SECURITIES AND EXCHANGE COMMISSION
                                           WASHINGTON, D.C. 20549

# FORM 10-Q

FOR QUARTERLY AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15 (d)
                                   OF THE SECURITIES EXCHANGE ACT OF 1934
                                                 (Mark One)
(X)  
           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
          ACT OF 1934

For Quarterly Period
Ended September 30, 2003
                                                     OR
                           ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)

OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____ 

Commission File Number 1-8538

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

| | DELAWARE
(State or Other Jurisdiction of Incorporation or Organization)                                    |  |  | 73-1165000
(I.R.S. Employer Identification No.) | 
| | ---------------------------------------------------------------------------------------------------------- |  |  | ----------------------------------------------- | 
| | 3100 Burnett Plaza, 801 Cherry Street,
Unit 33, Fort Worth, Texas
(Address of Principal Executive Offices) |  |  | 76102
(Zip Code)                               

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

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

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

                                                    None

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

Common Stock (par value $.01)
                                       Warrants to purchase Common Stock

Indicate, by check mark, whether the
Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

YES   X    
  NO

Indicate, by check mark whether the
Registrant has filed all documents and reports, required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934, subsequent to the distribution of securities
under a plan confirmed by a court.

YES   X    
  NO

Indicate, by check mark, whether the
Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES      
  NO  X

Common Stock  Par value $0.01; 6,532,100
shares outstanding at November 12, 2003.



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, 2003 and December 31, 2002                                            |  | 3       
|          |  | Ascent Assurance, Inc. Condensed
Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2003 and 2002              |  | 4       
|          |  | Ascent Assurance, Inc. Condensed Consolidated Statements of Comprehensive Income for the
Three and Nine Months Ended September 30, 2003 and 2002    |  | 5       
|          |  | Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders'
     Equity for the Nine Months Ended September 30, 2003                  |  | 6       
|          |  | Ascent Assurance, Inc.
Condensed Consolidated Statements of Cash Flow for the Three and Nine Months Ended September 30, 2003 and September 30, 2002 |  | 7       
|          |  | Notes to Condensed Consolidated Financial Statements                                                                                                |  | 8       
|         
|Item 2   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                               |  |         
|          |  | General                                                                                                                                             |  | 14      
|          |  | Operating Results                                                                                                                                   |  | 17      
|          |  | Financial Condition                                                                                                                                 |  | 20      
|          |  | Liquidity, Capital Resources and Statutory Capital and Surplus                                                                                      |  | 22      
|         
|Item 3   |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                          |  | 24      
|         
|Item 4   |  | Controls and Procedures                                                                                                                             |  | 24      
|         
|PART II  |  | OTHER INFORMATION                                                                                                                                   |  |         
|         
|Item 6   |  | Exhibits and Reports on Form 8-K                                                                                                                    |  | 26      
|         



ASCENT ASSURANCE, INC. 
CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                             |                                   | 
|---------------------------------------------------------------------------- | --------------------------------- | 
|                                                                             |                                   | 
|                                                                             | (Unaudited)                      
|                                                                             | (in thousands, except share data) | 
|Assets                                                                       |                                   | 
|Investments:                                                                 |                                   | 
|Fixed Maturities:                                                            |                                   | 
|Available-for-sale, at market value (amortized cost $93,591 and 95,580)      |                                   | 
|Short-term investments                                                       |                                   | 
|Other investments (cost $387 and $381)                                       |                                   | 
|                                                                             |                                   | 
|Total Investments                                                            |                                   | 
|Cash                                                                         |                                   | 
|Accrued investment income                                                    |                                   | 
|Receivables from agents, net of allowance for doubtful accounts of           |                                   | 
|$5,257 and $4,630                                                            |                                   | 
|Deferred policy acquisition costs                                            |                                   | 
|Property and equipment, net of accumulated depreciation of $5,527 and $4,986 |                                   | 
|Other assets                                                                 |                                   | 
|                                                                             |                                   | 
|Total Assets                                                                 |                                   | 
|                                                                             |                                   | 
|Liabilities, Preferred Stock and Stockholders' Equity                        |                                   | 
|Liabilities:                                                                 |                                   | 
|Policy liabilities and accruals:                                             |                                   | 
|Future policy benefits                                                       |                                   | 
|Claim reserves                                                               |                                   | 
|                                                                             |                                   | 
|Total Policy Liabilities and Accruals                                        |                                   | 
|Accounts payable and other liabilities                                       |                                   | 
|Notes payable to bank                                                        |                                   | 
|Notes payable to related party                                               |                                   | 
|Redeemable convertible preferred stock (Notes 2 and 4)                       |                                   | 
|                                                                             |                                   | 
|Total Liabilities                                                            |                                   | 
|                                                                             |                                   | 
|Commitments and Contingencies (Note 6)                                       |                                   | 
|Redeemable Convertible Preferred Stock (Notes 2 and 4)                       |                                   | 
|                                                                             |                                   | 
|Stockholders' Equity:                                                        |                                   | 
|Common stock ($.01 par value, 30,000,000 shares authorized;                  |                                   | 
|6,532,100 and 6,517,100 shares issued and outstanding)                       |                                   | 
|Capital in excess of par value                                               |                                   | 
|Accumulated other comprehensive income                                       |                                   | 
|Retained deficit                                                             |                                   | 
|                                                                             |                                   | 
|Total Stockholders' Equity                                                   |                                   | 
|                                                                             |                                   | 
|Total Liabilities, Redeemable Convertible Preferred Stock                    |                                   | 
|Stockholders' Equity                                                         |                                   | 
|                                                                             |                                   | 

See the Notes to the
Condensed Consolidated Financial Statements.



