SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
           OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year
                             ended December 31, 2001
                          Commission File Number 1-8538

                             ASCENT ASSURANCE, INC.
             (Exact Name of Registrant as Specified in its Charter)

         DELAWARE                                      73-1165000
(State or Other Jurisdiction of          (I.R.S. Employer Identification Number)
Incorporation or Organization)

110 West Seventh Street, Fort Worth, Texas                              76102
(Address of Principal Executive Offices)                              (Zip Code)

               Registrant's Telephone Number, Including Area Code:
                                 (817) 878-3300

        Registrant's Shareholder and Investor Relations Telephone Number
                                 (817) 877-3048

           Securities Registered Pursuant to Section 12(b) of the Act:
           -----------------------------------------------------------

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:
           -----------------------------------------------------------

                          Common Stock (par value $.01)

                        Warrants to purchase Common Stock

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
                             Yes         X         No
                                     ---------           ---------

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's knowledge, in the definitive Proxy Statement or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.
                                        X
                                    ---------

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.
                             Yes         X         No
                                      ---------           ---------

The  aggregate  market  value of  voting  stock  held by  non-affiliates  of the
Registrant amounted to $4,550,000 as of March 1 , 2002.

On March 1, 2002, 6,500,000 shares of Common Stock were outstanding.


<PAGE>



                             ASCENT ASSURANCE, INC.

                          2001 FORM 10-K ANNUAL REPORT

                                TABLE OF CONTENTS

<TABLE>

                                   PART I                                            Page
                                                                                    Number
<S>      <C>                                                                          <C>
ITEM 1.  Business                                                                      2

ITEM 2.  Properties                                                                   10

ITEM 3.  Legal Proceedings                                                            10

ITEM 4.  Submission of Matters to a Vote of Security Holders                          10

                                     PART II

ITEM 5.  Market for the Registrant's Common Stock and Related Stockholder Matters     11

ITEM 6.  Selected Consolidated Financial Data                                         12

ITEM 7.  Management's Discussion and Analysis of Results of Operations and
            Financial Condition                                                       14

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk                   26

ITEM 8.  Financial Statements and Supplementary Data                                  28

ITEM 9.  Changes in and Disagreements with Accountants on Accounting
            and Financial Disclosure                                                  75

                                    PART III

ITEM 10. Directors and Executive Officers of the Registrant                           76

ITEM 11. Executive Compensation                                                       76

ITEM 12. Security Ownership of Certain Beneficial Owners and Management               76

ITEM 13. Certain Relationships and Related Transactions                               76

                                     PART IV

ITEM 14. Financial Statement Schedules, Exhibits and Reports on Form 8-K              77

</TABLE>


<PAGE>


                                     PART I
ITEM 1 - BUSINESS

GENERAL

Ascent Assurance,  Inc. ("Ascent"),  a Delaware company incorporated in 1982, is
an insurance holding company engaged in the development, marketing, underwriting
and  administration  of  medical  expense  and  supplemental   health  insurance
products,  primarily to  self-employed  individuals  and small business  owners.
Ascent adopted its corporate  name on March 24, 1999, the date its  predecessor,
Westbridge Capital Corp. ("Westbridge"),  emerged from Chapter 11 reorganization
proceedings. References herein to the "Company" shall mean for all periods on or
prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on
or after the close of business on March 31, 1999, Ascent and its subsidiaries.

The  Company's  revenues  result  primarily  from  premiums  and  fees  from the
insurance   products  sold  by  its  wholly  owned  life  and  health  insurance
subsidiaries  National  Foundation Life Insurance Company ("NFL"),  Freedom Life
Insurance Company of America  ("FLICA"),  National  Financial  Insurance Company
("NFIC") and American  Insurance Company of Texas ("AICT" and together with NFL,
NFIC and FLICA,  collectively,  the  "Insurance  Subsidiaries".)  The  Insurance
Subsidiaries  are licensed to conduct  business in 40 states and the District of
Columbia.  Each of the  following  states  accounted for more than 5% of premium
revenue  for the year ended  December  31,  2001:  Texas - 17 %,  Florida - 16%,
Tennessee - 6% and  Arkansas - 6%. Since 1999,  new  business has been  produced
only in NFL and FLICA, with FLICA underwriting approximately 77% of new policies
issued. Since April 2000, NFL has reinsured  approximately 60% of the risk under
new major medical policies issued by FLICA.

The Company also derives fee and service revenue from (i) tele-survey  services,
(ii)  printing  services and (iii) renewal  commissions  for prior year sales of
unaffiliated insurance products.

Marketing Distribution System

NationalCare(R)  Marketing,  Inc.  ("NCM"),  a wholly-owned  subsidiary,  is the
principal  distribution channel for the Insurance  Subsidiaries'  products.  NCM
maintains an agency force that is organized by geographic region. All members of
NCM's agency force are independent  contractors and all compensation received is
based upon sales production and the persistency of such production. NCM's agents
market the Insurance Subsidiaires' products on a one-to-one basis to individuals
who are either not covered under group insurance  protection  normally available
to  employees  of  business  organizations  or who wish to  supplement  existing
coverage.

Sales  leads  for  NCM's  agents  are  generated  principally  by the  Company's
tele-survey  subsidiary,  Precision  Dialing  Services  ("PDS").  By utilizing a
predictive automated dialing system, PDS is able to generate quality sales leads
that maintain the  efficiency of NCM's agency  force.  By providing  these sales
leads,  NCM believes that its ability to attract  experienced  agents as well as
new agents entering the business is enhanced.

DESCRIPTION OF PRODUCTS

The  Company's  operations  are  comprised of one  segment,  Accident and Health
insurance. The principal products underwritten by the Insurance Subsidiaries are
medical expense  reimbursement  and  supplemental  policies.  These products are
designed with flexibility as to benefits, deductibles, coinsurance and premiums.
The  principal   product  groups   currently   underwritten   by  the  Insurance
Subsidiaries are summarized below:

     Comprehensive  major  medical  products  -  These  products  are  generally
     designed to reimburse  insureds for eligible expenses incurred for hospital
     confinement, surgical expenses, physician services, outpatient services and
     the cost of  medicines.  The  policies  provide  a number of  options  with
     respect  to  annual  deductibles,   coinsurance   percentages  and  maximum
     benefits.  After the annual  deductible is met, the insured is  responsible
     for a percentage of eligible  expenses up to a specified  stop-loss  limit.
     Thereafter,  eligible expenses are covered by the Insurance Subsidiaries up
     to  certain  maximum  aggregate  policy  limits.   All  such  products  are
     guaranteed  renewable  pursuant  to the Health  Insurance  Portability  and
     Accountability Act, 42 U.S.C. ss. 300 et seq. ("HIPAA").

     Hospital/surgical  major medical  products - These  products are similar to
     comprehensive  major  medical  products  except that benefits are generally
     limited to  hospital/surgical  services (services such as routine well care
     physician visits and  prescription  drugs are excluded) and deductibles and
     coinsurance  provisions  are generally  higher.  All such products are also
     guaranteed renewable pursuant to HIPAA.

     Supplemental  specified disease products - These products include indemnity
     policies for hospital  confinement and  convalescent  care for treatment of
     specified  diseases and "event  specific"  policies,  which  provide  fixed
     benefits or lump sum payments  upon  diagnosis of certain types of internal
     cancer. Benefits are payable directly to the insured following diagnosis of
     or treatment for a covered illness or injury.  Specified  disease  products
     are generally guaranteed renewable by contract, but are exempt from HIPAA.

Major medical products comprise  approximately 97% of new business sales.  These
products are individually  underwritten based upon medical information  provided
by the applicant  prior to issue.  Information  provided in the  application  is
verified with the applicant  through a tape-recorded  telephone  conversation or
through  written  correspondence.   In  addition,  the  major  medical  products
currently   underwritten   by  the  Insurance   Subsidiaries   are   stringently
underwritten  and  include  a  para-med  examination  or  other  medical  tests,
depending on the age of the applicant.

Prior to 1998, the Insurance  Subsidiaries also underwrote  Medicare  Supplement
products  designed to provide  reimbursement for certain expenses not covered by
the Medicare  program.  The Insurance  Subsidiaries  continue to receive renewal
premiums on Medicare Supplement policies sold prior to that date.

See Item 7.  "Management's  Discussion and Analysis of Results of Operations and
Financial Condition" for a discussion of premium revenue by product.

COMPETITION

The accident and health insurance  industry is highly competitive and includes a
large number of insurance  companies,  many of which have substantially  greater
financial  resources,  broader and more  diversified  product  lines,  favorable
ratings from A.M. Best Company,  Inc.  ("A.M.  Best") and larger staffs than the
Company.  Competitive  factors  applicable  to the  Company's  business  include
product mix, policy benefits,  service to  policyholders  and premium rates. The
Company  believes  that its current  benefits  and premium  rates are  generally
competitive  with those  offered by other  companies.  Management  believes that
service to  policyholders  and prompt and fair payment of claims  continue to be
important factors in the Company's ability to remain competitive.  The Insurance
Subsidiaries  are not currently rated with A.M. Best. The Company  believes that
its lack of an A.M.  Best  rating  is not a  significant  factor  affecting  its
ability to sell its products in the markets that it serves.

Private  insurers and voluntary and  cooperative  plans,  such as Blue Cross and
Blue Shield and HMOs, provide various alternatives for defraying hospitalization
and  medical  expenses.  Much of this  insurance  is  sold on a group  basis  to
employer  sponsored  groups.  The federal  and state  governments  also  provide
programs  for the payment of the costs  associated  with  medical  care  through
Medicare  and  Medicaid.   These  major  medical  programs   generally  cover  a
substantial  amount of the medical expenses incurred as a result of accidents or
illnesses. The Company's major medical products are designed to provide coverage
which  is  similar  to  these  major  medical  insurance  programs  but are sold
primarily to persons not covered by an employer sponsored group.

The Company's  supplemental  specified  disease products are designed to provide
coverage  which is  supplemental  to major medical  insurance and may be used to
defray non-medical as well as medical expenses. Since these policies are sold to
complement  major medical  insurance,  the Company competes only indirectly with
those insurers  providing major medical insurance,  however,  other insurers may
expand  coverage in the future which could reduce future sales levels and profit
margins.  Medicare  supplement  products are designed to supplement the Medicare
program  by  reimbursing  for  expenses  not  covered  by such  program.  Future
government  programs  may  reduce  participation  by  private  entities  in such
government programs.

In  addition  to product  and  service  competition,  there is also very  strong
competition  within the  accident  and health  insurance  market for  qualified,
effective  agents.  The recruitment and retention of such agents is important to
the success and growth of the Company's  business.  Management believes that the
Company is competitive  with respect to the  recruitment and training of agents.
However,  there can be no assurance that the Company will be able to continue to
recruit or retain qualified, effective agents.

REGULATION

General.  The Company and its Insurance  Subsidiaries  are subject to regulation
and supervision in all jurisdictions in which they conduct business. In general,
state insurance laws establish  supervisory  agencies with broad  administrative
powers relating to, among other things, the granting and revoking of licenses to
transact business,  regulation of trade practices,  premium rate levels, premium
rate increases,  licensing of agents,  approval of content and form of policies,
maintenance of specified  minimum  statutory  reserves and statutory capital and
surplus,  deposits  of  securities,  form  and  content  of  required  financial
statements,  nature of investments and limitations on dividends to stockholders.
The  purpose  of  such  regulation  and  supervision  is  primarily  to  provide
safeguards   for   policyholders   rather  than  to  protect  the  interests  of
stockholders.

The  National  Association  of Insurance  Commissioners  ("NAIC") is a voluntary
association of all of the state  insurance  commissioners  in the United States.
The  primary  function  of the NAIC is to develop  model  laws on key  insurance
regulatory  issues  that can be used as  guidelines  for  individual  states  in
adopting  or  enacting  insurance  legislation.  While the NAIC  model  laws are
accorded substantial deference within the insurance industry, these laws are not
binding on insurance companies unless enacted into state law and variations from
the model laws from state to state are common.

The Insurance  Subsidiaries are all domiciled in Texas and are therefore subject
to regulation under Texas laws. The State of Texas has enacted insurance holding
company  laws that  require  registration  and  periodic  reporting by insurance
companies.  Such legislation typically places restrictions on, or requires prior
notice or approval of, certain  transactions  within the holding company system,
including, without limitation, dividend payments from insurance subsidiaries and
the terms of loans and transfers of assets within the holding company structure.

Product  Approvals.  Generally,  before the  Company is  permitted  to market an
insurance product in a particular state, it must obtain regulatory approval from
that state and  adhere to that  state's  insurance  laws and  regulations  which
include, among other things, specific requirements regarding the form, language,
premium rates and policy  benefits of that product.  Consequently,  although the
Company's  policies  generally  provide  for the same basic  types and levels of
coverage in each of the states in which they are marketed,  the policies are not
precisely  identical in each state or other jurisdiction in which they are sold.
Such regulation may delay the  introduction  of new products and may impede,  or
impose  burdensome  conditions  on, rate  increases  or other  actions  that the
Company may wish to take in order to enhance its operating results. In addition,
federal or state  legislation or regulatory  pronouncements  may be enacted that
may  prohibit or impose  restrictions  on the ability to sell  certain  types of
insurance products or impose other restrictions on the Company's operations. For
example,  certain  states in which the Company does  business  have adopted NAIC
model statutes and regulations relating to market conduct practices of insurance
companies. Any limitations or other restrictions imposed on the Company's market
conduct  practices  by the  regulators  of a state  that has  adopted  the model
statutes and  regulations  may also be imposed by the regulators in other states
which have adopted such statutes and  regulations.  No  assurances  can be given
that future  legislative  or regulatory  changes will not  adversely  affect the
Company's business, financial condition or results of operations.

In addition,  state insurance  departments  generally require the maintenance of
certain  minimum loss ratios.  The states in which the Company is licensed  have
the authority to change the minimum mandated  statutory loss ratios to which the
Company is subject, the manner in which these ratios are computed and the manner
in which  compliance with these ratios is measured and enforced.  Most states in
which the Company writes health insurance  products have adopted the loss ratios
recommended  by the NAIC. The Company is unable to predict the impact of (i) any
changes in the mandatory  statutory loss ratios relating to products  offered by
the  Company  or (ii) any  change in the  manner  in which  these  minimums  are
computed or enforced in the future. Similarly, the Company's ability to increase
its premium  rates in response to adverse  loss ratios is subject to  regulatory
approval.  Failure to obtain such approval could have a material  adverse effect
on the Company's business, financial condition and results of operations.

NAIC  Accounting  Principles.  In 1998,  the NAIC  adopted the  Codification  of
Statutory Accounting Principles guidance,  which replaced the current Accounting
Practices  and  Procedures  manual as the NAIC's  primary  guidance on statutory
accounting.  The  Codification  provides  guidance  for  areas  where  statutory
accounting has been silent and changes current  statutory  accounting in certain
areas.  The Texas  Department of Insurance  adopted the  Codification  effective
January 1, 2001.  The adoption of the  Codification  did not  materially  impact
statutory surplus of the Insurance Subsidiaires.

Risk-Based  Capital.  The  NAIC's  Risk-Based  Capital  for Life  and/or  Health
Insurers Model Act (the "Model Act") provides a tool for insurance regulators to
determine  the levels of statutory  capital and surplus an insurer must maintain
in relation to its  insurance and  investment  risks and whether there is a need
for possible  regulatory  attention.  The Model Act (or similar  legislation  or
regulation)  has been adopted in states  where the  Insurance  Subsidiaries  are
domiciled.  The Model Act provides four levels of regulatory attention,  varying
with the ratio of the insurance company's total adjusted capital (defined as the
total of its statutory capital and surplus,  asset valuation reserve and certain
other adjustments) to its risk-based capital ("RBC"):

     If a company's total adjusted  capital is less than 100 percent but greater
     than or equal to 75 percent of its RBC, or if a negative  trend (as defined
     by the  NAIC) has  occurred  and total  adjusted  capital  is less than 125
     percent of RBC (the  "Company  Action  Level"),  the company  must submit a
     comprehensive   plan  aimed  at  improving  its  capital  position  to  the
     regulatory authority proposing corrective actions.

     If a company's  total adjusted  capital is less than 75 percent but greater
     than or equal to 50 percent of its RBC (the "Regulatory Action Level"), the
     regulatory  authority will perform a special examination of the company and
     issue an order specifying the corrective actions that must be followed.

     If a company's  total adjusted  capital is less than 50 percent but greater
     than or equal to 35 percent of its RBC (the  "Authorized  Control  Level"),
     the regulatory authority may take any action it deems necessary,  including
     placing the company under regulatory control.

     If a company's  total  adjusted  capital is less than 35 percent of its RBC
     (the "Mandatory  Control Level"),  the regulatory  authority must place the
     company under its control.

The Texas Department of Insurance  adopted the NAIC's RBC Model Act during 2000.
NFL's and FLICA's  statutory  annual  statements for the year ended December 31,
2001 filed with the Texas  Department  of  Insurance  reflected  total  adjusted
capital in excess of Company Action Level RBC.

In 1998,  NFIC and AICT  entered  into a voluntary  consent  order,  pursuant to
Article 1.32 of the Texas Insurance Code, providing for the continued monitoring
of the  operations  of NFIC and AICT by the Texas  Department  of  Insurance  in
response to losses sustained in 1997 and 1998 as well as the projected inability
to meet RBC requirements. Both NFIC and AICT ceased the sale and underwriting of
new business in 1998. At December 31, 2001,  AICT's RBC exceeded  Company Action
Level RBC; however,  NFIC's RBC only exceeded Authorized Control Level RBC. Both
NFIC and AICT are in compliance with the terms of the voluntary consent order.

Premium  Writing  Ratios.  Under  Florida  Statutes  Section  624.4095,  Florida
licensed  insurance  companies'  ratio of actual  or  projected  annual  written
premiums to current or projected  surplus with  regards to  policyholders  ("the
premium  writing  ratio")  may not  exceed  specified  levels  for gross and net
written  premiums as defined by the  statute.  If a company  exceeds the premium
writing ratio,  the Florida  Department of Insurance shall suspend the company's
certificate  of authority in Florida or establish by order  maximum gross or net
annual  premiums to be written by the company  consistent  with  maintaining the
ratios  specified.  At December 31, 2001,  the premium  writing  ratio for FLICA
complied with the limit mandated by Florida law. As FLICA currently produces 77%
of the  Company's  new  business  and  approximately  38% of such  new  business
production  is in the state of  Florida,  maintaining  the  ability to write new
business in Florida is a significant  factor in the Company's  current  business
plan.  (See  "Management's  Discussion  and Analysis of Financial  Condition and
Results of Operations" at Item 7).

Dividends.  Dividends paid by the Insurance  Subsidiaries  are determined by and
subject to the  regulations  of the  insurance  laws and  practices of the Texas
Department  of  Insurance.  The Texas  Insurance  Code  allows  life and  health
insurance  companies to make dividend  payments  from surplus  profits or earned
surplus  arising  from its  business.  Earned  surplus is defined as  unassigned
surplus  excluding  any  unrealized  gains.  Texas  life  and  health  insurance
companies may generally pay ordinary  dividends or make distributions of cash or
other property in the current twelve month period with a fair market value equal
to or less than the greater of 10% of surplus as regards policyholders as of the
preceding  December  31 or the net gain from  operations  for the  twelve  month
period ending on the preceding  December 31. Dividends  exceeding the applicable
threshold are  considered  extraordinary  and require the prior  approval of the
Texas Insurance Commissioner.

The Insurance  Subsidiaries  are  precluded  from paying  dividends  during 2002
without prior  approval of the Texas  Insurance  Commissioner  as the companies'
earned  surplus is  negative.  Due to recent  statutory  losses  incurred by the
Insurance  Subsidiaries,  the Company  does not expect to receive any  dividends
from the Insurance  Subsidiaries  for the foreseeable  future.  On September 30,
2000,  NFL  transferred  its  100%  ownership  of  FLICA to  Ascent  through  an
extraordinary dividend approved by the Texas Department of Insurance.

Guaranty  Associations.  The  Company  may be  required,  under the  solvency or
guaranty laws of most states in which it does business,  to pay  assessments (up
to prescribed  limits) to fund  policyholder  losses or liabilities of insurance
companies that become insolvent.  Non-affiliated  insurance company insolvencies
increase  the  possibility  that  such   assessments  may  be  required.   These
assessments  may be deferred or forgiven  under most guaranty laws if they would
threaten an  insurer's  financial  strength  and, in certain  instances,  may be
offset  against  future  premium  taxes.  The  incurrence  and  amount  of  such
assessments  may  increase in the future  without  notice.  The Company pays the
amount of such  assessments  as they are  incurred.  Assessments  that cannot be
offset  against future  premium taxes are charged to expense.  Assessments  that
qualify for offset against future premium taxes are  capitalized  and are offset
against such future premium taxes. As a result of such assessments,  the Company
paid approximately $226,000 during the year ended December 31, 2001.

HIPAA.  This federal  regulation  mandates  the  adoption of  standards  for the
exchange of  electronic  health  information  in an effort to encourage  overall
administrative  simplification  and enhance the effectiveness and the efficiency
of the healthcare industry. Ensuring privacy and security of patient information
-  "accountability"  - is a key  component  of the  legislation.  The  other key
component  is   "portability",   or  an   individual's   right,   under  certain
circumstances,  to  maintain  their  prior  satisfaction  of waiting  periods or
pre-existing coverage limitations when leaving the current group health coverage
plan.

In  December  2000,  final  regulations  were  issued  regarding  the privacy of
individually-identifiable health information. This final rule on privacy applies
to both electronic and paper records and imposes  extensive  requirements on the
way in which  health care  providers,  health plan  sponsors,  health  insurance
companies and their business associates use and disclose protected  information.
Under the new HIPAA privacy rules the Company will now be required to (a) comply
with a variety of requirements concerning its use and disclosure of individuals'
protected health  information,  (b) establish  rigorous  internal  procedures to
protect health information, and (c) enter into business associate contracts with
other companies that use similar privacy protection procedures.  The final rules
do not provide for  complete  federal  preemption  of state laws,  but,  rather,
preempt  all  contrary  state laws unless the state law is more  stringent.  The
effective date of the rules is April 14, 2003.

In August  2000,  proposed  rules  were  published  for  comment  related to the
security of electronic health data,  including individual health information and
medical  records,  for health  plans,  health  care  providers,  and health care
clearinghouses that maintain or transmit health information electronically.  The
proposed  rules  would  require  these  businesses  to  establish  and  maintain
confidentiality  of this  information.  The  standards  embraced  by these rules
include the implementation of technical and organization policies, practices and
procedures for security and confidentiality of health information and protecting
its integrity,  education and training  programs,  authentication of individuals
who access this information,  systems  controls,  physical security and disaster
recovery systems,  protection of external  communications  and use of electronic
signatures. These proposed rules have not yet become final.

Sanctions for failing to comply with HIPPA standards include criminal  penalties
of up to  $250,000  per  violation  and civil  sanctions  of up to  $25,000  per
violation.  Due to the complex  nature of the privacy  regulations,  they may be
subject  to court  challenge,  as well as  further  legislative  and  regulatory
actions that could alter their effect.

The Company is evaluating  the effect of HIPAA and has formed a HIPAA task force
for the purpose of HIPAA  compliance.  Due to the  uncertainty  surrounding  the
regulatory  requirements,  the Company  cannot be sure that planned  systems and
programs  will  comply  adequately  with the  regulations  that  are  ultimately
approved. Implementation of additional systems and programs may be required, the
cost of which cannot  currently be determined.  Further,  compliance  with these
regulations  require changes to many  operational  procedures  which may lead to
additional costs that have not yet been identified.

GLBA. The Financial Services Modernization Act of 1999 (the  "Gramm-Leach-Bliley
Act", or "GLBA")  contains  privacy  provisions and introduced new controls over
the  transfer  and use of  individuals'  nonpublic  personal  data by  financial
institutions,  including  insurance  companies,  insurance  agents  and  brokers
licensed by state insurance regulatory  authorities.  Numerous pieces of federal
and state  legislation  aimed at  protecting  the privacy of nonpublic  personal
financial and health  information  are pending.  The privacy  provisions of GLBA
became effective in July 2001 to provide written notice of its privacy practices
to all of the Company's  insureds.  In addition,  the Company provides  insureds
with an  opportunity to state their  preferences  regarding the Company's use of
their non-public personal information.

GLBA provides that there is no federal preemption of a state's insurance related
privacy laws if the state law is more  stringent  than the privacy rules imposed
under GLBA.  Pursuant to the  authority  granted  under GLBA to state  insurance
regulatory  authorities  to  regulate,  the  National  Association  of Insurance
Commissioners  promulgated  a new model  regulation  called  Privacy of Consumer
Financial and Health Information  Regulation which was adopted by numerous state
insurance  authorities.  The Company  believes that it is in compliance with the
privacy regulations that became effective in 2001.

Pending  Health Care  Reform.  The health care  industry,  as one of the largest
industries in the United States,  continues to attract much legislative interest
and public  attention.  In recent  years,  an increasing  number of  legislative
proposals  have been  introduced  or  proposed  in  Congress  and in some  state
legislatures  that would effect major changes in the health care system,  either
nationally or at the state level.  Proposals that have been  considered  include
cost  controls  on  hospitals,   insurance   market   reforms  to  increase  the
availability of group health insurance to small  businesses,  patients' bills of
rights and requirements  that all businesses offer health insurance  coverage to
their  employees.  There can be no assurance that future health care legislation
or other changes in the administration or interpretation of governmental  health
care programs will not have a material adverse affect on the business, financial
condition or results of the operations of the Company.



<PAGE>


REORGANIZATION EFFECTIVE MARCH 24, 1999

On September  16, 1998,  Westbridge  commenced  its  reorganization  by filing a
voluntary  petition for relief under  Chapter 11, Title 11 of the United  States
Code in the United  States  Bankruptcy  Court for the District of Delaware  (the
"Bankruptcy  Court"),  along  with  a  disclosure  statement  (as  amended,  the
"Disclosure  Statement") and a proposed plan of reorganization (as amended,  the
"Plan").  The filing of the Disclosure  Statement and Plan culminated  months of
negotiations  between  Westbridge  and  an ad  hoc  committee  (the  "Creditors'
Committee")  of  holders  of its 11%  Senior  Subordinated  Notes  due 2002 (the
"Senior  Notes")  and its 7-1/2%  Convertible  Subordinated  Notes due 2004 (the
"Convertible Notes"). The Disclosure Statement was approved by entry of an order
by the Bankruptcy Court on October 30, 1998.  Following the approval of the Plan
by the holders of allowed  claims and equity  interests,  the  Bankruptcy  Court
confirmed  the Plan on December 17, 1998.  The Plan became  effective  March 24,
1999 (the "Effective Date"). On the Effective Date, Westbridge's  certificate of
incorporation  and by-laws  were  amended and  restated  in their  entirety  and
pursuant thereto,  Westbridge  changed its corporate name to "Ascent  Assurance,
Inc.".

The  following  summary of the Plan omits certain  information  set forth in the
Plan. Any statements  contained  herein  concerning the Plan are not necessarily
complete,  and in each such  instance  reference  is made to the Plan, a copy of
which is incorporated  by reference to Exhibit 2 of Westbridge's  Current Report
on Form 8-K which was filed  with the  Securities  and  Exchange  Commission  on
December  29,  1998.  Each such  statement  is qualified in its entirety by such
reference.  The Plan provided for the  recapitalization  of certain old debt and
equity  interests in Westbridge  and the issuance of new equity  securities  and
warrants. Key terms of the Plan included the following:

Cancellation  of  Existing  Securities.  Pursuant  to the  Plan,  the  following
securities of  Westbridge  were  canceled as of the  Effective  Date:  (i) $23.3
million  aggregate  principal amount and all accrued and unpaid interest on, the
Senior Notes, (ii) $77.3 million aggregate  principal amount and all accrued and
unpaid  interest  on, the  Convertible  Notes,  (iii)  $13.2  million  aggregate
liquidation  preference of and all accrued and unpaid dividends on, Westbridge's
Series A Convertible Redeemable Exchangeable Preferred Stock (the "Old Preferred
Stock"),  (iv)  Westbridge's  Common  Stock,  par value $.10 per share (the "Old
Common Stock"),  (v) all outstanding warrants to purchase Old Common Stock, (vi)
all  outstanding  unexercised  stock options to purchase Old Common  Stock,  and
(vii) all unvested grants of restricted Old Common Stock.

New  Equity  Capital  Structure.  Pursuant  to  Ascent's  Amended  and  Restated
Certificate of Incorporation, the total number of shares of capital stock Ascent
has the authority to issue is  30,040,000,  consisting  of 30,000,000  shares of
common  stock,  par value $.01 per share  (the "New  Common  Stock")  and 40,000
shares of preferred stock, par value $.01 per share, all of which are designated
Series A Convertible Preferred Stock (the "New Preferred Stock").

