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 March 31, 2004OR
                           (  )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _____ to _____ 
 Commission File Number 1-8538

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

|
|
|
|

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

Common Stock (par value $.01)

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 is an accelerated filer (as defined in Rule 12b-2 of the Act).

YES       
  NO  X

Common Stock  Par value $0.01; 50,531,926
shares outstanding at May 4, 2004.



# ASCENT ASSURANCE, INC. 

INDEX TO FORM 10-Q

---

|PART I.  |  | FINANCIAL INFORMATION                                                                                                                         |  | Page No.
|-------- |  | --------------------------------------------------------------------------------------------------------------------------------------------- |  | --------
|        
|Item 1  |  | Financial Statements                                                                                                                          |  |         
|         |  | Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at
   March 31, 2004 and December 31, 2003                                       |  | 3       
|         |  | Ascent Assurance, Inc. Condensed
Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and March 31, 2003           |  | 4       
|         |  | Ascent Assurance, Inc. Condensed Consolidated Statements of Comprehensive Income for the
Three Months Ended March 31, 2004 and March 31, 2003 |  | 5       
|         |  | Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders'
     Equity for the Three Months Ended March 31, 2004               |  | 6       
|         |  | Ascent Assurance, Inc.
Condensed Consolidated Statements of Cash Flow for the Three Months Ended March 31, 2004 and March 31, 2003            |  | 7       
|         |  | Notes to Condensed Consolidated Financial Statements                                                                                          |  | 8       
|        
|Item 2  |  | Managements Discussion and Analysis of Financial Conditionand Results of Operations                                                          |  |         
|         |  | General                                                                                                                                       |  | 13      
|         |  | Business Overview                                                                                                                             |  | 13      
|         |  | Forward-Looking Statements                                                                                                                    |  | 14      
|         |  | Operating Results                                                                                                                             |  | 15      
|         |  | Financial Condition                                                                                                                           |  | 18      
|         |  | Liquidity, Capital Resources and Statutory Capital and Surplus                                                                                |  | 20      
|        
|Item 3  |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                    |  | 21      
|        
|Item 4  |  | Controls and Procedures                                                                                                                       |  | 22      
|        
|PART II. |  | OTHER INFORMATION                                                                                                                             |  |         
|        
|Item 4  |  | Submission of Matters to a Vote of Security Holders                                                                                           |  | 23      
|        
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                                              |  | 23      



# ASCENT ASSURANCE, INC. CONDENSED CONSOLIDATED
BALANCE SHEETS

|                                                                   |                                   | 
|------------------------------------------------------------------ | --------------------------------- | 
|                                                                   |                                   | 
|                                                                   |                                   | 
|                                                                   | (in thousands, except share data)
|Assets                                                             |                                   | 
|Investments:                                                       |                                   | 
|Fixed Maturities:                                                  |                                   | 
|Available-for-sale, at market value (amortized cost $96,515       
|and $93,922)                                                       |                                   | 
|Short-term investments                                             |                                   | 
|Other investments, at market value (cost $405 and $383)            |                                   | 
|                                                                   |                                   | 
|Total Investments                                                  |                                   | 
|Cash                                                               |                                   | 
|Accrued investment income                                          |                                   | 
|Receivables from agents, net of allowance for doubtful accounts of |                                   | 
|$3,512 and $3,439                                                  |                                   | 
|Deferred policy acquisition costs, net                             |                                   | 
|Property and equipment, net of accumulated depreciation of $5,266  |                                   | 
|and $5,000                                                         |                                   | 
|Other assets                                                       |                                   | 
|                                                                   |                                   | 
|Total Assets                                                       |                                   | 
|                                                                   |                                   | 
|Liabilities 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                                              |                                   | 
|Note payable to related party                                      |                                   | 
|                                                                   |                                   | 
|Total Liabilities                                                  |                                   | 
|                                                                   |                                   | 
|Stockholders' Equity:                                              |                                   | 
|Redeemable convertible Series B preferred stock ($1,000 stated     |                                   | 
|value, 40,000 shares authorized, 0 and 37,504 shares issued        |                                   | 
|and outstanding)                                                   |                                   | 
|Common stock ($.01 par value, 75,000,000 and 30,000,000 shares     |                                   | 
|authorized; 50,530,876 and 6,532,100 shares issued and             |                                   | 
|outstanding)                                                       |                                   | 
|Capital in excess of par value                                     |                                   | 
|Accumulated other comprehensive income                             |                                   | 
|Retained deficit                                                   |                                   | 
|                                                                   |                                   | 
|Total Stockholders' Equity                                         |                                   | 
|                                                                   |                                   | 
|Total Liabilities and Stockholders' Equity                         |                                   | 
|                                                                   |                                   | 

See the Notes to the
Condensed Consolidated Financial Statements.