ASCENT ASSURANCE, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                                           |                                       |  |                                       |                                     
|---------------------------------------------------------- | ------------------------------------- |  | ------------------------------------- | ------------------------------------
|                                                           |                                       |  | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                                           |                                       |  | 2003                                  | 2002                                
|                                                           | (in thousands, except per share data)
|First-year premium                                         |                                       |  | $                                     | 4,306                               
|Renewal premium                                            |                                       |  |                                       | 21,255                              
|                                                           |                                       |  |                                       |                                     
|Total premiums                                             |                                       |  |                                       | 25,561                              
|Net investment income                                      |                                       |  |                                       | 1,563                               
|Fee and service income                                     |                                       |  |                                       | 3,023                               
|Other insurance revenues                                   |                                       |  |                                       | 558                                 
|Net realized gain (loss) on investments                    |                                       |  |                                       | 53                                  
|                                                           |                                       |  |                                       |                                     
|Total revenue                                              |                                       |  |                                       | 30,758                              
|                                                           |                                       |  |                                       |                                     
|Benefits and claims                                        |                                       |  |                                       | 17,447                              
|Change in deferred acquisition costs                       |                                       |  |                                       | 561                                 
|Commissions                                                |                                       |  |                                       | 2,859                               
|General and administrative expenses                        |                                       |  |                                       | 5,416                               
|Fee and service operating expenses                         |                                       |  |                                       | 3,044                               
|Taxes, licenses and fees                                   |                                       |  |                                       | 921                                 
|Interest expense on notes payable                          |                                       |  |                                       | 624                                 
|Interest expense on redeemable convertible preferred stock |                                       |  |                                       | 914                                 
|                                                           |                                       |  |                                       |                                     
|Total expenses                                             |                                       |  |                                       | 31,786                              
|(Loss) income before income taxes                          |                                       |  |                                       | (1,028                              
|Federal income taxes                                       |                                       |  |                                       | -                                   
|                                                           |                                       |  |                                       |                                     
|Net (loss) income                                          |                                       |  | $                                     | (1,028                              
|Preferred stock dividends                                  |                                       |  |                                       | -                                   
|                                                           |                                       |  |                                       |                                     
|Loss applicable to common stockholders                     |                                       |  | $                                     | (1,028                              
|                                                           |                                       |  |                                       |                                     
|Basic and diluted loss per common share                    |                                       |  | $                                     | (.16                                
|                                                           |                                       |  |                                       |                                     
|Weighted average shares outstanding:                       |                                       | 
|Basic                                                      |                                       |  |                                       | 6,532                               
|                                                           |                                       |  |                                       |                                     
|Diluted                                                    |                                       |  |                                       | 6,532                               
|                                                           |                                       |  |                                       |                                     

See the Notes to the
Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC. 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

|                                                   |                                       |                                      |   |       
|-------------------------------------------------- | ------------------------------------- | ------------------------------------ | - | ------
|                                                   | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                                   |                                       |                                      |   | 2003  
|                                                   |                                       |                                      |   |       
|                                                   |                                       | (in thousands)                       |  
|
|Net (loss) income                                  |                                       |                                      | $ | (1,028
|Other comprehensive income:                        |                                       |                                     
|Unrealized holding (loss) gain on investments      |                                       |                                     
|arising during period                              |                                       |                                      |   | (1,374
|Reclassification adjustment of net realized (gain) |                                       |                                     
|loss on investments included in net (loss) income  |                                       |                                      |   | (53   
|                                                   |                                       |                                      |   |       
|Comprehensive (loss) income                        |                                       |                                      | $ | (2,455
|                                                   |                                       |                                      |   |       

See the Notes to the
Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC. 

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY(Unaudited) 

(in thousands, except share data)

|                              |                                              |                                          |                                                       |                                       |                                      |  
|----------------------------- | -------------------------------------------- | ---------------------------------------- | ----------------------------------------------------- | ------------------------------------- | ------------------------------------ | -
|                              | Common Stock
     
     Shares        Amount | Capital
     in Excess
     Of Par Value | Accumulated
     Other
     Comprehensive
     Income | Retained
     (Deficit)
     Earnings | Total
     Stockholders'
     Equity |  
|                              |                                              |                                          |                                                       |                                       |                                      |  
|Balance at December 31, 2002  |                                              |                                          |                                                       | 6,517,100                             |                                      | $
|Net loss                      |                                              |                                          |                                                       |                                       |                                      |  
|Preferred Stock dividends     |                                              |                                          |                                                       |                                       |                                      |  
|Other comprehensive gain      |                                              |                                          |                                                       |                                       |                                      |  
|Amortization of unearned     
|compensation                  |                                              |                                          |                                                       |                                       |                                      | 7
|Common Stock issued           |                                              |                                          |                                                       | 15,000                                |                                      |  
|                              |                                              |                                          |                                                       |                                       |                                      |  
|Balance at September 30, 2003 |                                              |                                          |                                                       | 6,532,100                             |                                      | $
|                              |                                              |                                          |                                                       |                                       |                                      |  

See the Notes to the
Condensed Consolidated Financial Statements.



ASCENT ASSURANCE, INC. 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW(Unaudited)

|                                                              |                                       |                                      |   |       
|------------------------------------------------------------- | ------------------------------------- | ------------------------------------ | - | ------
|                                                              | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                                              |                                       |                                      |   | 2003  
|                                                              |                                       |                                      |   |       
|                                                              | (in thousands)                        |                                     
|
|Cash Flow From Operating Activities:                          |                                       |                                      |   |       
|Net (loss) income                                             |                                       |                                      | $ | (1,028
|Adjustments to reconcile net (loss) income to cash            |                                       |                                     
|provided by (used for) operating activities                   |                                       |                                     
|Decrease in accrued investment income                         |                                       |                                      |   | 71    
|Decrease (increase) in deferred acquisition costs             |                                       |                                      |   | 561   
|Decrease in receivables from agents                           |                                       |                                      |   | 237   
|Provision for uncollectible agent receivables                 |                                       |                                      |   | 302   
|Decrease (increase) in other assets                           |                                       |                                      |   | 139   
|Decrease in policy liabilities and accruals                   |                                       |                                      |   | (2,394
|Increase (decrease) in accounts payable and other liabilities |                                       |                                      |   | 541   
|Interest expense on redeemable convertible preferred stock    |                                       |                                      |   | 914   
|Other, net                                                    |                                       |                                      |   | 870   
|                                                              |                                       |                                      |   |       
|Net Cash Provided By (Used For) Operating Activities          |                                       |                                      |   | 213   
|                                                              |                                       |                                      |   |       
|Cash Flow From Investing Activities:                          |                                       |                                     
|Purchases of fixed maturity investments                       |                                       |                                      |   | (3,855
|Sales of fixed maturity investments                           |                                       |                                      |   | 8,153 
|Maturities and calls of fixed maturity investments            |                                       |                                      |   | 793   
|Cost of equity securities purchased                           |                                       |                                      |   | -     
|Sales of equity securities                                    |                                       |                                      |   | 67    
|Net (decrease) increase in short-term and other investments   |                                       |                                      |   | (4,474
|Property and equipment purchased                              |                                       |                                      |   | (43   
|                                                              |                                       |                                      |   |       
|Net Cash Provided By Investing Activities                     |                                       |                                      |   | 641   
|                                                              |                                       |                                      |   |       
|Cash Flow From Financing Activities:                          |                                       |                                     
|Issuance of notes payable                                     |                                       |                                      |   | -     
|Repayment of notes payable                                    |                                       |                                      |   | -     
|                                                              |                                       |                                      |   |       
|Net Cash Used For Financing Activities                        |                                       |                                      |   | -     
|                                                              |                                       |                                      |   |       
|Increase (Decrease) In Cash During Period                     |                                       |                                      |   | 854   
|Cash At Beginning Of Period                                   |                                       |                                      |   | 1,358 
|                                                              |                                       |                                      |   |       
|Cash At End of Period                                         |                                       |                                      | $ | 2,212 
|                                                              |                                       |                                      |   |       