Distributions Under the Plan

Cash Distribution

To the holders of Senior Notes other than Credit Suisse First Boston Corporation
("CSFB"),  cash payments totaling approximately $15.2 million, which equaled the
total  Allowed 11% Senior Note Claims (as defined in the Plan) held by creditors
other than CSFB,  were  distributed  subject to  completion  of the  exchange of
securities  as  contemplated  by the Plan.  In order to provide the Company with
sufficient funds to make the cash  distribution to the holders of the 11% Senior
Notes under the Plan, an affiliate of CSFB (the "CSFB Affiliate")  purchased all
of the shares of the New Preferred  Stock which were not  otherwise  distributed
under the Plan.

Issuance of New Securities

Pursuant to the Plan and the purchase of New Preferred  Stock,  6,500,000 shares
of New  Common  Stock and 23,257  shares of New  Preferred  Stock  were  issued,
subject to the completion of the exchange  requirements  as  contemplated by the
Plan, on the Effective Date as follows:

     To holders of general unsecured claims and Convertible Notes as of December
     10, 1998, 6,077,500 shares, and to management at the Effective Date, 32,500
     shares, or in aggregate 94% of the New Common Stock issued on the Effective
     Date.  Holders of general  unsecured claims and Convertible  Notes received
     their first distribution of shares in partial satisfaction and discharge of
     their allowed  claims in April 1999.  The second  distribution  was made in
     September  1999  and  the  remaining   shares  of  New  Common  Stock  were
     distributed in November 1999.

     To holders of Old Preferred Stock as of December 10, 1998,  260,000 shares,
     or 4%, of the New Common  Stock issued on the  Effective  Date and Warrants
     ("New  Warrants") to purchase an additional  277,505 shares,  or 2%, of the
     New Common Stock issued on the Effective Date, on a fully diluted basis.

     To holders of Old Common Stock as of December 10, 1998,  130,000 shares, or
     2%, of the New Common Stock issued on the  Effective  Date and New Warrants
     to purchase an additional  693,761  shares,  or 5%, of the New Common Stock
     issued on the Effective Date, on a fully diluted basis.  Fractional  shares
     of New  Common  Stock  were not issued in  connection  with the Plan.  As a
     result of this  provision,  certain holders of Old Common Stock received no
     distribution of New Common Stock or New Warrants under the Plan.

     To the CSFB  Affiliate,  in respect of the Senior Notes owned by CSFB as of
     December 10, 1998, 8,090 shares of New Preferred Stock which, together with
     the 15,167  additional  shares of New Preferred Stock purchased by the CSFB
     Affiliate as described above, were convertible into 4,765,165 shares of the
     New Common Stock on March 24, 1999. As a result of the New Preferred  Stock
     received by the CSFB Affiliate,  together with the 3,093,998  shares of New
     Common Stock received by the CSFB  Affiliate in respect of the  Convertible
     Notes owned by CSFB,  the CSFB  Affiliate  beneficially  owned on March 24,
     1999 approximately  56.6% of the New Common Stock on an as converted basis,
     assuming  the exercise of all New Warrants and issuance of New Common Stock
     reserved  under the 1999 Stock  Option  Plan as  discussed  below.  The New
     Preferred  Stock has a stated  value of $1,000  per share and a  cumulative
     annual  dividend  rate of $102.50 per share payable in January of each year
     in cash or by the issuance of additional shares of New Preferred Stock. The
     New Preferred  Stock is convertible at any time into 204.8897 shares of New
     Common  Stock at an  initial  conversion  price of $4.88  per  share of New
     Common Stock, subject to customary anti-dilution adjustments.

Reservation of Additional New Common Stock

In  connection  with the New Warrants  described  above,  971,266  shares of New
Common Stock have been  reserved for issuance upon the exercise of New Warrants.
The New Warrants are exercisable at an initial exercise price of $9.04 per share
of New Common Stock, subject to customary  anti-dilution  adjustments,  and will
expire on March 24, 2004.

Pursuant to the Plan,  up to  1,251,685  shares,  or 10%,  of the fully  diluted
number of shares of New Common Stock  issued and  outstanding  on the  Effective
Date have been  reserved  for  issuance to employees  and  directors,  and up to
387,119 shares, or 3%, of the fully diluted number of shares of New Common Stock
issued on the  Effective  Date have been  reserved for issuance to the Company's
marketing  agents under the Company's 1999 Stock Option Plan, which was approved
by the Company's shareholders.

EMPLOYEES

At December 31,  2001,  the Company  employed  360 persons.  The Company has not
experienced any work stoppages, strikes or business interruptions as a result of
labor disputes involving its employees,  and the Company considers its relations
with its employees to be good.


<PAGE>


ITEM 2 - PROPERTIES

The Company's  principal  offices are located at 110 West Seventh  Street,  Fort
Worth,  Texas.  The lease for this facility expires in April,  2003.  Westbridge
Printing  Services,  Inc.,  the  Company's  wholly  owned  printing  subsidiary,
maintains its facility at 7333 Jack Newell Boulevard North,  Fort Worth,  Texas,
under a lease  agreement  which  expires in  October,  2005.  Precision  Dialing
Services,  the Company's wholly owned  telemarketing  subsidiary,  maintains its
facility at 9550  Forest  Lane,  Dallas,  Texas  under a lease  agreement  which
expires in December,  2003. The Company believes that its leased facilities will
meet its  existing  needs and that the  leases can be  renewed  or  replaced  on
reasonable terms if necessary.

ITEM 3 - LEGAL PROCEEDINGS

In the normal  course of its  business  operations,  the  Company is involved in
various  claims  and  other  business  related  disputes.   In  the  opinion  of
management, the Company is not a party to any pending litigation the disposition
of which  would  have a  material  adverse  effect  on the  Company's  business,
financial position or its results of operations.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There  were no  matters  submitted  by the  Company  to a vote of  stockholders,
through the  solicitation of proxies or otherwise,  during the fourth quarter of
the fiscal year for which this report is filed.



<PAGE>


                                     PART II

ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price  Range of Publicly  Traded  Securities.  The  Company's  Common  Stock and
Warrants  are  quoted on the  over-the-counter  bulletin  board  ("OTC  Bulletin
Board").  There  were  6,500,000  shares of Common  Stock and  971,266  Warrants
outstanding  as of March 1, 2002.  The high and low price  listed for the Common
Stock and Warrants  reflects the OTC  Bulletin  Board  closing bid prices of the
Company's  securities.  The closing  bid price on  December  31, 2001 was $0.60.
There were  approximately  311  shareholders  of record on  December  31,  2001,
representing approximately 1,450 beneficial owners.

OTC Bulletin Board
                          Common Stock                      Warrants
                        High         Low                High        Low
2001
Fourth Quarter         $1.100      $0.220              $0.031      $0.016
Third Quarter           1.550       1.050               0.031       0.016
Second Quarter          2.000       1.100               0.016       0.016
First Quarter           2.188       0.750               0.063       0.016

2000
Fourth Quarter         $2.375      $0.813              $0.120      $0.016
Third Quarter           3.125       1.250               0.150       0.020
Second Quarter          3.125       1.625               0.250       0.040
First Quarter           2.875       1.688               0.250       0.040


Dividend Policy

The Company does not anticipate declaring or paying cash dividends on its Common
Stock  in  the  foreseeable   future.  For  information   concerning   statutory
limitations  on the  payment  of  dividends  to  the  Company  by the  Insurance
Subsidiaries and further  discussion of the Company's  results of operations and
liquidity,  see ITEM 7 -  "Management's  Discussion  and  Analysis of Results of
Operations and Financial Condition", ITEM 1 - "Business -- Regulation", and NOTE
10 - "Statutory  Capital And Surplus" to the  Company's  Consolidated  Financial
Statements at Item 8.



<PAGE>


ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA

The  information  set forth below was derived  from the  Consolidated  Financial
Statements  of the Company.  The  information  set forth below should be read in
conjunction  with ITEM 7 -  "Management's  Discussion and Analysis of Results of
Operations and Financial Condition" and the Consolidated Financial Statements of
the Company and related notes.
<TABLE>

                                                  ASCENT ASSURANCE, INC.
                                     --------------------------------------------------
                                      Year Ended      Year Ended     Nine Months Ended
                                     December 31,    December 31,       December 31,
                                         2001            2000               1999
                                     ------------    ------------    ------------------
Statement of Operations Data:                  (in thousands, except per share data)
<S>                                  <C>             <C>                <C>
Premiums                             $ 125,206       $ 119,908          $   86,371
Total revenues                         155,381         149,586             105,972
(Loss) income before income taxes       (2,119)        (12,939)              3,231
Net (loss) income (3)                   (2,119)        (18,942)              2,106
Preferred stock dividends                2,932           2,576               1,874
(Loss) income applicable to common
shareholders                            (5,051)        (21,518)                232

(Loss) Earnings Per Share (3):
  Basic                              $   (0.78)      $  (3.31)          $   (0.04)
  Diluted                            $   (0.78)      $  (3.31)          $   (0.04)

Weighted Average Shares Outstanding
  Basic                                  6,500           6,500               6,500
  Diluted                                6,500           6,500               6,510

</TABLE>
<TABLE>

                                                    ASCENT ASSURANCE, INC.
                                  ----------------------------------------------------------

                                  December 31,   December 31,   December 31,     March 31,
                                     2001           2000           1999            1999
                                  ------------   ------------   ------------   -------------
                                                (in thousands, except per share data)
Balance Sheet Data:
<S>                               <C>            <C>            <C>             <C>
Cash and invested assets          $ 116,238      $ 112,235      $ 115,303       $ 129,142
Total assets                        162,593        160,478        163,690         169,795
Policy liabilities                   98,773        104,084         95,895          95,806
Notes payable (1)                    18,603          8,947          7,162           5,088
Total liabilities                   129,136        128,698        116,649         119,435
Redeemable convertible preferred
    stock (2)                        30,635         27,705         23,257          23,257
Stockholders' equity                  2,822          4,075         23,784          27,103

Book Value Per Share (3)          $    0.43      $    0.63      $    3.66       $    4.17
</TABLE>


(1)  In April  2001,  the  Company  borrowed  an  additional  $11  million.  See
     "Liquidity,  Capital Resources,  and Statutory Capital and Surplus" at Item
     7.

(2)  At December 31, 2001,  consists of 30,635  shares of New  Preferred  Stock,
     which are  convertible,  at the  option  of the  holders  thereof,  into an
     aggregate of 6,276,796  shares of New Common Stock at a conversion price of
     $4.88 per share of New Common Stock.

(3)  Net loss for the year ended December 31, 2000 includes a non-cash charge of
     $10.4  million  related to an increase in the deferred tax asset  valuation
     allowance which increased loss per share and decreased book value per share
     by $(1.60). See "Financial Condition - Deferred Tax Asset" at Item 7.


<PAGE>



SELECTED CONSOLIDATED FINANCIAL DATA (CONTINUED)
<TABLE>

                                                  WESTBRIDGE CAPITAL CORP.
                                      ------------------------------------------
                                      Three Months
                                         Ended
                                       March 31,        Year Ended December 31,
                                                     ---------------------------
                                          1999            1998          1997
                                      ------------   -------------   -----------
                                         (in thousands, except per share data)
Statement of Operations Data
<S>                                   <C>             <C>            <C>
Premiums                              $  29,948       $ 135,717      $ 161,097
Total revenues                           36,814         166,650        188,904
Extraordinary loss, net of income tax         -               -          1,007
Net income (loss)                           208         (22,285)       (97,144)
Preferred stock dividends                     -             520          1,572
Income (loss) applicable to
    common stockholders                     208         (22,805)       (98,716)

Earnings (Loss) Per Share:
    Basic                             $    0.03       $   (3.43)     $  (16.07)
    Diluted                           $    0.03       $   (3.43)     $  (16.07)

Weighted Average Shares Outstanding:
    Basic                                 7,032           6,640          6,143
    Diluted                               7,032           6,640          6,143
</TABLE>
<TABLE>

                                                     WESTBRIDGE CAPITAL CORP.
                                                --------------------------------
                                                          December 31,
                                                    1998               1997
                                                --------------    --------------
                                                          (in thousands)
Balance Sheet  Data
<S>                                             <C>                <C>
Total cash and invested assets                  $    131,708       $   148,442
Total assets                                         169,741           202,856
Policy liabilities                                    97,987           107,595
Notes payable                                         95,715           102,547
Total liabilities                                    219,886           229,274
Redeemable convertible preferred stock
                                                      11,935            19,000
Stockholders' (deficit) equity                       (62,080)          (45,418)
</TABLE>



<PAGE>


ITEM 7 -  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF RESULTS OF  OPERATIONS  AND
FINANCIAL CONDITION

GENERAL

Business Overview. Ascent Assurance, Inc. ("Ascent"), adopted its corporate name
on  March  24,  1999,  the  date  its  predecessor,   Westbridge  Capital  Corp.
("Westbridge")   emerged  from  Chapter  11  reorganization   proceedings.   For
additional  information regarding the reorganization and adoption of fresh start
accounting, see Notes 2 and 14 to the Consolidated Financial Statements included
at Item 8.  References  herein to the "Company" shall mean for all periods on or
prior to March 31, 1999, Westbridge and its subsidiaries, and for all periods on
or after the close of business on March 31, 1999, Ascent and its subsidiaries.

The  Company's  revenues  result  primarily  from  premiums  and  fees  from the
insurance  products sold by its wholly owned  subsidiaries  National  Foundation
Life  Insurance  Company  ("NFL"),  Freedom  Life  Insurance  Company of America
("FLICA"),  National Financial Insurance Company ("NFIC") and American Insurance
Company of Texas ("AICT"), and together with NFL, NFIC and FLICA,  collectively,
the "Insurance  Subsidiaries" and marketed by  NationalCare(R)  Marketing,  Inc.
("NCM"), also a wholly owned subsidiary.  To a lesser extent the Company derives
revenue from (i) tele-survey services, (ii) printing services, and (iii) renewal
commissions  received by the Company for prior year sales of insurance  products
for unaffiliated insurance carriers.

Critical Accounting  Policies.  The following  discussion provides  management's
assessment of financial  results and material changes in financial  position for
the Company. This discussion is based upon the Company's  consolidated financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the U.S. The Company's  significant  accounting  policies
relate to investments,  agent  receivables,  deferred policy  acquisition costs,
deferred tax assets, claim reserves, future policy benefit reserves, reinsurance
and statutory  accounting  practices.  These policies are discussed  below under
"Financial  Condition"  and in  Notes  2 and 10 to  the  Company's  consolidated
financial  statements at Item 8. The  application of these  accounting  policies
requires management to make significant  estimates and judgments that affect the
reported   amounts  of  assets,   liabilities  and  expenses  in  the  Company's
consolidated  financial  statements.  Such  estimates and judgments are based on
historical experience,  changes in laws and regulations,  observance of industry
trends and various information received from third parties.  While the estimates
and judgments  associated with the application of these accounting  policies may
be affected by different  assumptions  or conditions,  the Company  believes the
estimates  and judgments  associated  with the reported  consolidated  financial
statement   amounts  are  appropriate  in  the   circumstances.   For  a  better
understanding of this analysis,  reference should be made to Item 1 - "Business"
and  to  Item  8  -  "Financial  Statements  and  Supplementary  Data".  Certain
reclassifications  of prior  years'  amounts  have been made to conform with the
2001 presentation.

Forward-Looking Statements.  Statements contained in this analysis and elsewhere
in  this   document   that  are  not  based  on   historical   information   are
forward-looking statements and are based on management's projections,  estimates
and assumptions. In particular,  forward-looking statements can be identified by
the use of  words  such as  "may",  "will",  "should",  "expect",  "anticipate",
"estimate",  "continue", or similar words. Management cautions readers regarding
its forward-looking  statements. The Private Securities Litigation Reform Act of
1995 provides a "safe harbor" for forward-looking statements. Various statements
contained  in Item 1 -  "Business"  and Item 7 -  "Management's  Discussion  and
Analysis of Results of Operation and Financial  Condition",  are forward-looking
statements.  These forward-looking statements are based on the intent, belief or
current  expectations of the Company and members of its senior  management team.
While  the  Company  believes  that its  expectations  are  based on  reasonable
assumptions  within the bounds of its knowledge of its business and  operations,
prospective investors are cautioned that any such forward-looking statements are
not guarantees of future performance,  and involve risks and uncertainties,  and
that  actual  results  may differ  materially  from those  contemplated  by such
forward-looking  statements.  Important  factors known to management  that could
cause  actual  results  to differ  materially  from  those  contemplated  by the
forward-looking statements in this Report include, but are not limited to:

     any  limitation  imposed on the Company's  ability to control the impact of
     rising health care costs, especially prescription drugs, and rising medical
     service utilization rates through product and benefit design,  underwriting
     criteria, premium rate increases, utilization management and negotiation of
     favorable provider contracts;

     the impact of  changing  health  care  trends on the  Company's  ability to
     accurately estimate claim and settlement expense reserves;

     developments in health care reform and other regulatory  issues,  including
     the Health Insurance  Portability and  Accountability Act of 1996 ("HIPPA")
     and increased  privacy  regulation,  and changes in laws and regulations in
     key states where the Company operates;

     the Company's ability to meet minimum regulatory  capital  requirements for
     its Insurance Subsidiaries;

     the  ability  of  the  Company  to  maintain  adequate  liquidity  for  its
     non-insurance   subsidiary   operations   including  financing  by  NCM  of
     commission advances to agents;

     default by issuers of fixed maturity investments owned by the Company;

     and the loss of key management personnel

Subsequent  written or oral  statements  attributable  to the Company or persons
acting on its behalf are expressly qualified in their entirety by the cautionary
statements in this Report and those in the Company's  reports  previously  filed
with the SEC.  Copies of these filings may be obtained by contacting the Company
or the SEC.



<PAGE>


OPERATING RESULTS

Results of operations for Ascent are reported for 2001,  2000 and on a pro forma
basis as if Ascent and Westbridge  adopted fresh start  accounting on January 1,
1999 and operated as a single entity for the year ended  December 31, 1999.  (In
thousands except insurance operating ratios.)
<TABLE>
                                                                                Pro Forma
                                                           Ascent                 Ascent
                                                ---------------------------    -----------
                                                   2001           2000             1999
                                                ------------  -------------    -----------
<S>                                             <C>           <C>              <C>
Premiums                                        $  125,206    $  119,908       $ 116,319
Other                                                3,540         3,335           1,789
                                                ------------  -------------    -----------
Total insurance operating revenue                  128,746       123,243         118,108

Benefits and claims                                 93,376       101,940          87,498
Commissions                                         17,793        17,969          16,264
Increase in deferred acquisition costs                (889)       (6,818)         (5,216)
General and administrative expense                  25,339        28,284          23,345
Taxes, licenses and fees                             4,245         4,540           4,481
Recognition of premium deficiency                        -         1,500               -
                                                ------------  -------------    -----------
Total insurance operating expenses                 139,864       147,415         126,372

                                                ------------  -------------    -----------
       Insurance operating results                 (11,118)      (24,172)         (8,264)
                                                ------------  -------------    -----------

Fee and service income                              17,376        17,056          15,543
Fee and service expenses                            15,702        14,481          13,233
                                                ------------  -------------    -----------

       Fee and service results                       1,674         2,575           2,310
                                                ------------  -------------    -----------

Net investment income                                8,867         9,741           9,302
Net realized gain (loss) on investments                392          (454)           (167)
Interest expense on notes payable                   (1,934)         (629)           (403)
Resolution of pre-confirmation contingencies             -             -           1,235
                                                ------------  -------------    -----------

       (Loss) income before income taxes            (2,119)      (12,939)          4,013

Income tax expense                                       -         6,003           1,364
                                                ------------  -------------    -----------

       Net (loss) income                        $   (2,119)   $  (18,942)      $   2,649
                                                ============  =============    ===========

Insurance operating ratios*
       Benefits and claims                            74.6%         85.0%           75.2%
       Commissions                                    14.2%         15.0%           14.0%
       Increase in deferred acquisition costs         (0.7%)        (5.7%)          (4.5%)
       Recognition of premium deficiency                  -          1.3%               -
       General and administrative expense             19.7%         22.9%           19.8%
       Taxes, licenses and fees                        3.4%          3.8%            3.9%
</TABLE>

*Ratios are calculated as a percent of premium with the exception of the general
and  administrative  expense  ratio  which is  calculated  as a percent of total
insurance operating revenue.




<PAGE>


Overview.  The Company's  loss before income taxes  declined by $10.8 million in
2001 to ($2.1) million as compared to 2000,  after increasing to ($12.9) million
in 2000 from  income  before  income  taxes of $4.0  million in 1999.  Insurance
operating results for both 2001 and 2000 were adversely  impacted by losses from
the GPPO  comprehensive  major  medical  product,  the  principal  major medical
product  marketed  by  FLICA  and  NFL  from  1998  through  June  2000.  Losses
attributable to the GPPO product were approximately ($16.7) million for 2001 and
($25.7)  million for 2000.  As  discussed  more fully  below,  the $9.0  million
reduction  in GPPO  product  losses in 2001 as compared  to 2000 is  principally
attributable to active premium rate increase  management and  discontinuance  of
production.  Additional reductions in losses from the GPPO product and continued
sales of new major  medical  products  introduced in July 2000 that meet pricing
targets are key to the Company achieving profitability in 2002.

As a result of losses from the GPPO product,  FLICA required significant capital
contributions  during 2000 and 2001 to comply with minimum statutory capital and
surplus  requirements.  In April 2001,  Ascent  obtained  debt  financing of $11
million from an affiliate of its largest stockholder.  The proceeds of this loan
were used to fund an $11 million capital contribution to FLICA. The $1.3 million
increase in interest  expense for 2001 as compared to 2000 is due  primarily  to
this  loan.  Adverse  claims  experience  for the  GPPO  product  in  excess  of
management's  current  expectations  or  adverse  claims  experience  for  other
insurance  products  could  have a  material  adverse  impact  on the  Insurance
Subsidiaries' ability to meet minimum statutory capital and surplus requirements
and maintain new business  production  at current  levels and  therefore  have a
material adverse impact on Ascent's  liquidity and capital resources and results
of operations  (see  "Liquidity,  Capital  Resources  and Statutory  Capital and
Surplus" and Item 1 - Business - "Regulation").

The Company  reported no income tax  benefit  for 2001 and  incurred  income tax
expense  for  2000 of  $6.0  million  due to the  establishment  of a  valuation
allowance  beginning  December 31, 2000 for all net deferred tax assets.  Due to
GPPO  product  losses  during 2000,  the Company had reported a cumulative  loss
before  income taxes of ($9.7)  million  since the fresh start date of March 31,
1999  through  December  31, 2000.  Principally  as a result of this  cumulative
pre-tax loss position, generally accepted accounting principles ("GAAP") require
that a  valuation  allowance  be  provided  for  any  net  deferred  tax  asset.
Accordingly,  an  additional  deferred  tax asset  valuation  allowance of $10.4
million was  established at December 31, 2000.  This adjustment had no impact on
the Company's cash position and did not impact statutory  capital and surplus of
the  Insurance  Subsidiaries.  As more fully  discussed  below under  "Financial
Condition - Deferred  Tax Asset",  the Company  expects to record no future GAAP
income tax benefit or expense  until the Company  achieves a cumulative  pre-tax
income position since the fresh start date of March 31, 1999.

The following narratives discuss the principal components of insurance operating
results.

Premiums.  The Insurance  Subsidiaries'  premium revenue is derived  principally
from the following medical expense reimbursement  products:  comprehensive major
medical,  hospital/surgical  major medical,  supplemental  specified disease and
Medicare supplement. Comprehensive major medical products are generally designed
to reimburse  insureds for eligible expenses incurred for hospital  confinement,
surgical  expenses,  physician  services,  outpatient  services  and the cost of
medicines. Hospital surgical major medical products are similar to comprehensive
major  medical   products   except  that  benefits  are  generally   limited  to
hospital/surgical  services  and  deductibles  and  coinsurance  provisions  are
generally  higher.  Supplemental  specified  disease products include  indemnity
policies  for  hospital  confinement  and  convalescent  care for  treatment  of
specified diseases and "event specific"  policies,  which provide fixed benefits
or lump sum payments upon diagnoses of certain types of internal cancer or other
catastrophic diseases. Prior to 1998, the Insurance Subsidiaries also underwrote
Medicare  supplement products and continue to receive renewal premiums from such
policies.



<PAGE>


Premium revenue, in thousands, for each major product line is set forth below:

                                                                   Pro Forma
                                             Ascent                 Ascent
                                   --------------------------    ------------
                                       2001          2000            1999
                                   -----------    -----------    ------------
Major medical:
First-year                         $  28,310      $  28,082      $   15,863
Renewal                               49,792         37,632          39,891
                                   -----------    -----------    ------------
                                      78,102         65,714          55,754
                                   -----------    -----------    ------------

Supplemental specified disease:
First-year                             1,077          1,394           1,352
Renewal                               23,553         26,287          27,917
                                   -----------    -----------    ------------
                                      24,630         27,681          29,269
                                   -----------    -----------    ------------

Medicare supplement:
Renewal                               20,170         23,927          30,560

Other                                  2,304          2,586             736
-----
                                   -----------    -----------    ------------

     Consolidated Premium Revenue  $ 125,206      $ 119,908      $  116,319
                                   ===========    ===========    ============


Total premiums increased by $5.3 million, or 4.4%, for 2001 and $3.6 million, or
3.1% for 2000 as  compared to the  corresponding  prior  year,  as new  business
production  exceeded the expected decline in renewal premiums from older, closed
blocks of business.  Comprehensive  major medical products  comprised 97% of new
business sales for 2001 and represented 62% of consolidated  premium revenue for
2001 as compared to 55% for 2000 and 48% for 1999.

In July 2000,  the Company  began  marketing a new  comprehensive  major medical
policy in all  significant  marketing  regions.  The new major medical policy is
designed to produce a  substantially  lower benefits and claims to premium ratio
than the old GPPO product. Management believes that the new major medical policy
has been well  accepted by NCM's career agency  force.  Annual  premiums for new
major  medical  policies  in force at December  31,  2001 were $29.2  million as
compared to $8.7 million at December 31, 2000.

Premium  revenue  from the  unprofitable  GPPO major  medical  product was $36.0
million, $38.2 million and $17.5 million for 2001, 2000 and 1999,  respectively.
The  Company  discontinued  marketing  this  product  in June  2000 and has been
continuously  implementing  significant  premium rate increases since that date.
The premium rate  increase  actions have  accelerated  the policy lapse rate and
reduced  policies in force while  increasing  the premium  received  per policy.
Annual premiums for GPPO policies in force declined by $16.6 million,  or 37.5%,
to $27.7  million at December  31,  2001 as compared to December  31, 2000 while
policies in force  declined by 62.5%.  Management  expects that premium  revenue
from the unprofitable GPPO product will continue to decline in 2002.

Benefits and Claims.  Benefits and claims are comprised of (1) claims paid,  (2)
changes in claim reserves for claims incurred (whether or not reported), and (3)
changes in future policy  benefit  reserves (see  Financial  Condition - "Claims
Reserves"  and "Future  Policy  Benefit  Reserves").  The 9.8  percentage  point
increase  in the ratio of  consolidated  benefits  and  claims  to  consolidated
premiums from 1999 to 2000 and subsequent  10.4  percentage  point decrease from
2000 to 2001 were principally  attributable to the GPPO product. As noted above,
GPPO premiums increased significantly in 2000 as compared to 1999 and the claims
and  benefit  ratio for 2000 was  approximately  120%.  In 2001,  GPPO  premiums
declined slightly,  and the claims and benefit ratio dropped by approximately 26
percentage  points to 94% due to the  implementation  of premium rate increases.
The Company  expects to further  reduce the GPPO claims and benefit ratio during
2002 through the implementation of additional premium rate increases.

Commissions.  The commissions to premiums ratio declined by 0.8 percentage point
in 2001, as compared to 2000, due to a higher  percentage of renewal premiums to
total  premiums.  For 2000, the commissions to premium ratio increased over 1999
by 1.0 percentage  point as a result of the increase in first year major medical
premiums.  Commission rates on first year premiums are significantly higher than
those for renewal premiums.

General and Administrative Expense. The general and administrative expense ratio
declined by approximately  three percentage points in 2001, as compared to 2000,
due to non-recurring  expenses incurred in 2000 related to the implementation in
May 2000 of the Company's new policy  administration  and claims data processing
systems.

Net Investment  Income and Realized  Gains.  Net investment  income and realized
investment  gains and losses  totaled  $9.3  million  for 2001 and 2000 and $9.1
million  for  1999.   During  2001,   interest   rates  declined  which  reduced
reinvestment  rates;  however,  the market value of the Company's fixed maturity
bond portfolio  increased  which resulted in gains from bond sales in the normal
course of business.  Conversely,  market interest rates were generally higher in
2000;  but the market value of the Company's  fixed  maturity bond portfolio was
lower and the Company realized losses on bond sales.


