash paid..............................................     (37,937)
  Common stock issued....................................     (39,459)
                                                           ----------
  Fair value of liabilities assumed......................  $  926,786
                                                           ==========
  17. EXTRAORDINARY LOSS
  
      In 1993, the Company realized  extraordinary losses in the aggregate of $7.3
  million resulting from the extinguishment of debt. The extraordinary  losses are
  reflected net of the estimated tax effect of $2.5 million.
  
      An  extraordinary  loss in the amount of $3.9  million  was  realized by the
  Company in 1994 due to the amendment and restatement of the borrowings under the
  bank credit facility, and is reflected net of $1.4 million in estimated taxes.
  
  18. QUARTERLY FINANCIAL DATA (UNAUDITED)
  
      Earnings (loss) per common share for each quarter are computed independently
  of  earnings  per share  for the year.  Due to the  transactions  affecting  the
  weighted  average  number of shares  outstanding  in each quarter and due to the
  uneven  distribution  of  earnings  during  the year,  the sum of the  quarterly
  earnings  (loss) per share may not equal the  earnings  (loss) per share for the
  year.
  1995
                                                                              ------------------------------------------------
                                                                               1ST QTR.     2ND QTR.     3RD QTR.    4TH QTR.
                                                                              -----------  -----------  -----------  ---------
                                                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
  Total premium income and other considerations.............................   $    55.8    $    73.6    $    75.2   $   75.5
  Earnings (loss) before income taxes.......................................        10.9          6.7         23.2      (57.5)
  Net earnings (loss) applicable to common stock............................         6.9          4.4         14.8      (39.5)
  Net earnings (loss) per common share and common equivalent share..........   $    0.26    $    0.16    $    0.53   $  (1.42)
  1994
                                                                              ------------------------------------------------
                                                                               1ST QTR.     2ND QTR.     3RD QTR.     4TH QTR.
                                                                              -----------  -----------  -----------  ---------
                                                                                  (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
  Total premium income and other considerations.............................   $    54.1    $    54.1    $    55.3   $    54.4
  Earnings (loss) before income taxes and extraordinary item................        20.5         17.9         20.4        (0.3)
  Net earnings (loss) applicable to common stock............................        13.2         11.4         10.4        (0.4)
  
  Earnings (loss) per common share and common equivalent share:
    Earnings (loss) before extraordinary item...............................   $    0.51    $    0.44    $    0.50   $   (0.01)
    Extraordinary loss......................................................                                 (0.10)
                                                                               ---------    ---------    ---------   ---------
      Net earnings (loss)...................................................   $    0.51    $    0.44    $    0.40   $   (0.01)
                                                                               =========    =========    =========   =========
  Quarterly results of operations are based on numerous estimates, principally
  related to policy reserves, the amortization of cost of policies purchased,  the
  amortization of cost of policies  produced and income taxes.  Such estimates are
  revised  quarterly and are ultimately  adjusted to year-end  amounts.  When such
  revisions are determined, they are reported as part of operations of the current
  quarter. During the fourth quarter of 1995, the Company reassessed its estimates
  relating to deferred
  
                                         52
  LIFE PARTNERS GROUP, INC.
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  
  18. QUARTERLY FINANCIAL DATA (UNAUDITED) (CONTINUED)
  
  policy acquisition costs and deferred policy fees,  resulting in a $66.6 million
  net reduction in such  balances (See Note 1). Also during the fourth  quarter of
  1995,  the  Company  revised  its  liability  for  guarantee  fund  assessments,
  resulting in a $1.9 million increase in the liability (See Note 1).
  