See the Notes to the
Condensed Consolidated Financial Statements.

ASCENT ASSURANCE, INC. 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1  DESCRIPTION
OF BUSINESS

Ascent Assurance, Inc.
(Ascent) is the successor to a Delaware company incorporated in 1982 as an
insurance holding company. Ascent, through its applicable subsidiaries, is engaged in the
development, marketing, underwriting and administration of medical expense and
supplemental health insurance products, primarily to self-employed individuals and small
business owners (Ascent and its subsidiaries are collectively hereinafter the
Company).

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® Marketing, Inc. (NCM), also a wholly owned
subsidiary. To a lesser extent, the Company derives revenue from (i) tele-marketing
services, (ii) printing services, and (iii) renewal commissions received for prior year
sales of insurance products underwritten by unaffiliated insurance carriers.

NOTE 2  SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES

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. The preparation of financial statements in conformity with
GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have been
included. Certain reclassifications of prior period amounts have been made to conform to
the 2003 financial statement presentation. The financial statements should be read in
conjunction with the consolidated financial statements and notes thereto included in
Ascents Annual Report on Form 10-K for the year ended December 31, 2002.

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 stocks)
          which are included in other investments 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 any applicable deferred income taxes and, accordingly, will have
          no effect on current operations.

Deferred Policy Acquisition Costs
(DPAC).     Policy acquisition costs consisting of commissions and other policy
issue costs, which vary with and are primarily related to the production of new business,
are deferred and amortized over periods not to exceed the estimated premium-paying periods
of the related policies. 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, a subsidiary of Ascent advances commissions on policies written by its
general agencies and their agents. Net agent receivables were approximately $4.8 million
and $6.3 million at September 30, 2003 and December 31, 2002, respectively. Such
subsidiary 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
subsidiary has been fully reimbursed, the general agencies or the individual agents, as
the case may be, are responsible for reimbursing the subsidiary for the outstanding
balance of the commission advances. A reserve for uncollectible agents balances is
routinely established based upon historical experience and projected commission earnings.
As of September 30, 2003 and December 31, 2002, the Companys allowances for
uncollectible commission advances were $5.3 million and $4.6 million, respectively.

Property and Equipment.     Property and
equipment is stated on the basis of cost and consists primarily of furniture, fixtures,
leasehold improvements and software. Depreciation is computed principally by the
straight-line method for financial reporting purposes using estimated useful lives of 2 to
10 years.

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 Insurance Subsidiaries
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 Insurance Subsidiaries 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. 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, 2003, the Company
has reported cumulative pre-tax losses since the fresh start date of March 31, 1999.
Realization of the Companys deferred tax asset is dependent upon the return of the
Companys operations to profitability. 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 carries a valuation allowance to fully reserve all net deferred tax assets as of
September 30, 2003 and December 31, 2002.

Recognition of Revenue.     Premium
revenues from insurance contracts are recognized when due from policyholders. Fee and
service income is recognized when earned, the services have been provided and
collectibility is reasonably assured.

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 reflect the potential dilution
that could occur if securities or other contracts to issue common stock were converted or
exercised. For the nine months ended September 30, 2003 and 2002, stock options of 926,650
and 1,015,750, respectively, and the conversion of the preferred stock 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:

|                                       |                                                  |                                      |      |       
|-------------------------------------- | ------------------------------------------------ | ------------------------------------ | ---- | ------
|                                       | Three Months Ended
     September 30,            | Nine Months Ended
     September 30,
|                                       | 2003                                             | 2002                                 | 2003 | 2002  
|                                       |                                                  |                                      |      |       
|                                       | (amounts in thousands, except per share amounts)
|Net (loss) income                      |                                                  |                                      | $    | (1,028
|Preferred stock dividends              |                                                  |                                      |      | -     
|                                       |                                                  |                                      |      |       
|Loss applicable to common stockholders |                                                  |                                      | $    | (1,028
|                                       |                                                  |                                      |      |       
|Weighted average shares outstanding:   |                                                  |                                     
|Basic                                  |                                                  |                                      |      | 6,532 
|Diluted                                |                                                  |                                      |      | 6,532 
|Basic and diluted loss per share       |                                                  |                                      | $    | (.16  
|                                       |                                                  |                                      |      |       

Change in Accounting Estimate.     During
the third quarter of 2003, the Company redetermined the estimated useful life of certain
software programs used by the Company to manage policyholder data. Effective July 1, 2003,
the original estimated life was extended by twenty-four months, reducing software
amortization expense by approximately $138,000 for the three and nine month periods ended
September 30, 2003. It is expected that this change in accounting estimate will reduce
software amortization by approximately $276,000 for the year ending December 31, 2003. The
reduction in loss per basic and diluted share outstanding was approximately $.02 for the
three and nine month periods ended September 30, 2003.

Recently Issued Accounting
Pronouncements.     In December 2002, the FASB issued SFAS No. 148, Accounting and
Stock-Based Compensation  Transition and Disclosure an amendment of FASB Statement
No. 123". This statement amends FASB Statement No. 123, Accounting for
Stock-Based Compensation, to provide alternative transition for an entity that
voluntarily changes to the fair value based method of accounting for stock-based employee
compensation. It also amends the disclosure provisions of that Statement to require
prominent disclosure about the effects on reported net income of an entitys
accounting policy decisions with respect to stock-based employee compensation. Finally,
this statement amends APB Opinion No. 28, Interim Financial Reporting, to
require disclosure about those effects in interim financial information. SFAS No. 148 is
effective for financial statements for fiscal years ending after December 15, 2002. The
Company has complied with the requirements of SFAS No. 148 in the preparation of this
statement (see Note 5 of the Notes to the Condensed Consolidated Financial Statements).