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

|                                            |                                       | 
|------------------------------------------- | ------------------------------------- | 
|                                            | Three Months EndedMarch 31,          
|                                            |                                       | 
|                                            |                                       | 
|Revenues:                                   | (in thousands, except per share data) | 
|Premiums:                                   |                                       | 
|First-year                                  |                                       | 
|Renewal                                     |                                       | 
|                                            |                                       | 
|Total Premiums                              |                                       | 
|Net investment income                       |                                       | 
|Fee and service income                      |                                       | 
|Other insurance revenues                    |                                       | 
|Net realized (loss) gain on investments     |                                       | 
|                                            |                                       | 
|Total Revenues                              |                                       | 
|                                            |                                       | 
|Benefits, claims and expenses:              |                                       | 
|Benefits and claims                         |                                       | 
|Change in deferred policy acquisition costs |                                       | 
|Commissions                                 |                                       | 
|General and administrative expenses         |                                       | 
|Fee and service operating expense           |                                       | 
|Taxes, license and fees                     |                                       | 
|Interest expense on notes payable           |                                       | 
|                                            |                                       | 
|Total expenses                              |                                       | 
|Income before income taxes                  |                                       | 
|Federal income tax expense                  |                                       | 
|                                            |                                       | 
|Net income                                  |                                       | 
|Preferred stock dividends                   |                                       | 
|                                            |                                       | 
|Loss applicable to common stockholders      |                                       | 
|                                            |                                       | 
|Basic and diluted loss per common share     |                                       | 
|                                            |                                       | 
|Weighted average shares outstanding:        |                                       | 
|Basic                                       |                                       | 
|                                            |                                       | 
|Diluted                                     |                                       | 
|                                            |                                       | 

See the Notes to the
Condensed Consolidated Financial Statements.



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

|                                                       |                             | 
|------------------------------------------------------ | --------------------------- | 
|                                                       | Three Months EndedMarch 31,
|                                                       |                             | 
|                                                       |                             | 
|                                                       | (in thousands)             
|Net income                                             |                             | 
|Other comprehensive income:                            |                             | 
|Unrealized holding gain arising during period          |                             | 
|Reclassification adjustment of loss (gain) on sales of |                             | 
|investments included in net income                     |                             | 
|                                                       |                             | 
|Comprehensive income                                   |                             | 
|                                                       |                             | 

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)

|                                                                             |                                                 |              |                         |                        |                   |                    |         |   
|---------------------------------------------------------------------------- | ----------------------------------------------- | ------------ | ----------------------- | ---------------------- | ----------------- | ------------------ | ------- | --
|                                                                             | Redeemable Convertible Series B Preferred Stock | Common Stock | Capital in Excessof Par | AccumulatedOther Comp. | Retained(Deficit) | TotalStockholders'
|                                                                             |                                                 |              |                         | Shares                 |                   |                    | Amount  |   
|                                                                             |                                                 |              |                         |                        |                   |                    |         |   
|                                                                             |                                                 |              |                         |                        |                   |                    |         |   
|Balance at January 1, 2004                                                   |                                                 |              |                         | 37,504                 |                   | $                  | 37,504  |   
|Net income                                                                   |                                                 |              |                         |                        | 71                |                    |         | 71
|Series B preferred stock     dividends                                       |                                                 |              |                         |                        | 430               |                    |         |   
|Other comprehensive gain                                                     |                                                 |              |                         |                        | 1,876             |                    |         |   
|Amortization of unearned     compensation                                    |                                                 |              |                         |                        | 1                 |                    |         |   
|Conversion of redeemable     convertible preferred stock     to common stock |                                                 |              |                         | (37,504                | )                 |                    | (37,504 | ) 
|Common stock issued                                                          |                                                 |              |                         |                        | 3,750             |                    |         | - 
|                                                                             |                                                 |              |                         |                        |                   |                    |         |   
|Balance at March 31, 2004                                                    |                                                 |              |                         | -                      |                   | $                  | -       |   
|                                                                             |                                                 |              |                         |                        |                   |                    |         |   

See the Notes to the
Condensed Consolidated Financial Statements.