  19. SUBSEQUENT EVENT
  
      On March 11, 1996, the Company and Conseco, Inc. ("Conseco") jointly entered
  into a definitive merger agreement providing for all shareholders of the Company
  to receive Conseco stock for each of their shares through a share exchange based
  upon a value of $21.00 per share for Life Partners stockholders. The total value
  of the transaction would be approximately  $840 million,  including $600 million
  to purchase the Company's  outstanding common stock and $240 million of existing
  debt to be assumed by Conseco.  Under the merger agreement,  Life Partners would
  become a wholly  owned  subsidiary  of  Conseco.  Consummation  of the merger is
  subject  to  customary  terms and  conditions,  including  approval  by both the
  stockholders  of  the  Company  and  Conseco  and  regulatory   authorities.   A
  termination fee of $20 million is payable under certain  circumstances by either
  party if its shareholders do not approve the transaction.
  
                                         53
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(b).     Financial Statements and Exhibits, continued
  
                 (b) Pro forma consolidated  financial statements of Conseco, Inc.
                 and subsidiaries.
  
                                         54
  CONSECO, INC. AND SUBSIDIARIES
  
                PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
           The  unaudited  pro  forma  consolidated  statement  of  operations  of
  Conseco,  Inc. ("Conseco") for the year ended December 31, 1995, and for the six
  months  ended June 30,  1996,  present the  consolidated  operating  results for
  Conseco  as if the  acquisition  of  Life  Partners  Group,  Inc.  ("LPG")  (the
  "Merger") had occurred on January 1, 1995.
  
           The pro forma consolidated statement of operations data for Conseco for
  the year  ended  December  31,  1995,  set  forth  in the  unaudited  pro  forma
  consolidated  statement of operations under the column "Pro forma Conseco before
  the Merger" reflect the prior  application of certain pro forma  adjustments for
  the  following  transactions,  all of which have  already  occurred,  as if such
  transactions  had occurred on January 1, 1995: (i) the acquisition of all of the
  outstanding common stock of CCP Insurance,  Inc. ("CCP") not previously owned by
  Conseco  and  related  transactions  (including  the  repayment  of the a $250.0
  million revolving credit agreement); (ii) the increase of Conseco's ownership in
  Bankers Life Holding Corporation (BLH) to 90.5 percent, as a result of purchases
  of common  shares of BLH by  Conseco  and BLH  during  1995 and the first  three
  months  of  1996;  (iii)  the  issuance  of 4.37  million  shares  of  Preferred
  Redeemable  Increased  Dividend Equity  Securities  Convertible  Preferred Stock
  ("PRIDES") of Conseco in January 1996;  (iv) the BLH tender offer and repurchase
  of its 13% Senior  Subordinated  Notes due 2002 (the "13%  Notes")  and  related
  financing  transactions  completed in March 1996; and (v) the debt restructuring
  of American Life Holdings,  Inc. ("AGP") in the fourth quarter of 1995. Such pro
  forma  adjustments  are set forth in Exhibit 99.1 included in Conseco's Form 8-K
  dated April 10, 1996.
  
           The pro forma consolidated statement of operations data for Conseco for
  the six  months  ended  June 30,  1996,  set  forth in the  unaudited  pro forma
  consolidated  statement of operations under the column "Pro Forma Conseco before
  the Merger" reflect the prior  application of certain pro forma  adjustments for
  the  following  transactions,  all of which have  already  occurred,  as if such
  transactions  had occurred on January 1, 1995:  (i) the issuance of 4.37 million
  shares  of  PRIDES  in  January  1996;  and (ii) the BLH  tender  offer  for and
  repurchase  of the 13% Notes and related  financing  transactions  completed  in
  March 1996. Such pro forma adjustments are set forth in Exhibit 99.1 included in
  Conseco's Form 10-Q for the quarterly period ended June 30, 1996.
  
           The unaudited pro forma consolidated balance sheet as of June 30, 1996,
  gives effect to the Merger as if it had occurred on June 30, 1996.
  
           The unaudited pro forma  consolidated  statement of operations  data of
  LPG for the year ended  December 31, 1995, set forth under the column "Pro forma
  LPG  before  the  Merger"  reflect  the  prior  application  of  the  pro  forma
  adjustments  for the acquisition of Lamar Life Insurance  Company  (completed on
  April 28, 1995) as if such acquisition had occurred on January 1, 1995. Such pro
  forma adjustments are set forth in Exhibit 99.1 included in LPG's Form 8-K dated
  April 10, 1996.
  