In May 2003, the FASB issued SFAS
150, Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity. This Statement establishes standards for how an issuer
classifies and measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability measured at fair value. The Statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15, 2003. The
Company has implemented SFAS 150 effective with the beginning
of the third quarter 2003. As a result, the Companys mandatorily redeemable
convertible preferred stock of approximately $36.6 million has been classified as a
liability in the September 30, 2003 Condensed Consolidated Balance Sheet. The amount for
redeemable convertible preferred stock exhibited in the December 31, 2002 Condensed
Consolidated Balance Sheet has not been reclassified as specified in SFAS No. 150. Also,
under SFAS No. 150 amounts paid in excess of the initial measurement amount to holders of
the mandatorily redeemable preferred stock classified as liabilities are to be reflected
in interest cost in the Statements of Operations. All amounts paid to or accrued prior to
the reclassification of the stock as a liability shall not be reclassified as interest
cost upon implementation. As a result, the Company reflected in interest cost in its
Condensed Consolidated Statements of Operations the third quarter 2003 dividends paid to
the holders of the redeemable convertible preferred stock. All dividend amounts paid or
accrued prior to the implementation of SFAS 150 are reflected as preferred stock
dividends.

NOTE 3  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 were drawn in April 2001. The
loan bears interest at a rate of 12% per annum and matures in April 2004. Absent any
acceleration following an event of default, Ascent may elect to pay interest in kind by
issuance of additional notes. During the nine months ended September 30, 2003, Ascent
issued $1.3 million in additional notes for payment of interest in kind which increased
the notes payable balance to CSFB at September 30, 2003 to approximately $14.8 million.
Terms of the CSFB Credit Agreement are equivalent to terms that exist in arms-length
credit transactions.

Ascent must obtain additional
financing to retire the note payable when it matures in April 2004 or restructure the
terms of the note. In August 2003, CSFB indicated that it would discuss the terms in which
it would be willing to extend the maturity date. Ascents Board of Directors has
formed a special committee, consisting of the Boards four independent directors, to
evaluate and negotiate the terms of any such extension with CSFB. The special committee
has retained legal counsel and an independent financial advisor to assist it in evaluating
the fairness of the terms of any transaction to be entered into with CSFB. There can be no
assurance that the negotiations with CSFB will result in a successful extension of the
maturity date. Failure of Ascent to successfully restructure the terms of the note payable
would have a material adverse impact on Ascents liquidity, capital resources and
results of operations.

NOTE 4  REDEEMABLE
CONVERTIBLE PREFERRED STOCK

The Company has authorized 40,000
shares of non-voting preferred stock. At September 30, 2003, 36,567 shares of preferred
stock were outstanding, all of which, are owned by Special Situations Holdings, Inc.
 Westbridge, which is Ascents largest common stockholder and is also an
affiliate of CSFB. Dividends on Ascents preferred stock are payable in cash or
through issuance of additional shares of preferred stock at the option of Ascent. On
September 30, 2003, preferred stock dividends accrued in the third quarter of 2003 were
paid through the issuance of 913 shares of preferred stock.

The preferred stock is mandatorily
redeemable in cash on March 24, 2004 in an amount equal to the stated value per share plus
all accrued and unpaid dividends thereon to the date of redemption. Ascent must obtain
additional financing to retire the preferred stock when due or restructure the terms of
the preferred stock. In August 2003, CSFB indicated that it would discuss the terms in
which it would be willing to extend the maturity date. Ascents Board of Directors
has formed a special committee, consisting of the Boards four independent directors,
to evaluate and negotiate the terms of any such extension with CSFB. The special committee
has retained legal counsel and an independent financial advisor to assist it in evaluating
the fairness of the terms of any transaction to be entered into with CSFB. There can be no
assurance that the negotiations with CSFB will result in a successful extension of the
maturity date. Failure of Ascent to successfully restructure the terms of the preferred
stock would have a material adverse impact on Ascents liquidity, capital resources
and results of operations.



NOTE 5  EMPLOYEE
BENEFIT PLANS

Ascent applies the intrinsic value
method, in accordance with APB 25, in accounting for its stock options issued to employees
of one of its subsidiaries and non-employee directors. Accordingly, no compensation
expense has been recognized for options granted with an exercise price equal to market
value at the date of grant. Ascent applies the fair value method under SFAS 123 in
accounting for stock options issued to consultants (including marketing agents).
Accordingly, compensation cost recognized in the income statement for stock-based employee
and consultants (including marketing agents) compensation awards were approximately $4,500
and $3,100 for the three months ended September 30, 2003 and 2002, respectively, and
$7,200 and $53,000 for the nine months ended.

The following table illustrates the
effect on net loss and loss per share if Ascent had applied the fair value recognition
provisions of SFAS 123 to stock-based employee compensation.

|                                                |                                       |                                      |   |       
|----------------------------------------------- | ------------------------------------- | ------------------------------------ | - | ------
|                                                | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                                |                                       |                                      |   | 2003  
|                                                |                                       |                                      |   |       
|Net loss to common stockholders                 |                                       |                                      | $ | (1,028
|Total stock-based employee compensation expense |                                       |                                     
|determined under fair value based method for    |                                       |                                     
|all awards, net of related tax effects          |                                       |                                      |   | (71   
|                                                |                                       |                                      |   |       
|Pro forma net loss                              |                                       |                                      | $ | (1,099
|                                                |                                       |                                      |   |       
|Loss per share:                                 |                                       |                                     
|Basic - as reported                             |                                       |                                      | $ | (.16  
|                                                |                                       |                                      |   |       
|Basic - pro forma                               |                                       |                                      | $ | (.17  
|                                                |                                       |                                      |   |       
|Diluted - as reported                           |                                       |                                      | $ | (.16  
|                                                |                                       |                                      |   |       
|Diluted - pro forma                             |                                       |                                      | $ | (.17  
|                                                |                                       |                                      |   |       

For purposes of pro forma disclosure,
the estimated fair value of the stock compensation is amortized to expense over the
stocks vesting period. The effect on net loss of the stock compensation amortization
for the year presented above is not likely to be representative of the effects on reported
income for future years.