FINANCIAL CONDITION

Investments.  Investment  income  is an  important  source of  revenue,  and the
Company's  return on invested  assets has a material  effect on net income.  The
Company's  investment  policy  is  subject  to the  requirements  of  regulatory
authorities. In addition, certain assets are held on deposit in specified states
and invested in specified securities in order to comply with state law. Although
the Company  closely  monitors its  investment  portfolio,  available  yields on
newly-invested  funds  and  gains  or  losses  on  existing  investments  depend
primarily on general market conditions.  The Company's  investment  portfolio is
managed by Conseco Capital Management, Inc., a registered investment advisor.

Investment  policy is  determined  by the Board of  Directors of the Company and
each of the Insurance  Subsidiaries.  The Company's current investment policy is
to balance its portfolio between  long-term and short-term  investments so as to
achieve  long-term  returns  consistent  with the  preservation  of capital  and
maintenance  of adequate  liquidity to meet the payment of the Company's  policy
benefits  and claims.  The  current  schedule of the  Company's  invested  asset
maturities  corresponds with the Company's  expectations  regarding  anticipated
cash flow payments based on the Company's policy benefit and claim cycle,  which
the Company believes is medium term in nature.  The Company invests primarily in
fixed-income  securities  of the  U.S.  Government  and  its  related  agencies,
investment  grade   fixed-income   corporate   securities  and   mortgage-backed
securities.  Also, up to 5% of the Company's  fixed  maturity  securities may be
invested in higher yielding, non-investment grade securities.



<PAGE>


The following  table  provides  information  on the Company's  cash and invested
assets, in thousands, as of December 31:
                                                           2001         2000
                                                        ----------   ----------

Cash and cash equivalents                               $   2,337    $   2,658
                                                        ----------   ----------
Fixed Maturities (at market value):
     U.S. Government and related agencies                  10,823       10,462
     State, county and municipal                            2,226        1,982
     Finance                                               20,307       23,445
     Public utilities                                       7,452        6,787
     Mortgage-backed                                       10,731       13,302
     All other corporate bonds                             38,678       44,612
                                                        ----------   ----------
        Total Fixed Maturities                             90,217      100,590
                                                        ----------   ----------
Equity Securities (at market value)                         1,569        1,335
Other Invested Assets:
     Mortgage loans on real estate                              -           56
     Policy loans                                             314          342
     Short-term investments and certificates of deposit    21,801        7,254
                                                        ----------   ----------
        Total Other Invested Assets                        22,115        7,652
                                                        ----------   ----------
           Total Cash and Invested Assets               $ 116,238    $ 112,235
                                                        ==========   ==========

The  following  table  summarizes  consolidated  investment  results  (excluding
unrealized gains or losses) for the indicated year:
                                                                       Pro Forma
                                                      Ascent            Ascent
                                               --------------------   ---------
                                                 2001       2000        1999
                                               ---------  ---------   ---------

Net investment income (1)                      $ 6,869    $ 7,805     $ 8,016
Net realized (loss) gain on investments            392       (454)       (167)
Average gross annual yield on fixed maturities     7.0%       7.2%        7.2%


(1)  Excludes interest on receivables from agents of $2.0 million,  $1.9 million
     and $1.3  million for the years ended  December  31,  2001,  2000 and 1999,
     respectively.

The following  table  indicates by rating the composition of the Company's fixed
maturity securities portfolio, excluding short-term investments and certificates
of deposit, at December 31:
                                               2001                 2000
                                        ------------------   -------------------
                                         Market               Market
                                         Value        %       Value         %
                                       ----------  -------   ----------  -------
                                          (in                   (in
                                       thousands)            thousands)
Ratings (1) Investment grade:
    U.S. Government and agencies       $  20,451     22.7    $  22,754     22.6
    AAA                                    2,180      2.4        2,885      2.9
    AA                                     9,160     10.2        8,305      8.3
    A                                     28,318     31.4       38,552     38.3
    BBB                                   29,723     32.9       27,168     27.0
Non-Investment grade:
    BB                                       250      0.3          674      0.7
    B and below                              135      0.1          252      0.2
                                       ----------  -------   ----------  -------
      Total fixed maturity securities  $  90,217    100.0    $ 100,590    100.0
                                       ==========  =======   ==========  =======


(1)  Ratings are the lower of those assigned  primarily by Standard & Poor's and
     Moody's,  when  available,  and are shown in the table using the Standard &
     Poor's rating scale.  Unrated  securities are assigned ratings based on the
     applicable  NAIC  designation  or the rating  assigned to  comparable  debt
     outstanding of the same issuer.  NAIC 1 fixed maturity securities have been
     classified as "A" and NAIC 2 fixed maturity securities have been classified
     as "BBB".


<PAGE>


The NAIC assigns  securities  quality  ratings and uniform  prices  called "NAIC
Designations,"  which are used by insurers when preparing their annual statutory
reports.   The  NAIC  assigns   designations  to   publicly-traded  as  well  as
privately-placed securities. The ratings assigned by the NAIC range from Class 1
(highest  quality  rating) to Class 6 (lowest quality  rating).  At December 31,
2001, 66.2%,  29.9% and 3.9% of the market value of the Company's fixed maturity
securities were rated NAIC 1, NAIC 2, and NAIC 3 and below, respectively.

The scheduled contractual maturities of the Company's fixed maturity securities,
excluding short-term investments and certificates of deposit, at December 31 are
shown in the table  below.  Expected  maturities  may  differ  from  contractual
maturities  because  borrowers may have the right to call or prepay  obligations
with or without penalties.

                                              2001                 2000
                                      -------------------   -------------------
                                         Market                Market
                                         Value      %          Value       %
                                      ----------  -------   ----------  -------
                                         (in                   (in
                                      thousands)            thousands)
Scheduled Maturity
Due in one year or less               $   5,909      6.6    $   7,073      7.0
Due after one year through five years    27,451     30.4       28,877     28.7
Due after five years through ten years   24,165     26.8       26,327     26.2
Due after ten years                      21,961     24.3       25,011     24.9
Mortgage-backed securities               10,731     11.9       13,302     13.2
                                      ----------  -------   ----------  -------
Total fixed maturity securities       $  90,217    100.0    $ 100,590    100.0
                                      ==========  =======   ==========  =======

Agent  Receivables.  In the ordinary  course of business,  the Company  advances
commissions on policies  written by its general  agencies and their agents.  Net
agent  receivables  were $7.4  million and $8.7 million at December 31, 2001 and
2000,  respectively.  The  Company is  reimbursed  for these  advances  from the
commissions earned over the respective policy's life. In the event that policies
lapse  prior to the time the  Company  has been fully  reimbursed,  the  general
agency  or the  individual  agents,  as the case  may be,  are  responsible  for
reimbursing the Company for the outstanding  balance of the commission  advance.
The Company routinely  establishes a reserve for uncollectible  agent's balances
based upon  historical  experience  and  projected  commission  earnings.  As of
December 31, 2001 and 2000, the Company's allowance for uncollectible commission
advances was $4.0 million and $3.7 million, respectively.

Deferred  Policy  Acquisition  Costs.  Policy  acquisition  costs  consisting of
commissions  and other  policy issue  costs,  which vary with and are  primarily
related to the  production  of new  business,  are deferred and  amortized  over
periods  not to exceed  the  estimated  premium-paying  periods  of the  related
policies.  Projected  future  levels of  premium  revenue  are  estimated  using
assumptions as to interest, mortality, morbidity and withdrawals consistent with
those used in  calculating  liabilities  for future  policy  benefits.  Deferred
policy acquisition costs totaled $25.6 million and $24.7 million at December 31,
2001 and 2000, respectively.

A premium  deficiency  exists if the present value of future net cash flows plus
future policy benefit and claims reserves at the calculation date is negative or
less than net deferred policy  acquisition costs. The calculation of future cash
flows  includes  assumptions as to future rate  increases and  persistency.  The
Company routinely evaluates the recoverability of deferred  acquisition costs in
accordance  with GAAP. As a result of losses from the GPPO product,  the Company
determined  that a premium  deficiency  of $1.5 million  existed at December 31,
2000 related to medical expense reimbursement  products issued subsequent to the
fresh start date of March 31, 1999.  Accordingly,  deferred  policy  acquisition
costs were reduced by $1.5  million at December 31, 2000.  At December 31, 2001,
there was no premium deficiency related to deferred acquisition costs.

Deferred Tax Asset.  The  Company's  net  deferred  tax asset  before  valuation
allowance  at December  31, 2001 and 2000 was $17.8  million and $18.3  million,
respectively.  As the  Company  reported  cumulative  pre-tax  losses  of ($9.7)
million since the fresh start date of March 31, 1999 through  December 31, 2000,
principally due to GPPO product losses, applicable GAAP literature required that
the Company's net deferred tax asset be fully  reserved as of December 31, 2000.
The Company reported additional pre-tax losses of ($2.1) million in 2001 and has
now  reported  cumulative  pre-tax  losses since the fresh start date of ($11.8)
million.  Accordingly,  the Company has  reported no income tax benefit for 2001
and the net deferred tax asset remains fully  reserved.  The Company  expects to
record no income tax benefit or expense until the Company  achieves a cumulative
pre-tax income position since the fresh start date of March 31, 1999. Applicable
GAAP literature  provides that the deferred tax asset valuation allowance may be
eliminated  once the  Company is no longer in a  cumulative  loss  position,  as
defined.

The principal component of the Company's net deferred tax asset before valuation
allowance is net  operating  loss  carryforwards  ("NOLs")  which  totaled $52.9
million at December 31, 2001 and expire between 2003 and 2016. The establishment
of a valuation  allowance for GAAP does not impair the  availability of NOLs for
utilization in the Company's federal income tax return. As previously discussed,
pre-tax  losses  for 2001 and 2000  were  principally  attributable  to the GPPO
product.   Management   believes   that  future  GPPO  product   losses  can  be
significantly  reduced through continued active premium rate increase management
and that the Company will utilize  substantially  all of its tax NOLs within the
carry-forward period.

Claims  Reserves.  Claim  reserves  are  established  by the Company for benefit
payments which have already been incurred by the policyholder but which have not
been paid by the Company.  Claim reserves  totaled $37.2 million at December 31,
2001 as  compared  to $42.8  million  at  December  31,  2000.  The  process  of
estimating  claim  reserves  involves the active  participation  of  experienced
actuarial  consultants  with input from the  underwriting,  claims,  and finance
departments.  The inherent uncertainty in estimating claim reserves is increased
when  significant  changes occur.  Changes  impacting the Company  include:  (1)
changes  in  economic  conditions;  (2)  changes  in state or  federal  laws and
regulations, particularly insurance reform measures; (3) writings of significant
blocks of new business and (4) significant changes in claims payment patterns as
a result of the  implementation  of a new  claims  administration  system in May
2000. Because claim reserves are estimates, management monitors reserve adequacy
over time,  evaluating  new  information  as it becomes  available and adjusting
claim  reserves  as  necessary.   Such  adjustments  are  reflected  in  current
operations.

Management   considers  many  factors  when  setting  reserves  including:   (1)
historical trends; (2) current legal  interpretations of coverage and liability;
(3) loss  payments  and pending  levels of unpaid  claims;  and (4) product mix.
Based on these  considerations,  management believes that adequate provision has
been made for the  Company's  claim  reserves.  Actual  claims paid may deviate,
perhaps substantially, from such reserves.

Future Policy Benefit  Reserves.  Policy benefit reserves are established by the
Company for benefit payments that have not been incurred but which are estimated
to be  incurred  in the  future.  The policy  benefit  reserves  are  calculated
according  to the  net  level  premium  reserve  method  and  are  equal  to the
discounted present value of the Company's expected future policyholder  benefits
minus the discounted  present value of its expected  future net premiums.  These
present value determinations are based upon assumed fixed investment yields, the
age of the  insured(s) at the time of policy  issuance,  expected  morbidity and
persistency  rates,  and  expected  future  policyholder  benefits.  Except  for
purposes of reporting to insurance  regulatory  authorities  and for tax filing,
the  Company's  claim  reserves and policy  benefit  reserves are  determined in
accordance with GAAP.

In determining the morbidity, persistency rate, claim cost and other assumptions
used in determining the Company's  policy benefit  reserves,  the Company relies
primarily upon its own benefit payment history and upon information developed in
conjunction  with  actuarial   consultants  and  industry  data.  The  Company's
persistency  rates have a direct impact upon its policy benefit reserves because
the  determinations  for this  reserve are, in part, a function of the number of
policies in force and expected to remain in force to maturity. If persistency is
higher or lower than expected,  future policyholder benefits will also be higher
or lower because of the different than expected number of policies in force, and
the policy benefit reserves will be increased or decreased accordingly.


<PAGE>



The Company's  policy benefit reserve  requirements are also  interrelated  with
product  pricing and  profitability.  The Company  must price its  products at a
level sufficient to fund its policyholder  benefits and still remain profitable.
Because the  Company's  claim and  policyholder  benefits  represent  the single
largest category of its operating expenses, inaccuracies in the assumptions used
to estimate  the amount of such  benefits  can result in the Company  failing to
price its products appropriately and to generate sufficient premiums to fund the
payment  thereof.  The sharp  increase in claim loss ratios  experienced  by the
Company  during 2000 was  indicative of inadequate  pricing in the GPPO product,
the principal major medical product marketed from 1998 through June 2000.

Because the discount  factor used in  calculating  the Company's  policy benefit
reserves is based upon the rate of return of the Company's  investments designed
to fund this reserve,  the amount of the reserve is dependent  upon the yield on
these  investments.  Provided that there is no material adverse  experience with
respect to these benefits, changes in future market interest rates will not have
an impact on the profitability of policies already sold. Because fluctuations in
future market interest rates affect the Company's yield on new investments, they
also affect the discount  factor used to establish,  and thus the amount of, its
policy benefit  reserves for new sales. In addition,  because an increase in the
policy  benefit  reserves  in any period is  treated  as an  expense  for income
statement  purposes,  market interest rate  fluctuations can directly affect the
Company's  profitability for policies sold in such period. It is not possible to
predict future market interest rate fluctuations.

In accordance  with GAAP,  the  Company's  actuarial  assumptions  are generally
fixed, and absent materially adverse benefit experience,  they are not generally
adjusted. The Company monitors the adequacy of its policy benefit reserves on an
ongoing  basis  by   periodically   analyzing  the  accuracy  of  its  actuarial
assumptions.  The adequacy of the Company's  policy benefit reserves may also be
impacted by the development of new medicines and treatment  procedures which may
alter the incidence  rates of illness and the treatment  methods for illness and
accident  (such  as  out-patient   versus   in-patient  care)  or  prolong  life
expectancy. Changes in coverage provided by major medical insurers or government
plans may also affect the  adequacy of the  Company's  reserves if, for example,
such  developments had the effect of increasing or decreasing the incidence rate
and per claim  costs of  occurrences  against  which  the  Company  insures.  An
increase in either the incidence rate or the per claim costs of such occurrences
could result in the Company  needing to post  additional  reserves,  which could
have a material adverse effect upon its business, financial condition or results
of operations  (see  "Liquidity,  Capital  Resources  and Statutory  Capital and
Surplus").

Reinsurance.  As is customary in the insurance industry, the Company's Insurance
Subsidiaries   reinsure,   or  cede,   portions  of  the  coverage  provided  to
policyholders  to other  insurance  companies  on both an  excess  of loss and a
coinsurance basis. Cession of reinsurance is utilized by an insurer to limit its
maximum loss thereby providing a greater  diversification of risk and minimizing
exposures on larger risks.  Reinsurance does not discharge the primary liability
of the  original  insurer with respect to such  insurance,  but the Company,  in
accordance with prevailing  insurance  industry  practice,  reports reserves and
claims after adjustment for reserves and claims ceded to other companies through
reinsurance.

The Company reinsures its risks under its major medical policies on an excess of
loss basis so that its net payments on any one life insured under the policy are
limited  for any one  calendar  year  to  $125,000.  Risks  under  its  Medicare
Supplement policies are not reinsured.  The Company's risks under its Accidental
Death  policies  are one  hundred  percent  (100%)  reinsured.  Under  its  life
insurance  reinsurance  agreement,  FLICA and NFL retains fifty percent (50%) of
the  coverage  amount of each of its life  insurance  policies  in force up to a
maximum of $65,000. NFL reinsures, through an excess of loss reinsurance treaty,
a closed  block of  annually  renewable  term  life  insurance  policies.  NFL's
retention limit is $25,000 per year. In accordance with industry  practice,  the
reinsurance  arrangements in force with respect to these policies are terminable
by either  party  with  respect to claims  incurred  after the  termination  and
expiration dates.

At December 31, 2001, approximately $0.9 million of the $3.1 million recoverable
from  reinsurers  related to paid losses.  Of this balance,  all was recoverable
from reinsurers rated "A" or higher by the A.M. Best Company.

Statutory  Accounting  Practices.   The  Company's  Insurance  Subsidiaries  are
required to report their results of operations  and financial  position to state
regulatory  agencies based upon statutory  accounting  practices ("SAP").  Under
SAP, certain  assumptions used in determining the policy benefit reserves,  such
as claim costs and investment  return  assumptions,  are often more conservative
than those  appropriate  for use by the Company under GAAP. In  particular,  SAP
interest rate  assumptions  for investment  results are fixed by statute and are
generally lower than those used by the Company under GAAP.  Another  significant
difference  is that under SAP,  unlike GAAP,  the Company is required to expense
all sales and other policy  acquisition  costs as they are incurred  rather than
capitalizing  and  amortizing  them over the  expected  life of the policy.  The
effect  of this  requirement  is  moderated  by the  allowance  under  SAP of an
accounting  treatment known as the "two year preliminary term" reserve valuation
method.  This reserve  method  allows the Company to defer any  accumulation  of
policy benefit reserves until after the second policy year. The immediate charge
off of sales and acquisition expenses and the sometimes  conservative claim cost
and other valuation assumptions under SAP generally cause a lag between the sale
of a policy and the emergence of reported earnings.  Because this lag can reduce
the Company's  gain from  operations  on a SAP basis,  it can have the effect of
reducing  the amount of funds  available  for  dividend  distributions  from the
Insurance Subsidiaries (see "Liquidity,  Capital Resources and Statutory Capital
and Surplus").


LIQUIDITY, CAPITAL RESOURCES, AND STATUTORY CAPITAL AND SURPLUS

General. The primary sources of cash for the Company's  consolidated  operations
are premiums and fees from  insurance  policies,  sales and maturity of invested
assets and  investment  income  while the primary  uses of cash are  payments of
insurance  policy  benefits,  claims  and  commissions,  and  general  operating
expenses.  Net cash used in operations  totaled $6.6  million,  $4.9 million and
$2.6 million for the years ended December 31, 2001, 2000 and 1999, respectively.
The  increase  in cash used by  operations  since  1999 is  primarily  due to an
increase in the cash basis ratio of  benefits  and claims to premiums  resulting
from  a  decrease  in  the  average  time  expended  to pay a  claim  after  the
implementation of the Company's new claims administration system in May 2000.

Ascent is a holding  company,  the  principal  assets  of which  consist  of the
capital  stock of its  subsidiaries  and  invested  assets.  Ascent's  principal
sources of funds are comprised of dividends from its non-insurance subsidiaries.
The Insurance  Subsidiaries  are precluded from paying  dividends  without prior
approval of the Texas  Insurance  Commissioner  as the  Insurance  Subsidiaries'
earned surplus is negative due to statutory losses incurred in recent years (see
"Business -  Regulations"  at Item 1).  Ascent's  principal uses of cash are for
capital   contributions  to  maintain  minimum  statutory  capital  and  surplus
requirements  for the  Insurance  Subsidiaries  and general  and  administrative
expenses.  Ascent funded  capital  contributions  to the Insurance  Subsidiaries
totaling  approximately  $19.3  million,  $8.2 million,  and $5.9 million during
2001,  2000 and 1999,  respectively,  as a result of combined  statutory  losses
incurred by the Insurance  Subsidiaries for those years of $12.7 million,  $17.0
million and $6.5  million,  respectively.  As of December 31,  2001,  Ascent had
approximately $1.2 million in unrestricted cash and invested assets. In February
2002, Ascent funded contributions  totaling $1.8 million to two of its insurance
subsidiaries.

The statutory  losses incurred during recent years resulted from (1) significant
losses for the GPPO product (see "Operating  Results") and (2) costs  associated
with increased new business  production  which must be expensed under  statutory
accounting (for GAAP, such costs are deferred and amortized as related  premiums
are  recorded).  Adverse  claims  experience  for the GPPO  product in excess of
management's  current estimates or adverse claims experience for other insurance
products  would require  Ascent to make capital  contributions  to the Insurance
Subsidiaries  in  excess  of those  currently  projected  for  2002.  Additional
financing  would be  required  by  Ascent  in  order  to make any such  "excess"
contributions.  As a result,  adverse  claims  experience  could have a material
adverse effect on the Insurance  Subsidiaries' ability to meet minimum statutory
capital and surplus requirements and maintain new business production at current
levels and therefore,  have a material adverse impact on Ascent's  liquidity and
capital resources and results of operations.

CSFB  Financing.  Ascent  received debt financing to fund an $11 million capital
contribution  to FLICA in April 2001 from Credit Suisse First Boston  Management
Corporation,  ("CSFB"),  which is an affiliate of Special  Situations  Holdings,
Inc. -- Westbridge (Ascent's largest stockholder). The credit agreement relating
to  that  loan  ("CSFB  Credit  Agreement")  provided  Ascent  with  total  loan
commitments  of $11  million  (all of which  has  been  drawn).  The loan  bears
interest  at a rate of 12% per annum and  matures  in April,  2004.  Absent  any
acceleration  following  an event  of  default,  the  Company  may  elect to pay
interest in kind by issuance of  additional  notes.  During 2001,  Ascent issued
$987,000 in additional notes for payment of interest in kind which increased the
notes payable balance to CSFB at December 31, 2001 to approximately $12 million.
The CSFB Credit  Agreement  provides for a facility fee of $1.5 million which is
payable upon maturity or upon a change in control, as defined. This facility fee
is being accrued as additional interest payable over the term of the loan.

Ascent's  obligations to CSFB are secured,  pursuant to a guarantee and security
agreement and pledge  agreements,  by substantially  all of the assets of Ascent
and its subsidiaries (excluding the capital stock and the assets of AICT, FLICA,
NFL, NFIC, NCM, Ascent Funding, Inc. and Ascent Management, Inc., some or all of
which is pledged as collateral for bank  financing  described  below).  Ascent's
subsidiaries  (other  than those  listed  above) have also  guaranteed  Ascent's
obligations under the CSFB Credit Agreement. At December 31, 2001, there were no
events of default;  however, adverse claims experience in excess of management's
current  expectations  could  result in events of default  under the CSFB Credit
Agreement.

Bank Financing. The majority of commission advances to NCM's agents are financed
through Ascent Funding,  Inc.  ("AFI"),  an indirect wholly owned  subsidiary of
Ascent.  AFI has entered into a Credit  Agreement (the "Credit  Agreement") with
LaSalle Bank, NA ("LaSalle")  which  currently  provides AFI with a $7.5 million
revolving  loan  facility,  the  proceeds  of which are used to  purchase  agent
advance  receivables  from NCM and other  affiliates.  In  connection  with this
commission  advancing program  approximately  $4.4 million was outstanding under
the Credit Agreement at December 31, 2001.

The Credit  Agreement  expires  December 5, 2002, at which time the  outstanding
principal  and interest  will be due and payable.  Under the terms of the Credit
Agreement,  agent advances made within six months of the expiration  date (after
June 5, 2002) are not eligible for  financing.  Failure of the Company to obtain
additional  renewals of the Credit  Agreement  beyond December 2002 could have a
material  adverse impact on Ascent's  liquidity and capital  resources.  Lack of
adequate  financing  would  impair  the  Company's  ability  to pay  competitive
commission  advances and reduce new business  sales needed to replace the normal
lapsing of  existing  policies.  Therefore,  failure by Ascent to  maintain  new
business sales at current levels would result in declining  premium  revenue and
could have a material adverse impact on Ascent's results of operations.

AFI's  obligations  under  the  Credit  Agreement  are  secured  by  liens  upon
substantially  all of AFI's assets.  AFI's principal assets at December 31, 2001
are net agent receivables of $7.4 million and a cash collateral  account pledged
to LaSalle of $2.6 million. In addition, Ascent has guaranteed AFI's obligations
under the Credit  Agreement,  and has pledged all of the issued and  outstanding
shares of the capital stock of AFI, NFL,  FLICA and NFIC as collateral  for that
guaranty  (the  "Guaranty  Agreement").  As of December 31, 2001,  there were no
events of default  under the Credit or  Guaranty  Agreements.  However,  adverse
claims experience in excess of management's current expectations could result in
events of default under the Guaranty  Agreement,  Credit Agreement and term loan
facility discussed below.

In July 1999, Ascent Management,  Inc. ("AMI") received a $3.3 million term loan
facility  with LaSalle,  proceeds of which were used to fund system  replacement
costs. Advances under the term loan facility are secured by substantially all of
AMI's assets and the Guaranty Agreement.  Under the terms of the loan, principal
is payable in 60 equal  monthly  installments  beginning  January 31,  2000.  At
December 31, 2001,  approximately  $2.2 million was  outstanding  under the term
loan facility.


<PAGE>


Preferred Stock.  Dividends on Ascent's redeemable  convertible  preferred stock
(which is 100% owned by Special Situations  Holdings,  Inc. - Westbridge) may be
paid in cash or by issuance of  additional  shares of  preferred  stock,  at the
Company's  option.  During 2001,  the Company  paid  preferred  stock  dividends
through the issuance of 2,930 additional  shares of preferred stock. In December
2000, the Company paid preferred stock  dividends  through the issuance of 2,575
additional  shares of preferred  stock.  Preferred  stock  dividends  accrued at
December 31, 1999 were paid in January 2000 through issuance of 1,873 additional
shares of preferred stock.

Inflation.  Inflation  impacts  claim  costs and  overall  operating  costs and,
although  inflation  has been lower in the last few years,  hospital and medical
costs have still increased at a higher rate than general  inflation,  especially
prescription drug costs. New, more expensive and wider use of pharmaceuticals is
inflating  health care costs.  The Company will  continue to  establish  premium
rates in  accordance  with  trends in  hospital  and  medical  costs  along with
concentrated efforts in various cost containment programs. However, there can be
no  assurance  that these  efforts  will fully offset the impact of inflation or
that  increases  in premium  rates will  equal or exceed  increasing  healthcare
costs.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's primary  objectives in managing its cash flows and investments are
to maximize  investment income and yield while preserving capital and minimizing
credit risks. To attain these objectives, investment policies and strategies are
developed using expected underwriting results, forecasted federal tax positions,
regulatory  requirements,  forecasted  economic  conditions  including  expected
fluctuations in interest rates and general market risks.

Market risk represents the potential for loss due to adverse changes in the fair
market value of financial  instruments.  The market  risks  associated  with the
financial   instruments  of  the  Company  primarily  relate  to  the  Company's
investment  portfolio that consists largely (79.2%) of fixed income  securities.
The   Company's   investment   portfolio  is  exposed  to  market  risk  through
fluctuations  in  interest  rates,  changes  in  credit  quality  and  principal
prepayments.

Interest  Rate  Risk.  Interest  rate risk is the price  sensitivity  of a fixed
income  security  to  changes in  interest  rates.  The  Company  evaluates  the
potential  changes in  interest  rates and market  prices  within the context of
asset  and  liability  management.   Asset  and  liability  management  involves
forecasting  the  payout  pattern  of  the  Company's  liabilities,   consisting
primarily of accident and health claim reserves,  to determine duration and then
matching the duration of the  liabilities  to fixed  income  investments  with a
similar duration.  Through active portfolio asset and liability management,  the
Company believes that interest rate risk is mitigated.

Credit Risk. The company  invests  primarily in  fixed-income  securities of the
U.S.  Government  and  its  related  agencies,   investment  grade  fixed-income
corporate securities and mortgage-backed securities. (See Item 7 - "Management's
Discussion and Analysis of Results of Operations and Financial  Conditions"  and
Note 3 -  "Investments"  to the Company's  Consolidated  Financial  Statements.)
Approximately  0.4% of the  Company's  fixed-income  portfolio  market  value is
comprised of less than investment  grade  securities.  The Company's  investment
policy allows up to 5% of the Company's fixed maturity securities to be invested
in higher yielding,  non-investment  grade  securities.  Due to the overall high
quality of the  Company's  investment  portfolio  (over 95%  investment  grade),
management believes the Company has marginal risk with regard to credit quality.