           The pro  forma  consolidated  financial  statements  are  based  on the
  historical  financial  statements  of  Conseco  and  LPG and  should  be read in
  conjunction with their respective  financial statements and notes. The pro forma
  data are not  necessarily  indicative  of the results of operations or financial
  condition of Conseco had these transactions occurred on January 1, 1995, nor the
  results of future  operations.  Conseco  anticipates cost savings and additional
  benefits  as a result of certain  of the  transactions  contemplated  in the pro
  forma financial statements.  Such benefits and any other changes that might have
  resulted  from  management of the combined  companies  have not been included as
  adjustments to the pro forma consolidated financial statements.  Certain amounts
  from the  prior  periods  have  been  reclassified  to  conform  to the  current
  presentation.
  
           The unaudited pro forma consolidated  financial statements reflect cost
  allocations  for the  Merger  based  on:  (i) the  values  of LPG's  assets  and
  liabilities  as of the assumed dates of Merger;  and (ii)  appraisals  and other
  studies, which are not yet complete.  Accordingly, the final allocations will be
  different from the amounts included in the  accompanying pro forma  consolidated
  financial statements.  Although the final allocations will differ, the pro forma
  consolidated  financial  statements reflect  management's best estimate based on
  currently  available  information  as if the Merger had  occurred on the assumed
  dates of Merger.
  
                                         55
  CONSECO, INC.
                   PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                        for the year ended December 31, 1995
                   (Amounts in millions, except per share amounts)
                                     (unaudited)
  Pro forma          Pro forma            Pro forma          Pro forma
                                                         Conseco              LPG              adjustments          Conseco
                                                       before the         before the           relating to      reflecting the
                                                         Merger             Merger             the Merger           Merger
                                                       ----------         ----------          ------------      ---------------
  Revenues:
     Insurance policy income                            $1,464.9              $287.9          $     -              $1,752.8
     Investment activity:
       Net investment income                             1,138.5               299.4              16.0  (1)         1,457.8
                                                                                                  (0.3) (2)
                                                                                                   4.8  (3)
                                                                                                  (0.6) (4)
       Net trading income                                    2.5                 -                  -                   2.5
       Net realized gains                                  185.7                15.8               2.4  (1)           203.9
     Fee revenue                                            33.9                 -                  -                  33.9
     Restructuring income                                   15.2                 -                  -                  15.2
     Other income                                            9.4                 3.2                -                  12.6
                                                        --------           ---------           ---------            -------
  
           Total revenues                                2,850.1               606.3              22.3              3,478.7
                                                        --------           ---------           ---------            -------
  
  Benefits and expenses:
     Insurance policy benefits and change
       in future policy benefits                         1,106.4               155.0                -               1,261.4
     Interest expense on annuities and financial products  585.2               173.3                -                 758.5
     Interest expense on notes payable                     110.7                28.1              (0.6)  (4)          132.9
                                                                                                  (1.1)  (5)
                                                                                                  (4.2)  (6)
     Interest expense on investment borrowings              22.2                 8.0               -                   30.2
     Amortization related to operations                    207.8               165.0              (75.5) (7)          308.8
                                                                                                   11.5  (8)
     Amortization related to realized gains                126.0                (8.0)              15.6  (9)          133.6
     Other operating costs and expenses                    272.4                99.8              (15.8) (6)          356.4
                                                       ---------          ----------          ----------           --------
  
         Total benefits and expenses                     2,430.7               621.2              (70.1)            2,981.8
                                                       ---------          ----------          ----------           --------
  
         Income (loss) before income taxes,
           minority interest and extraordinary charge      419.4              (14.9)               92.4               496.9
  Income tax expense (benefit)                             163.3               (2.6)               (2.5)  (6)         193.4
                                                                                                   35.2  (11)
                                                       ---------          ----------          ----------           --------
         Income (loss) before minority interest and
           extraordinary charge                            256.1              (12.3)               59.7               303.5
  