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

|                                                                                                     |                             | 
|---------------------------------------------------------------------------------------------------- | --------------------------- | 
|                                                                                                     | Three Months EndedMarch 31,
|                                                                                                     |                             | 
|                                                                                                     |                             | 
|                                                                                                     | (in thousands)             
|Cash Flows From Operating Activities:                                                                |                             | 
|Net income                                                                                           |                             | 
|Adjustments to reconcile net income to cash     provided by operating activities:                    |                             | 
|Increase in accrued investment income                                                                |                             | 
|Decrease in deferred policy acquisition costs                                                        |                             | 
|Decrease in receivables from agents                                                                  |                             | 
|Provision for uncollectible agent receivables                                                        |                             | 
|Decrease (increase) in other assets                                                                  |                             | 
|Increase (decrease) in policy liabilities and accruals                                               |                             | 
|(Decrease) increase in accounts payable and other liabilities                                        |                             | 
|Interest expense on note payable to related party                                                    |                             | 
|Other, net                                                                                           |                             | 
|                                                                                                     |                             | 
|Net Cash Provided by Operating Activities                                                            |                             | 
|                                                                                                     |                             | 
|Cash Flows From Investing Activities:                                                                |                             | 
|Purchases of fixed maturity investments                                                              |                             | 
|Sales of fixed maturity investments                                                                  |                             | 
|Maturities and calls of fixed maturity investments                                                   |                             | 
|Sales of equity securities                                                                           |                             | 
|Net decrease in short term and other investments                                                     |                             | 
|Property and equipment purchased                                                                     |                             | 
|                                                                                                     |                             | 
|Net Cash (Used For) Provided By Investing Activities                                                 |                             | 
|                                                                                                     |                             | 
|Cash Flows From Financing Activities:                                                                |                             | 
|Retirement of Series B redeemable convertible        preferred stock upon conversion of common stock |                             | 
|Issue common stock upon conversion of Series B        redeemable convertible preferred stock         |                             | 
|Repayment of notes payable                                                                           |                             | 
|                                                                                                     |                             | 
|Net Cash Used For Financing Activities                                                               |                             | 
|                                                                                                     |                             | 
|Decrease In Cash During Period                                                                       |                             | 
|Cash At Beginning Of Period                                                                          |                             | 
|                                                                                                     |                             | 
|Cash At End Of Period                                                                                |                             | 
|                                                                                                     |                             | 

See the Notes to the
Condensed Consolidated Financial Statements.



ASCENT ASSURANCE, INC. NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTSMarch 31, 2004(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.

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. The Company, through applicable subsidiaries, also derives fee
and service revenue from (i) telemarketing services, (ii) printing services, (iii) renewal
commissions for prior year sales of both affiliated and unaffiliated insurance products,
and (iv) commissions on the sale of the benefits of unaffiliated membership benefit
programs.

# NOTE 2  ACCOUNTING
PRINCIPLES

Basis of
Presentation. The accompanying unaudited condensed consolidated financial
statements of the Company are 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. The Companys
significant accounting estimates relate to investments, agent receivables, deferred policy
acquisition costs, deferred tax assets, claim reserves, future policy benefit reserves,
reinsurance and statutory accounting practices. 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 years amounts
have been made to conform to the 2004 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, 2003.

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 consisting of 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 and, accordingly, will have no effect on current operations.

Deferred Policy Acquisition
Costs (DPAC). Policy acquisition costs consisting of
commissions and other policy issue costs, which vary with and are primarily related to the
production of new business, are deferred and amortized over periods not to exceed the
estimated premium-paying periods of the related policies. Also included in Other Assets is
the value of business acquired. 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 $4.0 million and $4.5 million at March 31, 2004 and
December 31, 2003, 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 March 31, 2004 and December 31, 2003, the
Companys allowances for uncollectible commission advances were $3.5 million and $3.4
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. The net deferred tax asset of
$18.8 million and $18.4 million at March 31, 2004 and December 31, 2003, respectively, was
fully reserved.