PrePayment Risk.  Mortgage-backed securities investors are compensated primarily
for  prepayment  risk  rather  than  credit  quality  risk.  During  periods  of
significant  interest rate volatility,  the underlying  mortgages may repay more
quickly or more slowly than  anticipated.  If the repayment of principal  occurs
earlier than anticipated during periods of declining interest rates,  investment
income may decline due to the  reinvestment  of these funds at the lower current
market  rates.  To  manage  prepayment  risk,  the  Company  limits  the type of
mortgage-backed  structures  invested in and  restricts  the  portfolio's  total
exposure in  mortgage-backed  securities.  If the  repayment  occurs  later than
expected during periods of increasing  interest rates,  the cost of funds to pay
liabilities may increase due to the mismatching of assets and liabilities.

Sensitivity  Analysis.  The Company regularly conducts various analyses to gauge
the financial impact of changes in interest rate on its financial condition. The
ranges  selected in these  analyses  reflect  management's  assessment  as being
reasonably  possible over the succeeding  twelve-month  period. The magnitude of
changes modeled in the accompanying  analyses should, in no manner, be construed
as a prediction of future economic  events,  but rather,  be treated as a simple
illustration of the potential  impact of such events on the Company's  financial
results.

The sensitivity analysis of interest rate risk assumes an instantaneous shift in
a parallel  fashion  across the yield curve,  with  scenarios of interest  rates
increasing  and decreasing 50 and 100 basis points from their levels at December
31, 2001, and with all other  variables held constant.  A 50 and 100 basis point
increase  in market  interest  rates would  result in a pre-tax  decrease in the
market value of the Company's fixed income  investments of $2.1 million and $4.1
million,  respectively.  Similarly,  a 50 and 100 basis point decrease in market
interest  rates would  result in a pre-tax  increase in the market  value of the
Company's   fixed  income   investments   of  $2.1  million  and  $4.3  million,
respectively.


<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial  Statements and Financial  Statement Schedules Covered by the
Following Report of Independent Accountants.
<TABLE>

                                                                                               Page
                                                                                              Number

<S>                                                                                             <C>
Reports of Independent Accountants                                                              29

Financial Statements:

Ascent Assurance, Inc. Consolidated Balance Sheets at December 31, 2001 and 2000                31

Ascent Assurance, Inc. Consolidated Statements of Operations for the Years
   Ended December 31, 2001 and 2000 and the Nine Months Ended December 31, 1999                 32

Westbridge Capital Corp. Consolidated Statement of Operations for the Three Months
   Ended March 31, 1999                                                                         33

Ascent Assurance, Inc. Consolidated Statements of Comprehensive Income for the
   Years Ended December 31, 2001 and 2000 and the Nine Months Ended December 31, 1999
                                                                                                34

Westbridge Capital Corp. Consolidated Statement of Comprehensive Income for the
   Three Months Ended March 31, 1999                                                            35

Ascent Assurance, Inc. Consolidated Statements of Changes in Stockholders' Equity for
   The Years Ended December 31, 2001 and 2000 and the Nine Months Ended December 31, 1999       36

Westbridge Capital Corp. Consolidated Statement of Changes in Stockholders' Equity for
   The Three Months Ended March 31, 1999                                                        37

Ascent Assurance, Inc. Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2001 and 2000 and the Nine Months Ended December 31, 1999                       38

Westbridge Capital Corp. Consolidated Statement of Cash Flows for the Three Months
   Ended March 31, 1999                                                                         39

Notes to the Consolidated Financial Statements                                                  40

Financial Statement Schedules:

II.  Condensed Financial Information of Registrant                                              64

III. Supplementary Insurance Information                                                        73

IV.  Reinsurance                                                                                74

V.   Valuation and Qualifying Accounts and Reserves                                             74
</TABLE>

All  other  Financial  Statement  Schedules  are  omitted  because  they are not
applicable or the required  information is shown in the Financial  Statements or
notes thereto.


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
and Stockholders of
Ascent Assurance, Inc.

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Ascent
Assurance, Inc. and its subsidiaries at December 31, 2001 and December 31, 2000,
and the  results of their  operations  and their cash flows for the years  ended
December 31, 2001 and 2000 and nine months ended December 31, 1999 in conformity
with accounting  principles  generally accepted in the United States of America.
In addition,  in our opinion,  the financial  statement  schedules listed in the
accompanying index present fairly, in all material respects, the information set
forth therein when read in conjunction with the related  consolidated  financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing  standards  generally  accepted in the United States of America,  which
require that we plan and perform the audit to obtain reasonable  assurance about
whether the financial  statements  are free of material  misstatement.  An audit
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.




/s/ PricewaterhouseCoopers LLP
Dallas, Texas
March  8, 2002



<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors
and Stockholders of
Westbridge Capital Corp. (now, Ascent Assurance, Inc.)

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly,  in all material  respects,  the results of operations and
cash flows of Westbridge Capital Corp. and its subsidiaries for the three months
ended  March 31,  1999,  in  conformity  with  accounting  principles  generally
accepted in the United  States.  In  addition,  in our  opinion,  the  financial
statement  schedules  listed in the  accompanying  index present fairly,  in all
material  respects,  the  information set forth therein when read in conjunction
with the related consolidated  financial statements.  These financial statements
and  financial  statement  schedules  are the  responsibility  of the  Company's
management;  our  responsibility  is to express  an  opinion on these  financial
statements and financial  statement  schedules based on our audits. We conducted
our audits of these statements in accordance with auditing  standards  generally
accepted in the United States,  which require that we plan and perform the audit
to obtain reasonable  assurance about whether the financial  statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.

As  discussed in Note 1 to the  consolidated  financial  statements,  Westbridge
Capital  Corp.  filed a voluntary  petition for relief  under  Chapter 11 of the
Bankruptcy  Code with the United  States  Bankruptcy  Court for the  District of
Delaware on September  16, 1998.  The  Bankruptcy  Court  confirmed  the Plan of
Reorganization  on December 17, 1998, and, after the satisfaction of a number of
conditions,  the Plan of  Reorganization  became effective on March 24, 1999 and
the Company  emerged from  bankruptcy.  In connection  with its  emergence  from
Chapter  11,  Westbridge  Capital  Corp.  changed its  corporate  name to Ascent
Assurance, Inc. and adopted fresh start accounting.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Dallas, Texas
March 29, 2000




<PAGE>



                             ASCENT ASSURANCE, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>


                                                                    December 31,
                                                          ---------------------------
                                                              2001           2000
                                                          ------------   ------------
Assets                                               (in thousands, except per share data)
------
<S>                                                        <C>           <C>
Investments:
  Fixed Maturities:
    Available-for-sale, at market value (amortized cost
      $90,475 and $104,081)                                $  90,217     $ 100,590
  Equity securities, at market (cost $1,432 and $1,365)        1,569         1,335
  Other investments                                              314           398
  Short-term investments                                      21,801         7,254
                                                           -----------   -----------
      Total Investments                                      113,901       109,577

Cash                                                           2,337         2,658
Accrued investment income                                      1,710         1,965
Receivables from agents, net of allowance for doubtful
  accounts of $4,013 and $3,711                                7,412         8,737
Deferred policy acquisition costs                             25,600        24,711
Property and equipment, net of accumulated depreciation
  of $3,904 and $2,683                                         5,436         6,375
Other assets                                                   6,197         6,455
                                                           -----------   -----------
      Total Assets                                         $ 162,593     $ 160,478
                                                           ===========   ===========

Liabilities, Redeemable Convertible Preferred Stock  and
Stockholders' Equity
Liabilities:
  Policy liabilities and accruals:
    Future policy benefits                                 $  61,571     $  61,306
    Claim reserves                                            37,202        42,778
                                                           -----------   -----------
      Total Policy Liabilities and Accruals                   98,773       104,084

Accounts payable and other liabilities                        11,760        15,667
Notes payable                                                 18,603         8,947
                                                           -----------   -----------
      Total Liabilities                                      129,136       128,698
                                                           -----------   -----------

Commitments and Contingencies

Redeemable convertible preferred stock                        30,635        27,705
                                                           -----------   -----------

Stockholders' Equity
  Common stock ($0.01 par value, 30,000,000 shares
    authorized; 6,500,000 shares issued)                          65            65
  Capital in excess of par value                              28,017        27,620
  Accumulated other comprehensive loss, net of tax              (121)       (2,324)
  Retained Deficit                                           (25,139)      (21,286)
                                                           -----------   -----------
      Total Stockholders' Equity                               2,822         4,075
                                                           -----------   -----------

      Total Liabilities, Redeemable Convertible
      Preferred Stock and Stockholders' Equity             $ 162,593     $ 160,478
                                                           ===========   ===========
</TABLE>

             See the Notes to the Consolidated Financial Statements.


<PAGE>



                             ASCENT ASSURANCE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>


                                                  Year Ended             Nine Months Ended
                                                  December 31,              December 31,
                                           --------------------------    -----------------
                                               2001          2000              1999
                                           -----------    -----------    -----------------
Revenues:                                         (in thousands, except per share data)
  Premiums:
<S>                                        <C>            <C>            <C>
    First-year                             $  29,984      $  30,984      $    14,350
    Renewal                                   95,222         88,924           72,021
                                           -----------    -----------    -----------------
      Total Premiums                         125,206        119,908           86,371

  Net investment income                        8,867          9,741            6,740
  Fee and service income                      20,916         20,391           13,069
  Net realized gain (loss) on
    investments                                  392           (454)            (208)
                                           -----------    -----------    -----------------
         Total Revenue                       155,381        149,586          105,972
                                           -----------    -----------    -----------------

Benefits, claims and expenses:
  Benefits and claims                         93,376        101,940           65,699
  Increase in deferred acquisition costs        (889)        (6,818)          (4,354)
  Commissions                                 21,445         25,010           17,891
  General and administrative expense          36,871         35,159           21,034
  Taxes, license and fees                      4,764          5,105            3,422
  Interest expense on notes payable            1,933            629              284
  Recognition of premium deficiency                -          1,500                -
  Resolution of pre-confirmation
    contingencies                                  -              -           (1,235)
                                           -----------    -----------     ----------------
         Total Expenses                      157,500        162,525          102,741

(Loss) income before income taxes             (2,119)       (12,939)           3,231
Federal income tax expense                         -          6,003            1,125
                                           -----------    -----------     ----------------
         Net (Loss) Income                    (2,119)       (18,942)           2,106

Preferred stocks dividends                     2,932          2,576            1,874
                                           -----------    -----------    -----------------
(Loss) income applicable to common
  stockholders                             $  (5,051)     $ (21,518)     $       232
                                           ===========    ===========    =================

Basic and diluted net (loss) income
  per common share                         $   (0.78)     $   (3.31)     $      0.04
                                           ===========    ===========    =================

Weighted average shares outstanding:
  Basic                                        6,500          6,500            6,500
                                           ===========    ===========    =================
  Diluted                                      6,500          6,500            6,510
                                           ===========    ===========    =================
</TABLE>

             See the Notes to the Consolidated Financial Statements.


<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                          (now ASCENT ASSURANCE, INC.)
                      CONSOLIDATED STATEMENT OF OPERATIONS



                                                    Three Months
                                                       Ended
                                                   March 31, 1999
                                                  ----------------
                                               (In thousands, except
Revenues:                                          per share data)
  Premiums:
     First-year                                   $       3,121
     Renewal                                             26,827
                                                  ----------------
       Total Premiums                                    29,948

  Net investment income                                   2,562
  Fee and service income                                  4,263
  Net realized gain on investments                           41
                                                  ----------------
       Total Revenue                                     36,814
                                                  ----------------

Benefits, claims and expenses:
   Benefits and claims                                   21,799
   Increase in deferred acquisition costs                  (862)
   Commissions                                            6,688
   General and administrative expenses                    7,229
   Taxes, licenses and fees                               1,059
   Interest expense on notes payable                        119
   Interest expense on retired/cancelled debt               507
                                                  ----------------
     Total Expenses                                      36,539

Income before income taxes                                  275
Federal income tax expense                                   67
                                                  ----------------
       Net Income                                           208

Preferred stock dividends                                     -
                                                  ----------------
Income applicable to common stockholders          $         208
                                                  ================

Basic and diluted net income per common share     $        0.03
                                                  ================

Weighted average shares outstanding:
      Basic                                               7,032
                                                  ================
      Diluted                                             7,032
                                                  ================

             See the Notes to the Consolidated Financial Statements.


<PAGE>


                             ASCENT ASSURANCE, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>


                                                         Year Ended             Nine Months Ended
                                                        December 31,               December 31,
                                                 --------------------------     -----------------
                                                    2001           2000               1999
                                                 -----------   ------------     -----------------
                                                                 (in thousands)
<S>                                              <C>           <C>              <C>
Net (loss) income                                $  (2,119)    $  (18,942)      $     2,106
Other comprehensive income (loss):
  Unrealized holding gain (loss)
    arising during period, net of tax                2,595          1,227            (3,956)
  Reclassification adjustment of (gain)
    loss on sales of investments
    in net income, net of tax                         (392)           300               105
                                                 -----------   ------------     -----------------
Comprehensive Income (Loss)                      $      84     $  (17,415)      $    (1,745)
                                                 ===========   ============     =================
</TABLE>

             See the Notes to the Consolidated Financial Statements.



<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                          (now ASCENT ASSURANCE, INC.)
                 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



                                                            Three Months
                                                               Ended
                                                           March 31, 1999
                                                          ----------------
                                                           (in thousands)
Net income                                                $        208
Other comprehensive income (loss):
  Unrealized holding loss arising during period,
    net of tax                                                  (1,959)
  Reclassification adjustment of gain on sales of
    investments included in net income, net of tax                 (27)
                                                          ----------------
Comprehensive Loss                                        $     (1,778)
                                                          ================

             See the Notes to the Consolidated Financial Statements.



<PAGE>





                             ASCENT ASSURANCE, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                        (in thousands, except share data)


<TABLE>
                                                                                    Accumulated
                                                                      Capital          Other        Retained        Total
                                                Common Stock         In Excess     Comprehensive    (Deficit)    Stockholders'
                                                ------------
                                            Shares        Amount    Of Par Value       Loss         Earnings        Equity

<S>                                        <C>           <C>         <C>           <C>             <C>           <C>
Balance at March 31, 1999                  6,500,000     $    65     $  27,038     $         -     $       -     $    27,103

Net income                                                                                             2,106           2,106
Preferred stock dividend                                                                              (1,874)         (1,874)
Other comprehensive loss, net of tax                                                    (3,851)                       (3,851)
Amortization of unearned compensation                                      300                                           300
                                         -------------   ---------   -----------   -------------   -----------   -------------
Balance at December 31, 1999               6,500,000          65        27,338          (3,851)          232          23,784
                                         =============   =========   ===========   =============   ===========   =============

Net loss                                                                                             (18,942)        (18,942)
Preferred stock dividend                                                                              (2,576)         (2,576)
Other comprehensive income, net of tax                                                   1,527                         1,527
Amortization of unearned compensation                                      282                                           282
                                         -------------   ---------   -----------    ------------   -----------   -------------
Balance at December 31, 2000               6,500,000          65        27,620          (2,324)      (21,286)          4,075
                                         =============   =========   ===========    ============   ===========   =============

Net loss                                                                                              (2,119)         (2,119)
Preferred stock dividend                                                                              (2,932)         (2,932)
Other comprehensive income, net of tax                                                   2,203                         2,203
Decrease in deferred tax asset valuation
  allowance attributable to unrealized
  gains on investments                                                                                 1,198           1,198
Amortization of unearned compensation                                      397                                           397
                                         -------------   ---------   -----------    ------------   -----------   -------------
Balance at December 31, 2001               6,500,000     $    65     $  28,017      $     (121)    $ (25,139)    $     2,822
                                         =============   =========   ===========    ============   ===========   =============
</TABLE>



             See the Notes to the Consolidated Financial Statements.


<PAGE>






                            WESTBRIDGE CAPITAL CORP.
                          (now ASCENT ASSURANCE, INC.)
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

                        (in thousands, except share data)

<TABLE>

                                                                                 Accumulated
                                                                    Capital         Other         Retained        Total
                                              Common Stock         in Excess     Comprehensive    (Deficit)    Stockholders'
                                              ------------
                                           Shares       Amount    Of Par Value   Income (Loss)    Earnings        Equity
                                           ------       ------    ------------   -------------   -----------   -------------

<S>                                      <C>           <C>        <C>            <C>             <C>           <C>
Balance at December 31, 1998             7,035,809     $  703     $   37,641     $     3,911     $(104,335)    $  (62,080)
  Net income                                                                                           208            208
  Other comprehensive loss, net of tax                                                (1,986)                      (1,986)
  Cancellation of old preferred stock                                 11,935                        (3,088)         8,847
  Issuance of new preferred stock                                                                     (477)          (477)
  Cancellation of old common stock      (7,035,809)      (703)                                                       (703)
  Issuance of new common stock           6,500,000         65         79,203                                       79,268
  Fresh start adjustments                                           (101,741)         (1,925)      107,692          4,026
                                       -------------   --------   ------------   -------------   -----------   -------------
Balance at March 31, 1999                6,500,000     $   65     $   27,038     $         -     $       -     $   27,103
                                       =============   ========   ============   =============   ===========   =============
</TABLE>


             See the Notes to the Consolidated Financial Statements

<PAGE>


                             ASCENT ASSURANCE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>

                                                        Year Ended            Nine Months Ended
                                                       December 31,              December 31,
                                               --------------------------     -----------------
                                                  2001            2000              1999
                                               -----------    -----------     -----------------
Cash Flow From Operating Activities:                           (in thousands)
<S>                                            <C>            <C>             <C>
  Net (loss) income                            $  (2,119)     $ (18,942)      $      2,106
  Adjustments to reconcile net income
    to cash used for operating activities:
    Recognition of premium deficiency                  -          1,500                  -
    Decrease in accrued investment income            255             65                139
    Increase in deferred acquisition costs          (889)        (6,818)            (4,354)
    Decrease (increase) in receivables from
      agents                                       1,325         (1,675)             1,120
    Decrease (increase) in other assets              258             88             (1,200)
    (Decrease) increase in policy liabilities
      and accruals                                (5,311)         8,189                 89
    Decrease (increase) in accounts payable
      and accruals                                (3,907)         2,075             (4,949)
    Decrease in deferred income taxes, net             -          7,086                261
    Other, net                                     3,836          3,557              1,707
                                               -----------    -----------     -----------------
Net Cash Used for Operating Activities            (6,552)        (4,875)            (5,081)
                                               -----------    -----------     -----------------

Cash Flow From Investing Activities:
    Purchase of fixed maturity investments       (24,423)       (55,678)            (9,001)
    Sales of fixed maturity investments           30,826         49,463             17,096
    Maturities and calls of fixed maturity
      investments                                  7,074          4,631              1,132
    Net (increase)decrease in short term and
      other investments                          (14,531)         3,665                873
    Property and equipment purchased                (918)        (1,443)            (4,193)
                                               -----------    -----------     -----------------
Net Cash (Used for) Provided by
    Investing Activities                          (1,972)           638              5,907
                                               -----------    -----------     -----------------

Cash Flow From Financing Activities:
    Issuance of notes payable                     11,305          2,873              4,129
    Repayment of notes payable                    (2,635)        (1,088)            (2,055)
    Deferred debt costs                             (467)             -                  -
                                               -----------    -----------     -----------------
Net Cash Provided by Financing Activities          8,203          1,785              2,074
                                               -----------    -----------     -----------------

(Decrease) Increase in Cash During Period           (321)        (2,452)             2,900
Cash at Beginning of Period                        2,658          5,110              2,210
                                               -----------    -----------     -----------------
Cash at End of Period                          $   2,337      $   2,658       $      5,110
                                               ===========    ===========     =================
</TABLE>

             See the Notes to the Consolidated Financial Statements.


<PAGE>


                            WESTBRIDGE CAPITAL CORP.
                          (now ASCENT ASSURANCE, INC.)
                      CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>


                                                               Three Months
                                                                   Ended
                                                              March 31, 1999
                                                             ----------------
Cash Flows From Operating Activities:                         (in thousands)
<S>                                                          <C>
  Net income                                                 $        208
  Adjustments to reconcile net income to cash
     provided by (used for) operating activities:
        Increase in deferred acquisition costs                       (862)
        Decrease in receivables from agents                         1,678
        Increase in other assets                                   (1,007)
        Decrease in policy liabilities and accruals                (2,181)
        Increase in accounts payable and accruals                   4,428
        Decrease in deferred income taxes, net                     (1,070)
        Other, net                                                  1,308
                                                             ----------------
Net Cash Provided By Operating Activities                           2,502
                                                             ----------------

Cash Flows From Investing Activities:
  Proceeds from investments sold:
        Fixed maturities, called or matured                         2,215
        Fixed maturities, sold                                      4,904
        Other investments, sold or matured                            139
        Cost of investments acquired                               (5,851)
        Other                                                        (873)
                                                             ----------------
Net Cash Provided By Investing Activities                             534
                                                             ----------------

Cash Flows From Financing Activities:
  Retirement of senior subordinated debentures                    (15,167)
  Issuance of preferred stock                                      15,167
  Issuance of notes payable                                           911
  Repayment of notes payable                                       (2,015)
                                                             ----------------
Net Cash Used For Financing Activities                             (1,104)
                                                             ----------------
Increase In Cash During Period                                      1,932
Cash At Beginning Of Period                                           278
                                                             ----------------
Cash At End Of Period                                        $      2,210
                                                             ================

</TABLE>

             See the Notes to the Consolidated Financial Statements.


<PAGE>


                             ASCENT ASSURANCE, INC.
                      (formerly, Westbridge Capital Corp.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS

Ascent Assurance,  Inc. ("Ascent"),  a Delaware company incorporated in 1982, is
an insurance holding company engaged in the development, marketing, underwriting
and  administration  of  medical  expense  and  supplemental   health  insurance
products,  primarily to  self-employed  individuals  and small business  owners.
Ascent adopted its corporate  name on March 24, 1999, the date its  predecessor,
Westbridge Capital Corp. ("Westbridge"),  emerged from Chapter 11 reorganization
proceedings (see Note 14). References herein to the "Company" shall mean for all
periods on or prior to March 31, 1999, Westbridge and its subsidiaries,  and for
all periods on or after the close of business on March 31, 1999,  Ascent and its
subsidiaries.

The  Company's  revenues  result  primarily  from  premiums  and  fees  from the
insurance  products sold by its wholly owned  subsidiaries  National  Foundation
Life  Insurance  Company  ("NFL"),  Freedom  Life  Insurance  Company of America
("FLICA"),  National Financial Insurance Company ("NFIC") and American Insurance
Company of Texas ("AICT",  and together with NFL, NFIC and FLICA,  collectively,
the "Insurance  Subsidiaries") and marketed by NationalCare(R)  Marketing,  Inc.
("NCM"), also a wholly owned subsidiary.  To a lesser extent the Company derives
revenue from (i)  telemarketing  services,  (ii)  printing  services,  and (iii)
renewal  commissions  received by the Company for prior year sales of  insurance
products underwritten by unaffiliated insurance carriers.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of  Presentation.  The consolidated  financial  statements are prepared in
accordance with accounting  principles  generally  accepted in the United States
("GAAP")   and  include  the  accounts  of  Ascent   Assurance,   Inc.  and  its
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated.  Certain reclassifications of prior years' amounts have been made to
conform with the 2001 financial statement presentation.

Fresh Start Adjustments.  In accordance with the American Institute of Certified
Public  Accountants'  Statement  of  Position  90-7  ("SOP  90-7"),   "Financial
Reporting by Entities in Reorganization  Under the Bankruptcy Code," the Company
adopted  fresh start  reporting  effective  March 31, 1999 (see Note 14).  Fresh
start reporting  requires the new reporting entity created on the reorganization
effective date to determine a reorganization book value. The reorganization book
value is  allocated to the fair value of assets and  liabilities  similar to the
purchase method of accounting under Accounting  Principles Board Opinion No. 16.
As a  result  of  the  application  of  fresh  start  reporting,  the  financial
statements of Ascent issued  subsequent to the adoption of fresh start reporting
will not be comparable  with those of  Westbridge  prepared  before  adoption of
fresh  start  accounting,  including  the  historical  financial  statements  of
Westbridge in this annual report.  With the adoption of fresh start  accounting,
the Company retained a fiscal accounting year ended on December 31 of each year.

Ascent's  reorganization  book value was  determined  with the assistance of its
financial  advisors.  The  significant  factors  used  in the  determination  of
reorganization book value were analyses of industry, economic and overall market
conditions,  historical and projected  performance  of the Company,  and certain
financial  analyses,  including  discounted future cash flows. In December 2001,
deferred policy  acquisition costs and policy liabilities and accruals were both
increased by $650,000 to reflect  corrections  of the fresh start balance sheet.
These  corrections  had no  impact  on  Ascent's  reorganization  book  value or
stockholders' equity as subsequently reported.


<PAGE>


The effects of the Plan and fresh start reporting on the Company's  consolidated
balance sheet as of March 31, 1999 are as follows (in thousands):
<TABLE>

                                        Westbridge     Issue New    Issue New    Fresh Start      Ascent
                                        03/31/1999   Preferred (a)  Common (b)  Adjustments(c)  03/31/1999
                                       ------------- ------------- ------------ -------------- ------------
Assets
<S>                                    <C>           <C>           <C>          <C>            <C>
Total investments                      $   126,932   $             $            $              $  126,932
Cash                                         2,210                                                  2,210
Accrued investment income                    2,169                                                  2,169
Agent receivables, net                       8,182                                                  8,182
Deferred policy acquisition costs           15,039                                                 15,039
Deferred tax asset, net                      1,070                                     6,277        7,347
Other assets                                13,504                     (3,088)        (2,500)       7,916
                                       ------------- ------------- ------------ -------------- ------------

     Total assets                      $   169,106   $         -   $   (3,088)  $      3,777   $  169,795
                                       ============= ============= ============ ============== ============

Liabilities, Preferred Stock & Equity
Policy liabilities and accruals        $    95,806   $             $            $              $   95,806
Accounts payable and accruals               18,790                                      (249)      18,541
Notes payable                                5,088                                                  5,088
Accrued dividends                            1,304                     (1,304)                          -
Accrued interest                            10,518        (3,257)      (7,261)                          -
Senior subordinated notes, net              19,523       (19,523)                                       -
Convertible subordinated notes              70,000                    (70,000)                          -
                                       ------------- ------------- ------------ -------------- ------------
     Total liabilities                     221,029       (22,780)     (78,565)          (249)     119,435

Old Series A preferred stock                11,935                    (11,935)                          -
New Series A preferred stock                              23,257                                   23,257
                                       ------------- ------------- ------------ -------------- ------------
     Total preferred stock                  11,935        23,257      (11,935)             -       23,257

Old common stock                               703                       (703)                          -
New common stock                                                           65                          65
Additional paid in capital                  37,641                     91,138       (101,741)      27,038
Accumulated other comprehensive
  income, net of tax                         1,925                                    (1,925)           -
Retained earnings                         (104,127)         (477)      (3,088)       107,692            -
                                       ------------- ------------- ------------ -------------- ------------

     Total equity                          (63,858)         (477)      87,412          4,026       27,103
                                       ------------- ------------- ------------ -------------- ------------
     Total liabilities, preferred
       stock and equity                $   169,106   $         -   $   (3,088)  $      3,777   $  169,795
                                       ============= ============= ============ ============== ============
</TABLE>


(a)  Reflects issuance of 23,257 shares of New Preferred Stock to CSFB for $15.2
     million  in cash and  exchange  of  Senior  Notes  held by CSFB,  including
     accrued interest,  for $8.1 million.  Includes  simultaneous  retirement of
     Senior Notes held by holders other than CSFB,  including  accrued interest,
     for $15.2  million  and  write-off  of  unamortized  debt  discount of $0.5
     million.

(b)  Reflects  issuance of 6,500,000  shares of New Common Stock in exchange for
     Convertible Notes, Old Preferred Stock , Old Common Stock and settlement of
     general unsecured claims. Includes 32,500 shares of New Common Stock issued
     to management on the Effective Date, and includes  write-off of unamortized
     debt issuance costs of $3.1 million.

(c)  Reflects  adjustments to record assets and liabilities at fair market value
     and to set retained earnings to zero.

<PAGE>


The following  significant  accounting  policies are applicable to the financial
statements of both Ascent and Westbridge, unless otherwise indicated.

Cash Equivalents.  Cash equivalents  consists of highly liquid  instruments with
maturities at the time of acquisition of three months or less. Cash  equivalents
are stated at cost, which approximates market.

Short-Term  Investments.  Short-term  investments  are  stated  at  cost,  which
approximates market.

