SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For Quarterly Period Ended September 30, 2002

                          Commission File Number 1-8538


                             ASCENT ASSURANCE, INC.
             (Exact name of Registrant as specified in its Charter)

                               DELAWARE 73-1165000
          (State of Incorporation) (I.R.S. Employer Identification No.)

           110 West Seventh Street, Suite 300, Fort Worth, Texas 76102
               (Address of Principal Executive Offices) (Zip Code)

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

                                       N/A
 -----------------------------------------------------------------------------
   (Former Name, Address and Former Fiscal Year, if changed since Last Report)

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 whether the Registrant has filed all 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
    -------

Common Stock - Par Value $.01 6,517,100  Shares Outstanding at November 14, 2002



<PAGE>



                             ASCENT ASSURANCE, INC.
                               INDEX TO FORM 10-Q

--------------------------------------------------------------------------------




PART 1 - FINANCIAL INFORMATION                                          Page No.
------------------------------                                          --------

Item 1 - Financial Statements

Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at
  September 30, 2002 and December 31, 2001                                   2

Ascent Assurance, Inc. Condensed Consolidated Statements of Operations
  for the Three and Nine Months Ended September 30, 2002 and 2001            3

Ascent Assurance, Inc. Condensed Consolidated Statements of
  Comprehensive Income for the Three and Nine Months Ended September
  30, 2002 and 2001                                                          4

Ascent Assurance, Inc. Condensed Consolidated Statements of Cash Flow
  for the Three and Nine Months Ended September 30, 2002 and 2001            5

Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders'
  Equity for the Nine Months Ended September 30, 2002                        6

Notes to Condensed Consolidated Financial Statements                         7

Item 2 - Management's Discussion and Analysis of Financial Condition
         and Results of Operations

General                                                                     12

Business Overview                                                           12

Forward-Looking Statements                                                  13

Operating Results                                                           14

Financial Condition                                                         17

Liquidity, Capital Resources and Statutory Capital and Surplus              19

Item 4 - Controls and Procedures                                            22

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K                                   23



<PAGE>


                             ASCENT ASSURANCE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>

                                                                       September 30,    December 31,
                                                                           2002            2001
                                                                        (Unaudited)      (Audited)
                                                                       -------------   -------------
                                                                   (in thousands, except per share data)
Assets
Investments:
  Fixed Maturities:
<S>                                                                   <C>                     <C>
    Available-for-sale, at market value (amortized cost $95,949
      and $90,475)                                                     $    99,755     $    90,217
    Short-term investments                                                   9,325          21,801
    Other investments (cost $384 and $1,746)                                   363           1,883
                                                                       -------------   -------------
        Total Investments                                                  109,443         113,901

Cash                                                                         1,996           2,337
Accrued investment income                                                    1,410           1,710
Receivables from agents, net of allowance for doubtful accounts
  of $4,478 and $4,013                                                       6,782           7,412
Deferred policy acquisition costs                                           25,639          25,600
Property and equipment, net of accumulated depreciation of
  $5,312 and $3,904                                                          4,224           5,436
Other assets                                                                 6,902           6,197
                                                                       -------------   -------------
          Total Assets                                                 $   156,396     $   162,593
                                                                       =============   =============

Liabilities, Preferred Stock and Stockholders' Equity
Liabilities:
  Policy liabilities and accruals:
    Future policy benefits                                             $    60,310     $    61,571
    Claim reserves                                                          31,645          37,202
                                                                       -------------   -------------
      Total Policy Liabilities and Accruals                                 91,955          98,773

Accounts payable and other liabilities                                       8,405          11,760
Notes payable                                                               18,796          18,603
                                                                       -------------   -------------
          Total Liabilities                                                119,156         129,136
                                                                       -------------   -------------

Redeemable Convertible Preferred Stock                                      33,050          30,635
                                                                       -------------   -------------

Stockholders' Equity:
  Common stock ($.01 par value, 30,000,000 shares authorized;
     6,517,100 shares issued)                                                   65              65
  Capital in excess of par value                                            28,069          28,017
  Accumulated other comprehensive income (loss)                              3,785            (121)
  Retained deficit                                                         (27,729)        (25,139)
                                                                       -------------   -------------
          Total Stockholders' Equity                                         4,190           2,822
                                                                       -------------   -------------

Total Liabilities, Redeemable Convertible Preferred Stock
  And Stockholders' Equity                                             $   156,396     $   162,593
                                                                       =============   =============
</TABLE>

        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>


                             ASCENT ASSURANCE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>

                                                      Three Months Ended              Nine Months Ended
                                                         September 30,                   September 30,
                                                -----------------------------   -----------------------------
                                                     2002            2001            2002            2001
                                                -------------   -------------   -------------   -------------
                                                            (in thousands, except per share data)
Revenues:
  Premiums:
<S>                                                  <C>             <C>             <C>             <C>
    First-year                                  $     5,715     $     7,176     $    17,603     $    23,544
    Renewal                                          22,156          24,496          67,224          72,043
                                                -------------   -------------   -------------   -------------
      Total premiums                                 27,871          31,672          84,827          95,587

    Net investment income                             1,929           2,186           5,891           6,802
    Fee, service and other income                     3,229           4,852           9,725          15,822
    Net realized gain (loss) on investments              84             211            (333)            306
                                                -------------   -------------   -------------   -------------
      Total revenue                                  33,113          38,921         100,110         118,517
                                                -------------   -------------   -------------   -------------