  Minority interest                                         72.5                -                   -                  72.5
                                                       ---------          ----------          ----------           --------
  
         Income (loss) before extraordinary charge     $   183.6           $ (12.3)             $ 59.7              $ 231.0
                                                       =========          ==========            =======            ========
  
  Earnings per common shares and common equivalent share:
     Primary:
       Weighted average shares outstanding                  50.5                                  16.3  (12)             66.8
                                                           =====                                  ====                  =====
       Income before extraordinary charge                  $3.27                                                        $3.18
                                                           =====                                                        =====
  
     Fully diluted:
       Weighted average shares outstanding                  59.7                                  16.3  (12)             76.0
                                                           =====                                  ====                  =====
       Income before extraordinary charge                  $3.07                                                        $3.04
                                                           =====                                                        =====
  The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  56
  CONSECO, INC.
                   PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
                       for the six months ended June 30, 1996
                   (Amounts in millions, except per share amounts)
                                     (unaudited)
  Pro forma                              Pro forma          Pro forma
                                                          Conseco                              adjustments          Conseco
                                                        before the            LPG              relating to      reflecting the
                                                          Merger          historical           the Merger           Merger
                                                       ----------         ----------          ------------      ---------------
  Revenues:
     Insurance policy income                            $  741.4              $155.8            $   -             $   897.2
     Investment activity:
       Net investment income                               561.9               148.3               7.4  (1)           719.0
                                                                                                  (0.2) (2)
                                                                                                   2.2  (3)
                                                                                                  (0.6) (4)
       Net trading losses                                   (7.3)                -                  -                  (7.3)
       Net realized gains                                   10.2                 2.3               1.9  (1)            14.4
     Fee revenue                                            20.1                 -                  -                  20.1
     Restructuring income                                   30.4                 -                  -                  30.4
     Other income                                            7.6                 2.6                -                  10.2
                                                         -------              ------            ------             --------
  
         Total revenues                                  1,364.3               309.0              10.7              1,684.0
                                                        --------              ------             -----            --------- 
  
  Benefits and expenses:
     Insurance policy benefits and change in
       future policy benefits                              556.5                69.5                -                 626.0
     Interest expense on annuities and financial products  289.7                88.6                -                 378.3
     Interest expense on notes payable                      51.4                11.8              (0.6)  (4)           62.2
                                                                                                  (0.4)  (5)
     Interest expense on investment borrowings               8.6                 2.1                -                  10.7
     Amortization related to operations                     99.5                65.6              (2.4)  (7)          168.3
                                                                                                   5.6   (8)
     Amortization related to realized gains                 12.3                 0.1               1.8   (9)           14.2
     Acquisition and merger expenses                         -                   7.9              (7.9)  (10)            -
     Other operating costs and expenses                    122.0                35.9                -                 157.9
                                                          ------              ------            -------            --------
  
         Total benefits and expenses                     1,140.0               281.5              (3.9)             1,417.6
                                                         -------              ------            -------            --------
  
         Income before income taxes, minority interest
           and extraordinary charge                        224.3                27.5              14.6                266.4
  Income tax expense                                        85.3                11.6               5.5  (11)          102.4
                                                         -------              ------             -------           --------
  
         Income before minority interest and
           extraordinary charge                            139.0                15.9               9.1                164.0
  
  Minority interest                                         23.5                  -                 -                  23.5
                                                         -------              ------             ------            --------
  
         Income before extraordinary charge             $  115.5              $ 15.9              $ 9.1             $ 140.5
                                                        ========              ======             ======            ========
  
  Earnings per common share and common equivalent share:
       Primary:
         Weighted average shares outstanding                52.0                                  16.3 (12)            68.3
                                                          ======                                  ====                 ====
         Income before extraordinary charge                $2.05                                                      $1.93
                                                           =====                                                      =====
  