Investments.   The  Company's   fixed   maturity   portfolio  is  classified  as
available-for-sale  and is carried at estimated market value.  Equity securities
(common and nonredeemable preferred stocks) are also carried at estimated market
value. With the application of fresh start reporting,  the Company's  marketable
securities  book values under GAAP were  adjusted to equal the market  values of
such securities at March 31, 1999. Accordingly, the stockholders' equity section
of Ascent's  March 31, 1999 fresh start balance sheet reflects a zero balance in
accumulated  other  comprehensive   income.   Changes  in  aggregate  unrealized
appreciation or depreciation on fixed maturity and equity securities  subsequent
to  March  31,  1999 are  reported  directly  in  stockholders'  equity,  net of
applicable  deferred  income  taxes  and,  accordingly,  will  have no effect on
current operations.

Deferred Policy Acquisition Costs ("DPAC").  Policy acquisition costs consisting
of commissions  and other policy issue costs,  which vary with and are primarily
related to the  production  of new  business,  are deferred and  amortized  over
periods  not to exceed  the  estimated  premium-paying  periods  of the  related
policies.  Also included in DPAC is the cost of insurance  purchased on acquired
business.  The  amortization  of these costs is based on  actuarially  estimated
future premium revenues,  and the amortization rate is adjusted  periodically to
reflect  actual  experience.  Projected  future  levels of premium  revenue  are
estimated using assumptions as to interest, mortality, morbidity and withdrawals
consistent  with  those  used  in  calculating  liabilities  for  future  policy
benefits.  No changes were made to DPAC  assumptions for purposes of fresh start
accounting.

Agent  Receivables.  In the ordinary  course of business,  the Company  advances
commissions on policies  written by its general  agencies and their agents.  Net
agent  receivables  were $7.4  million and $8.7 million at December 31, 2001 and
2000,  respectively.  The  Company is  reimbursed  for these  advances  from the
commissions earned over the respective policy's life. In the event that policies
lapse  prior to the time the  Company  has been fully  reimbursed,  the  general
agency  or the  individual  agents,  as the case  may be,  are  responsible  for
reimbursing the Company for the outstanding  balance of the commission  advance.
The Company routinely  establishes a reserve for uncollectible  agent's balances
based upon  historical  experience  and  projected  commission  earnings.  As of
December 31, 2001 and 2000, the Company's allowance for uncollectible commission
advances was $4.0 million and $3.7 million, respectively.

Future Policy Benefits.  Liabilities for future policy benefits not yet incurred
are computed  primarily using the net level premium method  including  actuarial
assumptions  as  to  investment  yield,   mortality,   morbidity,   withdrawals,
persistency  and  other  assumptions  which  were  appropriate  at the  time the
policies were issued.  Assumptions used are based on the Company's experience as
adjusted to provide for possible adverse deviation.  Generally,  these actuarial
assumptions are fixed and, absent material adverse benefit  experience,  are not
adjusted.  No changes were made to such  actuarial  assumptions  for purposes of
fresh start accounting.

Claim  Reserves.  Claim reserves  represent the estimated  liabilities on claims
reported  plus claims  incurred  but not yet  reported.  No changes were made to
claim reserve estimates for purposes of fresh start  accounting.  The process of
estimating  claim  reserves  involves the active  participation  of  experienced
actuarial  consultants  with input from the  underwriting,  claims,  and finance
departments.  The inherent uncertainty in estimating claim reserves is increased
when  significant  changes occur.  Changes  impacting the Company  include:  (1)
changes  in  economic  conditions;  (2)  changes  in state or  federal  laws and
regulations, particularly insurance reform measures; (3) writings of significant
blocks of new business and (4) significant changes in claims payment patterns as
a result of the  implementation  of a new  claims  administration  system in May
2000. Because claim reserves are estimates, management monitors reserve adequacy
over time,  evaluating  new  information  as it becomes  available and adjusting
claim  reserves  as  necessary.   Such  adjustments  are  reflected  in  current
operations.

Notes Payable. Notes payable are stated at cost, which approximates market.

Federal  Income Taxes.  The Company  records income taxes based on the asset and
liability  approach,  which requires the recognition of deferred tax liabilities
and assets for the expected  future tax  consequence  of  temporary  differences
between the carrying  amounts and the tax basis of assets and  liabilities.  The
tax effect of future  taxable  temporary  differences  (liabilities)  and future
deductible temporary differences (assets) are separately calculated and recorded
when such  differences  arise.  A valuation  allowance,  reducing any recognized
deferred tax asset,  must be recorded if it is determined that it is more likely
than not that such  deferred  tax asset will not be  realized.  The deferred tax
asset at December 31, 2001 and 2000 is fully reserved as discussed at Note 9.

In connection with its  reorganization,  the Company realized a non-taxable gain
from the extinguishment of certain indebtedness for tax purposes, since the gain
resulted from a  reorganization  under the  Bankruptcy  Code.  As a result,  the
Company was required to reduce certain tax attributes of Ascent Assurance, Inc.,
including (i) NOLs,  (ii) certain tax credits,  and (iii) tax bases in assets in
an amount equal to the gain on extinguishment.

Resolution of Preconfirmation  Contingencies.  Preconfirmation contingencies are
disputed,  unliquidated or contingent  claims that are unresolved at the date of
the  confirmation  of the  plan  of  reorganization.  As  part  of  fresh  start
accounting,  the  Company  estimated  and  recorded  values for  preconfirmation
contingencies relative to the payment of professional fees and the collection of
receivables  from third  parties.  During the third quarter of 1999, the Company
favorably  resolved  such  preconfirmation  contingencies.  In  accordance  with
generally accepted accounting principles, the Company recognized $1.2 million of
income   relative  to  the   favorable   resolution   of  such   preconfirmation
contingencies.

Earnings  Per Share.  Under GAAP,  there are two measures of earnings per share:
"basic earnings per share" and "diluted  earnings per share." Basic earnings per
share is computed by dividing  income  available to common  shareholders  by the
weighted average number of common shares outstanding during the period.  Diluted
earnings  per  share  reflects  the  potential  dilution  that  could  occur  if
securities or other contracts to issue common stock were converted or exercised.
For  the  years  2001  and  2000,   stock  options  of  1,085,850  and  944,600,
respectively,  that could  potentially  dilute  basic  earnings per share in the
future  were not  included  in the  computation  of diluted  earnings  per share
because to do so would have been anti-dilutive.

The following  tables reflect the calculation of basic and diluted  earnings per
share:
<TABLE>

                                                             Year Ended        Nine Months Ended
                                                            December 31,          December 31,
                                                     ------------------------  -----------------
Ascent Assurance, Inc.                                   2001         2000           1999
                                                     -----------  -----------  -----------------
                                                        (in thousands, except per share data)
Basic:
<S>                                                  <C>          <C>          <C>
  (Loss) income available to common shareholders     $  (5,051)   $ (21,518)   $       232
                                                     ===========  ===========  =================
  Weighted average shares outstanding                    6,500        6,500          6,500
                                                     ===========  ===========  =================

  Basic (loss) earnings per share                    $   (0.78)   $   (3.31)   $      0.04
                                                     ===========  ===========  =================

Diluted:
  (Loss) income available to common shareholders     $  (5,051)   $ (21,518)   $       232
                                                     ===========  ===========  =================
  Weighted average shares outstanding                    6,500        6,500          6,510
                                                     ===========  ===========  =================

  Diluted (loss) earnings per share                  $   (0.78)   $   (3.31)   $      0.04
                                                     ===========  ===========  =================
</TABLE>



<PAGE>



                                                Three Months
                                                   Ended
Westbridge Capital Corp.                       March 31, 1999
                                               --------------
Basic:
  Income available to common shareholders      $      208
                                               ==============
  Weighted average shares outstanding               7,032
                                               ==============
  Basic earnings per share                     $     0.03
                                               ==============

Diluted:
  Income available to common shareholders      $      208
                                               ==============
  Weighted average shares outstanding               7,032
                                               ==============
  Diluted earnings per share                   $     0.03
                                               ==============

Use of Estimates.  The  preparation of financial  statements in conformity  with
GAAP requires  management  to make  estimates  and  assumptions  that affect the
reported  amounts of assets and liabilities and 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. Important factors known to
management  that could  cause  actual  results to differ  materially  from those
contemplated by estimates include, but are not limited to:

     any  limitation  imposed on the Company's  ability to control the impact of
     rising health care costs, especially prescription drugs, and rising medical
     service utilization rates through product and benefit design,  underwriting
     criteria, premium rate increases, utilization management and negotiation of
     favorable provider contracts;

     the impact of  changing  health  care  trends on the  Company's  ability to
     accurately estimate claim and settlement expense reserves;

     developments in health care reform and other regulatory  issues,  including
     the  Health  Insurance  Portability  and  Accountability  Act of  1996  and
     increased  privacy  regulation,  and changes in laws and regulations in key
     states where the Company operates;

     the company's ability to meet minimum regulatory  capital  requirements for
     its Insurance Subsidiaries;

     ability of the Company to maintain adequate liquidity for its non-insurance
     subsidiary operations, including financing by NCM of commission advances to
     agents;

     default by issuers of fixed maturity investments owned by the Company;

     and the loss of key management personnel.

Recently  Issued  Accounting  Pronouncements.  In  1998,  the NAIC  adopted  the
Codification of Statutory Accounting Principles guidance replaced the Accounting
Practices  and  Procedures  manual as the NAIC's  primary  guidance on statutory
accounting.  The  Codification  provides  guidance  for  areas  where  statutory
accounting has been silent and changes current  statutory  accounting in certain
areas.  The  Insurance  Department  of the State of  domicile  of the  Company's
Insurance  Subsidiaries  adopted  the  Codification  effective  January 1, 2001.
Codification  did not materially  impact the statutory  surplus of the Company's
Insurance Subsidiaries.

In June,  1998,  the  FASB  issued  SFAS No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities" ("SFAS 133"). This statement (as amended by
SFAS No. 137,  "Accounting For Derivative  Instruments  and Hedging  Activities,
Deferral of the  Effective  Date of SFAS No. 133, an amendment of SFAS No. 133")
is effective for fiscal years beginning  after June 15, 2000. The  pronouncement
established  accounting  and  reporting  standards for  derivative  instruments,
including  certain  derivative  instruments  embedded in other contracts and for
hedging activities. As the Company has not participated in derivative or hedging
activities, the Company's financial statements are not affected by SFAS 133.

In March 2000,  the FASB  issued FASB  Interpretation  No. 44,  "Accounting  for
Certain  Transactions  Involving Stock  Compensation - an  interpretation of APB
Opinion No. 25" ("FIN 44").  The Company  adopted FIN 44 on a prospective  basis
effective July 1, 2000. The adoption of FIN 44 did not have a material impact on
the Company's results of operations, liquidity or financial position.

In June 2001, the FASB issued SFAS No.141,  "Business Combinations" (SFAS 141").
This statement  supercedes APB Opinion No. 16, "Business  Combinations" and FASB
Statement No. 38,  "Accounting  for  Preacquisition  Contingencies  of Purchased
Enterprises",  and establishes  accounting and reporting  standards for business
combinations. Under the statement, all business combinations in the scope of the
statement are to be accounted  for using one method,  the purchase  method.  The
provisions of the statement apply to all business  combinations  initiated after
June 30, 2001.  As the Company has not been a part of any  business  combination
initiated after the effective date, the Company's  financial  statements are not
affected by SFAS 141.

In June 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible  Assets".
SFAS 142  supersedes  APB 17,  "Intangible  Assets," and is effective for fiscal
years  beginning  after  December 15, 2001.  SFAS 142  primarily  addresses  the
accounting  for goodwill  and  intangible  assets  subsequent  to their  initial
recognition.   SFAS  142  (1)  prohibits  the   amortization   of  goodwill  and
indefinite-lived  intangible  assets,  (2)  requires  testing  of  goodwill  and
indefinite-lived  intangible  assets on an annual basis for impairment (and more
frequently  if  the  occurrence  of  an  event  or  circumstance   indicates  an
impairment),  (3) requires that reporting units be identified for the purpose of
assessing   potential  future  impairments  of  goodwill  and  (4)  removes  the
forty-year  limitation on the amortization period of intangible assets that have
finite  lives.  The Company will adopt SFAS 142 on January 1, 2002.  The Company
does not expect to recognize an  impairment  loss upon adoption of SFAS 142. The
Company has no goodwill or  indefinite-lived  intangible assets. The Company has
identified  intangible  assets totaling $3.0 million included in deferred policy
acquisition costs  representing the estimated present value of future profits of
certain  insurance  policies  acquired  prior to March  1999.  The  Company  has
determined that there is no indication of impairment related to these assets and
that the useful lives assigned to the assets are appropriate. Going forward, the
Company will test these  intangibles for impairment  annually or more frequently
if the occurrence of an event or circumstances indicates impairment.

In August 2001, the FASB issued SFAS No. 143,  "Accounting for Asset  Retirement
Obligations".  SFAS No. 143 requires  that the fair value of a liability  for an
asset retirement  obligation be recognized in the period in which it is incurred
if a  reasonable  estimate  of fair  value  can be made.  The  associated  asset
retirement  costs  are  capitalized  as  part  of  the  carrying  amount  of the
long-lived asset. SFAS No. 143 will be effective for financial statements issued
for fiscal years  beginning  after June 15, 2002. An entity shall  recognize the
cumulative  effect  of  adoption  of SFAS  No.  143 as a  change  in  accounting
principle.  The  Company  does not  expect  the  adoption  of the  statement  to
materially impact the Company's results of operations and financial position.

In August 2001, the FASB approved SFAS No. 144,  "Accounting  for the Impairment
or Disposal of Long-Lived Assets." The Statement requires that long-lived assets
to be disposed of other than by sale be considered  held and used until they are
disposed of. SFAS No. 144 requires that  long-lived  assets to be disposed of by
sale be  accounted  for under the  requirements  of SFAS No.  121.  SFAS No. 121
requires  that such assets be measured at the lower of carrying  amounts or fair
value less cost to sell and to cease depreciation  (amortization).  SFAS No. 144
requires a  probability-weighted  cash flow  estimation  approach in  situations
where  alternative  courses  of  action  to  recover  the  carrying  amount of a
long-lived asset are under consideration or a range of possible future cash flow
amounts are estimated.  As a result,  discontinued  operations will no longer be
measured on a net realizable  basis,  and future operating losses will no longer
be recognized before they occur. Additionally, goodwill will be removed from the
scope  SFAS No.  121.  As a result  goodwill  will no longer be  required  to be
allocated  to  long-lived  assets to be tested for  impairment.  SFAS No. 144 is
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001, and interim  periods  within those fiscal years.  The Company
does not expect the adoption of the statement to materially impact the Company's
results of operations and financial position.


<PAGE>



NOTE 3 - INVESTMENTS

Major categories of investment income are summarized as follows:

<TABLE>
                                                                                       Westbridge
                                                Ascent Assurance, Inc.                Capital Corp.
                                    ---------------------------------------------    --------------
                                            Year Ended          Nine Months Ended     Three Months
                                           December 31,            December 31,      Ended March 31
                                    -------------------------   -----------------    --------------

                                        2001          2000            1999                1999
                                    -----------   -----------   -----------------    --------------
                                                         (in thousands)
<S>                                 <C>           <C>           <C>                  <C>
Fixed maturities                    $   6,424     $   7,088     $      5,368         $     2,125
Short-term investments                    458           741              291                  86
Interest on receivables from agents     1,998         1,936              941                 345
Other                                     138           189              201                  73
                                    -----------   -----------   -----------------    --------------
                                        9,018         9,954            6,801               2,629

  Less: Investment expenses               151           213               61                  67
                                    -----------   -----------   -----------------    --------------
  Net investment income             $   8,867     $   9,741     $      6,740         $     2,562
                                    ===========   ===========   =================    ==============
</TABLE>


Realized gain (loss) on investments are summarized as follows:
<TABLE>
                                                                                      Westbridge
                                                  Ascent Assurance, Inc.             Capital Corp.
                                    ---------------------------------------------    -------------
                                            Year Ended          Nine Months Ended     Three Months
                                           December 31,            December 31,      Ended March 31
                                    -------------------------   -----------------    --------------
                                        2001          2000             1999               1999
                                    ------------  -----------   -----------------    --------------
                                                                   (in thousands)
<S>                                 <C>           <C>           <C>                  <C>
Fixed maturities                    $     392     $   (454)     $       (162)        $        40
Equity securities                           -            -               (37)                  1
Other                                       -            -                (9)                  -
                                    ------------  -----------   -----------------    --------------
Realized gain (loss)on investments  $     392     $   (454)     $       (208)        $        41
                                    ============  ===========   =================    ==============
</TABLE>


Unrealized  (depreciation)  appreciation on investments is reflected directly in
stockholders'  equity as a component of accumulated other  comprehensive  (loss)
income and is summarizes as follows:


                                            --------------------------
                                                     Year Ended
                                                    December 31,
                                            --------------------------
                                                2001           2000
                                            -----------    -----------
                                                   (in thousands)
Balance at beginning of period              $  (2,324)     $  (3,851)
Unrealized appreciation, net of tax, on
  fixed maturities available-for-sale           2,046          1,513
Unrealized appreciation, net of tax , on
  equity securities and other investments         157             14
                                            -----------    -----------
Balance at end of period                    $    (121)     $  (2,324)
                                            ===========    ===========



<PAGE>


Estimated  market  values  represent  the  closing  sales  prices of  marketable
securities.  The amortized  cost and estimated  market values of  investments in
fixed maturities are summarized by category as follows:
<TABLE>

                                                         Gross            Gross       Estimated
                                          Amortized    Unrealized      Unrealized       Market
December 31, 2001 Available-for-Sale        Cost         Gains           Losses         Value
------------------------------------        ----         -----           ------         -----
                                                              (in thousands)
U.S. Government and governmental
<S>                                      <C>           <C>             <C>            <C>
  agencies and authorities               $  10,581     $      273      $      31      $  10,823
States, municipalities, and political
  subdivisions                               2,197             33              4          2,226
Finance companies                           20,025            373             91         20,307
Public utilities                             7,651             62            261          7,452
Mortgage-backed securities                  10,754             87            110         10,731
All other corporate bonds                   39,267            527          1,116         38,678
                                         -----------   ------------    -----------    -----------
Balance at December 31, 2001             $  90,475     $    1,355      $   1,613      $  90,217
                                         ===========   ============    ===========    ===========
</TABLE>
<TABLE>

                                                         Gross            Gross       Estimated
                                         Amortized     Unrealized      Unrealized       Market
December 31, 2000 Available-for-Sale       Cost          Gains           Losses         Value
------------------------------------       ----          -----           ------         -----
                                                              (in thousands)
U.S. Government and governmental
<S>                                      <C>           <C>             <C>            <C>
  agencies and authorities               $  10,415     $      74       $      27      $  10,462
States, municipalities, and political
  subdivisions                               2,013             -              31          1,982
Finance companies                           23,891            63             509         23,445
Public utilities                             7,091             8             312          6,787
Mortgage-backed securities                  13,328            28              54         13,302
All other corporate bonds                   47,343           143           2,874         44,612
                                         -----------   ------------    -----------    -----------
Balance at December 31, 2000             $ 104,081     $     316       $   3,807      $ 100,590
                                         ===========   ============    ===========    ===========
</TABLE>


The   amortized   cost   and   estimated   market   value  of   investments   in
available-for-sale fixed maturities as of December 31, 2001, are shown below, in
thousands,   summarized  by  year  to  contractual   maturity.   Mortgage-backed
securities  are  listed   separately.   Expected   maturities  may  differ  from
contractual  maturities  because  borrowers may have the right to call or prepay
obligations with or without penalties.

                                                       Estimated
                                         Amortized       Market
                                           Cost          Value
                                           ----          -----
                                             (in thousands)
Due in one year or less                 $   5,846      $   5,909
Due after one year through five years      26,972         27,451
Due after five years through ten years     24,005         24,165
Due after ten years                        22,898         21,961
Mortgage-backed securities                 10,754         10,731
                                        -----------    -----------
                                        $  90,475      $  90,217
                                        ===========    ===========



<PAGE>


A summary of unrealized  depreciation  on  investments  in fixed  maturities and
equity   securities   available-for-sale,   which  is   reflected   directly  in
stockholders'  equity as a component of accumulated other comprehensive loss, is
as follows:


                                                   December 31,
                                           --------------------------
                                               2001           2000
                                           -----------    -----------
                                                  (in thousands)
Amortized cost                             $  91,907      $ 105,446
Estimated market value                        91,786        101,925
                                           -----------    -----------
Deficit of market value to amortized cost       (121)        (3,521)
Estimated tax benefit                              -         (1,197)
                                           -----------    -----------
Unrealized depreciation, net of tax        $    (121)     $  (2,324)
                                           ===========    ===========

At December 31, 2000, the estimated tax benefit related to unrealized investment
losses has been fully reserved (see Note 9).

Proceeds from sales and maturities of  investments in fixed maturity  securities
were   approximately   $37.9  million  and  $54.1  million  for  2001  and  2000
respectively,  $18.2  million for the nine months ended  December 31, 1999,  and
$7.1  million for the three  months  ended March 31,  1999.  Gross gains of $0.7
million  and gross  losses  of $0.3  million  were  realized  on fixed  maturity
investment  sales during  2001.  Gross gains of $0.3 million and gross losses of
$0.7 million were realized on fixed maturity investment sales during 2000. Gross
gains of $0.1 million and gross  losses of $0.3  million were  realized on fixed
maturity  investment sales during the nine months ended December 31, 1999. Gross
gains of $0.2 million and gross  losses of $0.2  million were  realized on fixed
maturity  investment  sales during the three  months  ended March 31, 1999.  The
basis  used  in  determining  the  cost of  securities  sold  was  the  specific
identification method.

Included in fixed  maturities  at December  31, 2001 and 2000,  are  high-yield,
unrated or less than  investment  grade  corporate  debt  securities  comprising
approximately  0.4% and 0.9% of fixed  maturities at December 31, 2001 and 2000,
respectively.

Investment  securities on deposit with insurance  regulators in accordance  with
statutory  requirements  at December 31, 2001 and 2000 had a par value  totaling
$26.4 million and $27.2  million,  respectively.  At December 31, 2001 and 2000,
the  Company  had  pledged  short-term  investments  totaling  $2.6  million  in
connection with its receivables financing program (see Note 6).


<PAGE>


NOTE 4 - FUTURE POLICY BENEFITS

Future  policy  benefits for Accident and Health  insurance  products  have been
calculated using  assumptions  (which generally  contemplate the risk of adverse
deviation) for withdrawals, interest, mortality and morbidity appropriate at the
time the policies were issued. The more material assumptions are as follows:

Withdrawals           Issues through 1980 are based on industry experience; 1981
          through  2001  issues are based on  industry  experience  and  Company
          experience,  where  available.  Policies  acquired in acquisitions are
          based on recent experience of the blocks acquired.

Interest            Issues through 1980 are 6% graded to 4.5% in 25 years;  most
          1981  through  1992 issues are 10% graded to 7% in 10 years except for
          certain NationalCare and Supplemental Hospital Income issues which are
          8% graded to 6% in 8 years and LifeStyles Products which are 9% graded
          to 7% in 10  years.  1993  and  later  issues  are 7%  level.  Certain
          policies acquired in 1992 are 6.4% level while other policies acquired
          in 1993 and 1994 are 6% level. Policies acquired in the acquisition of
          NFIC and AICT are 7% level.

Mortality           Issues through 1980 use the 1955-1960 Ultimate Table; issues
          subsequent to 1980 through 1992 us the 1965-1970  Ultimate Table. 1993
          and later issues use the 1975-1980  Ultimate Table.  Policies acquired
          in acquisitions use the 1965-1970 Ultimate Table.

Morbidity           Based on industry  tables  published in 1974 by Tillinghast,
          Nelson and Warren,  Inc., as well as other  population  statistics and
          morbidity studies.

NOTE 5 - CLAIM RESERVES

The following table provides a reconciliation  of the beginning and ending claim
reserve balances, on a  gross-of-reinsurance  basis, for 2001, 2000 and 1999, to
the amounts reported in the Company's balance sheet:
<TABLE>

                                                                                                Westbridge
                                                         Ascent Assurance, Inc.                Capital Corp.
                                          -------------------------------------------------    -------------
                                                    Year Ended            Nine Months Ended     Three Months
                                                   December 31,              December 31,      Ended March 31
                                          ----------------------------    -----------------    --------------
                                              2001            2000               1999                1999
                                          ------------    ------------    -----------------    --------------
                                                                  (in thousands)
<S>                                       <C>             <C>             <C>                  <C>
Balance, beginning of the year (gross)    $   42,778      $   38,776      $      41,068        $    44,116
  Less: reinsurance recoverables on claim
    reserves                                   2,491           1,501              1,871              1,765
                                          ------------    ------------    -----------------    --------------
Net Balance at beginning of period            40,287          37,275             39,197             42,351

Incurred related to:
  Current year                                94,527          94,516             60,255             19,401
  Prior years                                 (1,785)          1,550              2,213              1,596
                                          ------------    ------------    -----------------    --------------
    Total incurred                            92,742          96,066             62,468             20,997
                                          ------------    ------------    -----------------    --------------

Paid related to:
  Current year                                66,250          61,834             47,300              5,277
  Prior years                                 31,577          31,220             17,090             18,874
                                          ------------    ------------    -----------------    --------------
    Total incurred                            97,827          93,054             64,390             24,151
                                          ------------    ------------    -----------------    --------------
Balance at end of period                      35,202          40,287             37,275             39,197

  Plus: reinsurance recoverables on claim
    reserves                                   2,000           2,491              1,501              1,871
                                          ------------    ------------    -----------------    --------------
Balance at end of period (gross)          $   37,202      $   42,778      $      38,776        $    41,068
                                          ============    ============    =================    ==============
</TABLE>


Included in reinsurance  recoverables  on claim reserves is  approximately  $0.9
million,  $1.5 million, $0.5 million and $0.9 million relating to paid claims as
of December 31, 2001, 2000, 1999 and March 31, 1999, respectively.

NOTE 6 - FINANCING ACTIVITIES

CSFB  Financing.  Ascent  received debt financing to fund an $11 million capital
contribution  to FLICA in April 2001 from Credit Suisse First Boston  Management
Corporation,  ("CSFB"),  which is an affiliate of Special  Situations  Holdings,
Inc. -- Westbridge (Ascent's largest stockholder). The credit agreement relating
to  that  loan  ("CSFB  Credit  Agreement")  provided  Ascent  with  total  loan
commitments  of $11  million  (all of which  has  been  drawn).  The loan  bears
interest  at a rate of 12% per annum and  matures  in April,  2004.  Absent  any
acceleration  following  an event  of  default,  the  Company  may  elect to pay
interest in kind by issuance of  additional  notes.  During 2001,  Ascent issued
$987,000 in additional notes for payment of interest in kind which increased the
notes payable balance to CSFB at December 31, 2001 to approximately $12 million.
The CSFB Credit  Agreement  provides for a facility fee of $1.5 million which is
payable upon maturity or upon a change in control, as defined. This facility fee
is being accrued as additional interest payable over the term of the loan.

Ascent's  obligations to CSFB are secured,  pursuant to a guarantee and security
agreement and pledge  agreements,  by substantially  all of the assets of Ascent
and its subsidiaries (excluding the capital stock and the assets of AICT, FLICA,
NFL, NFIC, NCM, Ascent Funding Corporation and Ascent Management,  Inc., some or
all of which is pledged  as  collateral  for bank  financing  described  below).
Ascent's  subsidiaries  (other than those  listed  above)  have also  guaranteed
Ascent's  obligations  under the CSFB Credit  Agreement.  At December  31, 2001,
there were no events of default; however, adverse claims experience in excess of
management's  current  expectations  could result in events of default under the
CSFB Credit Agreement.

Bank Financing. The majority of commission advances to NCM's agents are financed
through Ascent Funding,  Inc.  ("AFI"),  an indirect wholly owned  subsidiary of
Ascent.  AFI has entered into a Credit  Agreement (the "Credit  Agreement") with
LaSalle  which  currently  provides  AFI  with a  $7.5  million  revolving  loan
facility,  the proceeds of which are used to purchase agent advance  receivables
from NCM and other  affiliates.  As of  December  31,  2001,  $4.4  million  was
outstanding under the Credit Agreement (weighted average interest rate of 7.7%).
AFI incurs a commitment fee on the unused  portion of the Credit  Agreement at a
rate of 0.50% per annum. Interest of $0.4 million, $0.5 million and $0.3 million
was expensed and paid in 2001, 2000 and 1999, respectively.

The Credit  Agreement  expires  December 5, 2002, at which time the  outstanding
principal  and interest  will be due and payable.  Under the terms of the Credit
Agreement,  agent advances made within six months of the expiration  date (after
June 5, 2002) are not eligible for  financing.  Failure of the Company to obtain
additional  renewals of the Credit  Agreement  beyond December 2002 could have a
material  adverse impact on Ascent's  liquidity and capital  resources.  Lack of
adequate  financing  would  impair  the  Company's  ability  to pay  competitive
commission  advances and reduce new business  sales needed to replace the normal
lapsing of  existing  policies.  Therefore,  failure by Ascent to  maintain  new
business sales at current levels would result in declining  premium  revenue and
could have a material adverse impact on Ascent's results of operations.