NOTE 6  COMMITMENTS
AND CONTINGENCIES

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

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



ASCENT ASSURANCE, INC. 

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

GENERAL

Ascent Assurance, Inc.
(Ascent) is the successor to a Delaware company incorporated in 1982 as an
insurance holding company. Ascent, through its applicable subsidiaries, is engaged in the
development, marketing, underwriting and administration of medical expense and
supplemental health insurance products, primarily to self-employed individuals and small
business owners (Ascent and its subsidiaries are collectively hereinafter the
Company).

The following discussion provides
managements assessment of financial condition at September 30, 2003 as compared to
December 31, 2002 and results of operations for the three and nine months ended September
30, 2003 as compared to the comparable 2002 periods for the Company. This discussion
updates the Managements Discussion and Analysis of Financial Condition and
Results of Operations in the Companys 2002 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® Marketing, Inc.
(NCM), also a wholly owned subsidiary. To a lesser extent the Company derives
revenue from (i) tele-marketing services, (ii) printing services, and (iii) renewal
commissions received 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 NFL and FLICA 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 NFL and FLICA 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.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to 1998, the Insurance
Subsidiaries also actively 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 Ascent and members of its senior management
team. While Ascent management 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:

|o |  | the ability of Ascent to  restructure  the terms of redeemable  preferred  stock and notes payable  maturing in March 2004 and
     April 2004, respectively;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | the ability of the Company to fund  competitive  commission  advances to its agents  from  internally  generated  cash flow or
     external financing;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Ascents ability to make capital contributions to its Insurance Subsidiaries, if
needed, in order that they meet minimum regulatory capital requirements;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | any limitation imposed on the Insurance Subsidiaries ability to control the impact
of rising healthcare 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;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | the impact of changing healthcare trends on the Insurance Subsidiaries ability to
accurately estimate claim and settlement expense reserves;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

|o |  | developments in healthcare reform and other regulatory issues, including the Health
Insurance Portability and Accountability Act of 1996 and increased privacy regulation, and
changes in laws and regulations in key states where the Insurance Subsidiaries operate;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | default by issuers of fixed maturity investments owned by the Insurance Subsidiaries; and
|- |  | -----------------------------------------------------------------------------------------

|o |  | the loss of key management personnel.
|- |  | -------------------------------------

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



OPERATING RESULTS

Consolidated results of operations
for Ascent are reported for the three and nine months ended September 30, 2003 and 2002.
(In thousands except insurance operating ratios.)

|                                        |                                       |                                      |   |       
|--------------------------------------- | ------------------------------------- | ------------------------------------ | - | ------
|                                        | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                        |                                       |                                      |   | 2003  
|                                        |                                       |                                      |   |       
|Premiums                                |                                       |                                      | $ | 25,561
|Other                                   |                                       |                                      |   | 558   
|Net investment income                   |                                       |                                      |   | 1,563 
|Net realized gain (loss) on investments |                                       |                                      |   | 53    
|                                        |                                       |                                      |   |       
|Total insurance operating revenue       |                                       |                                      |   | 27,735
|Benefits and claims                     |                                       |                                      |   | 17,447
|Commissions                             |                                       |                                      |   | 2,859 
|Change in deferred acquisition costs    |                                       |                                      |   | 561   
|General and administrative expense      |                                       |                                      |   | 5,416 
|Taxes, licenses and fees                |                                       |                                      |   | 921   
|Interest expense on bank facilities     |                                       |                                      |   | 16    
|                                        |                                       |                                      |   |       
|Total insurance operating expenses      |                                       |                                      |   | 27,220
|                                        |                                       |                                      |   |       
|Insurance operating results             |                                       |                                      |   | 515   
|                                        |                                       |                                      |   |       
|Fee and service income                  |                                       |                                      |   | 3,023 
|Fee and service expenses                |                                       |                                      |   | 3,044 
|                                        |                                       |                                      |   |       
|Fee and service results                 |                                       |                                      |   | (21   
|                                        |                                       |                                      |   |       
|Interest expense on note payable to     |                                       |                                     
|related party                           |                                       |                                      |   | (608  
|Interest expense on redeemable          |                                       |                                     
|convertible preferred  stock            |                                       |                                      |   | (914  
|                                        |                                       |                                      |   |       
|(Loss) income before income taxes       |                                       |                                      |   | (1,028
|Federal income taxes                    |                                       |                                      |   | -     
|                                        |                                       |                                      |   |       
|Net (loss) income                       |                                       |                                      | $ | (1,028
|                                        |                                       |                                      |   |       
|Insurance operating ratios*             |                                       |                                     
|Benefits and claims                     |                                       |                                      |   | 68.3  
|Commissions                             |                                       |                                      |   | 11.2  
|Increase in deferred acquisition costs  |                                       |                                      |   | 2.2   
|General and administrative expenses     |                                       |                                      |   | 20.7  
|Taxes, licenses and fees                |                                       |                                      |   | 3.6   




*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 the total of premiums and other.


Overview.    
          For the third quarter of 2003, net loss was approximately ($1 million) compared
          to net income of $154,000 for the corresponding period in 2002. The $1.2 million
          decrease in net income was primarily due to the implementation of SFAS 150 (see
          Note 2 to the Condensed Consolidated Financial Statements, Recently Issued
          Accounting Pronouncements) whereby preferred stock dividends of $.9 million have
          been reported as a component of interest expense. Pursuant to SFAS 150, prior
          periods have not been restated. In addition, net investment income declined by
          $366,000 for the third quarter of 2003 as compared to the prior period quarter
          due to declining market interest rates.

Net loss for the nine months ended
September 30, 2003 was ($477,000) compared to a net loss of ($174,000) for the comparable
2002 period. The net loss for year to date September 2003 included $.9 million of
preferred stock dividends reported as interest as a result of the implementation of SFAS
150. Insurance operating results for the nine months ended September 30, 2003 and 2002
were $2.1 million and $1.1 million, respectively. The $1 million improvement in insurance
operating results was principally due to a 3.0 percentage point decrease in the benefits
and claims ratio. Fee and service results decreased $249,000 for year to date 2003
compared to 2002 principally as a result of Ascents printing subsidiary.