Benefits, claims and expenses:
  Benefits and claims                                19,525          22,392          60,344          71,767
  Decrease (increase) in deferred
     acquisition costs                                  105           1,118             (39)         (1,109)
  Commissions                                         4,274           5,031          12,687          16,532
  General and administrative expenses                 7,521           8,310          22,490          28,063
  Taxes, licenses and fees                              905           1,186           2,956           3,539
  Interest expense on notes payable                     629             640           1,846           1,296
                                                -------------   -------------   -------------   -------------
    Total expenses                                   32,959          38,677         100,284         120,088

Income (loss) before income taxes                       154             244            (174)         (1,571)
Federal income tax benefit                                -               -               -               -
                                                -------------   -------------   -------------   -------------

      Net income (loss)                         $       154     $       244     $      (174)         (1,571)

Preferred stock dividends                               826             746           2,416           2,166
                                                -------------   -------------   -------------   -------------
Loss applicable to common stockholders          $      (672)    $      (502)    $    (2,590)    $    (3,737)
                                                =============   =============   =============   =============

Basic and diluted loss per common share         $      (.10)    $      (.08)    $      (.40)    $      (.57)
                                                =============   =============   =============   =============

Weighted average shares outstanding:
      Basic                                           6,502           6,500           6,501           6,500
                                                =============   =============   =============   =============
      Diluted                                         6,502           6,500           6,501           6,500
                                                =============   =============   =============   =============
</TABLE>


        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>



                             ASCENT ASSURANCE, INC.
            CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (Unaudited)

<TABLE>
                                                    Three Months Ended          Nine Months Ended
                                                       September 30,               September 30,
                                                -------------------------   -------------------------
                                                    2002          2001          2002          2001
                                                -----------   -----------   -----------   -----------
                                                                   (in thousands)

<S>                                             <C>          <C>            <C>           <C>
Net income (loss)                               $     154     $     244     $    (174)    $  (1,571)
Other comprehensive income (loss):
  Unrealized holding gain arising during
    period                                          3,144         2,512         3,573         3,371
  Reclassification adjustment of (gain) loss
    on sales of investments included in
    net income                                        (84)         (211)          333          (306)
                                                -----------   -----------   -----------   -----------

Comprehensive income                            $   3,214     $   2,545     $   3,732     $   1,494
                                                ===========   ===========   ===========   ===========
</TABLE>


        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>


                             ASCENT ASSURANCE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (Unaudited)

<TABLE>
                                                      Three Months Ended         Nine Months Ended
                                                         September 30,              September 30,
                                                  -------------------------   -------------------------
                                                      2002          2001          2002          2001
                                                  -----------   -----------   -----------   -----------
                                                                      (in thousands)
Cash Flow From Operating Activities:

<S>                                               <C>           <C>           <C>           <C>
Net income (loss)                                 $     154     $     244     $    (174)    $  (1,571)
  Adjustments to reconcile net income (loss) to
  cash provided by (used for) operating
  activities
    Decrease in accrued investment income               198           250           300           367
    Decrease (increase) in deferred
       acquisition costs                                105         1,118           (39)       (1,109)
    Decrease in receivables from agents                 329           420           630           803
    Decrease (increase) in other assets                 384           467          (706)         (447)
    Decrease in policy liabilities & accruals        (1,711)       (1,836)       (6,818)       (6,676)
    Decrease in accounts payable and other
       Liabilities                                   (4,037)       (1,372)       (3,355)       (3,451)
    Other, net                                          863           921         3,231         2,820
                                                  -----------   -----------   -----------   -----------
  Net Cash (Used For) Provided By Operating
    Activities                                       (3,715)          212        (6,931)       (9,264)
                                                  -----------   -----------   -----------   -----------

Cash Flow From Investing Activities:

  Purchases of fixed maturity investments            (6,485)       (2,941)      (40,392)      (15,939)
  Sales of fixed maturity investments                 6,648         6,083        25,659        19,491
  Maturities and calls of fixed maturity
    Investments                                       3,647         2,517         8,535         5,161
  Purchases of equity securities                          -          (368)            -          (368)
  Sales of equity securities                              -           301         1,477           301
  Net decrease (increase) in short term and
    other investments                                   933        (3,040)       12,450        (8,362)
  Property and equipment purchased                      (41)         (168)         (196)         (648)
                                                  -----------   -----------   -----------   -----------
  Net Cash Provided By (Used For) Investing
    Activities                                        4,702         2,384         7,533          (364)
                                                  -----------   -----------   -----------   -----------

Cash Flow From Financing Activities:

  Issuance of notes payable                               1             -            69        11,305
  Repayment of notes payable                           (353)       (1,361)       (1,012)       (1,811)
  Deferred debt costs                                     -          (120)            -          (467)
                                                  -----------   -----------   -----------   -----------
  Net Cash (Used For) Provided By
    Financing Activities                               (352)       (1,481)         (943)        9,027
                                                  -----------   -----------   -----------   -----------

  Increase (Decrease) In Cash During Period             635         1,115          (341)         (601)
  Cash At Beginning Of Period                         1,361           942         2,337         2,658
                                                  -----------   -----------   -----------   -----------
  Cash At End Of Period                           $   1,996     $   2,057         1,996     $   2,057
                                                  ===========   ===========   ===========   ===========
</TABLE>

        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>


                             ASCENT ASSURANCE, INC.
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                   (Unaudited)
                        (in thousands, except share data)



<TABLE>

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

<S>                                     <C>          <C>     <C>           <C>            <C>          <C>
Balance at December 31, 2001             6,500,000   $  65   $   28,017    $      (121)   $ (25,139)         2,822

  Net loss                                                                                     (174)          (174)
  Preferred Stock dividend                                                                   (2,416)        (2,416)
  Other comprehensive gain, net of tax                                           3,906                       3,906
  Amortization of unearned compensation                              52                                         52
  Common Stock issued                       17,100       -                                                       -
                                        -----------  ------  ------------  -------------  -----------  -------------
Balance at September 30, 2002            6,517,100   $  65   $   28,069    $     3,785    $ (27,729)   $     4,190
                                        ===========  ======  ============  =============  ===========  =============

</TABLE>




        See the Notes to the Condensed Consolidated Financial Statements.