AFI's  obligations  under  the  Credit  Agreement  are  secured  by  liens  upon
substantially  all of AFI's assets.  AFI's principal assets at December 31, 2001
are net agent receivables of $7.4 million and a short-term  investment  account,
pledged to LaSalle,  of $2.6 million.  In addition,  Ascent has guaranteed AFI's
obligations  under the Credit  Agreement , and has pledged all of the issued and
outstanding  shares  of the  capital  stock  of  AFI,  NFL,  FLICA  and  NFIC as
collateral  for that guaranty  (the  "Guaranty  Agreement").  As of December 31,
2001,  there were no events of default under the Credit or Guaranty  Agreements.
However,   adverse  claims   experience  in  excess  of   management's   current
expectations  could result in events of default  under the  Guaranty  Agreement,
Credit Agreement and the term loan facility discussed below.


In July 1999, Ascent  Management,  Inc. ("AMI") entered into a $3.3 million term
loan agreement with LaSalle,  secured by  substantially  all of AMI's assets and
the guarantee of Ascent.  Principal is payable in 60 equal monthly  installments
beginning  January  31,  2000.  As  of  December  31,  2001,  $2.2  million  was
outstanding  under the term loan  facility  (weighted  average  interest rate of
6.16%).  Interest  of $0.2  million  was  expensed  and paid in 2001  and  2000.
Interest of $0.1 million was capitalized and paid in 1999.

NOTE 7 - PREFERRED STOCK

The Company has  authorized  40,000 shares of  non-voting  preferred  stock.  At
December 31, 2001,  30,635 shares of preferred  stock were  outstanding,  all of
which are owned by Special  Situations  Holdings,  Inc. -  Westbridge,  Ascent's
largest common stockholder.

The following summarizes the significant terms of the preferred stock:

     Stated value of $1,000 per share.

     Cumulative annual dividend rate of $102.50 per share payable, at a minimum,
     annually  in arrears by the last day of January in each year by issuance of
     cash or additional shares of preferred stock.

     Each share of preferred stock is convertible at any time in 204.8897 shares
     of common stock at an initial conversion price of $4.88 per share,  subject
     to customary anti-dilution adjustments.

The preferred  stock is  mandatorily  redeemable in cash on March 24, 2004 in an
amount equal to the stated value per share plus all accrued and unpaid dividends
thereon to the date of redemption.

During 2001, Ascent paid preferred stock dividends through the issuance of 2,930
additional  shares of preferred  stock and $1,603 in  distributions  of cash. In
December 2000, the Company paid preferred stock  dividends  through the issuance
of 2,575 additional  shares of preferred stock and a $825  distribution of cash.
Preferred stock dividends accrued at December 31, 1999 were paid in January 2000
through the issuance of 1,873  additional  shares of preferred  stock and a $965
distribution of cash.

NOTE 8 - DEFERRED POLICY ACQUISITION COSTS ("DPAC")

A summary of DPAC follows (in thousands):
<TABLE>

                                                                                              Westbridge
                                                       Ascent Assurance, Inc.                Capital Corp.
                                        ------------------------------------------------    ---------------
                                                 Year Ended            Nine Months Ended     Three Months
                                                December 31,              December 31,      Ended March 31,
                                        ---------------------------    -----------------    ---------------
                                           2001              2000             1999               1999
                                        -----------    ------------    -----------------    ---------------

<S>                                     <C>            <C>             <C>                  <C>
Balance at beginning of period          $  24,711      $   19,393      $       15,039       $     14,177

Deferrals                                   8,563           9,816               5,832              1,148

Adjustment of Fresh Start Balance Sheet       645               -                   -                  -

Recognition of premium deficiency               -          (1,500)                  -                  -

Amortization expense                       (8,319)         (2,998)             (1,478)              (286)

                                        -----------    ------------    -----------------    ---------------
Balance at end of period                $  25,600      $   24,711      $       19,393       $     15,039
                                        ===========    ============    =================    ===============
</TABLE>

The Company routinely evaluates the recoverability of deferred acquisition costs
in accordance with GAAP. In general,  a premium deficiency exists if the present
value of future net cash flows plus future policy  benefit and claim reserves at
the calculation  date is negative or less than net deferred  policy  acquisition
costs.  The  calculation  of future net cash flows  includes  assumptions  as to
future rate increases and persistency. As a result of losses in 2000 for certain
major medical products, the Company determined that a premium deficiency of $1.5
million  existed at December 31, 2000 related to medical  expense  reimbursement
products  issued  subsequent  to  the  fresh  start  date  of  March  31,  1999.
Accordingly,  deferred policy  acquisition costs were reduced by $1.5 million at
December 31, 2000 by a non-cash charge to expense.


<PAGE>


NOTE 9 - INCOME TAXES

The  provision  for (benefit  from) income taxes is  calculated as the amount of
income  taxes  expected to be payable  for the current  year plus (or minus) the
deferred  income  tax  expense  (or  benefit)  represented  by the change in the
deferred income tax accounts at the beginning and end of the year. The effect of
changes in tax rates and federal  income tax laws are  reflected  in income from
continuing operations in the period such changes are enacted.

The tax effect of future taxable temporary differences  (liabilities) and future
deductible temporary differences (assets) are separately calculated and recorded
when such  differences  arise.  A valuation  allowance,  reducing any recognized
deferred tax asset,  must be recorded if it is determined that it is more likely
than not that such deferred tax asset will not be realized.

No taxes were paid in 2001. Taxes  (recovered) paid in 2000 and 1999 were $(1.2)
million and $80,000 respectively. The Company and its wholly owned subsidiaries,
other than FLICA, file a consolidated  federal income tax return.  FLICA files a
separate  federal  income  tax  return.  Prior  to 2000,  NFIC and AICT  filed a
separate  consolidated tax return. NFIC and AICT entered the Ascent consolidated
return in 2000.

The provision for (benefit from) U.S. federal income taxes charged to continuing
operations was as follows:
<TABLE>

                                                                                    Westbridge
                                               Ascent Assurance, Inc.               Capital Corp.
                                  ---------------------------------------------    --------------
                                          Year Ended          Nine Months Ended     Three Months
                                         December 31,            December 31,      Ended March 31
                                  -------------------------   -----------------    --------------
                                      2001          2000             1999               1999
                                  -----------   -----------   -----------------    --------------
                                                      (in thousands)
<S>                               <C>           <C>           <C>                  <C>
Current                           $      -      $    (206)    $     (1,199)        $       67
Deferred                                 -          6,209            2,324                  -
                                  -----------   -----------   -----------------    --------------
Total provision for income taxes  $      -      $   6,003     $      1,125         $       67
                                  ===========   ===========   =================    ==============
</TABLE>

Provision has not been made for state and foreign  income tax expense since such
expense is minimal.

The  differences  between  the  effective  tax rate and the  amount  derived  by
multiplying the (loss) income before income taxes by the federal income tax rate
for the Company's last three years was as follows:
<TABLE>

                                                                                     Westbridge
                                               Ascent Assurance, Inc.               Capital Corp.
                                  ---------------------------------------------    --------------
                                          Year Ended          Nine Months Ended     Three Months
                                         December 31,             December 31,     Ended March 31
                                  -------------------------   -----------------    --------------
                                      2001          2000             1999               1999
                                  -----------   -----------   -----------------    --------------

<S>                                   <C>            <C>               <C>                <C>
Statutory tax rate                    (34%)          (34%)             34%                34%
Change in valuation allowance          35%            80%               -                  -
Unutilized loss carry-forwards          -              -                2%                (9%)
Other items, net                       (1%)            -               (1%)               (1%)
                                  -----------   -----------   -----------------    --------------
Effective tax rate                      -             46%              35%                24%
                                  ===========   ===========   =================    ==============

</TABLE>


<PAGE>


Deferred  taxes are recorded for  temporary  differences  between the  financial
reporting  basis and the federal  income tax basis of the  Company's  assets and
liabilities.  The sources of these  differences  and the estimated tax effect of
each are as follows:
                                                          December 31,
                                                  ---------------------------
                                                      2001            2000
                                                  -----------     -----------
                                                             (in thousands)
Deferred Tax Assets:
  Unrealized loss on investments                  $       -       $   1,198
  Policy reserves                                     4,116           6,792
  Net operating loss carryforwards                   17,939          13,538
  Other deferred tax assets                           1,800           3,055
                                                  -----------     -----------
    Total deferred tax asset                      $  23,855       $  24,583
                                                  -----------     -----------

Deferred Tax Liabilities:
  Deferred policy acquisition costs               $   2,533       $   1,361
  Other deferred tax liabilities                      3,481           4,959
                                                  -----------     -----------
    Total deferred tax liability                  $   6,014       $   6,320
                                                  -----------     -----------

Net Deferred Tax Asset Before Valuation
  allowance                                       $  17,841       $  18,263
Less Valuation Allowance                            (17,841)        (18,263)
                                                  -----------     -----------
Net Deferred Tax Asset                            $       -       $       -
                                                  ===========     ===========

As of December 31,  2001,  the Company has reported  cumulative  pre-tax  losses
since the fresh  start  date of March 31,  1999.  Realization  of the  Company's
deferred tax asset is dependent  upon the return of the Company's  operations to
profitability.  Pre-tax  losses  during 2001 were  principally  attributable  to
adverse  claims  experience  for  certain  major  medical  products.  Management
believes  that  such  product  losses  can  be  significantly   reduced  through
aggressive   rate   increase   management.   However,   projections   of  future
profitability are significantly discounted when evaluating the recoverability of
deferred  tax assets and do not overcome  the  negative  evidence of  cumulative
losses.  Accordingly,  the Company  increased  its deferred tax asset  valuation
allowance by $10.4  million to $18.3  million to fully reserve the remaining net
deferred tax assets as of December 31, 2000. As a result of limitations  arising
from the  action of  sections  108 and 382 of the  Internal  Revenue  Code,  the
Company's  net  operating  loss  carryforwards  and  valuation  allowance  as of
December  31,  1999 were  reduced  by $9.1  million.  Changes  in the  valuation
allowance  applicable  to the net  deferred  tax asset for the three years ended
December 31, 2001 are as follows:
<TABLE>
                                                                                           Westbridge
                                                      Ascent Assurance, Inc.              Capital Corp.
                                        ---------------------------------------------    ---------------
                                               Year Ended           Nine Months Ended     Three Months
                                              December 31,              December 31,     Ended March 31,
                                        -------------------------   -----------------    ---------------
                                            2001         2000              1999               1999
                                        -----------   -----------   -----------------    ---------------
                                                               (in thousands)
Valuation allowance, beginning of
<S>                                     <C>           <C>           <C>                 <C>
  year                                  $ (18,263)    $ (16,949)    $      (16,949)     $     (36,449)
Decrease related to permanent
  limitations of net operating loss
  carry-forwards                                -         9,081                  -             19,500
Decrease attributable to unrealized
  gains on investments                      1,198             -                  -                  -
Increase charged to income                   (776)      (10,395)                 -                  -
                                        -----------   -----------   -----------------    ---------------
Valuation allowance, end of year        $ (17,841)    $ (18,263)    $      (16,949)      $    (16,949)
                                        ===========   ===========   =================    ===============
</TABLE>


Under the provisions of pre-1984 life insurance tax  regulations,  NFL was taxed
on the lesser of  taxable  investment  income or income  from  operations,  plus
one-half of any excess of income from operations over taxable investment income.
One-half  of the excess  (if any) of the income  from  operations  over  taxable
investment  income, an amount which was not currently subject to taxation,  plus
special deductions allowed in computing the income from operations,  were placed
in a special memorandum tax account known as the policyholders' surplus account.
The  aggregate  accumulation  in the account at December 31, 2001,  approximated
$2.5 million.  Federal  income taxes will become  payable on this account at the
then current tax rate when and to the extent that the account exceeds a specific
maximum,  or  when  and if  distributions  to  stockholders,  other  than  stock
dividends and other limited  exceptions,  are made in excess of the  accumulated
previously taxed income.  The Company does not anticipate any transactions  that
would cause any part of the amount to become taxable and, accordingly,  deferred
taxes  which  would  approximate  $0.9  million  have not been  provided on such
amount.

At both December 31, 2001 and 2000,  NFL had  approximately  $7.8 million in its
shareholders  surplus  account  from  which it could make  distributions  to the
Company  without  incurring any federal tax  liability.  The amount of dividends
which may be paid by NFL to the Company is limited by statutory regulations.

At  December  31,  2001,  the  Company and its wholly  owned  subsidiaries  have
aggregate  net  operating  loss  carryforwards,  net of  bankruptcy  related tax
attribute  reductions,  of approximately $52.9 million for regular tax and $53.3
million for alternative minimum tax purposes,  which will expire in 2003 through
2016.


NOTE 10 - STATUTORY CAPITAL AND SURPLUS

Under  the  applicable  laws of the  states  in which  insurance  companies  are
licensed,  the companies are required to maintain minimum amounts of capital and
surplus.  Effective  September 28, 2000, NFL and FLICA  redomesticated  from the
states of Delaware and  Mississippi,  respectively,  to the state of Texas. As a
result,  NFL, FLICA, NFIC and AICT are Texas domestic  companies and are subject
to regulation  under Texas insurance  laws.  Under the Texas Insurance Code, the
insurance subsidiaries are required to maintain aggregate capital and surplus of
$1.4  million.  The following  states where the  companies are licensed  require
greater  amounts of capital and surplus:  California $1.5 million of capital and
$2.5  million of  surplus,  Washington  $4.8  million of  aggregate  capital and
surplus  and  Nebraska  and  Tennessee  $1 million of capital  and $1 million of
surplus.  Accordingly, the minimum aggregate statutory capital and surplus which
NFL and NFIC must each maintain is $5.0  million.  FLICA must maintain a minimum
of $4.8  million and AICT must  maintain  $2.0  million.  At December  31, 2001,
aggregate  statutory  capital  and  surplus  for NFL,  FLICA,  NFIC and AICT was
approximately  $6.5  million,  $8.8  million,  $1.6  million  and $1.8  million,
respectively.  Although  NFIC's capital and surplus is less than $5.0 million at
December 31,  2001,  NFIC  voluntarily  ceased  writing new  business  effective
December  15, 1997.  Moreover,  NFIC's  capital and surplus  exceeds the minimum
requirements  of its state of  domicile,  Texas.  AICT is wholly  owned by NFIC.
Accordingly,  statutory  capital  and  surplus of NFIC  includes  the  statutory
capital and surplus of AICT.

As a result of losses from the GPPO comprehensive  major medical product,  FLICA
required  significant capital  contributions during 2000 and 2001 to comply with
minimum  statutory  capital and  surplus  requirements.  In April  2001,  Ascent
obtained  debt  financing  of $11  million  from  an  affiliate  of its  largest
stockholder.  The proceeds of this loan were used to fund an $11 million capital
contribution to FLICA.  Adverse claims experience for the GPPO product in excess
of  management's  current  expectations  or adverse claims  experience for other
insurance  products  could  have a  material  adverse  impact  on the  Insurance
Subsidiaries' ability to meet minimum statutory capital and surplus requirements
and maintain new business  production  at current  levels and  therefore  have a
material adverse impact on Ascent's  liquidity and capital resources and results
of operations.

Dividends paid by the Insurance  Subsidiaries  are subject to the regulations of
the insurance laws and practices of the Texas Department of Insurance. The Texas
Insurance  Code  allows life and health  insurance  companies  to make  dividend
payments  from surplus  profits or earned  surplus  arising  from its  business.
Earned surplus is defined as unassigned  surplus excluding any unrealized gains.
Texas life and health insurance  companies may generally pay ordinary  dividends
or make  distributions  of cash or other property within any twelve month period
with a fair market  value equal to or less than the greater of 10% of surplus as
regards  policyholders  as of the  preceding  December  31 or the net gain  from
operations  for the twelve month  period  ending on the  preceding  December 31.
Dividends  exceeding the applicable  threshold are considered  extraordinary and
require the prior approval of the Texas Insurance Commissioner.

The Insurance  Subsidiaries  are  precluded  from paying  dividends  during 2001
without prior  approval of the Texas  Insurance  Commissioner  as the companies'
earned  surplus is negative.  On September 30, 2000,  NFL  transferred  its 100%
ownership of FLICA to Ascent through an extraordinary  dividend  approved by the
Texas Department of Insurance. Generally, all states require insurance companies
to maintain  statutory  capital and surplus  that is  reasonable  in relation to
their existing  liabilities  and adequate to their  financial  needs.  The Texas
Department of Insurance  also  maintains  discretionary  powers  relative to the
declaration and payment of dividends based upon an insurance company's financial
position. Due to recent statutory losses incurred by the Insurance Subsidiaries,
the  Company  does not  expect  to  receive  any  dividends  from the  Insurance
Subsidiaries for the foreseeable future.

In December 1990, the Company and NFL entered into an agreement  under which NFL
issued  a  surplus  certificate  to the  Company  in  the  principal  amount  of
$2,863,000  in exchange  for  $2,863,000  of the  Company's  assets.  The unpaid
aggregate  principal  under the surplus  certificate  bore interest at an agreed
upon rate not to exceed  10% and was  repayable,  in whole or in part,  upon (i)
NFL's surplus  exceeding  $7,000,000,  exclusive of any surplus  provided by any
reinsurance  agreements and (ii) NFL receiving prior approval for repayment from
the Delaware  Insurance  Commissioner.  During 1993 and 1994,  NFL received such
approval and repaid $2,086,000 to the Company.  In 1999, with the prior approval
of the Delaware Insurance Commissioner,  NFL converted the remaining $776,961 of
the  surplus  debenture  to $600,000  of capital  stock and  $176,961 of paid in
surplus.

In December 1992, the NAIC adopted the Risk-Based Capital for Life and/or Health
Insurers  Model  Act (the  "Model  Act").  The  Model  Act  provides  a tool for
insurance regulators to determine the levels of statutory capital and surplus an
insurer must  maintain in relation to its  insurance  and  investment  risks and
whether  there is a need for possible  regulatory  attention.  The Model Act (or
similar  legislation  or  regulation)  has been  adopted  in  states  where  the
Insurance  Subsidiaries  are  domiciled.  The Model Act provides  four levels of
regulatory  attention,  varying with the ratio of the insurance  company's total
adjusted  capital  (defined as the total of its  statutory  capital and surplus,
asset valuation reserve and certain other adjustments) to its risk-based capital
("RBC").  If a  company's  total  adjusted  capital is less than 100 percent but
greater  than or equal to 75  percent  of its RBC,  or if a  negative  trend (as
defined by the NAIC) has  occurred and total  adjusted  capital is less than 125
percent  of RBC  (the  "Company  Action  Level"),  the  company  must  submit  a
comprehensive  plan aimed at improving  its capital  position to the  regulatory
authority proposing corrective actions. If a company's total adjusted capital is
less than 75  percent  but  greater  than or equal to 50 percent of its RBC (the
"Regulatory  Action  Level"),  the  regulatory  authority will perform a special
examination of the company and issue an order specifying the corrective  actions
that must be followed.  If a Company's  total  adjusted  capital is less than 50
percent  but  greater  than or equal to 35 percent  of its RBC (the  "Authorized
Control  Level"),  the  regulatory  authority  may  take  any  action  it  deems
necessary,  including  placing  the  company  under  regulatory  control.  If  a
company's  total  adjusted  capital  is less  than 35  percent  of its RBC  (the
"Mandatory  Control  Level"),  the  regulatory  authority must place the company
under its control.  The NAIC's  requirements  are  effective on a state by state
basis if, and when, they are adopted by the regulators in the respective states.

The Texas  Department  of  Insurance  adopted the NAIC's  Model Act during 2000.
NFL's and FLICA's  statutory  annual  statements for the year ended December 31,
2001 filed with the Texas Department of Insurance reflect total adjusted capital
in excess of Company Action Level RBC.

In 1998,  NFIC and AICT  entered  into a voluntary  consent  order,  pursuant to
Article 1.32 of the Texas Insurance Code, providing for the continued monitoring
of the  operations  of NFIC and AICT by the Texas  Department  of  Insurance  in
response to losses sustained in 1997 and 1998 as well as the projected inability
to meet RBC requirements. Both NFIC and AICT ceased the sale and underwriting of
new business in 1998. At December 31, 2001,  AICT's RBC exceeded  Company Action
Level RBC; however,  NFIC's RBC only exceeded Authorized Control Level RBC. Both
NFIC and AICT are in compliance with the terms of the voluntary consent order.

Under Florida Statutes Section 624.4095,  Florida licensed insurance  companies'
ratio of actual or  projected  annual  written  premiums to current or projected
surplus as regards to policyholders ("the premium writing ratio") may not exceed
specified  levels for gross and net written  premiums as defined by the statute.
If a company  exceeds the premium  writing  ratio,  the  Florida  Department  of
Insurance  shall  suspend the company's  certificate  of authority in Florida or
establish  by order  maximum  gross or net annual  premiums to be written by the
company consistent with maintaining the ratios specified.  At December 31, 2001,
the premium  writing  ratio for FLICA,  which  currently  underwrites  insurance
policies in Florida, met the limit mandated by Florida law.

The statutory  financial  statements of the Insurance  Subsidiaries are prepared
using  accounting  methods  which are  prescribed  or permitted by the insurance
department of the respective companies' state of domicile.  Prescribed statutory
accounting  practices  include the NAIC  Codification  of  Statutory  Accounting
practices as well as state laws,  regulations and general  administrative rules.
Permitted statutory  accounting practices encompass all accounting practices not
so prescribed.

A  reconciliation  of capital  and  surplus  net income  (loss) as reported on a
statutory  basis  by the  Company's  Insurance  Subsidiaries  to  the  Company's
consolidated GAAP stockholders' equity and net income (loss) is as follows:
<TABLE>

                                                                     December 31,
                                                      ---------------------------------------
                                                         2001          2000          1999
                                                         ----          ----          ----
                                                                      (in thousands)

<S>                                                   <C>           <C>           <C>
Consolidated statutory capital and surplus            $  16,960     $  13,014     $  16,990

  Deferred acquisition costs                             25,600        24,711        19,393
  Future policy benefits and claims                      (7,049)      (14,338)       (9,518)
  Unrealized gain (loss) on investments, net of tax         925          (723)       (2,585)
  Income taxes                                             (892)            -         3,363
  Non-admitted assets                                         9           258         1,490
  Asset valuation reserve                                   494           674           687
  Interest maintenance reserve                            1,389           780         1,251
  Other                                                     303          (139)         (273)
  Capital contributions to insurance subsidiaries       (38,189)      (21,362)       (8,962)
  Non-insurance subsidiaries and eliminations             3,272         1,200         1,948

                                                      -----------   -----------   -----------
GAAP stockholders' equity                             $   2,822     $   4,075     $  23,784
                                                      ===========   ===========   ===========
</TABLE>
<TABLE>

                                                              Year Ended December 31,
                                                      ----------------------------------------
                                                           2001         2000          1999
                                                           ----         ----          ----
                                                                     (in thousands)

<S>                                                   <C>           <C>            <C>
Consolidated statutory net income                     $ (12,725)    $ (16,956)     $  (6,486)

  Deferred acquisition costs, net of amortization           889         6,818          5,217
  Future policy benefits and claims                       4,804        (5,761)           228
  Recognition of premium deficiency                           -        (1,500)             -
  Income taxes                                           (1,835)       (4,754)        (4,366)
  Other                                                   1,364           261           (384)
  Non-insurance subsidiaries and eliminations             5,384         2,950          8,105

                                                      -----------   -----------    -----------
GAAP net (loss) income                                $  (2,119)    $ (18,942)     $   2,314
                                                      ===========   ===========    ===========
</TABLE>



<PAGE>


NOTE 11 - EMPLOYEE BENEFIT PLANS

In September  1986, the Company  established a retirement  savings plan ("401(k)
plan") for its employees.  As amended in August 1999, all employees are eligible
to participate in the 401(k) plan upon completion of six months of service.  The
401(k) plan is  qualified  under  Section  401(a) of the  Internal  Revenue Code
("IRC")  and the trust  established  to hold the  assets of the  401(k)  plan is
tax-exempt under Section 501 (a) of the IRC. Ascent Assurance,  Inc. is the plan
administrator,  and may amend, terminate or suspend contributions to the plan at
any  time  it may  deem  advisable.  Employees  who  elect  to  participate  may
contribute up to 10% of pre-tax compensation, including commissions, bonuses and
overtime.  The Company may make discretionary  contributions,  determined by the
Company's Board of Directors,  up to 50% of the employees'  first 3% of deferred
compensation.  Certain IRC required  limitations may be imposed for participants
who are  treated as "highly  compensated  employees"  for  purposes  of the IRC.
Participants vest 25% after one year of service, 50% after two years of service,
75% after three  years of service  and 100% after 4 years of  service.  Employee
contributions  are invested in any of ten investment  funds at the discretion of
the employee.  Generally,  the Company  contributions  are in the form of common
stock.  During the period of July 1998 through  October  1999,  the Company made
cash  contributions.  The Company's  contributions  to the 401 (k) plan in 2001,
2000 and 1999 approximated $81,000, $92,000 and $96,000, respectively.

The Company's incentive stock option plans adopted as of July 1, 1982, September
5, 1985 and March 26, 1992, and the Company's  restricted  stock plan adopted as
of April 19, 1996,  have been canceled as of the Effective Date. All outstanding
grants  of  stock  options  or  restricted  stock  have  been   extinguished  as
contemplated by the terms of the Plan (see Note 14).

1999 Stock  Option Plan On March 24,  1999,  the  Company's  Board of  Directors
adopted  the 1999 Stock  Option  Plan (the "1999  Plan") in order to further and
promote the interest of the Company,  its  subsidiaries  and its shareholders by
enabling  the  Company and its  subsidiaries  to  attract,  retain and  motivate
employees,  non-employee  directors and consultants (including marketing agents)
or those who will  become  employees,  non-employee  directors  and  consultants
(including  marketing  agents),  and to align the interests of those individuals
and the  Company's  shareholders  (see  Note  14).  Pursuant  to the 1999  Plan,
1,251,685  shares of common stock are  reserved  for  issuance to employees  and
directors  and  387,119  shares  are  reserved  for  issuance  to the  Company's
marketing agents. The maximum term of an award under the 1999 Plan is 10 years.

The 1999 Plan became  effective  on the date of its  adoption by the Company and
will remain in effect until December 31, 2008, except with respect to awards (as
that term is defined in the 1999 Plan) then  outstanding,  unless  terminated or
suspended  by the Board of  Directors  at that time.  After such date no further
awards shall be granted under the 1999 Plan.

A summary of stock option activity is as follows:

                                         Year Ended December 31,
                             ------------------------------------------------
                                  2001             2000             1999
                             --------------   --------------   --------------

Outstanding at January 1          944,600        1,096,750                -
Granted                           155,750           42,950        1,106,750
Exercised                               -                -                -
Forfeit / Cancelled               (14,500)        (195,100)         (10,000)
                             --------------   --------------   --------------
Outstanding at December 31      1,085,850          944,600        1,096,750
                             ==============   ==============   ==============


The  weighted  average  option  exercise  price was  $2.63,  $2.82 and $2.88 for
options  outstanding  at December 31,  2001,  2000 and 1999,  respectively.  For
options granted,  weighted average exercise price was $1.49, $1.63 and $2.85 for
2001, 2000 and 1999. For options forfeited,  the weighted average exercise price
was $2.77, $2.74 and $2.85, respectively.

The weighted  average fair value of options  granted during 2001,  2000 and 1999
was $1.26,  $1.57 and $2.85. The fair value of each option grant is estimated on
the  date of  grant  using  the  Black-Scholes  option  pricing  model  with the
following significant weighted-average assumptions used for grants in 2001, 2000
and 1999, respectively:  dividend yield of 0% for all years; expected volatility
of 1.218,  1.839 and 1.142; risk free interest rate of 4.65% for 2001, 6.57% for
2000 and 1999; expected life of 5 years for all years.

Because the Company's employee stock options have characteristics  significantly
different  from those of traded  options,  and because  change in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

Compensation  cost recognized in the income  statement for stock-based  employee
compensation awards was $0.4 million in 2001, and $0.3 million for both 2000 and
1999.

If the fair value of the stock compensation granted had been accounted for under
FAS 123,  the pro forma net loss would have been  ($2.5)  million or ($0.84) per
basic share and diluted share for 2001 and ($19.1)  million or ($3.33) per basic
share and diluted share for 2000.  For the nine months ended  December 31, 1999,
the pro forma net income would have been $2.0 million, or ($.05) per basic share
and diluted  share.  For purposes of pro forma  disclosure,  the estimated  fair
value of the stock compensation is amortized to expense over the stock's vesting
period. The effect on net income of the stock compensation  amortization for the
year  presented  above is not  likely to be  representative  of the  effects  on
reported net income for future years.