Interest expense on the note payable
to related party increased to $608,000 in the third quarter of 2003 from $558,000 in the
third quarter of 2002 due to the increase in the note payable balance to $14.8 million as
of September 30, 2003 from $13.1 million as of September 30, 2002 for interest paid in
kind. In addition, dividends on the redeemable convertible preferred stock increased
during the third quarter 2003 due to the payment of such dividends in kind. At September
30, 2003, total redeemable convertible preferred stock outstanding was $36.6 million. The
redeemable preferred stock and note payable mature in March 2004 and April 2004,
respectively. Failure of Ascent to successfully restructure the terms of these facilities
would have a material adverse impact on Ascents liquidity, capital resources and
results of operations (see Liquidity, Capital Resources and Statutory Capital and
Surplus.)

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

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

|                                |                                       |                                      |   |       
|------------------------------- | ------------------------------------- | ------------------------------------ | - | ------
|                                | Three Months Ended
     September 30, | Nine Months Ended
     September 30,
|                                |                                       |                                      |   | 2003  
|                                |                                       |                                      |   |       
|Major medical:                  |                                       |                                      |   |       
|First-year                      |                                       |                                      | $ | 4,204 
|Renewal                         |                                       |                                      |   | 11,839
|                                |                                       |                                      |   |       
|Subtotal                        |                                       |                                      |   | 16,043
|Supplemental specified disease: |                                       |                                     
|First-year                      |                                       |                                      |   | 21    
|Renewal                         |                                       |                                      |   | 5,170 
|                                |                                       |                                      |   |       
|Subtotall                       |                                       |                                      |   | 5,191 
|Medicare supplement:            |                                       |                                     
|Renewal                         |                                       |                                      |   | 3,887 
|                                |                                       |                                      |   |       
|Subtotal                        |                                       |                                      |   | 3,887 
|Other                           |                                       |                                      |   | 440   
|                                |                                       |                                      |   |       
|Consolidated Premium Revenue    |                                       |                                      | $ | 25,561
|                                |                                       |                                      |   |       

Total premiums decreased by $2.3
million, or 8.3%, for the third quarter of 2003 and $7.5 million, or 8.9 %, for the nine
months of 2003 as compared to the corresponding 2002 periods as a result of lower new
major medical policy sales and the normal lapsing of supplemental specified disease and
Medicare supplement policies.

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
1.8 and 3.0 percentage point improvements in the ratio of consolidated benefits and claims
to consolidated premiums for the third quarter of 2003 and year to date 2003 as compared
to the comparable 2002 periods are principally attributable to a favorable shift in major
medical product mix toward products marketed subsequent to June 2000 which were designed
to produce a substantially lower benefits and claims to premium ratio than previously
marketed products.

FINANCIAL CONDITION

Investments.    
          The following table summarizes the Companys fixed maturity securities,
          excluding short-term investments. All of the
          Companys fixed maturity securities are classified as available-for-sale
          and are carried at market value. Investments in the debt securities of
          corporations are principally in publicly traded bonds.

|                                                  |                    |                   |                |       
|------------------------------------------------- | ------------------ | ----------------- | -------------- | ------
|                                                  | September 30, 2003 | December 31, 2002
|                                                  |                    |                   |                | Market
|Fixed Maturity Securities                         |                    |                   |                | Value 
|                                                  |                    |                   |                |       
|                                                  |                    |                   | (in thousands) |       
|U.S. Government and governmental agencies         |                    |                   |                |       
|and authorities (except mortgage-backed)          |                    |                   | $              | 11,063
|Finance                                           |                    |                   |                | 19,749
|Public utilities                                  |                    |                   |                | 9,312 
|Mortgage-backed                                   |                    |                   |                | 24,949
|States, municipalities and political subdivisions |                    |                   |                | 2,336 
|All other corporate bonds                         |                    |                   |                | 30,048
|                                                  |                    |                   |                |       
|Total fixed maturity securities                   |                    |                   | $              | 97,457
|                                                  |                    |                   |                |       
|                                                  |                    |                  

The following table indicates by
rating the composition of the Companys fixed maturity securities portfolio,
excluding short-term investments.

|                                |                    |                   |                |       
|------------------------------- | ------------------ | ----------------- | -------------- | ------
|                                | September 30, 2003 | December 31, 2002
|Composition of Fixed Maturity   |                    |                   |                | Market
|Securities by Rating            |                    |                   |                | Value 
|                                |                    |                   |                |       
|                                |                    |                   | (in thousands) |       
|Ratings                         |                    |                  
|Investment grade:               |                    |                   |                |       
|U.S. Government and agencies    |                    |                   | $              | 19,659
|AAA                             |                    |                   |                | 18,140
|AA                              |                    |                   |                | 1,484 
|A                               |                    |                   |                | 35,069
|BBB                             |                    |                   |                | 21,045
|Non-Investment grade:           |                    |                  
|BB                              |                    |                   |                | 1,108 
|B and below                     |                    |                   |                | 952   
|                                |                    |                   |                |       
|Total fixed maturity securities |                    |                   | $              | 97,457
|                                |                    |                   |                |       

The scheduled contractual maturities
of the Companys fixed maturity securities, excluding short-term investments, at September 30, 2003 and December 31, 2002 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.

|                                            |                    |                   |                |       
|------------------------------------------- | ------------------ | ----------------- | -------------- | ------
|                                            | September 30, 2003 | December 31, 2002
|                                            |                    |                   |                | Market
|                                            |                    |                   |                | Value 
|                                            |                    |                   |                |       
|                                            |                    |                   | (in thousands) |       
|Scheduled Maturity                          |                    |                   |                |       
|Due in one year or less                     |                    |                   | $              | 5,061 
|Due after one year through five years       |                    |                   |                | 22,734
|Due after five years through ten years      |                    |                   |                | 27,085
|Due after ten years                         |                    |                   |                | 17,628
|Mortgage-backed and asset-backed securities |                    |                   |                | 24,949
|                                            |                    |                   |                |       
|Total fixed maturity securities             |                    |                   | $              | 97,457
|                                            |                    |                   |                |       

Claim Reserves.    Claim reserves are
established by the Insurance Subsidiaries for benefit payments which have already been
incurred by the policyholder, but which have not been paid by the applicable Insurance
Subsidiary. Claim reserves totaled $25.8 million at September 30, 2003 as compared to
$30.9 million at December 31, 2002. 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
Insurance Subsidiaries 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.
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 claim reserves of the Insurance Subsidiaries. Actual claims paid may
deviate, perhaps substantially, from such reserves.