<PAGE>


                             ASCENT ASSURANCE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


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.

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  for  prior  year  sales  of  insurance  products   underwritten  by
unaffiliated insurance carriers.

NOTE 2 - ACCOUNTING PRINCIPLES

Basis  of  Presentation.   The  accompanying  unaudited  condensed  consolidated
financial  statements of the Company have been  prepared in accordance  with the
instructions  to Form 10-Q and Rule 10-01 of  Regulation  S-X and do not include
all of the information and footnotes required by accounting principles generally
accepted  in the United  States  ("GAAP")  for  complete  financial  statements.
Financial  statements  prepared  in  accordance  with  GAAP  require  the use of
management estimates. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. Certain reclassifications have been made to 2001 amounts in order
to  conform  to  the  2002  financial  statement  presentation.   The  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended December 31, 2001.

Cash  Equivalents.  Cash equivalents  consist 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.  Changes in aggregate  unrealized  appreciation  or depreciation on fixed
maturity and equity  securities are reported  directly in stockholders'  equity,
net of applicable deferred income taxes and, accordingly, will have no effect on
current operations.


<PAGE>


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.

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  approximately $6.8 million and $7.4 million at September
30, 2002 and December  31, 2001,  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  agents'  balances based upon historical  experience and projected
commission  earnings.  As of  September  30, 2002 and  December  31,  2001,  the
Company's allowances for uncollectible commission advances were $4.5 million and
$4.0 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.

Claim  Reserves.  Claim reserves  represent the estimated  liabilities on claims
reported plus claims  incurred but not yet  reported.  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.

As of September 30, 2002,  the Company has reported  cumulative  pre-tax  losses
since  March  31,  1999,   the  date  it  emerged  from  Chapter  11  bankruptcy
proceedings.  Realization of the Company's  deferred tax asset is dependent upon
the return of the Company's  operations to profitability.  Pre-tax losses during
2000,  2001 and the first nine months of 2002 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 under GAAP. Accordingly, the Company has increased its deferred tax asset
valuation allowance to fully reserve all net deferred tax assets as of September
30, 2002 and December 31, 2001.

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  applicable 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.
Diluted weighted shares exclude all convertible securities for loss periods. For
the nine months ended  September  30, 2002 and 2001,  stock options of 1,015,750
and 1,092,350,  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 table reflects the calculation of basic and diluted EPS:
<TABLE>

                                            Three Months Ended           Nine Months Ended
                                               September 30,               September 30,
                                        -------------------------   -------------------------
                                            2002          2001          2002          2001
                                        -----------   -----------   -----------   -----------
                                          (amounts in thousands, except per share amounts)
<S>                                     <C>           <C>           <C>           <C>
Net income (loss)                       $     154     $     244     $    (174)    $  (1,571)
Preferred stock dividends                    (826)         (746)       (2,416)       (2,166)
                                        -----------   -----------   -----------   -----------
Loss applicable to common shareholders  $    (672)    $    (502)    $  (2,590)    $  (3,737)
                                        ===========   ===========   ===========   ===========

Weighted average shares outstanding:
   Basic                                    6,502         6,500         6,501         6,500
   Diluted                                  6,502         6,500         6,501         6,500
Basic and diluted loss per share        $    (.10)    $    (.08)    $    (.40)    $    (.57)
                                        ===========   ===========   ===========   ===========
</TABLE>




<PAGE>


Recently Issued  Accounting  Pronouncements.  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  adopted  SFAS 142 on
January 1, 2002 and did not  recognize an  impairment  loss upon  adoption.  The
Company has no goodwill or  indefinite-lived  intangible assets. The Company has
identified  intangible  assets totaling $2.8 million included in deferred policy
acquisition costs  representing the estimated present value of future profits of
certain  insurance  policies  acquired  prior to March  1999.  These  assets are
amortized over the premium paying lives of the policies  acquired based upon the
present  value of the  total  anticipated  future  premiums  applicable  to such
policies.  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 indicate 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 of 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 adoption
of the statement did not materially  impact the Company's  results of operations
and financial position.


<PAGE>


In April 2002, the FASB issued SFAS No. 145,  "Rescission of FASB Statements No.
4, 44 and 64,  Amendment of FASB  Statement No. 13, and Technical  Corrections".
SFAS No. 145  rescinds  SFAS No. 4,  which  required  all gains and losses  from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item, net of related income tax effect. As a result, the criteria
in  Opinion  30  will  now be used to  classify  those  gains  and  losses.  The
provisions of this  Statement  related to the  rescission of SFAS No. 4 shall be
applied in fiscal years  beginning  after May 15, 2002. SFAS No. 145 amends SFAS
No. 13 to require that certain lease  modifications  that have economic  effects
similar to  sale-leaseback  transactions  be accounted for in the same manner as
sales-leaseback  transactions.  The provisions of this Statement related to SFAS
No. 13 shall be effective for  transactions  occurring  after May 15, 2002.  The
Company does not expect the adoption of the statement to  materially  impact the
Company's results of operations and financial position.

