MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Segment Results - Administrative Services 

                             For the year ended December 31,
                                2000       1999       1998  
                                       (In thousands)
Net premiums and
 policyholder fees:
 Life and annuity . . .       $     -    $     -    $     -
 Accident & Health  . .             -          -          - 
Net premiums  . . . . .             -          -          -
Net investment income .            77          -          -
Other income  . . . . .        24,130      9,290      8,700 
 Total revenue  . . . .        24,207      9,290      8,700 

Policyholder benefits .             -          -          -
Interest credited
 to policyholders . . .             -          -          -
Change in deferred
 acquisition costs  . .             -          -          -
Amortization of present
 value of future profits
 and goodwill . . . . .         2,920          -          -
Commissions and
 general expenses . . .        17,443      7,254      6,720 
Total benefits, claims
 and other deductions .        20,363      7,254      6,720 
Segment operating
 income . . . . . . . .       $ 3,844    $ 2,036    $ 1,980

Years ended December 31, 2000 and 1999

Administrative service revenue increased by $14.8 million, or 160%, in 2000 as compared to 1999. Fees from AIAG, acquired in January 2000 and CHCS, acquired in August 2000 added $10.3 million and $2.2 million, respectively, to the segment in 2000. Affiliated revenues at WorldNet increased by $2.7 million as a result of the increase in premiums serviced by WorldNet on behalf of the affiliated Insurance Subsidiaries.

Currently, the Administrative Services segment administers more than $330.0 million of annualized in-force premium. Approximately $304.0 million of annualized premium in force is administered on behalf of affiliates. This combined with fees for telephone support and managed care and claims services on behalf of the affiliated Insurance Subsidiaries generated $18.1 million of affiliated revenue for the year ended December 31, 2000. The remaining $6.0 million was generated from services provided to unrelated companies.

The amortization of present value of future profits ("PVFP") and goodwill relates primarily to the acquisition of AIAG. Approximately $7.7 million of PVFP was established when AIAG was acquired. It is being amortized in proportion to the expected profits from the contracts in force on the date of acquisition. A large portion of the contracts had a remaining term of three years; accordingly, the amortization is heavily weighted to those periods. During 2000, approximately $2.8 million or 36% of the original balance was amortized. Based on the current schedule, the Company anticipates amortizing approximately 27% and 20% in 2001 and 2002, respectively. The remaining amortization relates to the goodwill established in connection with the acquisition of CHCS.

Operating expenses for the segment increased by $10.2 million. Approximately $8.1 million of the increase relates to the acquisition of AIAG and CHCS. The remaining increase relates to the costs associated with the increase in business administered for the affiliated Insurance Subsidiaries.

Years ended December 31, 1999 and 1998

Administrative service revenue increased by $0.6 million, or 7%, in 1999 as compared to 1998. This increase relates to affiliated revenues at WorldNet as a result of the increase in premiums serviced by WorldNet on behalf of the affiliated insurance subsidiaries. During 1999, WorldNet's business was primarily the administration of certain blocks of business on behalf of the affiliated insurance subsidiaries.

Operating expenses for the segment increased by $0.5 million in 1999 as compared to 1998. The increase relates to the costs associated with the increase in business administered for the affiliated Insurance Subsidiaries.