Future Policy Benefit Reserves.    
Future policy benefit reserves are established by each applicable Insurance Subsidiary for
benefit payments that have not been incurred but which are estimated to be incurred in the
future. Future policy benefit reserves totaled $58.9 million at September 30, 2003 as
compared to $60.7 million at December 31, 2002. Future policy benefit reserves are
calculated according to the net level premium reserve method and are equal to the
discounted present value of the applicable Insurance Subsidiary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, policy benefit reserves
are determined in accordance with GAAP.

In determining the morbidity,
persistency rate, claim cost and other assumptions used in determining future policy
benefit reserves, the Insurance Subsidiaries each rely primarily upon their own respective
benefit payment history and upon information developed in conjunction with actuarial
consultants and industry data. Persistency rates have a direct impact upon their policy
benefit reserves because the determinations for these reserves 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, actuarial
assumptions of each of the Insurance Subsidiaries are generally fixed, and absent
materially adverse benefit experience, are not generally adjusted. The Insurance
Subsidiaries each monitor the adequacy of their policy benefit reserves on an ongoing
basis by periodically analyzing the accuracy of their actuarial assumptions. The adequacy
of 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 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 applicable Insurance Subsidiary insures. An increase in either the
incidence rate or the per claim costs of such occurrences could result in the need for the
Insurance Subsidiaries to post additional reserves, which could have a material adverse
effect upon Ascents liquidity, capital resources and 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 provided by (used for) operations totaled $0.2 million and $1.2 million for
          the three and nine months ended September 30, 2003, compared to ($3.7) million
          and ($6.9) million for the comparable 2002 periods, respectively. The increase
          in cash provided by operations is principally due to decreases in the cash basis
          ratio of benefits and claims to premiums and to the timing of payments of
          accounts payable and other liabilities.

Ascent is a holding company, the
principal assets of which consist of the capital stock of its subsidiaries and invested
assets. Ascents principal sources of funds are comprised of dividends from its
non-insurance subsidiaries. The Insurance Subsidiaries are precluded from paying dividends
without prior approval of the Texas Insurance Commissioner as the Insurance
Subsidiaries earned surplus is negative due to statutory losses incurred in recent
years. 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 $0.7 million and $1.8 million during the nine months
ended September 30, 2003 and 2002, respectively. As of September 30, 2003, Ascent had
approximately $2.4 million 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). Major medical claims experience adverse to managements current estimates
or adverse claims experience for other insurance products may cause Ascent to make capital
contributions to the Insurance Subsidiaries in excess of those currently projected for
2003. As a result, adverse claims experience could have a material adverse effect on
Ascents liquidity and capital resources and results of operations.

CSFB Financing and Preferred Stock.    
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 common stockholder). The Credit Agreement relating to that loan
(CSFB Credit Agreement) provided Ascent with total loan commitments of $11
million, all of which were drawn in April 2001. 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 and nine months ended September 30, 2003, Ascent issued $445,000 and $1.3
million in additional notes for payment of interest in kind which increased the notes
payable balance to CSFB at September 30, 2003 to approximately $14.8 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,
2003, there were no events of default.

Ascents redeemable convertible
preferred stock is 100% owned by Special Situations Holdings, Inc.  Westbridge,
which is Ascents largest common stockholder and is also an affiliate of CSFB.
Dividends may be paid in cash or by issuance of additional shares of preferred stock, at
Ascents option. Ascent paid preferred stock dividends through the issuance of 913
and 825 additional shares of preferred stock in the third quarter of 2003 and 2002,
respectively. The preferred stock is mandatorily redeemable in cash in March 2004.

Ascent must obtain additional
financing to retire the redeemable preferred stock and note payable when due in early 2004
or restructure these facilities. In August 2003, CSFB indicated that it would discuss the
terms in which it would be willing to extend the maturity date. Ascents Board of
Directors has formed a special committee, consisting of the Boards four independent
directors, to evaluate and negotiate the terms of any such extension with CSFB. The
special committee has retained legal counsel and an independent financial advisor to
assist it in evaluating the fairness of the terms of any transaction to be entered into
with CSFB. There can be no assurance that the negotiations with CSFB will result in a
successful extension of the maturity date. Failure of Ascent to successfully refinance
these facilities would have a material adverse impact on Ascents liquidity, capital
resources and results of operations.

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 $3.0 million revolving loan
facility, the proceeds of which are used to purchase agent advance receivables from NCM
and other affiliates. As of September 30, 2003, $1.4 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 January
5, 2004, at which time the outstanding principal and interest will be due and payable.
Under the terms of the Credit Agreement, agent advances made within two months of the
expiration date (after November 5, 2003) are not eligible for financing. The Company has
obtained a commitment from a local bank for a $3.0 million line of credit to finance agent
receivables that is intended to replace the LaSalle loan facility. This commitment is
subject to the execution of definitive agreements by December 31, 2003 and other customary
conditions. There can be no assurance that this financing will be obtained. Failure of the
Company to maintain an agent receivable financing credit facility may limit growth in new
business sales.

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, 2003 are net agent receivables of $5.0
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, 2003, there were no events of default under the
Credit or Guaranty Agreements.

On January 31, 2003, pursuant to the
terms of the Credit Agreement, AFI liquidated a $2.6 million cash collateral account
pledged to LaSalle. Pursuant to an agreement with LaSalle, AFI paid a dividend of $1.6
million to Ascent. The proceeds of this dividend were used to fully pay off Ascent
Management, Inc.s (AMI) term loan facility with LaSalle on January 31,
2003. In addition, AMIs assets and capital stock were pledged as collateral under
the Credit Agreement. The remaining proceeds from the cash collateral account were
principally used to reduce the outstanding loan balance under the Credit Agreement.

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
          healthcare costs. The Insurance Subsidiaries will continue to establish premium
          rates in accordance with trends in hospital and medical costs along with
          concentrated efforts in various cost containment programs. However, there can be
          no assurance that these efforts will fully offset the impact of inflation or
          that increases in premium rates will equal or exceed increasing healthcare
          costs.

ITEM 3 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Ascent has no material changes to the
disclosure concerning market risk made in its Annual Report on Form 10-K for the year
ended December 31, 2002.