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 collection 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 are computed by dividing income available 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 first quarter ended March 31, 2004,
43,995,026 of common shares attributable to the conversion of Ascents Series B
convertible participating preferred stock (see the Notes to the Condensed Consolidated
Financial Statements  Note 4  Conversion of Redeemable Convertible Preferred
Stock) were included in the computation of basic earnings per share as of March 15, 2004.
For the first quarter ended March 31, 2004 and March 31, 2003, stock options of 877,550
and 974,150, respectively, and, prior to March 15, 2004, the conversion of the preferred
stock, potentially diluted basic earnings per share, but 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 EndedMarch 31,
|                                       |                             | 
|                                       |                             | 
|Net income                             |                             | 
|Preferred stock dividends              |                             | 
|                                       |                             | 
|Loss applicable to common shareholders |                             | 
|                                       |                             | 
|Weighted average shares outstanding:   |                             | 
|Basic                                  |                             | 
|Diluted                                |                             | 
|Basic and diluted loss per share       |                             | 
|                                       |                             | 

# NOTE 3  RELATED
PARTY FINANCING

Ascent received debt financing to
fund an $11 million capital contribution to FLICA in April 2001 from Credit Suisse First
Boston Management LLC, (CSFBM), which is an affiliate of Special Situations
Holdings, Inc.  Westbridge (SSHW)(Ascents largest common
stockholder), and a subsidiary of Credit Suisse First Boston LLC (CSFB). The
Credit Agreement relating to that loan (CSFBM Credit Agreement) provided
Ascent with total loan commitments of $11 million, all of which were drawn in April 2001.
Under restructured terms effective December 31, 2003, the loan bears interest at a rate of
6% per annum and matures in March 2010. Absent any acceleration following an event of
default, Ascent may elect to pay interest in kind by issuance of additional notes. During
the three months ended March 31, 2004, Ascent issued $233,000 in additional notes for
payment of interest in kind which increased the notes payable balance to CSFBM at March
31, 2004 to approximately $15.5 million. Ascents obligations to CSFBM 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 CSFBM Credit Agreement. At March 31, 2004, there were no events of
default.

# NOTE 4  CONVERSION
OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 15, 2004, Ascents
shareholders approved an amendment to the Companys Certificate of Incorporation to
increase the authorized number of shares of common stock to 75 million shares from 30
million shares. The approval of this amendment resulted in the automatic conversion of all
37,504 outstanding shares of the Companys Series B convertible participating
preferred stock (Series B Preferred Stock) into 43,995,026 shares of common
stock. As a result, preferred stock dividends of $430,000 accrued through March 15, 2004
were credited to capital in excess of par value and had no impact on total
stockholders equity. All outstanding shares of the Series B Preferred Stock were
held by SSHW, the Companys largest shareholder. The conversion of the Series B
Preferred Stock increased the ownership percentage of SSHW in the Companys common
stock to approximately 93% from 49%.

# 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 in accounting for stock
options issued to consultants (including marketing agents).

Compensation cost recognized in the
income statement for stock-based employee and consultants (including marketing agents)
compensation awards was approximately $1,000 and $3,000 for the three months ended March
31, 2004 and 2003, respectively.

The following table illustrates the
effect on net loss and loss per share if Ascent had applied the fair value recognition
provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.

|                                                                                                                                    |                             | 
|----------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | 
|                                                                                                                                    | Three Months Ended March 31
|                                                                                                                                    |                             | 
|                                                                                                                                    |                             | 
|Net loss to common stockholders                                                                                                     |                             | 
|Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |                             | 
|                                                                                                                                    |                             | 
|Pro forma net loss                                                                                                                  |                             | 
|                                                                                                                                    |                             | 
|Loss per share:                                                                                                                     |                             | 
|Basic - as reported                                                                                                                 |                             | 
|Basic - pro forma                                                                                                                   |                             | 
|Diluted - as reported                                                                                                               |                             | 
|Diluted - pro forma                                                                                                                 |                             | 

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 its business
operations, the Company is involved in various claims, other business related suits
(alleging actual as well as substantial exemplary damages) and regulatory matters. In the
opinion of management, the Company is not a party to any pending litigation which is
reasonable likely to have an adverse result or disposition that would have a material
adverse effect on the Companys business, consolidated financial position or
consolidated results of operations.