       Fully diluted:
         Weighted average shares outstanding                61.5                                  16.3 (12)            77.8
                                                           ======                                 ====                =====
         Income before extraordinary charge                $1.88                                                      $1.81
                                                           =====                                                      =====
  The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  57
  CONSECO, INC.
                        PRO FORMA CONSOLIDATED BALANCE SHEET
                                    June 30, 1996
                                (Dollars in millions)
                                     (unaudited)
  Pro forma         Pro forma
                                                                                                adjustments        Conseco
                                                           Conseco             LPG              relating to      reflecting the
                                                          historical        historical          the Merger         Merger
                                                          ----------         ----------        ------------      ---------------
  Assets
     Investments:
       Actively managed fixed maturity securities
         at fair value                                     $12,500.8          $2,731.2          $661.2  (13)      $15,872.3
                                                                                                  15.0  (14)
                                                                                                 (35.9) (15)
       Held-to-maturity fixed maturity securities                -               661.2          (661.2) (13)             -
       Equity securities at fair value                          82.3              23.8            (6.5) (16)           99.6
       Mortgage loans                                          311.0             103.2           (10.0) (14)          404.2
       Credit-tenant loans                                     309.7               -                -                 309.7
       Policy loans                                            301.2             227.5              -                 528.7
       Other invested assets                                   113.5              78.2              -                 191.7
       Short-term investments                                  146.7              79.1            (8.5) (17)          217.3
       Assets held in separate accounts                        271.6                -               -                 271.6
                                                           ---------            --------       ----------          --------
  
           Total investments                                14,036.8            3,904.2          (45.9)            17,895.1
  
     Accrued investment income                                 228.1               56.0             -                 284.1
     Cost of policies purchased                              1,209.5              300.9         (300.9) (18)        1,794.8
                                                                                                 585.3  (18)
     Cost of policies produced                                 561.2              265.4         (265.4) (19)          561.2
     Reinsurance receivables                                    95.0              279.6             -                 374.6
     Income taxes                                               74.9                9.7          127.4  (20)          212.0
     Goodwill                                                  908.3               99.5          (99.5) (21)        1,508.0
                                                                                                 599.7  (21)
     Property and equipment                                     89.0                 -              -                  89.0
     Securities segregated for future redemption
       of redeemable preferred stock of a
       Partnership II entity                                    40.7                 -              -                  40.7
     Other assets                                              182.8               59.4           (8.0) (22)          234.2
                                                           ---------            -------        -------            ---------
  
           Total assets                                    $17,426.3           $4,974.7         $592.7            $22,993.7
                                                          ==========           ========       =========          =========        
  
                          (continued on the following page)
  The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  58
  CONSECO, INC.
                   PRO FORMA CONSOLIDATED BALANCE SHEET, continued
                                    June 30, 1996
                                (Dollars in millions)
                                     (unaudited)
  Pro forma         Pro forma
                                                                                                adjustments        Conseco
                                                           Conseco             LPG              relating to      reflecting the
                                                          historical        historical          the Merger         Merger
                                                          ----------         ----------        ------------      ---------------
  Liabilities:
     Insurance liabilities                                 $13,546.9          $4,243.7          $342.6  (23)      $18,133.2
     Income tax liabilities                                      -                 5.1            (5.1) (20)             -
     Investment borrowings                                     445.0              71.6              -                 516.6
     Other liabilities                                         344.1              63.8            50.0  (24)          457.9
     Liabilities related to separate accounts                  271.6                -               -                 271.6
     Notes payable of Conseco                                  670.0             238.9            10.6  (25)          888.7
                                                                                                 (30.8) (15)
     Notes payable of Bankers Life Holding
       Corporation, not direct obligations of Conseco          297.9                -               -                 297.9
     Notes payable of Partnership II entities, not direct
       obligations of Conseco                                  281.6                -             (4.5)  (15)         277.1
                                                           ---------           -------        ---------            --------
  
           Total liabilities                                15,857.1           4,623.1           362.8             20,843.0
                                                           ---------           -------        --------            ---------
  
  Minority interest                                            292.3                -             (6.5) (16)          285.8
                                                           ---------           --------       --------             --------
  