The following table summarizes  information about the stock options  outstanding
at December 31, 2001:


              Options Outstanding                       Options Exercisable
------------------------------------------------   -----------------------------


                                Weighted Average
Weighted Average     Number        Remaining         # Shares   Weighted Average
Exercise Prices    Outstanding  Contractual Life   Exercisable   Exercise Price
----------------   -----------  ----------------   -----------  ----------------
     $0.01           270,900           7.25           135,000         $0.01
     $1.49           155,750           9.75              -                -
     $1.63            29,850           8.25              -                -
     $3.00           135,000            .25           135,000         $3.00
     $4.39           494,350           7.25              -                -
                  ------------  ----------------   -----------  ----------------
                    1,085,850          6.74           270,000         $1.51
                  ============  ================   ===========  ================


NOTE 12 - REINSURANCE

The Insurance  Subsidiaries  cede  insurance to other insurers and reinsurers on
both life and accident and health business.  Reinsurance  agreements are used to
limit maximum losses and provide greater  diversity of risk. The Company remains
liable to  policyholders  to the extent the  reinsuring  companies are unable to
meet their treaty obligations. Total premiums ceded to other companies were $2.8
million,  $4.0 million and $2.6 million for 2001,  2000 and 1999,  respectively.
Face amounts of life insurance in force ceded approximated $16.6 million,  $12.6
million and $6.5 million at December 31, 2001, 2000 and 1999, respectively.

The Company  reinsures its risks under its Medical Expense policies on an excess
of loss basis so that its net payments on any one life insured  under the policy
are limited for any one  calendar  year to  $125,000.  Risks under its  Medicare
Supplement policies are not reinsured.  The Company's risks under its Accidental
Death  policies  are one  hundred  percent  (100%)  reinsured.  Under  its  life
insurance  reinsurance  agreement,  FLICA and NFL retains fifty percent (50%) of
the  coverage  amount of each of its life  insurance  policies  in force up to a
maximum of $65,000. NFL reinsures, through an excess of loss reinsurance treaty,
a closed  block of  annually  renewable  term  life  insurance  policies.  NFL's
retention limit is $25,000 per year. In accordance with industry  practice,  the
reinsurance  arrangements in force with respect to these policies are terminable
by either  party  with  respect to claims  incurred  after the  termination  and
expiration dates.



<PAGE>


NOTE 13 - COMMITMENTS AND CONTINGENCIES

The Company's future minimum lease payments for non-cancelable operating leases,
relating  primarily to office facilities and data processing  equipment having a
remaining  term in excess of one year,  at December  31, 2001,  aggregated  $7.4
million.  The amounts due by year are as follows:  2002 - $2.2  million;  2003 -
$1.8 million; 2004 - $1.1 million; 2005 - $1.0 million; 2006 - $0.4 million; and
thereafter  -  $  0.9  million.   Aggregate   rental  expense  included  in  the
consolidated  financial  statements for all operating leases  approximated  $2.0
million, $2.1 million and $2.4 million in 2001, 2000 and 1999, respectively.

In the normal course of their business operations,  the Insurance  Subsidiaries,
continue to be involved in various claims,  lawsuits (alleging actual as well as
substantial  exemplary  damages)  and  regulatory  matters.  In the  opinion  of
management,  the disposition of these or any other legal matters will not have a
material  adverse  effect  on the  Company's  business,  consolidated  financial
position or results of operations.

The  Company's  Insurance  Subsidiaries  are subject to  extensive  governmental
regulation  and  supervision at both federal and state levels.  Such  regulation
includes premium rate levels, premium rate increases, policy forms, minimum loss
ratios,  dividend payments,  claims settlement,  licensing of insurers and their
agents,  capital  adequacy,   transfer  of  control,  and  amount  and  type  of
investments.  Additionally,  there are numerous health care reform proposals and
regulatory   initiatives  under   consideration  which  if  enacted  could  have
significant impact on the Company's results of operations.

NOTE 14 - REORGANIZATION EFFECTIVE MARCH 24, 1999

On September 16, 1998,  Westbridge Capital Corp.,  ("Westbridge")  commenced its
reorganization by filing a voluntary petition for relief under Chapter 11, Title
11 of the United  States  Code in the  United  States  Bankruptcy  Court for the
District of Delaware (the "Bankruptcy Court"), along with a disclosure statement
(as amended,  the "Disclosure  Statement") and a proposed plan of reorganization
(as  amended,  the  "Plan").  The filing of the  Disclosure  Statement  and Plan
culminated  months of  negotiations  between  Westbridge and an ad hoc committee
(the "Creditors' Committee") of holders of its 11% Senior Subordinated Notes due
2002 (the "Senior Notes") and its 7-1/2% Convertible Subordinated Notes due 2004
(the "Convertible  Notes"). The Disclosure Statement was approved by entry of an
order by the Bankruptcy Court on October 30, 1998. Following the approval of the
Plan by the holders of allowed claims and equity interests, the Bankruptcy Court
confirmed  the Plan on December 17, 1998.  The Plan became  effective  March 24,
1999 (the "Effective Date").

On the Effective Date,  Westbridge's  certificate of  incorporation  and by-laws
were amended and restated in their  entirety  and pursuant  thereto,  Westbridge
changed its corporate name to "Ascent  Assurance,  Inc." ("Ascent").  References
herein to the  "Company"  shall  mean for all  periods  on or prior to March 31,
1999, Westbridge and its subsidiaries, and for all periods on or after the close
of business on March 31, 1999, Ascent and its subsidiaries.

The  following  summary of the Plan omits certain  information  set forth in the
Plan. Any statements  contained  herein  concerning the Plan are not necessarily
complete,  and in each such  instance  reference  is made to the Plan, a copy of
which is incorporated  by reference to Exhibit 2 of Westbridge's  Current Report
on Form 8-K which was filed  with the  Securities  and  Exchange  Commission  on
December  29,  1998.  Each such  statement  is qualified in its entirety by such
reference.  The Plan provided for the  recapitalization  of certain old debt and
equity  interests in Westbridge  and the issuance of new equity  securities  and
warrants. Key terms of the Plan included the following:

Cancellation  of  Existing  Securities.  Pursuant  to the  Plan,  the  following
securities of  Westbridge  were  canceled as of the  Effective  Date:  (i) $23.3
million  aggregate  principal amount and all accrued and unpaid interest on, the
Senior Notes, (ii) $77.3 million aggregate  principal amount and all accrued and
unpaid  interest  on, the  Convertible  Notes,  (iii)  $13.2  million  aggregate
liquidation  preference of and all accrued and unpaid dividends on, Westbridge's
Series A Convertible Redeemable Exchangeable Preferred Stock (the "Old Preferred
Stock"),  (iv)  Westbridge's  Common  Stock,  par value $.10 per share (the "Old
Common Stock"),  (v) all outstanding warrants to purchase Old Common Stock, (vi)
all  outstanding  unexercised  stock options to purchase Old Common  Stock,  and
(vii) all unvested grants of restricted Old Common Stock.

New  Equity  Capital  Structure   Pursuant  to  Ascent's  Amended  and  Restated
Certificate of Incorporation, the total number of shares of capital stock Ascent
has the authority to issue is  30,040,000,  consisting  of 30,000,000  shares of
common  stock,  par value $.01 per share  (the "New  Common  Stock")  and 40,000
shares of preferred stock, par value $.01 per share, all of which are designated
Series A Convertible Preferred Stock (the "New Preferred Stock").

DISTRIBUTIONS UNDER THE PLAN

Cash Distribution

To the holders of Senior Notes other than Credit Suisse First Boston Corporation
("CSFB"),  cash payments totaling approximately $15.2 million, which equaled the
total  Allowed 11% Senior Note Claims (as defined in the Plan) held by creditors
other than CSFB,  were  distributed  subject to  completion  of the  exchange of
securities  as  contemplated  by the Plan.  In order to provide the Company with
sufficient funds to make the cash distribution to the holders of the Allowed 11%
Senior  Notes  under the Plan,  an  affiliate  of CSFB  (the  "CSFB  Affiliate")
purchased all of the shares of the New Preferred  Stock which were not otherwise
distributed under the Plan.

Issuance of New Securities

Pursuant to the Plan and the purchase of New Preferred  Stock,  6,500,000 shares
of New  Common  Stock and 23,257  shares of New  Preferred  Stock  were  issued,
subject to the completion of the exchange  requirements  as  contemplated by the
Plan, on the Effective Date as follows:

     To holders of general unsecured claims and Convertible Notes as of December
     10, 1998 6,077,500 shares,  and to management at the Effective Date, 32,500
     shares, or in aggregate 94% of the New Common Stock issued on the Effective
     Date.  Holders of general  unsecured claims and Convertible  Notes received
     their first distribution of shares in partial satisfaction and discharge of
     the  allowed  claims in April  1999.  The second  distribution  was made in
     September  1999  and  the  remaining   shares  of  New  Common  Stock  were
     distributed in November 1999.

     To holders of Old Preferred Stock as of December 10, 1998,  260,000 shares,
     or 4%, of the New Common  Stock issued on the  Effective  Date and Warrants
     ("New  Warrants") to purchase an additional  277,505 shares,  or 2%, of the
     New Common Stock issued on the Effective Date, on a fully diluted basis.

     To holders of Old Common Stock as of December 10, 1998,  130,000  shares or
     2%, of the New Common Stock issued on the  Effective  Date and New Warrants
     to purchase an additional  693,761  shares,  or 5%, of the New Common Stock
     issued on the Effective Date, on a fully diluted basis.  Fractional  shares
     of New  Common  Stock  were not issued in  connection  with the Plan.  As a
     result of this  provision,  certain holders of Old Common Stock received no
     distribution of New Common Stock or New Warrants under the Plan.

     To the CSFB  Affiliate,  in respect of the Senior Notes owned by CSFB as of
     December 10, 1998, 8,090 shares of New Preferred Stock which, together with
     the 15,167  additional  shares of New Preferred Stock purchased by the CSFB
     Affiliate as described  above, are convertible into 4,765,165 shares of the
     New Common Stock.  As a result of the New Preferred  Stock  received by the
     CSFB  Affiliate,  together  with the  3,093,998  shares of New Common Stock
     received by the CSFB Affiliate in respect of the Convertible Notes owned by
     CSFB, the CSFB Affiliate  beneficially owns approximately  56.6% of the New
     Common  Stock on an as  converted  basis,  assuming the exercise of all New
     Warrants  and issuance of New Common  Stock  reserved  under the 1999 Stock
     Option Plan as discussed  below. The New Preferred Stock has a stated value
     of $1,000 per share and a cumulative  annual  dividend  rate of $102.50 per
     share payable no later than January of each year in cash or by the issuance
     of additional  shares of New Preferred  Stock.  The New Preferred  Stock is
     convertible  at any time into  204.8897  shares of New  Common  Stock at an
     initial conversion price of $4.88 per share of New Common Stock, subject to
     customary anti-dilution adjustments.

Reservation of Additional New Common Stock

In  connection  with the New Warrants  described  above,  971,266  shares of New
Common Stock are reserved for issuance  upon the exercise of New  Warrants.  The
New Warrants are exercisable at an initial exercise price $9.04 per share of New
Common Stock, subject to customary anti-dilution adjustments, and will expire on
March 24, 2004.

Pursuant to the Plan,  up to  1,251,685  shares,  or 10%,  of the fully  diluted
number of shares of New Common Stock  issued and  outstanding  on the  Effective
Date are reserved for issuance to  employees  and  directors,  and up to 387,119
shares,  or 3%, of the fully diluted number of shares of New Common Stock issued
on the  Effective  Date are  reserved for  issuance to the  Company's  marketing
agents under the  Company's  1999 Stock  Option Plan,  which was approved by the
Company's shareholders.

Description of Cancelled Securities

Prior  to the  Effective  Date  of the  Plan,  the  Company  had  the  following
securities outstanding:

Senior Notes During the first quarter of 1995,  the Company issued $20.0 million
aggregate  principal  amount of its Senior Notes,  due 2002, in an  underwritten
public  offering.  The Senior  Notes were  issued at par,  less an  underwriting
discount of 4%. Contractual  interest on the Senior Notes was payable in monthly
installments.  In November  1997,  the Company  suspended the scheduled  monthly
interest payments on these Senior Notes.

Accrued but unpaid  interest on the Senior Notes  through the Petition  Date was
approximately $2.1 million.  The Plan required the continued accrual of interest
on the Senior Notes from the Petition  Date to the Effective  Date.  Accrued but
unpaid  interest on the Senior Notes from the Petition Date to December 31, 1998
totaled approximately $0.6 million.  Contractual interest continued to accrue at
a rate of $6,111 per day from January 1, 1999 through the Effective Date.

As of the Effective  Date,  these Senior Notes were canceled,  extinguished  and
retired.  As described above,  holders of Allowed 11% Senior Note Claims held by
creditors other than CSFB received cash payments totaling $15.2 million.

As more fully  described  above, in order to provide the Company with sufficient
funds to make the cash  distributions  to the  holders of the Allowed 11% Senior
Notes under the Plan, the Company  entered into a Stock Purchase  Agreement with
CSFB,  a  significant  noteholder,  pursuant  to  which  CSFB,  subject  to  the
conditions  contained therein,  purchased all of the shares of the New Preferred
Stock which were not otherwise distributed under the Plan.

Convertible  Notes During the second quarter of 1997, the Company  completed the
sale of $70.0 million aggregate  principal amount of its Convertible  Notes, due
2004,  in  an  underwritten  public  offering.   Contractual   interest  on  the
Convertible Notes was payable in semi-annual  installments on May 1 and November
1 of each year,  commencing  November  1, 1997.  In November  1997,  the Company
suspended the scheduled  interest  payments on these  Convertible  Notes. At the
Petition Date,  approximately  $7.3 million of unpaid interest was accrued.  The
Company did not accrue interest on its Convertible Notes after the Petition Date
as it was unlikely  such  interest  would be paid under the Plan.  The amount of
contractual  interest that would have  otherwise  been accrued from the Petition
Date to December 31, 1998 totaled $2.7 million,  and such  contractual  interest
would have continued to accrue at $14,583 per day from January 1, 1999 until the
Effective Date.

As of the Effective Date, these  Convertible  Notes were canceled,  extinguished
and retired.  Holders of the  Convertible  Notes and allowed  general  unsecured
creditors received their pro rata share of 94% of the New Common Stock issued on
the Effective Date.

Old Preferred  Stock. On April 12, 1994, the Company issued 20,000 shares of Old
Preferred  Stock,  at a price of $1,000 per share.  The Old Preferred  Stock was
issued  in  a  private  placement  and  was  subsequently  registered  with  the
Securities and Exchange  Commission  under a registration  statement,  which was
declared  effective  in  October  1994.  The  terms of the Old  Preferred  Stock
included a  cumulative  annual  dividend  rate of 8.25%,  subject to increase to
9.25%, upon non-compliance by the Company with certain restrictions.

Seven  thousand  sixty-five  (7,065)  shares  of the Old  Preferred  Stock  were
converted  into shares of Old Common  Stock  during the year ended  December 31,
1998. the converted  shares of Old Preferred Stock had an aggregate  liquidation
preference of $7,065,000  and were  converted  into 840,071 shares of Old common
Stock. Old Preferred Stock was convertible into 1,419,144 shares of Common Stock
as of December 31, 1998 at a conversion price of $8.41 per share.

One thousand  shares of the Company's Old Preferred  Stock were  converted  into
shares of Old Common  Stock,  par value  $.10 per  share,  during the year ended
December 31, 1997. The converted  shares of Old Preferred Stock had an aggregate
liquidation  preference of $1,000,000  and were converted into 118,905 shares of
Old Common Stock.

In November 1997, the Company  suspended the scheduled  dividend payments on its
Old Preferred  Stock.  The failure to declare and pay the scheduled  dividend on
the Old Preferred Stock constituted an event of  non-compliance  under the terms
of the Old Preferred Stock Agreement and resulted in an immediate  increase from
8.25%  to 9.25% in the rate at  which  dividends  accrued  on the Old  Preferred
Stock. At the Petition Date,  approximately  $1.3 million of cumulative,  unpaid
dividends  were  accrued.  The  Company  did  not  accrue  dividends  on its Old
Preferred  Stock after the Petition Date as it was unlikely such dividends would
be paid under the Plan.  The  amount of  contractual  dividends  that would have
otherwise  been accrued from the Petition Date to December 31, 1998 totaled $0.6
million, and such contractual dividends would have continued to accrue at $3,067
per day from January 1, 1999 until the Effective Date.

As of  the  Effective  Date,  shares  of  Old  Preferred  Stock  were  canceled,
extinguished and retired. Holders of Old Preferred Stock received their pro rata
share  of 4% of the New  Common  Stock  issued  on the  Effective  Date  and New
Warrants to purchase their pro rata share of up to 2% of the number of shares of
New Common  Stock  issued and  outstanding  on the  Effective  Date,  on a fully
diluted basis.


<PAGE>


NOTE 15 - QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized  quarterly  financial  information for each of the Company's last two
years of operations is as follows:

<TABLE>

                                                         Quarter Ended
                                    --------------------------------------------------------
                                       March          June         September      December
                                       2001           2001            2001          2001
                                    ----------     -----------    -----------    -----------
                                                           (in thousands)
<S>                                 <C>            <C>            <C>            <C>
Premium income                      $  31,974      $  31,941      $  31,672      $  29,619
Net investment income                   2,322          2,294          2,186          2,065
Net realized gain (loss) on                42             52            211             87
  investment
Fee, service and other income           5,609          5,362          4,852          5,093
                                    -----------    -----------    -----------    -----------
Total revenues                      $  39,947      $  39,649      $  38,921      $  36,864
                                    ===========    ===========    ===========    ===========

(Loss) income before income
  taxes                             $  (1,051)     $    (764)     $     244      $    (548)
Net (loss) income                      (1,051)          (764)           244           (548)
Preferred stock dividend                  710            710            746            766
Loss applicable to common
  stockholders                         (1,761)        (1,474)          (502)        (1,314)
Loss per share:
  Basic                             $   (0.27)     $   (0.23)     $   (0.08)     $   (0.20)
  Diluted                           $   (0.27)     $   (0.23)     $   (0.08)     $   (0.20)

</TABLE>
<TABLE>

                                                         Quarter Ended
                                    --------------------------------------------------------
                                       March          June         September      December
                                       2000           2000            2000          2000
                                    -----------    -----------    -----------    -----------
                                                        (in thousands)
<S>                                 <C>            <C>            <C>            <C>
Premium income                      $    29,005    $  29,228      $  30,831      $  30,844
Net investment income                     2,078        2,266          2,626          2,771
Net realized gain (loss) on
  investments                                17         (254)            28           (245)
Fee, service and other income             4,896        5,294          5,207          4,994
                                    -----------    -----------    -----------    -----------
Total revenues                      $    35,996    $  36,534      $  38,692      $  38,364
                                    ===========    ===========    ===========    ===========

Income before income taxes          $   (1,258)    $    (918)     $  (1,193)     $  (9,570) (1)
Net income                                (830)         (606)          (787)       (16,719) (2)
Preferred stock dividend                    651          651            651            622
Income (loss) applicable to
  common stockholders                   (1,481)       (1,257)        (1,438)       (17,341)
Earnings (loss) per share:
  Basic                             $    (0.23)    $   (0.19)     $   (0.22)     $   (2.67)
  Diluted                           $    (0.23)    $   (0.19)     $   (0.22)     $   (2.67)
</TABLE>

(1)  Increase  in losses  for the fourth  quarter of 2000 due to adverse  claims
     experience for major medical products and recognition of premium deficiency
     (see Note 8).

(2)  Includes $10.4 million  non-cash  charge for increase in deferred tax asset
     valuation allowance (see Note 9).


<PAGE>


                                   SCHEDULE II

                     ASCENT ASSURANCE, INC. (PARENT COMPANY)
                            CONDENSED BALANCE SHEETS

                                 (in thousands)

                                                          December 31,
                                                   -------------------------
                                                       2001          2000
                                                   -----------   -----------

Assets:
  Cash                                             $     897     $   1,407
  Short-term investments                                 299         1,682
  Fixed maturities, at market value                        -         1,193
  Equity securities, at market value                      21
  Investment in consolidated subsidiaries             48,622        37,168
  Accrued investment income                                -            29
  Receivables from affiliates                            655             -
  Other assets                                           403            52
                                                   -----------   -----------
    Total Assets                                   $  50,897     $  41,531
                                                   ===========   ===========
Liabilities:
  Note payable                                     $  11,987     $       -
  Payable to subsidiaries                              3,175         7,155
  Other liabilities                                    2,278         2,596
                                                   -----------   -----------
    Total Liabilities                                 17,440         9,751
                                                   -----------   -----------

Redeemable Convertible Preferred Stock                30,635        27,705
                                                   -----------   -----------

Stockholders' Equity:
  Common stock                                            65            65
  Capital in excess of par value                      28,017        27,620
  Accumulated other comprehensive loss, net of tax      (121)       (2,324)
  Retained Deficit                                   (25,139)      (21,286)
                                                   -----------   -----------

    Total Stockholders' Equity                         2,822         4,075
                                                   -----------   -----------

    Total Liabilities, Redeemable Convertible
      Preferred Stock and Stockholders' Equity     $  50,897     $  41,531
                                                   ===========   ===========



                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.


<PAGE>


                                   SCHEDULE II

                     ASCENT ASSURANCE, INC. (PARENT COMPANY)
                         CONDENSED STATEMENTS OF INCOME

                                 (in thousands)

<TABLE>
                                                          Year Ended          Nine Months Ended
                                                         December 31,            December 31,
                                                  -------------------------   -----------------
                                                      2001          2000            1999
                                                  -----------   -----------   -----------------
                                                                 (in thousands)
<S>                                               <C>           <C>           <C>
Net investment income                             $      56     $     308     $        509
Realized gain (loss) on investments                      56            24             (376)
Inter-company interest on Surplus Certificates            -             -               58
Other income                                              -             -                3
                                                  -----------   -----------   -----------------
                                                        112           332              194
                                                  -----------   -----------   -----------------

Resolution of pre-confirmation contingencies              -             -           (1,235)
Inter-company interest on advances to
  subsidiaries                                           20           109              (22)
General and administrative expenses                     781           218             (237)
Interest expense on notes payable                     1,338             -                -
Taxes, licenses and fees                                192           119               (1)
                                                  -----------   -----------   -----------------
                                                      2,331           446           (1,495)
                                                  -----------   -----------   -----------------

(Loss) income before income taxes and equity
  in undistributed net earning of subsidiaries       (2,219)         (114)           1,689
Expense (benefit) from income taxes                       -         2,773             (629)
                                                  -----------   -----------   -----------------
                                                     (2,219)       (2,887)           2,318

Equity in undistributed net income (loss) of
  subsidiaries                                          100       (16,055)            (212)
                                                  -----------   -----------   -----------------

    Net (loss) income                                (2,119)      (18,942)           2,106

Preferred stock dividends                             2,932         2,576            1,874
                                                  -----------   -----------   -----------------

(Loss) income applicable to common
  stockholders                                    $  (5,051)    $ (21,518)    $        232
                                                  ===========   ===========   =================

</TABLE>


                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.


<PAGE>


                                   SCHEDULE II

                    WESTBRIDGE CAPITAL CORP. (PARENT COMPANY)
                          (now ASCENT ASSURANCE, INC.)
                          CONDENSED STATEMENT OF INCOME

                                 (in thousands)

                                                            Three Months
                                                               Ended
                                                              March 31,
                                                             ----------
                                                                1999
                                                             ----------

Net investment income                                        $    209
Realized gains on investments                                      12
Intercompany interest income on surplus certificates               20
Interest on advances to subsidiaries                              110
                                                             ----------
                                                                  351
                                                             ----------

General and administrative expenses                              (112)
Taxes, licenses and fees                                           24
Interest expense                                                  507
                                                             ----------
                                                                  419
                                                             ----------

Loss before income taxes and equity in undistributed
  net earnings of subsidiaries                                    (68)
Provision for income taxes                                          -
                                                             ----------
                                                                  (68)

Equity in undistributed net earnings of
  subsidiaries                                                    276
                                                             ----------

    Net income                                                    208

Preferred stock dividends                                           -
                                                             ----------

Income applicable to common stockholders                     $    208
                                                             ==========



                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.


<PAGE>


                                   SCHEDULE II

                     ASCENT ASSURANCE, INC. (PARENT COMPANY)
                       STATEMENTS OF COMPREHENSIVE INCOME

                                 (in thousands)
<TABLE>

                                                                       Year Ended            Nine Months Ended
                                                                      December 31,              December 31,
                                                                -------------------------    -----------------
                                                                    2001          2000             1999
                                                                -----------   -----------    -----------------
                                                                                   (in thousands)
<S>                                                             <C>           <C>            <C>
Net (loss) income                                               $  (2,119)    $ (18,942)     $        2,106
Other comprehensive income (loss):
  Unrealized holding gain (loss) arising during
    period, net of tax                                                 50            22                (245)
  Reclassification adjustment of (gain) loss on
    sales of investments included in net income,
    net of tax                                                        (56)          (16)                245


Other comprehensive income (loss) on investment in subsidiaries:
  Unrealized holding gain (loss) during period,
    net of tax                                                      2,545         1,805              (3,711)

  Reclassification adjustment of gain on sales of
    investments included in net income, net of tax                   (336)         (284)               (140)

                                                                -----------   -----------    -----------------
Comprehensive income (loss)                                     $      84     $ (17,415)     $       (1,745)
                                                                ===========   ===========    =================
</TABLE>



                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.


<PAGE>


                                   SCHEDULE II

                    WESTBRIDGE CAPITAL CORP. (PARENT COMPANY)
                          (now ASCENT ASSURANCE, INC.)
                        STATEMENT OF COMPREHENSIVE INCOME

                                 (in thousands)

                                                             Three Months
                                                                Ended
                                                               March 31,
                                                             -------------
                                                                 1999
                                                             -------------

Net income                                                   $      208
Other comprehensive income (loss):
  Unrealized holding loss arising during period, net
    of tax                                                         (331)
  Reclassification adjustment of gain on sales of
    investments included in net income, net of tax                   (8)

Other comprehensive income (loss) on investment in
  Subsidiaries:
  Unrealized holding loss arising during period, net
    of tax                                                       (1,628)
  Reclassification adjustment of gain on sales of
    investments included in net income, net of tax                  (19)
                                                             -------------
Comprehensive loss                                           $   (1,778)
                                                             =============



                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.

<PAGE>


                                   SCHEDULE II

                     ASCENT ASSURANCE, INC. (PARENT COMPANY)
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                        (in thousands, except share data)

<TABLE>

                                                                                      Accumulated
                                                                        Capital          Other        Retained        Total
                                                   Common Stock        in Excess     Comprehensive    (Deficit)   Stockholders'
                                                   ------------
                                              Shares       Amount     of Par Value        Loss        Earnings        Equity
                                              ------       ------     ------------        ----        --------    -------------

<S>                                          <C>          <C>        <C>             <C>             <C>          <C>
Balance at March 31, 1999                    6,500,000    $   65     $   27,038      $        -      $      -     $   27,103

  Net income                                                                                            2,106          2,106
  Preferred stock dividend                                                                             (1,874)        (1,874)
  Other comprehensive loss, net of tax                                                   (3,851)                      (3,851)
  Amortization of unearned compensation                                     300                                          300
                                           -------------  --------   -------------   -------------   ----------   -------------
Balance at December 31, 1999                 6,500,000        65         27,338          (3,851)          232         23,784
                                           =============  ========   =============   =============   ==========   =============


  Net loss                                                                                            (18,942)       (18,942)
  Preferred stock dividend                                                                             (2,576)        (2,576)
  Other comprehensive loss, net of tax                                                    1,527                        1,527
  Amortization of unearned compensation                                     282                                          282
                                           -------------  --------   -------------   -------------   ----------   -------------
Balance at December 31, 2000                 6,500,000        65         27,620          (2,324)      (21,286)         4,075
                                           =============  ========   =============   =============   ==========   =============


  Net loss                                                                                             (2,119)        (2,119)
  Preferred stock dividend                                                                             (2,932)        (2,932)
  Other comprehensive loss, net of tax                                                    2,203                        2,203
  Decrease in deferred tax asset valuation
    allowance attributable to unrealized
    gains on investments                                                                                1,198          1,198
  Amortization of unearned compensation                                     397                                          397
                                           -------------  --------   -------------   -------------   ----------   -------------
Balance at December 31, 2001                 6,500,000    $   65     $   28,017      $     (121)     $(25,139)    $    2,822
                                           =============  ========   =============   =============   ==========   =============

</TABLE>

  The financial statements should be read in conjunction with the Consolidated
            Financial Statements and the accompanying notes thereto.