ITEM 4  CONTROLS
AND PROCEDURES

Evaluation of disclosure controls and
procedures.     Under the supervision and with the participation of Ascents management,
including the Chief Executive Officer and Chief Financial Officer, the Company has
evaluated the effectiveness of its disclosure controls and procedures as of September 30,
2003, the end of the quarter covered by this report. In designing and evaluating the
disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, as the Companys control and
procedures are designed to do, and management necessarily was required to apply its
judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on such evaluation, Ascents Chief Executive Officer and Chief Financial
Officer have concluded that, as of September 30, 2003, the end of the quarter
covered by this report, the Companys disclosure controls and procedures were
effective to ensure that information required to be disclosed by Ascent 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 changes in the Companys internal controls over financial reporting that have
materially affected, or, are reasonably likely to material affect, these controls during
the period covered by this quarterly report.



# 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 Ascent 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 Ascent, 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 Ascent, effective as of April 5, 2000 (incorporated by
reference to Exhibit 3.3 to the Companys Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4.3 |  | Form of Warrant Agreement dated as of March 24, 1999, between Ascent 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
Ascent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 Ascent 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
Ascent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 Ascent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
Ascent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 and LaSalle Bank
National Association (incorporated by reference to Exhibit 10.6 to Ascents Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

|10.11 |  | First Amendment to Pledge Agreement, dated as of November 30, 2000, by and among, Ascent
and LaSalle Bank National Association (incorporated by reference to Exhibit 10.22 to
Ascents Annual Report on Form 10-K for the year ended December 31, 2000).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | Fifth Amendment to Guaranty Agreement, dated as of November 30, 2000, by and among, Ascent
and LaSalle Bank National Association (incorporated by reference to Exhibit 10.23 to
Ascents Annual Report on Form 10-K for the year ended December 31, 2000).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | Third Amendment to Credit Agreement, dated as of November 30, 2000, by and among, Ascent
Funding, Inc. and LaSalle Bank National Association (incorporated by reference to Exhibit
10.24 to Ascents Annual Report on Form 10-K for the year ended December 31, 2000).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | First Amendment to Security Agreement, dated as of November 30, 2000, by and among, Ascent
Management, Inc. and LaSalle Bank National Association (incorporated by reference to
Exhibit 10.25 to Ascents Annual Report on Form 10-K for the year ended December 31,
2000).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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
Ascent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 Ascent'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
Ascent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 Ascent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
Ascent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
Ascent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 Ascent, Ascent Management,
Inc., and Mr. Patrick J. Mitchell (incorporated by reference to Exhibit 10.32 to
Ascent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 Ascent, Ascent Management,
Inc., and Mr. Patrick H. ONeill (incorporated by reference to Exhibit 10.33 to
Ascent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
Ascents Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | Seventh Amendment to Credit Agreement dated November 20, 2002 between Ascent Funding, Inc.
and LaSalle Bank National Association (incorporated by reference to Exhibit 10.35 to
Ascents Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | Employment  Agreement  dated as of December  18, 2002,  by and between  Ascent,  Ascent  Management,  Inc. and Mr.  Patrick J.
Mitchell. (incorporated by reference to Exhibit 10.36 to Ascents Annual Report on
          Form 10-K for the year ended December 31, 2002).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | Employment  Agreement  dated as of December  18, 2002,  by and between  Ascent,  Ascent  Management,  Inc. and Mr.  Patrick H.
         O'Neill.  (incorporated  by reference to Exhibit 10.37 to Ascent's  Annual Report on Form 10-K for the year ended December 31,
         2002).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | Employment  Agreement dated as of January 10, 2003, by and between Ascent,  Ascent  Management,  Inc. and Mr. Konrad H. Kober.
         (incorporated by reference to Exhibit 10.38 to Ascent's Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | Employment Agreement dated as of January 10, 2003, by and between Ascent,  Ascent Management,  Inc. and Ms. Cynthia B. Koenig.
         (incorporated by reference to Exhibit 10.39 to Ascent's Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | Seventh Amendment to Guaranty Agreement dated January 27, 2003 between Ascent and LaSalle
Bank National Association. (incorporated by reference to Exhibit 10.40 to Ascents
Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | Eighth  Amendment  to Credit  Agreement  dated  January 27, 2003  between  Ascent  Funding,  Inc.  and LaSalle  Bank  National
Association. (incorporated by reference to Exhibit 10.41 to Ascents Annual Report on
          Form 10-K for the year ended December 31, 2002).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Second  Amendment to Security  Agreement  dated  January 27, 2003 between  Ascent  Management,  Inc. and LaSalle Bank National
         Association.  (incorporated  by reference to Exhibit 10.42 to Ascent's  Annual Report on Form 10-K for the year ended December
         31, 2002).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.32 |  | First Amendment to Pledge Agreement dated January 27, 2003 between Ascent and LaSalle Bank
National Association. (incorporated by reference to Exhibit 10.43 to Ascents Annual
Report on Form 10-K for the year ended December 31, 2002).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Termination Agreement dated January 31, 2003 executed by LaSalle Bank National Association
acknowledging payment in full of Ascent Management, Inc. note payable. (incorporated by
reference to Exhibit 10.44 to Ascents Annual Report on Form 10-K for the year ended
December 31, 2002).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.34 |  | First Amendment to Credit Agreement dated February 26, 2003 between Ascent and Credit
Suisse First Boston Management Corporation. (incorporated by reference to Exhibit 10.45 to
Ascents Annual Report on Form 10-K for the year ended December 31, 2002).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Ninth Amendment to Credit Agreement dated July 25, 2003 between Ascent Funding, Inc. and LaSalle Bank National Association.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------

|31.1* |  | Certification  of Patrick J.  Mitchell,  Chairman and Chief  Executive  Officer of the Company  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|31.2* |  | Certification  of Cynthia B. Koenig,  Chief  Financial  Officer and  Treasurer  of the Company  pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------

|32.1* |  | Certification of Patrick J. Mitchell, Chairman and Chief Executive Officer and Cynthia B.
Koenig, Senior Vice President, Chief Financial 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 13, 2003 under Item 9. Regulation FD Disclosure and also
under Item 12. Results of Operations and Financial Condition attaching a copy
of the registrants press release reporting the registrants financial results for the
second quarter of 2003.

*Filed Herewith



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 12, 2003