  Shareholders' equity:
     Preferred stock                                           536.5                -               -                 536.5
     Common stock and additional paid-in capital               183.4             286.6          (286.6) (26)          771.8
                                                                                                 588.4  (26)
     Unrealized appreciation (depreciation) of securities      (55.7)             (3.5)            (.4) (15)          (56.1)
                                                                                                   3.5  (26)
     Retained earnings                                         612.7              68.5           (68.5) (26)          612.7
                                                           ---------            -------        -------             --------
  
           Total shareholders' equity                        1,276.9             351.6           236.4              1,864.9
                                                           ---------          --------         -------             --------
  
           Total liabilities and shareholders' equity      $17,426.3          $4,974.7          $592.7            $22,993.7
                                                           =========          ========         =======            =========
  The accompanying notes are an integral
                         part of the pro forma consolidated
                                financial statements.
  59
  CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       PRO FORMA ADJUSTMENTS
  
       Allocation of Cost to Acquire LPG
  
       The  acquisition of LPG will be accounted for under the purchase  method of
  accounting.  Under this method,  the total cost to acquire LPG will be allocated
  to the assets and liabilities acquired based on their fair values as of the date
  of the Merger, with any excess of the total purchase cost over the fair value of
  the assets acquired less the fair value of the liabilities  assumed  recorded as
  goodwill.  In the  Merger,  each  outstanding  share  of LPG  common  stock  was
  converted  into .5833 shares of Conseco  common  stock.  A total of 16.3 million
  shares of Conseco  common  stock (or  equivalent  shares) with a value of $588.4
  million were issued to complete the Merger.
  
  The cost to acquire LPG is allocated as follows (dollars in millions):
  Net assets acquired based on assumed date of the
       Merger (June 30, 1996) ............................................................    $357.6
  
  Increase (decrease) in LPG's net asset value to reflect estimated fair value and
       asset reclassifications at the assumed date of the Merger:
          Actively managed fixed maturity securities......................................     676.2
          Held-to-maturity fixed maturity securities......................................    (661.2)
          Mortgage loans..................................................................     (10.0)
          Cost of policies purchased (historical).........................................    (300.9)
          Cost of policies purchased (related to the Merger)..............................     585.3
          Cost of policies produced.......................................................    (265.4)
          Goodwill (historical)...........................................................     (99.5)
          Goodwill (related to the Merger)................................................     587.2
          Insurance liabilities ..........................................................    (342.6)
          Notes payable...................................................................     (10.6)
          Other...........................................................................      88.8
                                                                                             --------
  
               Total estimated fair value adjustments.....................................     247.3
                                                                                             -------
  
  Net assets acquired.....................................................................     604.9
  
  Notes payable of LPG at acquisition.....................................................     249.5
                                                                                             -------
  
       Total cost to acquire LPG..........................................................    $854.4
                                                                                              ======
  Adjustments to the pro forma  consolidated  statement of operations to give
  effect to the Merger as of January 1, 1995, are summarized below:
  
       (1)   Net  investment  income and net realized gains of LPG are adjusted to
             include the effect of adjustments to restate the amortized cost basis
             of fixed maturity  securities  and mortgage loans to their  estimated
             fair value.
  
       (2)   Net  investment  income is reduced for the lost interest  income on 
             cash used to pay expenses incurred to complete the Merger.
  
       (3)   After the Merger,  a subsidiary  of Conseco  will provide  investment
             advisory  services to LPG.  Investment  advisory fees incurred by LPG
             prior to the Merger are  eliminated.  LPG's pro forma net  investment
             income is not reduced to reflect the  advisory  fees to be paid under
             agreements  with the subsidiary of Conseco since,  in accordance with
             generally accepted accounting principles,  such intercompany fees are
             eliminated  in  consolidation  and the  subsidiary  of  Conseco  will
             provide such services without incurring additional costs.
  