On June 28, 2002, the FASB voted in favor of issuing SFAS 146,  "Accounting  for
Exit or Disposal  Activities".  SFAS 146 addresses  significant issues regarding
the  recognition,  measurement  and reporting of costs that are associated  with
exit  and  disposal  activities,  including  restructuring  activities  that are
currently  accounted for pursuant to the guidance that the Emerging  Issues Task
Force  (EITF) has set forth in the EITF Issue No. 94-3,  "Liability  Recognition
for Certain  Employee  Termination  Benefits and Other Costs to Exit an Activity
(including  Certain Costs Incurred in a  Restructuring)".  The scope of SFAS 146
also includes (1) costs related to  terminating a contract that is not a capital
lease  and  (2)  termination  benefits  that  employees  who  are  involuntarily
terminated receive under the terms of a one-time benefit arrangement that is not
an ongoing benefit arrangement or an individual deferred compensation  contract.
SFAS 146 will be  effective  for  financial  statements  issued for fiscal years
beginning after December 31, 2002. The Company has determined that SFAS 146 will
have no impact on its results of operations and financial position.


NOTE 3 - PREFERRED STOCK

Dividends  on the  Company's  preferred  stock are  payable  in cash or  through
issuance of additional  shares of preferred stock, at the Company's  option.  On
September 30, 2002,  preferred stock  dividends  accrued in the third quarter of
2002 were paid through the issuance of 825 shares of preferred stock.

NOTE 4 - COMMITMENTS AND CONTINGENCIES

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.


<PAGE>


                             ASCENT ASSURANCE, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


GENERAL

The following discussion provides management's assessment of financial condition
at September 30, 2002 as compared to December 31, 2001 and results of operations
for the three and nine  months  ended  September  30,  2002 as  compared  to the
comparable  2001  periods  for  the  Company.   This   discussion   updates  the
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations"  in the  Company's  2001  Report on Form 10-K and  should be read in
conjunction therewith.

Business  Overview.  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.

The  Company's  operations  are  comprised of one  segment,  Accident and Health
insurance.  The principal products currently marketed by NCM and underwritten by
the Insurance  Subsidiaries are medical expense  reimbursement  policies.  These
products are designed with flexibility as to benefits, deductibles,  coinsurance
and premium payments, which can be adapted to meet regional sales or competitive
needs, as well as those of the individual  policyholders.  The principal product
groups currently  underwritten by the Insurance  Subsidiaries are  comprehensive
major  medical   products,   hospital/surgical   major   medical   products  and
supplemental specified disease products:

o    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.

o    Hospital/surgical major medical products are similar to comprehensive major
     medical  products  except that  benefits  are 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.

o    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  diagnosis of certain  types of internal  cancer or
     other catastrophic diseases.



<PAGE>


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 premiums on
Medicare Supplement policies sold prior to that date.

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 the  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:

|X|  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;

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

|X|  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;

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

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

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

|X|  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 the three and nine  months
ended  September 30, 2002 and 2001.  (In thousands  except  insurance  operating
ratios.)
<TABLE>

                                              Three Months Ended              Nine Months Ended
                                                 September 30,                   September 30,
                                         -----------------------------   -----------------------------
                                              2002            2001            2002            2001
                                         -------------   -------------   -------------   -------------

<S>                                      <C>              <C>               <C>                <C>
Premiums                                 $    27,871     $    31,672     $    84,827     $    95,587
Other                                            665             788           1,996           2,659
                                         -------------   -------------   -------------   -------------
Total insurance operating revenue             28,536          32,460          86,823          98,246
                                         -------------   -------------   -------------   -------------

Benefits and claims                           19,525          22,392          60,344          71,767
Commissions                                    3,596           4,219          10,602          13,770
Decrease (increase) in deferred
  Acquisition costs                              105           1,118             (39)         (1,109)
General and administrative expense             5,690           5,529          17,307          19,434
Taxes, licenses and fees                         847           1,076           2,825           3,119
                                         -------------   -------------   -------------   -------------

Total insurance operating expenses            29,763          34,334          91,039         106,981

                                         -------------   -------------   -------------   -------------
  Insurance Operating Results                 (1,227)         (1,874)         (4,216)         (8,735)
                                         -------------   -------------   -------------   -------------

Fee and service revenue                        2,564           4,064           7,729          13,163
Fee and service expenses                      (2,567)         (3,703)         (7,399)        (11,811)
                                         -------------   -------------   -------------   -------------

  Fee and Service Results                         (3)            361             330           1,352
                                         -------------   -------------   -------------   -------------

Net investment income                          1,929           2,186           5,891           6,802
Net realized gain (loss) on investments           84             211            (333)            306
Interest expense on notes payable               (629)           (640)         (1,846)         (1,296)
                                         -------------   -------------   -------------   -------------

  Income (loss) Before Income Taxes              154             244            (174)         (1,571)

Income tax expense                                 -               -               -               -
                                         -------------   -------------   -------------   -------------

    Net Income (Loss)                    $       154     $       244     $      (174)    $    (1,571)
                                         =============   =============   =============   =============

Insurance operating ratios*
  Benefits and claims                           70.1%           70.7%           71.1%           75.1%
  Commissions                                   12.9%           13.3%           12.5%           14.4%
  Decrease (increase) in deferred
    acquisition costs                            0.4%            3.5%            0.0%           (1.2%)
  General and administrative expenses           19.9%           17.0%           19.9%           19.8%
  Taxes, licenses and fees                       3.0%            3.4%            3.3%            3.3%
</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. For the third quarter of 2002, income before income taxes was $154,000
compared to $244,000 for the corresponding  period in 2001. The $90,000 decrease
in  pre-tax  income  was  primarily  due to lower fee and  service  revenue  and
investment  results,  and partially offset by more favorable insurance operating
results.