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



# 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.

The following discussion provides
managements assessment of financial condition at March 31, 2004 as compared to
December 31, 2003 and results of operations for the three months ended March 31, 2004 as
compared to the comparable 2003 period for the Company. This discussion updates the
Managements Discussion and Analysis of Financial Condition and Results of
Operations in the Companys 2003 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. The Company, through applicable subsidiaries, also derives fee and service
revenue from (i) telemarketing services, (ii) printing services, (iii) renewal commissions
for prior year sales of both affiliated and unaffiliated insurance products, and (iv)
commissions on the sale of benefits of unaffiliated membership benefit programs.

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 medical expense 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 inpatient medicines.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Hospital/surgical medical expense products are similar to comprehensive major medical
products except that benefits are generally limited to medical and surgical services
received in a hospital either as an inpatient or outpatient (services such as outpatient
physician office visits and outpatient prescription drugs are excluded) and deductibles
and coinsurance provisions are generally higher.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|o |  | Supplemental specified disease products include blanket group accident coverages, blanket
group hospital daily indemnity coverages, as well as 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 directly to the
insured upon diagnosis of certain types of internal cancer or heart disease.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Prior to 1998, some of the Insurance
Subsidiaries also actively underwrote Medicare Supplement products designed to provide
reimbursement for certain expenses not covered by the Medicare program. Such 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s 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 |  | any limitation imposed on the Insurance Subsidiaries ability to control the impact
of rising health care costs, especially prescription drugs, and rising medical service
utilization rates through product and benefit design, underwriting criteria, premium rate
increases, utilization management and negotiation of favorable provider contracts;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

|o |  | Ascents ability to make additional investment in its Insurance Subsidiaries in the
form of capital contributions, if needed, in order for such subsidiary to comply with
regulatory capital or debt covenant requirements;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 months ended March 31, 2004 and 2003. (In thousands
except insurance operating ratios.)

|                                                  |                             | 
|------------------------------------------------- | --------------------------- | 
|                                                  | Three Months EndedMarch 31,
|                                                  |                             | 
|                                                  |                             | 
|Premiums                                          |                             | 
|Other insurance revenue                           |                             | 
|Net investment income                             |                             | 
|                                                  |                             | 
|Total insurance revenues                          |                             | 
|Benefits and claims                               |                             | 
|Commissions                                       |                             | 
|Change in deferred policy acquisition costs       |                             | 
|General and administrative expense                |                             | 
|Taxes, license and fees                           |                             | 
|Interest expense on bank facilities               |                             | 
|Interest expense on note payable to related party |                             | 
|                                                  |                             | 
|Total insurance operating expenses                |                             | 
|                                                  |                             | 
|Insurance operating results                       |                             | 
|                                                  |                             | 
|Fee and service income                            |                             | 
|Fee and service expenses                          |                             | 
|                                                  |                             | 
|Fee and service results                           |                             | 
|                                                  |                             | 
|Net realized (losses) gains on investments        |                             | 
|                                                  |                             | 
|Income before income taxes                        |                             | 
|Income taxes                                      |                             | 
|                                                  |                             | 
|Net income                                        |                             | 
|Preferred stock dividends                         |                             | 
|                                                  |                             | 
|Loss applicable to common shareholders            |                             | 
|                                                  |                             | 
|Insurance operating ratios*                       |                             | 
|Benefits and claims                               |                             | 
|Commissions                                       |                             | 
|Decrease in deferred acquisition costs            |                             | 
|General and administrative expenses               |                             | 
|Taxes, licenses and fees                          |                             | 

---

*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 premiums plus other
insurance revenue.


Overview.    
          For the first quarter of 2004, net income was $71,000 compared to $189,000 for
          the corresponding period in 2003. The $118,000 decrease in net income was
          principally due to a $111,000 decrease in net realized capital gains on sales of
          investments.

Insurance operating results declined
$52,000 for the first quarter of 2004 as compared to the first quarter of 2003 as reduced
interest expense on the note payable to related party was more than offset by lower
investment income, principally due to a decline in interest on agents balances, and
higher general expenses. Interest expense on the note payable to related party decreased
by $339,000 due to the restructuring of the note payable on December 31, 2003 that reduced
the interest rate from 12% to 6% per annum. Interest expense on the note payable has been
paid in kind through the issuance of additional notes payable.