                                         60
  CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
       (4)   Net  investment  income and  interest  expense on notes  payable  are
             adjusted to reflect the  following  items which will be eliminated in
             consolidation  after the Merger:  (i) actively managed fixed maturity
             securities  of Conseco  include $6.3  million of LPG notes;  and (ii)
             actively  managed  fixed  maturity  securities  of LPG include  $25.1
             million of Conseco notes and $4.5 million of notes of a subsidiary of
             Conseco.
  
       (5)   Interest  expense on notes  payable of LPG is adjusted as a result of
             restating  notes payable of LPG to their estimated fair value and the
             anticipated repayment of LPG's bank debt, using additional borrowings
             from Conseco's credit facility (the "Conseco Credit Agreement").
  
       (6)   At the assumed Merger date, certain contingent liabilities related to
             potential  losses for tax  examinations  and a class  action  lawsuit
             existed. Expenses incurred in 1995 with respect to such contingencies
             are  eliminated,  since such amounts are considered in the accounting
             for the Merger.
  
       (7)   Amortization of the cost of policies produced, the historical cost of
             policies  purchased  and deferred  revenues for policies  sold by LPG
             prior to January 1, 1995, are replaced with the  amortization  of the
             cost of  policies  purchased  (amortized  in  relation  to  estimated
             profits on the policies purchased with interest equal to the contract
             rates primarily ranging from 4.0 percent to 7.0 percent).
  
       (8)   LPG's historical  amortization of goodwill is eliminated and replaced
             with the  amortization  of goodwill  recognized  in the Merger.  Such
             amortization  is recognized  over a 40-year period on a straight-line
             basis.
  
       (9)   Anticipated  returns,  including realized gains and losses,  from the
             investment of policyholder balances are considered in determining the
             amortization of the cost of policies  purchased.  Amortization of the
             cost of  policies  purchased  is  adjusted  to  reflect  amortization
             related to the pro forma net realized gains of LPG during 1995.
  
       (10)  Acquisition  and merger  expenses are reduced to eliminate the merger
             costs  incurred by LPG during the six months ended June 30, 1996,  in
             connection with the Merger.
  
       (11)  Reflects  the  tax  adjustments  for  all  applicable  pro  forma
             adjustments at the appropriate rate for the specific item.
  
       (12)  Common shares outstanding are increased to reflect the shares issued
             in the Merger.
  
       Adjustments to the pro forma  consolidated  balance sheet to give effect to
  the Merger as of June 30, 1996, are summarized below:
  
       (13)  After the Merger, all held-to-maturity  fixed maturity securities are
             classified as actively managed fixed maturity  securities  consistent
             with the intention of the new management.
  
       (14)  LPG's  held-to-maturity  fixed maturity  securities and mortgage 
             loans are restated to estimated fair value.
  
       (15)  Actively  managed fixed maturity  securities of Conseco  include $6.3
             million of LPG notes which will be eliminated in consolidation  after
             the Merger. Actively managed fixed maturity securities of LPG include
             $25.1  million of Conseco  notes and $4.5 million of  Partnership  II
             notes,  both of which will be eliminated in  consolidation  after the
             Merger.  Unrealized  appreciation  (depreciation) is adjusted for the
             unrealized gains related to these investments.
  
       (16)  Equity securities of LPG include $6.5 million of preferred stock of 
             a subsidiary of Partnership II which will be eliminated after the 
             Merger.
  
       (17)  Cash is reduced for expenses incurred to complete the Merger.
  
       (18)  LPG's  historical  cost  of  policies  purchased  is  eliminated  and
             replaced  with  the  cost of  policies  purchased  recognized  in the
             Merger.  Cost of policies purchased reflects the estimated fair value
             of LPG's  business in force and represents the portion of the cost to
             acquire  LPG that is  allocated  to the value of the right to receive
             future cash flows from insurance contracts existing at June 30, 1996.
             Such  value  is  the  present  value  of the  actuarially  determined
             projected cash flows from the acquired policies.
  
                                         61
  CONSECO, INC. AND SUBSIDIARIES
                NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
                                     (unaudited)
  
             The 18 percent discount rate used to determine such value is the rate
             of  return  required  by  Conseco  to invest  in the  business  being
             acquired.  In determining such rate of return,  the following factors
             are considered:
  
             -    The magnitude of the risks associated with each of the actuarial
                  assumptions used in determining the expected cash flows.
  