For the nine months  ended  September  30,  2002,  pre-tax  loss was  ($174,000)
compared to pre-tax loss of ($1.6)  million for the nine months ended  September
30, 2001. The $1.4 million  decrease in pre-tax loss was primarily the result of
the $4.5 million  improvement in insurance  operating results in 2002, which was
partially offset by a decrease in fee and service revenue and investment results
and an increase in interest expense.

The $648,000 and $4.5 million improvement in insurance operating results for the
three and nine months ended  September 30, 2002 is principally  attributable  to
the 0.6 percentage  point and 4.0 percentage  point reduction in the benefit and
claims to premium ratio, due to a favorable change in major medical product mix.
Since July 2000,  the Company has been  marketing a new major medical  policy in
all significant  marketing  regions.  This new product was designed to produce a
substantially  lower  benefits  and  claims to  premium  ratio  than  previously
marketed major medical products.

Fee and service  revenue  decreased  $365,000 and $1.0 million for the three and
nine months ended September 30, 2002 compared to the 2001 periods  primarily due
to lower sales volumes for the tele-survey  operations as a result of the recent
economic downturn.

Net  investment  income  decreased  $257,000 and $911,000 for the three and nine
months  ended  September  30,  2002  compared  to the  comparable  2001  periods
primarily due to a decline in  receivables  from agents and lower fixed maturity
investment  yields,  emphasized by a repositioning  of the Company's  investment
portfolio in the latter part of 2001. During the nine months ended September 30,
2002, the Company  recorded net realized  investment  losses of $333,000,  which
were principally due to the write-down of a WorldCom, Inc. bond investment.

Interest  expense for the three and nine  months  ended  September  30, 2002 was
$629,000 and $1.8 million,  respectively,  compared to $640,000 and $1.3 million
during the corresponding 2001 periods. The increase for the nine month period is
due to debt  financing  obtained  from Credit  Suisse  First  Boston  Management
Corporation  in April  2001.  Interest  expense  related to this  financing  was
$559,000  and $1.6  million for the three and nine months  ended  September  30,
2002, and included $394,000 and $1.1 million,  respectively, of interest paid in
kind by issuance of  additional  notes (see  "Liquidity,  Capital  Resources and
Statutory Capital and Surplus").

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


<PAGE>



Premiums.  Premium  revenue,  in  thousands,  for each major product line is set
forth below:
<TABLE>

                                       Three Months Ended               Nine Months Ended
                                          September 30,                   September 30,
                                 -----------------------------    -----------------------------
                                      2002            2001             2002            2001
                                 -------------   -------------    -------------   -------------
Major medical:
<S>                              <C>             <C>              <C>             <C>
  First-year                     $     5,539     $     6,683      $    16,965     $    22,059
  Renewal                             12,176          13,394           36,516          37,377
                                 -------------   -------------    -------------   -------------
    Subtotal                          17,715          20,077           53,481          59,436
                                 -------------   -------------    -------------   -------------

Supplemental specified disease:
  First-year                              54             271              301             855
  Renewal                              5,546           5,794           16,889          17,837
                                 -------------   -------------    -------------   -------------
    Subtotal                           5,600           6,065           17,190          18,692
                                 -------------   -------------    -------------   -------------

Medicare supplement:
   First-year                              -               -                -               -
   Renewal                             4,033           4,945           12,603          15,536
                                 -------------   -------------    -------------   -------------
     Subtotal                          4,033           4,945           12,603          15,536
                                 -------------   -------------    -------------   -------------

Other                                    523             585            1,553           1,923
                                 -------------   -------------    -------------   -------------
Consolidated Premium Revenue     $    27,871     $    31,672      $    84,827     $    95,587
                                 =============   =============    =============   =============
</TABLE>

Total premiums decreased by $3.8 million,  or 12%, for the third quarter of 2002
and $10.8 million,  or 11%, for the first nine months of 2002 as compared to the
corresponding  2001 periods  principally as a result of  accelerated  lapsing of
major medical  products  marketed  prior to July 2000 and the normal  lapsing of
supplemental  specified disease and medicare supplement policies.  Premiums from
the new comprehensive  major medical product,  for which marketing began in July
2000,  were $9.0  million and $24.2  million for the three and nine months ended
September  30, 2002 and $5.6 million and $13.0  million,  respectively,  for the
comparable  periods in 2001. The Company is principally  marketing major medical
products.

Benefits and Claims.  Benefits and claims are comprised of (1) claims paid,  (2)
changes in the claim reserves for claims incurred (whether or not reported), and
(3) changes in future policy benefit reserves.  The ratio of benefits and claims
to premiums decreased by 0.6 percentage points and 4.0 percentage points for the
three and nine  months  ended  September  30, 2002  compared  to the  comparable
periods in 2001 due  primarily  to the improved  mix of major  medical  products
discussed above.  Continued  improvement in the Company's  benefit and claims to
premium ratio is dependent  upon the Company's  ability to control the impact of
rapidly rising healthcare costs on in force business through timely premium rate
increases,   utilization   management  and  negotiation  of  favorable  provider
contracts.

Commissions. The commissions to premiums ratio declined by 0.4 percentage points
and 1.9 percentage points for the three and nine months ended September 30, 2002
compared  to the  comparable  periods  in 2001,  due to a higher  percentage  of
renewal premiums to total premiums.  Commission rates on first-year premiums are
significantly higher than those for renewal premiums.