<PAGE>


                                   SCHEDULE II

     WESTBRIDGE CAPITAL CORP. (now ASCENT ASSURANCE, INC.) (PARENT COMPANY)
             STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

                        (in thousands, except share data)

<TABLE>

                                                                                      Accumulated
                                                                         Capital         Other           Retained       Total
                                                  Common Stock          in Excess    Comprehensive       (Deficit)   Stockholders'
                                                  ------------
                                               Shares      Amount     of Par Value    Income (Loss)      Earnings       Equity
                                               ------      ------     ------------   --------------      --------    -------------

<S>                                          <C>          <C>        <C>             <C>              <C>            <C>
Balance at December 31, 1998                 7,035,809    $  703     $     37,641    $     3,911      $  (104,335)   $   (62,080)
  Net income                                                                                                  208            208
  Other comprehensive loss, net of tax                                                      (339)                           (339)
  Other comprehensive loss on investments
    in subsidiaries, net of tax                                                           (1,647)                         (1,647)
  Cancellation of old preferred stock                                      11,935                          (3,088)         8,847
  Issuance of new preferred stock                                                                            (477)          (477)
  Cancellation of old common stock          (7,035,809)     (703)                                                           (703)
  Issuance of new common stock               6,500,000        65           79,203                                         79,268
  Fresh start adjustments                                                (101,741)        (1,925)         107,692          4,026
                                           ------------   --------   --------------  --------------   -------------  -------------
Balance at March 31, 1999                    6,500,000    $   65     $     27,038    $         -      $         -    $    27,103
                                           ============   ========   ==============  ==============   =============  =============
</TABLE>


  The financial statements should be read in conjunction with the Consolidated
            Financial Statements and the accompanying notes thereto.


<PAGE>




                                   SCHEDULE II

                     ASCENT ASSURANCE, INC. (PARENT COMPANY)
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                             STATEMENT OF CASH FLOWS

                                 (in thousands)
<TABLE>

                                                    Year Ended           Year Ended        Nine Months Ended
                                                 December 31, 2001    December 31, 2000    December 31, 1999
                                                 -----------------    -----------------    -----------------
Cash Flow from Operating Activities:
<S>                                              <C>                  <C>                  <C>
  Net (loss) income                              $       (2,119)      $      (18,942)      $        2,106
  Adjustments to reconcile net (loss) income to
    cash provided by operating activities:
  Equity in undistributed net income of
    subsidiaries                                           (100)              16,055                  212
  (Increase) decrease in accrued investment
    income                                                   29                  (26)                 168
  Increase in deferred tax asset                              -                  646                 (646)
  Increase in receivables from subsidiaries                (655)                   -                    -
  Increase in other assets                                 (351)                  (2)                 (25)
  Decrease in other liabilities                            (318)                (765)              (3,048)
  Increase in payables to subsidiaries                   (3,980)               4,999                5,733
  Dividends received from subsidiaries                    6,971                    -                  300
  Other, net                                              3,238                1,685               (2,263)
                                                 -----------------    -----------------    -----------------
    Net Cash Provided by Operating Activities             2,715                3,650                2,537
                                                 -----------------    -----------------    -----------------

Cash Flow from  Investing Activities:
  Proceeds from sale of fixed maturity
    investments                                           1,240                  246                3,938
  Cost of fixed maturity investments acquired                 -               (2,660)                (699)
  Net change in short-term and other
    investments                                           1,362                3,004               (1,907)
  Capital contributions to subsidiaries                 (16,827)              (6,860)                (500)
                                                 -----------------   ------------------    -----------------
    Net Cash (Used For) Provided by Investing
       Activities                                       (14,225)              (6,270)                 832
                                                 -----------------   ------------------    -----------------

Cash Flow from Financing Activities:
  Issuance of note payable                               11,000                    -                    -
                                                 -----------------   ------------------    -----------------
    Net Cash Provided by Financing Activities            11,000                    -                    -
                                                 -----------------   ------------------    -----------------
(Decrease) Increase in Cash During the Period              (510)              (2,620)               3,369
Cash at Beginning of Period                               1,407                4,027                  658
                                                 -----------------   ------------------    -----------------
Cash at End of Period                            $          897      $         1,407       $        4,027
                                                 =================   ==================    =================

</TABLE>


                    The financial statement should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.



<PAGE>


                                   SCHEDULE II

                    WESTBRIDGE CAPITAL CORP. (PARENT COMPANY)
                          (now ASCENT ASSURANCE, INC.)
                             STATEMENT OF CASH FLOWS

                                 (in thousands)

                                                               Three Months
                                                                   Ended
                                                                 March 31,
                                                               ------------
                                                                   1999
                                                               ------------

Cash Flows From Operating Activities:
  Net income                                                   $      208
  Adjustments to reconcile net income to cash
    used for operating activities:
  Equity in undistributed net (income) loss of subsidiaries          (276)
  Accrued investment income                                            42
  Decrease (increase) in other assets                               3,063
  (Decrease) increase in other liabilities                        (13,102)
  Other, net                                                        9,589
                                                               ------------
    Net Cash Used For Operating Activities                           (476)
                                                               ------------

Cash Flows From Investing Activities:
  Proceeds from sale of investments                                 2,455
  Net change in short-term investments                             (1,403)
  Capital contributions to subsidiaries                              (400)
                                                               ------------
    Net Cash Provided by Investing Activities                         652
                                                               ------------

Cash Flows From Financing Activities:
  Retirement of senior subordinated debentures                    (15,167)
  Issuance of preferred stock                                      15,167
                                                               ------------
    Net Cash Provided by Financing Activities                           -
                                                               ------------
Increase in Cash During the Period                                    176
Cash at Beginning of Period                                           482
                                                               ------------
Cash at End of Period                                          $      658
                                                               ============



                   The financial statements should be read in
                   conjunction with the Consolidated Financial
                 Statements and the accompanying notes thereto.


<PAGE>




                                  SCHEDULE III

                       SUPPLEMENTARY INSURANCE INFORMATION

                                 (in thousands)
<TABLE>

                                                          Other
                                                         Policy
                                    Deferred             Claims                      Benefits Amortization
                                     Policy     Future    and                 Net      and     of Policy      Other
                                   Acquisition  Policy  Benefits Premium  Investment  Claims   Acquisition  Operating  Premiums
              Segment                 Costs    Benefits  Payable Revenue    Income    Expense     Costs      Expenses   Written*
---------------------------------------------- -------- -------- -------- ---------- --------  ----------- ---------- -----------
      ASCENT ASSURANCE, INC.

Year Ended December 31, 2001:
<S>                                <C>         <C>      <C>      <C>      <C>        <C>      <C>          <C>        <C>
  Total                            $   25,600  $61,571  $37,202  $125,206 $   8,867  $ 93,376 $    8,319   $   55,805 $  125,515
                                   =========== ======== ======== ======== ========== ======== ============ ========== ===========

Year Ended December 31, 2000:
  Total                            $   24,711  $61,306  $42,778  $119,908 $   9,741  $101,940 $    2,998   $   67,683 $  120,667
                                   =========== ======== ======== ======== ========== ======== ============ ========== ===========

Nine Months Ended December 31, 1999
  Total                            $   19,393  $57,119  $38,776  $ 86,371 $   6,740  $ 65,699 $    1,478   $   35,564 $   85,694
                                   =========== ======== ======== ======== ========== ======== ============ ========== ===========

      WESTBRIDGE CAPITAL CORP.
Three Months Ended March 31, 1999:
   Total                           $   15,039  $54,738  $41,068  $ 29,948 $   2,562  $ 21,799 $      286   $   14,454 $   23,878
                                   =========== ======== ======== ======== ========== ======== ============ ========== ===========

</TABLE>

* Premiums Written - Amounts do not apply to life insurance/other.
<PAGE>





                                   SCHEDULE IV

                                   REINSURANCE

                       (in thousands, except percentages)
<TABLE>

                                                                                                       Percentage of
                                                       Ceded to         Assumed                            Amount
                                      Gross             Other          From Other          Net          Assumed to
                                      Amount          Companies        Companies          Amount            Net
                                   --------------  ---------------  ---------------  ---------------  ----------------

     ASCENT ASSURANCE, INC.

Year Ended December 31, 2001
<S>                                <C>             <C>              <C>             <C>                   <C>
Life insurance in force            $      53,128         16,577                -           36,551
                                   ==============  ===============  ===============  ===============
Premiums:
  Life                             $         572             63                -              509             -
  Accident and health                    125,846          2,709            1,170          124,307           0.94%
  Other                                      390              -                -              390             -
                                   --------------  ---------------  ---------------  ---------------
    Total premiums                 $     126,808          2,772            1,170          125,206           0.93%
                                   ==============  ===============  ===============  ===============

Year Ended December 31, 2000
Life insurance in force            $      46,744   $     12,553     $          -     $     34,191             -
                                   ==============  ===============  ===============  ===============
Premiums:
  Life                             $         497   $         12     $          -     $        485             -
  Accident and health                    121,601          3,939            1,257          118,919           1.05%
  Other                                      504              -                -              504             -
                                   --------------  ---------------  ---------------  ---------------
    Total premiums                 $     122,602   $      3,951     $      1,257     $    119,908           1.05%
                                   ==============  ===============  ===============  ===============

Nine Months Ended December 31, 1999
Life insurance in force            $      38,184   $      6,465     $          -     $     31,719             -
                                   ==============  ===============  ===============  ===============
Premiums:
  Life                             $         396   $         12     $          -     $        384             -
  Accident and health                     86,794          1,849            1,042           85,987           1.21%
                                   --------------  ---------------  ---------------  ---------------
    Total premiums                 $      87,190   $      1,861     $      1,042     $     86,371           1.21%
                                   ==============  ===============  ===============  ===============

       WESTBRIDGE CAPITAL CORP.

Three Months Ended March 31, 1999
Life insurance in force            $     43,157    $      7,072     $          -     $     36,085             -
                                   ==============  ===============  ===============  ===============
Premiums:
  Life                             $        147    $          2     $          -     $        145             -
  Accident and health                    30,041             722              484           29,803           1.62%
                                   --------------  ---------------  ---------------  ---------------
    Total premiums                 $     30,188    $        724     $        484     $     29,948           1.62%
                                   ==============  ===============  ==============  ===============


</TABLE>




<PAGE>


                                   SCHEDULE V

                 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

                                 (in thousands)
<TABLE>

                                                            Additions
                                                           (Reductions)
                                         Balance at         Charged to                                           Balance at
                                         Beginning          Costs and          Deductions                          End Of
                                         of Period           Expenses        (Charge Offs)        Other*           Period
                                     -----------------  -----------------  -----------------  ---------------  -----------------

                ASCENT ASSURANCE, INC.

Year Ended December 31, 2001:
Allowance for doubtful agents'
<S>                                  <C>                <C>                <C>                <C>              <C>
    receivables                      $         3,711    $           824    $          (522)   $            -   $        4,013
                                     =================  =================  =================  ===============  =================


Year Ended December 31, 2000:
Allowance for doubtful agents'
    receivables                      $         6,060    $          (722)   $        (1,627)   $            -   $        3,711
                                     =================  =================  =================  ===============  =================

Nine Months Ended December 31, 1999:
Allowance for doubtful agents'
    receivables                      $         5,125    $           123    $        (1,356)   $        2,168   $        6,060
                                     =================  =================  =================  ===============  =================

               WESTBRIDGE CAPITAL CORP.

Three Months Ended March 31, 1999:
Allowance for doubtful agents'
    receivables                      $         5,176    $           195    $          (246)   $            -   $        5,125
                                     =================  =================  =================  ===============  =================

</TABLE>

* Represents reclassification of allowance netted against receivable.




ITEM 9 -  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

None.



<PAGE>


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  relating to directors and executive officers is incorporated herein
by reference to "Election of Directors" and "Certain  Information  Regarding the
Executive  Officers" from the Company's  definitive proxy statement for the 2002
Annual Meeting of Stockholders, which will be filed on or before April 30, 2002.

ITEM 11 - EXECUTIVE COMPENSATION

Executive  compensation  is  incorporated  herein by  reference  to "Election of
Directors  --  Executive  Compensation"  from  the  Company's  definitive  proxy
statement for the 2002 Annual Meeting of Stockholders, which will be filed on or
before April 30, 2002.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  pertaining to security  ownership of certain  beneficial owners and
management is incorporated  herein by reference to "Principal  Stockholders" and
"Election of Directors -- Security  Ownership of Management"  from the Company's
definitive  proxy statement for the 2002 Annual Meeting of  Stockholders,  which
will be filed on or before April 30, 2002.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  pertaining to certain  relationships  and related  transactions  is
incorporated  herein by reference to "Principal  Stockholders"  and "Election of
Directors"  from the Company's  definitive  proxy  statement for the 2002 Annual
Meeting of Stockholders, which will be filed on or before April 30, 2002.



<PAGE>


                                     PART IV


ITEM 14 - FINANCIAL STATEMENT SCHEDULES, EXHIBITS AND REPORTS ON FORM 8-K

(a)  The documents set forth below are filed as part of this report.

(1)  Financial Statements:

Reference  is made to ITEM 8,  "Index  to  Financial  Statements  and  Financial
Statement Schedules."

(2)  Financial Statement Schedules:

Reference  is made to ITEM 8,  "Index  to  Financial  Statements  and  Financial
Statement Schedules."

All  other  schedules  are  omitted  because  they  are not  applicable,  or not
required,  or because the  required  information  is  included in the  financial
statements or notes thereto.

(3)  Exhibits:

The following  exhibits are filed herewith.  Exhibits  incorporated by reference
are indicated in the parentheses following the description.

2.1  First  Amended Plan of  Reorganization  of Westbridge  Capital Corp.  Under
     Chapter  11  of  the  Bankruptcy   Code,  dated  as  of  October  30,  1998
     (incorporated  by reference to Exhibit 2 to the Company's Form 8-K filed on
     September 21, 1998).

2.2  Amended  Disclosure  Schedule   Accompanying  the  First  Amended  Plan  of
     Reorganization  of  Westbridge  Capital  Corp.  under  Chapter  11  of  the
     Bankruptcy  Code  (incorporated  by reference to Exhibit 2 to the Company's
     Form 8-K filed on September 21, 1998).

2.3  Findings  of Fact,  Conclusions  of Law,  and  Order  confirming  the First
     Amended Plan of  Reorganization  of Westbridge  Capital Corp. dated October
     30,  1998,  as  modified  (incorporated  by  reference  to Exhibit 2 to the
     Company's Form 8-K filed on December 29, 1998).

3.1  Second  Amended and Restated  Certificate of  Incorporation  of the Company
     filed  with  the   Secretary  of  State  of  Delaware  on  March  24,  1999
     (incorporated  by reference to Exhibit 3.1 to the Company's  Form 8-A filed
     on March 25, 1999).

3.2  Amended and Restated By-Laws of the Company, effective as of March 24, 1999
     (incorporated  by reference to Exhibit 3.2 to the Company's  Form 8-A filed
     on March 25, 1999).

3.3  Amendment  to the  By-Laws of the  Company,  effective  as of April 5, 2000
     (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report
     on Form 10-Q for the quarter ended June 30, 2000).

4.1  Form of Common Stock Certificate  (incorporated by reference to Exhibit 4.1
     to the Company's Form 8-A filed on March 25, 1999).

4.2  Form of Warrant  Certificate,  included  in the Form of  Warrant  Agreement
     (incorporated  by reference to Exhibit 4.2 to the Company's  Form 8-A filed
     on March 25, 1999).

4.3  Form of Warrant  Agreement dated as of March 24, 1999,  between the Company
     and LaSalle  National Bank, as warrant agent  (incorporated by reference to
     Exhibit 4.3 to the Company's Form 8-A filed on March 25, 1999).

4.4  Form of Preferred Stock  Certificate  (incorporated by reference to Exhibit
     4.4 to the Company's Annual Report on Form 10-K for the year ended December
     31, 1998).

10.1 Credit  Agreement  dated  as of June 6,  1997  between  Westbridge  Funding
     Corporation and LaSalle National Bank (incorporated by reference to Exhibit
     10.1 to the Company's  Quarterly  Report on Form 10-Q for the quarter ended
     June 30, 1997).

10.2 Guaranty  Agreement dated as of June 6, 1997 by Westbridge Capital Corp. in
     favor of LaSalle  National Bank  (incorporated by reference to Exhibit 10.2
     to the Company's  Quarterly  Report on Form 10-Q for the quarter ended June
     30, 1997).

10.3 Pledge  Agreement  dated as of June 6, 1997  between  Westbridge  Marketing
     Corporation and LaSalle National Bank (incorporated by reference to Exhibit
     10.3 to the Company's  Quarterly  Report on Form 10-Q for the quarter ended
     June 30, 1997).

10.4 Security  Agreement  dated as of June 6, 1997  between  Westbridge  Funding
     Corporation  for the  benefit of LaSalle  National  Bank  (incorporated  by
     reference to Exhibit 10.4 to the  Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 1997).

10.5 Second Amended and Restated Receivables Purchase and Sale Agreement,  dated
     as of June 6, 1997 between  National  Foundation  Life  Insurance  Company,
     National Financial Insurance Company,  American Insurance Company of Texas,
     Freedom  Life  Insurance  Company  of  America,   and  Westbridge   Funding
     Corporation  (incorporated  by reference  to Exhibit 10.5 to the  Company's
     Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).

10.6 Amended and Restated Non-Insurance Company Sellers Receivables Purchase and
     Sale Agreement,  dated as of June 6, 1997 between  American Senior Security
     Plans, L.L.C.,  Freedom Marketing,  Inc., Health Care-One Insurance Agency,
     Health Care-One  Marketing  Group,  Inc.,  LSMG,  Inc.,  Senior Benefits of
     Texas,  Inc.,  and  Westbridge  Marketing   Corporation   (incorporated  by
     reference to Exhibit 10.6 to the  Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 1997).

10.7 Lock-Up Agreement, dated as of September 16, 1998, by and among the Company
     and Credit Suisse First Boston  Corporation  (incorporated  by reference to
     Exhibit 10.1 to the Company's Form 8-K filed on September 21, 1998).

10.8 Stock  Purchase  Agreement,  dated as of September  16,  1998,  between the
     Company  and  Credit  Suisse  First  Boston  Corporation  (incorporated  by
     reference to Exhibit 10.2 to the Company's  Form 8-K filed on September 21,
     1998).

10.9 Employment  Agreement,  dated as of September  15,  1998,  by and among the
     Company,   Westbridge   Management   Corp.  and  Mr.  Patrick  J.  Mitchell
     (incorporated  by reference to Exhibit 10.3 to the Company's Form 8-K filed
     on September 21, 1998).

10.10Employment  Agreement  dated as of  September  15,  1998,  by and among the
     Company,   Westbridge   Management   Corp.   and  Mr.  Patrick  H.  O'Neill
     (incorporated  by reference to Exhibit 10.4 to the Company's Form 8-K filed
     on September 21, 1998).

10.11First  Amendment and Waiver to Credit  Agreement among  Westbridge  Funding
     Corporation, Westbridge Capital Corp. and LaSalle National Bank dated as of
     September  8, 1998  (incorporated  by  reference  to  Exhibit  10.11 to the
     Company's Annual Report on Form 10-K for the year ended December 31, 1998).

10.12First  Amendment to Guaranty  Agreement  dated as of March 24, 1999 between
     Westbridge Capital Corp. in favor of LaSalle National Bank (incorporated by
     reference to Exhibit 10.12 to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1998).

10.13Registration  Rights  Agreement  dated as of March  24,  1999  between  the
     Company and Special Situations Holdings, Inc. - Westbridge (incorporated by
     reference to Exhibit 10.13 to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1998).

10.141999  Stock  Option  Plan  dated  as of March  24,  1999  (incorporated  by
     reference to the Company's  Schedule 14A filed with the Commission on April
     30, 1999).

10.15Installment  Note Agreement dated July 20, 1999 between Ascent  Management,
     Inc. and LaSalle Bank National  Association  (incorporated  by reference to
     Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter
     ended September 30, 1999).

10.16Second  Amendment to Credit  Agreement dated August 12, 1999 between Ascent
     Funding,  Inc.  and LaSalle  Bank  National  Association  (incorporated  by
     reference to Exhibit 10.5 to the  Company's  Quarterly  Report on Form 10-Q
     for the quarter ended September 30, 1999).

10.17Second  Amendment to Guaranty  Agreement dated July 20, 1999 between Ascent
     Assurance,  Inc. and LaSalle Bank  National  Association  (incorporated  by
     reference to Exhibit 10.6 to the  Company's  Quarterly  Report on Form 10-Q
     for the quarter ended September 30, 1999).

10.18Third  Amendment to Guaranty  Agreement dated April 17, 2000 between Ascent
     Assurance,  Inc. and LaSalle Bank  National  Association  (incorporated  by
     reference to Exhibit 10.7 to the  Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 2000).

10.19Extension of Employment  Agreement,  dated as of September 15, 1998, by and
     among the Company,  Westbridge Management Corp. and Mr. Patrick J. Mitchell
     (incorporated  by  reference  to Exhibit  10.8 to the  company's  Quarterly
     Report on Form 10-Q for the quarter ended June 30, 2000).

10.20Extension of Employment  Agreement,  dated as of September 15, 1998, by and
     among the Company,  Westrbridge Management Corp. and Mr. Patrick H. O'Neill
     (incorporated  by  reference  to Exhibit  10.9 to the  Company's  Quarterly
     Report on Form 10-Q for the quarter ended June 30, 2000).

10.21Fourth  Amendment  to Guaranty  Agreement  dated  August 10,  2000  between
     Ascent Assurance,  Inc. and LaSalle Bank National Association (incorporated
     by reference to Exhibit  10.10 to the  Company's  Quarterly  Report on Form
     10-Q for the quarter ended September 30, 2000).

10.22First Amendment to Pledge Agreement,  dated as of November 30, 2000, by and
     among  Ascent  Assurance,   Inc.  and  LaSalle  Bank  National  Association
     (incorporated  by reference to Exhibit 10.22 to the Company's Annual Report
     on Form 10-K for the year ended December 31, 2000).

10.23Fifth  Amendment to Guaranty  Agreement,  dated as of November 30, 2000, by
     and among Ascent  Assurance,  Inc. and LaSalle  Bank  National  Association
     (incorporated  by reference to Exhibit 10.23 to the Company's Annual Report
     on Form 10-K for the year ended December 31, 2000).

10.24Third Amendment to Credit Agreement,  dated as of November 30, 2000, by and
     among  Ascent   Funding,   Inc.  and  LaSalle  Bank  National   Association
     (incorporated  by reference to Exhibit 10.24 to the Company's Annual Report
     on Form 10-K for the year ended December 31, 2000).

10.25First  Amendment to Security  Agreement,  dated as of November 30, 2000, by
     and among Ascent  Management,  Inc. and LaSalle Bank  National  Association
     (incorporated  by reference to Exhibit 10.25 to the Company's Annual Report
     on Form 10-K for the year ended December 31, 2000).

10.26Credit  Agreement dated April 17, 2001 between Ascent  Assurance,  Inc. and
     Credit  Suisse  First  Boston  Management   Corporation   (incorporated  by
     reference to Exhibit 10.1 to the Company's Form 8-K filed April 25, 2001).


<PAGE>


10.27Guaranty  and  Security  Agreement  dated April 17,  2001 among  Foundation
     Financial  Services,  Inc.,  NationalCare(R)   Marketing,Inc.,   LifeStyles
     Marketing Group,  Inc.,  Precision Dialing Services,  Inc., Senior Benefits
     L.L.C.  and  Westbridge  Printing  Services,  Inc., and Credit Suisse First
     Boston Management Corporation (incorporated by reference to Exhibit 10.2 to
     the Company's Form 8-K filed April 25, 2001).

10.28Pledge  Agreement dated April 17, 2001 between Ascent  Assurance,  Inc. and
     Credit  Suisse  First  Boston  Management   Corporation   (incorporated  by
     reference to Exhibit 10.3 to the Company's Form 8-K filed April 25, 2001).

10.29Sixth  Amendment  to  Guaranty  Agreement  and Waiver  dated April 17, 2001
     between  Ascent  Assurance,  Inc.  and LaSalle  Bank  National  Association
     (incorporated  by reference to Exhibit 10.4 to the Company's Form 8-K filed
     April 25, 2001).

10.30Fourth  Amendment to Credit  Agreement  dated April 17, 2001 between Ascent
     Funding,  Inc.  and LaSalle  Bank  National  Association  (incorporated  by
     reference to Exhibit 10.5 to the Company's Form 8-K filed April 25, 2001).

10.31* Fifth  Amendment  to Credit  Agreement  dated  November  27, 2001 between
     Ascent Funding, Inc. and LaSalle Bank National Association.

10.32* Employment  Agreement,  dated as of September  16, 2001, by and among the
     Company, Ascent Management, Inc., and Mr. Patrick J. Mitchell.

10.33* Employment  Agreement,  dated as of September  16, 2001, by and among the
     Company, Ascent Management, Inc., and Mr. Patrick H. O'Neill.

21.1* List of Subsidiaries of Ascent Assurance, Inc.

24.1* Consent of PricewaterhouseCoopers LLP


(b)  Report on Form 8-K.

No  reports on Form 8-K were  filed  during  the last  quarter of the year ended
December 31, 2001.



------------------------
*        Filed Herewith.



<PAGE>


                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) 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,  on the 8th day of March,
2002.


                         ASCENT ASSURANCE, INC.

                          /s/ Cynthia B. Koenig
                         -------------------------------------------------
                         Cynthia B. Koenig
                         Senior Vice President and Chief Financial Officer
                         (Principal Financial and Accounting Officer)


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the date indicated.


SIGNATURE                    TITLE                             DATE
---------------------------- --------------------------------- -----------------

 /s/ Patrick J. Mitchell     Director, Chairman of the Board   March 8, 2002
--------------------------
(Patrick J. Mitchell)        and Chief Executive Officer
                             (Principal Executive Officer)


 /s/ John H. Gutfreund       Director                          March 8, 2002
--------------------------
(John H. Gutfreund)

 /s/ Richard H. Hershman     Director                          March 8, 2002
--------------------------
(Richard H. Hershman)

 /s/ Michael A. Kramer       Director                          March 8, 2002
--------------------------
(Michael A. Kramer)

 /s/ Robert A. Peiser        Director                          March 8, 2002
--------------------------
(Robert A. Peiser)

 /s/ James K. Steen          Director                          March 8, 2002
--------------------------
(James K. Steen)

 /s/ Paul E. Suckow          Director                          March 8, 2002
--------------------------
(Paul E. Suckow)




<PAGE>


                                INDEX OF EXHIBITS




Exhibit
Number   Description of Exhibit

21.1*   List of Subsidiaries of Ascent Assurance, Inc.

24.1*   Consent of PricewaterhouseCoopers LLP








* Filed Herewith


<PAGE>


                                  Exhibit 21.1


                     SUBSIDIARIES OF ASCENT ASSURANCE, INC.


     Percentage Subsidiary                                            Ownership

 1.  National Foundation Life Insurance Company (Texas)                  100%

 2.  American Insurance Company of Texas (Texas)                         100%

 3.  National Financial Insurance Company (Texas)                        100%

 4.  Freedom Life Insurance Company of America (Texas)                   100%

 5.  Ascent Funding, Inc. (Delaware)                                     100%

 6.  Foundation Financial Services, Inc. (Nevada)                        100%

 7.  NationalCare(R)Marketing, Inc. (Delaware)                           100%

 8.  Westbridge Printing Services, Inc. (Delaware)                       100%

 9.  Ascent Management, Inc. (Delaware)                                  100%

10.  Precision Dialing Services, Inc. (Delaware)                         100%

11.  Senior Benefits, LLC (Arizona)                                      100%

12.  LifeStyles Marketing Group, Inc. (Delaware)                         100%

13.  Health Care-One Insurance Agency, Inc. (California)                  50%

14.  Pacific Casualty Company, Inc. (Hawaii)                             100%

15.  HPI Marketing, Inc. (Delaware)                                      100%



<PAGE>


                                  Exhibit 24.1



                       CONSENT OF INDEPENDENT ACCOUNTANTS


We  hereby  consent  to the  incorporation  by  reference  in  the  Registration
Statement  on Form  S-8  (No.  333-82155)  of  Ascent  Assurance,  Inc.  and its
subsidiaries  (Ascent)  of our  reports  dated  March 8, 2002 and March 29, 2000
relating to the financial statements and financial statement schedules of Ascent
and Westbridge Capital Corp. and its subsidiaries, respectively, which appear in
this Form 10-K.



/s/ PricewaterhouseCoopers LLP
--------------------------------

PricewaterhouseCoopers LLP
Dallas, Texas
March 8, 2002