             -    Cost of capital available to fund the acquisition.
  
             -    The perceived likelihood of changes in insurance regulations and
                  tax laws.
  
             -    Complexity of the acquired company.
  
             -    Prices paid (i.e., discount rates used in determining valua-
                  tions) on similar blocks of business sold recently.
  
             The value  allocated to the cost of policies  purchased is based on a
             preliminary valuation;  accordingly,  this allocation may be adjusted
             upon final  determination of such value.  Expected gross amortization
             of such value using  current  assumptions  and  accretion of interest
             based on an interest  rate equal to the  liability  or contract  rate
             (such rates  primarily  ranging  from 4.0 percent to 7.0 percent) for
             each of the years in the five-year  period ending June 30, 2001,  are
             as follows (dollars in millions):
  Year ending                 Beginning          Gross           Accretion           Net             Ending
                    June 30,                    balance       amortization       of interest     amortization         balance
                   -----------                ----------      ------------       -----------    -------------       ----------
  1997                      $585.3           $109.8             $32.4           $77.4             $507.9
                      1998                       507.9             98.0              28.7            69.3              438.6
                      1999                       438.6             83.0              24.7            58.3              380.3
                      2000                       380.3             71.9              21.5            50.4              329.9
                      2001                       329.9             61.9              18.4            43.5              286.4
  (19)  LPG's cost of policies produced is eliminated since such amounts are
             reflected in the determination of the cost of policies purchased.
  
       (20)  Reflects the tax adjustment for all applicable pro forma adjustments
             at the appropriate  rate for the specific item. In addition, deferred
             tax  liabilities  of LPG are netted against the deferred tax assets 
             of Conseco.
  
       (21)  LPG's  historical  goodwill is eliminated  and replaced with goodwill
             determined for the Merger.  Such goodwill  reflects the excess of the
             cost to acquire LPG over the net assets acquired.
  
       (22)  Other assets of Conseco are reduced to eliminate common stock of LPG
             acquired by Conseco prior to the Merger.
  
       (23)  Deferred  revenues on certain life insurance and annuity  policies of
             LPG  are  eliminated,   since  such  amounts  are  reflected  in  the
             determination of the cost of policies purchased. Additional insurance
             liabilities are recognized to reflect future losses expected to occur
             on certain  products.  Such additional  liabilities were reflected in
             the determination of the cost of policies purchased.
  
       (24)  A  liability  is  established  for  various  expenses   incurred  and
             liabilities  assumed  in  conjunction  with  Merger,  including:  (i)
             liabilities assumed related to unfavorable contracts and leases; (ii)
             direct acquisition  costs;  (iii) involuntary  termination costs; and
             (iv) relocation costs.
  
       (25)  Notes payable are adjusted to reflect their estimated fair value.
  
       (26)  The prior  shareholders'  equity of LPG is eliminated in  conjunction
             with the  Merger.  Other  assets are reduced to  eliminate  Conseco's
             investment in LPG common stock purchased prior to the Merger.  Common
             stock and  additional  paid-in  capital is  increased by the value of
             Conseco common stock issued in the Merger.
  
                                         62
  CONSECO, INC. AND SUBSIDIARIES
  
  ITEM 7(c).     EXHIBITS.
  
                 (c) Exhibits
  
                     2.5    Agreement and Plan of Merger dated March 11, 1996*
  
                     * Previously filed with Form 8-K dated March 11, 1996.
  
                                                              63
  SIGNATURE
  
           Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
  the  Registrant  has duly  caused  this report to be signed on its behalf by the
  undersigned thereunto duly authorized.
  
  Date: August 16, 1996
  
                                    CONSECO, INC.
  
                                           By:     /s/ ROLLIN M. DICK
                                                   -----------------------------
  
                                                    Rollin M. Dick
                                                    Executive Vice President
                                                      and Chief Financial Officer
  
                                         64