<PAGE>


FINANCIAL CONDITION

Investments.  The  following  table  summarizes  the  Company's  fixed  maturity
securities, excluding short-term investments and certificates of deposit. All of
the Company's fixed maturity securities are classified as available-for-sale and
are carried at estimated  market value.  Estimated  market value  represents the
closing  sales  prices  of  marketable  securities.   Investments  in  the  debt
securities of corporations are principally in publicly traded bonds.



<PAGE>




<TABLE>
                                             September 30, 2002              December 31, 2001
                                       -----------------------------   -----------------------------
                                           Market                          Market
Fixed Maturity Securities                  Value             %             Value             %
------------------------------------   -------------   -------------   -------------   -------------
                                       (in thousands)                  (in thousands)
<S>                                    <C>               <C>          <C>                <C>
U.S. Government and governmental
  agencies and authorities (except
  mortgage-backed)                     $    11,392           11.4       $    10,823          12.0
Finance                                     21,647           21.7            20,307          22.5
Public utilities                             7,236            7.3             7,452           8.2
Mortgage-backed                             21,728           21.8            10,731          11.9
States, municipalities and political
  subdivisions                               2,890            2.9             2,226           2.5
All other corporate bonds                   34,862           34.9            38,678          42.9
                                       -------------   -------------    -------------  -------------
    Total fixed maturity securities    $    99,755          100.0       $    90,217         100.0
                                       =============   =============    =============  =============
</TABLE>

The following  table  indicates by rating the composition of the Company's fixed
maturity securities portfolio, excluding short-term investments and certificates
of  deposit.  Ratings  are the lower of those  assigned 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's  designation or the rating assigned to comparable debt outstanding of the
same issuer.  NAIC 1 fixed maturity  securities have been classified as "A" (and
above) and NAIC 2 fixed maturity securities have been classified as "BBB".
<TABLE>

                                             September 30, 2002               December 31, 2001
                                       -----------------------------    ----------------------------
Composition of Fixed Maturity              Market                           Market
Securities by Rating                       Value             %              Value            %
------------------------------------   -------------   -------------    -------------  -------------
                                      (in thousands)                   (in thousands)
Ratings
Investment grade:
<S>                                   <C>                <C>           <C>              <C>
  U.S. Government and agencies         $    31,296            31.4      $    20,451           22.7
  AAA                                        3,668             3.7            2,180            2.4
  AA                                         8,734             8.7            9,160           10.2
  A                                         33,729            33.8           28,318           31.4
  BBB                                       21,343            21.4           29,723           32.9
Non-Investment grade:
  BB                                           800             0.8              250            0.3
  B and below                                  185             0.2              135            0.1
                                       -------------   -------------    -------------  -------------
    Total fixed maturity securities    $    99,755           100.0      $    90,217          100.0
                                       =============   =============    =============  =============
</TABLE>

The Company  regularly  evaluates  its  investments  for possible  impairment to
determine  if the decline in a  security's  net  realizable  value is other than
temporary. If the decline is determined to be other than temporary,  the Company
recognizes an impairment  charge in the  Consolidated  Statements of Operations.
The Company  considers  various  factors in determining  whether to recognize an
impairment charge  including,  but not limited to, the length of time and extent
to which  the fair  value  has been  less than the  Company's  cost  basis,  the
financial  condition  and near-term  prospects of the issuer,  and the Company's
intent and ability to hold the  investment  for a period of time  sufficient  to
allow for any anticipated  recovery in market value. The ultimate value realized
on these  investments is subject to market price volatility until they are sold.
During  2002,  the  Company has  recorded  realized  losses of $448,000  for the
recognition  of  impairment of value  considered to be other than  temporary for
investments in WorldCom, Inc.

The scheduled contractual maturities of the Company's fixed maturity securities,
excluding  short-term  investments and certificates of deposit, at September 30,
2002 and December 31, 2001 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.
<TABLE>

                                              September 30, 2002              December 31, 2001
                                        -----------------------------   -----------------------------
Composition of Fixed Maturity               Market                          Market
Securities by Maturity                      Value             %             Value             %
------------------------------------    -------------   -------------   -------------   -------------
                                       (in thousands)                  (in thousands)
Scheduled Maturity

<S>                                     <C>               <C>          <C>                 <C>
Due in one year or less                 $     5,529             5.6     $     5,909             6.6
Due after one year through five years        26,377            26.4          27,451            30.4
Due after five years through ten years       26,553            26.6          24,165            26.8
Due after ten years                          19,568            19.6          21,961            24.3
Mortgage-backed and asset-backed
  securities                                 21,728            21.8          10,731            11.9
                                        -------------   -------------   -------------   -------------
    Total fixed maturity securities     $    99,755           100.0        $ 90,217           100.0
                                        =============   =============   =============   =============
</TABLE>

Claim  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 $31.6 million at September
30, 2002 as  compared to $37.2  million at  December  31,  2001.  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.  Future 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.  Future policy benefit  reserves totaled
$60.3 million at September 30, 2002 as compared to $61.6 million at December 31,
2001.  Future 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  future 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.

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.


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) provided by operations  totaled ($3.7) million and
$212,000 for the three months ended  September 30, 2002 and 2001,  respectively.
The decrease in cash provided by operations is principally  due to the timing of
payments of accounts  payable and other  liabilities.  For the nine months ended
September 30, 2002 and 2001,  net cash used in operations was ($6.9) million and
($9.3)  million,  respectively.  The  decrease  in cash  used in  operations  is
primarily  due to  decreases  in the cash basis ratio of benefits  and claims to
premiums.