Fee and service results increased
$45,000 for first quarter 2004 compared to first quarter 2003 principally due to expense
reductions effected by Ascents printing subsidiary. Over the last several years,
this operation has been impacted by a reduction in the number of customers, reduced order
volume from continuing customers and lower profit margins.

The Company reported no income tax
benefit for the first quarters of 2004 and 2003 due to the maintenance of a 100% valuation
allowance for all net deferred tax assets. (see Note 2 to the Condensed Consolidated
Financial Statements at Item 1.)

On March 15, 2004, Ascents
shareholders approved an amendment to the Companys Certificate of Incorporation to
increase the authorized number of shares of common stock to 75 million shares from 30
million shares. The approval of this amendment resulted in the automatic conversion of all
37,504 outstanding shares of the Companys convertible participating Series B
preferred stock into 43,995,026 shares of common stock. As a result, preferred stock
dividends of $430,000 accrued through March 15, 2004 were credited to capital in excess of
par value and had no impact on total stockholders equity.

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

Premiums.    
          The Insurance Subsidiaries premium revenue is derived principally from the
          following medical expense reimbursement products: comprehensive major medical,
          hospital/surgical medical expense, supplemental products including specified
          disease coverage and Medicare supplement. Comprehensive major medical products
          are generally designed to reimburse insureds for eligible expenses incurred for
          hospital confinement, surgical expenses, physician services, outpatient
          services, and the cost of laboratory and diagnostic services, as well as
          inpatient medicines. Hospital surgical medical expense products are similar to
          comprehensive major medical products with respect to benefits for inpatient
          services, except that deductibles and coinsurance provisions are generally
          higher. However, benefits for outpatient services are generally more limited
          under hospital/surgical medical expense coverage than comprehensive major
          medical coverage. Supplemental products include blanket group accident
          coverages, blanket group hospital daily indemnity coverages, as well as
          individual indemnity policies for hospital confinement and convalescent care for
          treatment of specified diseases and event specific individual
          policies, which provide fixed benefits or lump sum payments directly to the
          insured upon diagnosis of certain types of internal cancer or heart disease.
          Prior to 1998, the Insurance Subsidiaries also underwrote Medicare supplement
          products and continue to receive renewal premiums from such policies.

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

|                                |                             | 
|------------------------------- | --------------------------- | 
|                                | Three Months EndedMarch 31,
|                                |                             | 
|                                |                             | 
|Major medical:                  |                             | 
|First-year                      |                             | 
|Renewal                         |                             | 
|                                |                             | 
|Subtotal                        |                             | 
|                                |                             | 
|Supplemental specified disease: |                             | 
|First-year                      |                             | 
|Renewal                         |                             | 
|                                |                             | 
|Subtotal                        |                             | 
|                                |                             | 
|Medicare supplement:            |                             | 
|Renewal                         |                             | 
|                                |                             | 
|Other                           |                             | 
|                                |                             | 
|Consolidated Premium Revenue    |                             | 
|                                |                             | 

Total premiums decreased $2.5
million, or 9.6%, for the first quarter of 2004 as compared to the first quarter of 2003.
Major medical premiums declined due to lower new business sales resulting from delays in
new product deliveries to NCM in 2003 and a disciplined pricing philosophy focused upon
profitability. In addition, supplemental specified disease and Medicare supplement
premiums declined due to normal lapsing of policies. In July 2003, NCM began selling a new
line of medical insurance products, consisting of three products with varying degrees of
benefits, designed to provide increased consumer choice and price flexibility for cost
conscious consumers. As of March 31, 2004, the new products had been introduced in 21 of
the 24 states in which NCM markets health insurance products.

Benefits and Claims.Benefits and claims are comprised of (1) claims paid, (2) changes in claim reserves
for claims incurred (whether or not reported), and (3) changes in future policy benefit
reserves (see Financial Condition  Claims Reserves and Future
Policy Benefit Reserves). The Companys ability to maintain the benefits and
claims ratio of 68.2% for the first quarters of 2004 and 2003 is principally attributable
to the Companys adherence to a disciplined pricing philosophy for both new major
medical product sales and in force insurance policies.