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  Subsidiaires'
earned  surplus is negative due to statutory  losses  incurred in recent  years.
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 $1.8 million
and $18.2  million  during the nine months  ended  September  30, 2002 and 2001,
respectively.  As of September 30, 2002,  Ascent had  approximately  $475,000 in
unrestricted cash and invested assets.

The statutory  losses incurred during recent years resulted from (1) significant
losses for comprehensive  major medical products marketed prior to July 2000 due
to higher than expected claims frequency 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 previously  marketed major medical products 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 the three months ended
September 30, 2002,  Ascent issued  $394,000 in additional  notes for payment of
interest in kind which  increased the notes payable balance to CSFB at September
30, 2002 to approximately $13.1 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 guaranty 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 September 30, 2002, 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 $6.5 million
revolving  loan  facility,  the  proceeds  of which are used to  purchase  agent
advance  receivables  from NCM and other  affiliates.  As of September 30, 2002,
$3.9 million was outstanding under the Credit Agreement. AFI incurs a commitment
fee on the unused portion of the Credit Agreement at a rate of 0.50% per annum.

The  Credit  Agreement  expires  June 5,  2003,  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
December 5, 2002) are not  eligible  for  financing.  The Company has received a
commitment from LaSalle for a seven month renewal of the Credit  Agreement until
January 5, 2004 under  existing  terms  except for the  reduction of the maximum
credit loan amount to $4.5 million  from $6.5  million.  The Company  expects to
execute definitive  documentation for that renewal by November 30, 2002. Failure
of the Company to finalize the current renewal or obtain additional  renewals of
the Credit Agreement 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 September 30, 2002
are net agent receivables of $6.8 million and a cash collateral  account pledged
to LaSalle of $2.6 million. In addition,  Ascent has guaranteed AFI's obligation
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 September 30, 2002,  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  replacements
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.   At  September  30,  2002,
approximately $1.8 million was outstanding under the term loan facility.

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.  On September 30, 2002,  preferred stock dividends accrued in
the third  quarter  of 2002 were paid  through  the  issuance  of 825  shares of
preferred stock.

Inflation.  Inflation  impacts  claim  costs and  overall  operating  costs and,
although inflation has been lower 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  health care
costs.














ITEM 4 - CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.  The Company's Chief Executive
Officer and Chief  Financial  Officer have  evaluated the  effectiveness  of the
Company's  "disclosure  controls and  procedures" (as defined in Rules 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act")) as
of a date (the "Evaluation  Date") within 90 days before the filing date of this
quarterly report. Based on such evaluation,  they have concluded that, as of the
Evaluation Date, the Company's disclosure controls and procedures were effective
to ensure  that  information  required  to be  disclosed  by the  Company in the
reports that it files or submits under the Exchange Act is recorded,  processed,
summarized  and  reported,  within the time  periods  specified in the rules and
forms of the Securities and Exchange Commission.

Changes in internal controls. There were no significant changes in the Company's
internal  controls or in other  factors  that could  significantly  affect these
controls during the period covered by this quarterly report.


<PAGE>


                             ASCENT ASSURANCE, INC.

--------------------------------------------------------------------------------
                                     PART II

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

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


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, 2001
        (incorporated  by  reference to Exhibit 3.3 to the  Company's  Quarterly
        Report on Form 10-Q for the quarter ended June 30, 2001).

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    First 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).

10.2    Registration  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).

10.3    1999 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)

10.4    Installment   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).

10.5    Second  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).

10.6    Second  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).

10.7    Third  Amendment  to Guaranty  Agreement  dated  April 17, 2001  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, 2001).

10.8    Extension 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, 2001).

10.9    Extension of  Employment  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  10.9 to the  Company's
        Quarterly Report on Form 10-Q for the quarter ended June 30, 2001).

10.10   Fourth  Amendment  to Guaranty  Agreement  dated August 10, 2001 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, 2002).

10.11   First Amendment to Pledge  Agreement,  dated as of November 30, 2001, 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, 2001).

10.12   Fifth Amendment to Guaranty Agreement, dated as of November 30, 2001, 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, 2001).

10.13   Third Amendment to Credit  Agreement,  dated as of November 30, 2001, 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, 2001).

10.14   First Amendment to Security Agreement, dated as of November 30, 2001, 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, 2001).

10.15   Credit 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).

10.16   Guaranty and Security  Agreement  dated April 17, 2001 among  Foundation
        Financial Services,  Inc.,  NationalCare(R)Marketing,  Inc.,  LifeStyles
        marketing Group, Inc., Precision Dialing Service, 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).

10.17   Pledge 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).

10.18   Sixth  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).

10.19   Fourth 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).

10.20   Fifth  Amendment  to Credit  Agreement  dated  November 27, 2001 between
        Ascent Funding, Inc. and LaSalle Bank National Association (incorporated
        by reference to Exhibit  10.31 to the  Company's  Annual  Report on Form
        10-K for the year ended December 31, 2001).

10.21   Employment  Agreement,  dated  September  16,  2001,  by and  among  the
        Company,   Ascent   Management,   Inc.,  and  Mr.  Patrick  J.  Mitchell
        (incorporated  by reference  to Exhibit  10.32 to the  Company's  Annual
        Report on Form 10-K for the year ended December 31, 2001).

10.22   Employment  Agreement,  dated  September  16,  2001,  by and  among  the
        Company,   Ascent   Management,   Inc.,   and  Mr.  Patrick  H.  O'Neill
        (incorporated  by reference  to Exhibit  10.33 to the  Company's  Annual
        Report on Form 10-K for the year ended December 31, 2001).

10.23   Sixth  Amendment to Credit  Agreement  dated May 15, 2002 between Ascent
        Funding,  Inc. and LaSalle Bank National  Association  (incorporated  by
        reference to Exhibit  10.23 to the  Company's  Quarterly  Report on Form
        10-Q for the quarter ended June 30, 2002).

99.1    Press Release dated  November 14, 2002  announcing  the Company's  third
        quarter financial results.

99.2    Certification  of  Patrick J.  Mitchell,  Chairman  and Chief  Executive
        Officer and Cynthia B. Koenig,  Senior Vice  President,  Chief Executive
        Officer  and  Treasurer  of the  Company  pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002.


(b)  Reports on Form 8-K

The  Registrant  filed a Report on Form 8-K dated  August 2, 2002 in response to
Item 5, Other Events,  to report the  submission of the  certification  required
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 in connection with its
Form 10-Q for the quarterly  period ended June 30, 2002 which was filed with the
Securities and Exchange Commission on July 31, 2002.

The  Registrant  filed a Report on Form 8-K dated  October 2, 2002 to report the
dismissal of  PricewaterhouseCoopers,  LLP as its independent accountant and the
engagement of Ernst & Young,  LLP as the independent  accountant for the Company
for the fiscal year ending December 31, 2002.

<PAGE>





--------------------------------------------------------------------------------
                                                                       Form 10-Q



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                       ASCENT ASSURANCE, INC.




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
















Dated at Fort Worth, Texas
November 14, 2002












                  Certification of Principal Executive Officer

I, Patrick J. Mitchell, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of the Company;

2.       Based on my  knowledge,  this  quarterly  report  does not  contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included in this quarterly  report,  fairly present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         quarterly report;

4.       The  Company's  other  certifying  officers and I are  responsible  for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
         have:

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that material information  relating to the Company,  including
                  its consolidated  subsidiaries,  is made known to us by others
                  within those entities, particularly during the period in which
                  this quarterly report is being prepared;

         b)       evaluated  the  effectiveness  of  the  Company's   disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

         c)       presented in this quarterly  report our conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The Company's other certifying officers and I have disclosed,  based on
         our most recent  evaluation,  to the  Company's  auditors and the audit
         committee of Company's  board of directors (or persons  performing  the
         equivalent function):

         a)       all  significant  deficiencies  in the design or  operation of
                  internal  controls which could adversely  affect the Company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  Company's  auditors  any
                  material weaknesses in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  Company's internal controls; and

6.       The Company's  other  certifying  officers and I have indicated in this
         quarterly  report  whether  or not there  were  significant  changes in
         internal controls or in other factors that could  significantly  affect
         internal controls subsequent to the date of our most recent evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.


Date: November 14, 2002

                                              /s/ Patrick J. Mitchell
                                             ----------------------------------
                                             Patrick J. Mitchell
                                             Chairman of the Board and
                                             Chief Executive Officer

































                  Certification of Principal Financial Officer

I, Cynthia B. Koenig, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of the Company;

2.       Based on my  knowledge,  this  quarterly  report  does not  contain any
         untrue  statement of a material  fact or omit to state a material  fact
         necessary to make the  statements  made, in light of the  circumstances
         under which such  statements  were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge,  the financial  statements,  and other financial
         information  included in this quarterly  report,  fairly present in all
         material  respects the financial  condition,  results of operations and
         cash flows of the Company as of, and for, the periods presented in this
         quarterly report;

4.       The  Company's  other  certifying  officers and I are  responsible  for
         establishing  and  maintaining  disclosure  controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and we
         have:

         a)       designed  such  disclosure  controls and  procedures to ensure
                  that material information  relating to the Company,  including
                  its consolidated  subsidiaries,  is made known to us by others
                  within those entities, particularly during the period in which
                  this quarterly report is being prepared;

         b)       evaluated  the  effectiveness  of  the  Company's   disclosure
                  controls and  procedures  as of a date within 90 days prior to
                  the filing  date of this  quarterly  report  (the  "Evaluation
                  Date"); and

         c)       presented in this quarterly  report our conclusions  about the
                  effectiveness of the disclosure  controls and procedures based
                  on our evaluation as of the Evaluation Date;

5.       The Company's other certifying officers and I have disclosed,  based on
         our most recent  evaluation,  to the  Company's  auditors and the audit
         committee of Company's  board of directors (or persons  performing  the
         equivalent function):

         a)       all  significant  deficiencies  in the design or  operation of
                  internal  controls which could adversely  affect the Company's
                  ability to record,  process,  summarize  and report  financial
                  data  and  have  identified  for the  Company's  auditors  any
                  material weaknesses in internal controls; and

         b)       any fraud,  whether or not material,  that involves management
                  or  other  employees  who  have  a  significant  role  in  the
                  Company's internal controls; and

6.       The Company's  other  certifying  officers and I have indicated in this
         quarterly  report  whether  or not there  were  significant  changes in
         internal controls or in other factors that could  significantly  affect
         internal controls subsequent to the date of our most recent evaluation,
         including   any   corrective   actions   with  regard  to   significant
         deficiencies and material weaknesses.


Date: November 14, 2002

                                          /s/ Cynthia B. Koenig
                                         -------------------------------------
                                         Cynthia B. Koenig
                                         Senior Vice President,
                                         Chief Financial Officer and Treasurer