For the past several years, the costs
of medical services covered by the Companys major medical insurance policies has
increased dramatically, with medical inflation averaging 15% to 20% annually in comparison
to an average increase in the consumer price index of 3%. To maintain a consistent ratio
of claims and benefits to premium into future periods, the Company must accurately
estimate future medical inflation and implement timely premium rate increases for both new
major medical product sales and the majority of its in force insurance policies, including
supplemental specified disease and Medicare supplement policies.

Commissions.    
          The commissions to premiums ratio decreased by 1.0 percentage points in first
          quarter 2004 as compared to the corresponding prior year as a result of the
          decrease in first year major medical premiums. Commission rates on first year
          premiums are significantly higher than those for renewal premiums.



# FINANCIAL CONDITION

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

|                                                  |                |                   |   |            
|------------------------------------------------- | -------------- | ----------------- | - | -----------
|                                                  | March 31, 2004 | December 31, 2003
|Fixed Maturity Securities                         |                |                   |   | MarketValue
|                                                  |                |                   |   |            
|                                                  | (in 000's)     |                   |   |            
|U.S. Government and governmental agencies         |                |                  
|and authorities (except mortgage backed)          |                |                   | $ | 10,974     
|Finance companies                                 |                |                   |   | 19,418     
|Public utilities                                  |                |                   |   | 11,604     
|Mortgage-backed securities                        |                |                   |   | 21,300     
|States, municipalities and political subdivisions |                |                   |   | 2,373      
|All other corporate bonds                         |                |                   |   | 35,766     
|                                                  |                |                   |   |            
|Total fixed maturity securities                   |                |                   | $ | 101,435    
|                                                  |                |                   |   |            

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

|                                                  |                |                   |   |            
|------------------------------------------------- | -------------- | ----------------- | - | -----------
|                                                  | March 31, 2004 | December 31, 2003
|Composition of Fixed MaturitySecurities by Rating |                |                   |   | MarketValue
|                                                  |                |                   |   |            
|                                                  | (in 000's)     |                   |   |            
|Ratings                                           |                |                   |   |            
|Investment grade:                                 |                |                  
|U.S. Government and agencies                      |                |                   | $ | 19,878     
|AAA                                               |                |                   |   | 14,670     
|AA                                                |                |                   |   | 2,184      
|A                                                 |                |                   |   | 34,219     
|BBB                                               |                |                   |   | 28,311     
|Non-Investment grade:                             |                |                  
|BB                                                |                |                   |   | 1,689      
|B and below                                       |                |                   |   | 484        
|                                                  |                |                   |   |            
|Total fixed maturity securities                   |                |                   | $ | 101,435    
|                                                  |                |                   |   |            

The scheduled contractual maturities
of the Companys fixed maturity securities, excluding short-term investments and
certificates of deposit, at March 31, 2004 and December 31, 2003 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.

|                                                    |                |                   |   |            
|--------------------------------------------------- | -------------- | ----------------- | - | -----------
|                                                    | March 31, 2004 | December 31, 2003
|Composition of Fixed MaturitySecurities by Maturity |                |                   |   | MarketValue
|                                                    |                |                   |   |            
|                                                    | (in 000's)     |                   |   |            
|Scheduled Maturity                                  |                |                   |   |            
|Due in one year or less                             |                |                   | $ | 2,182      
|Due after one year through five years               |                |                   |   | 24,865     
|Due after five years through ten years              |                |                   |   | 35,491     
|Due after ten years                                 |                |                   |   | 17,597     
|Mortgage-backed and asset-backed securities         |                |                   |   | 21,300     
|                                                    |                |                   |   |            
|Total fixed maturity securities                     |                |                   | $ | 101,435    
|                                                    |                |                   |   |            

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 $26.9 million at March 31, 2004 as
compared to $26.2 million at December 31, 2003. 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 $54.6
million at March 31, 2004 as compared to $54.9 million at December 31, 2003. 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 operations totaled $1.2 million for both the first quarter of
          2004 and 2003.

Ascent is a holding company, the
principal assets of which consist of the capital stock of its subsidiaries and invested
assets. Ascents principal sources of funds are comprised of dividends from its
non-insurance subsidiaries. The Insurance Subsidiaries are precluded from paying dividends
without prior approval of the Texas Insurance Commissioner as the Insurance
Subsidiaires earned surplus is negative due to statutory losses incurred prior to
2003. Ascents principal uses of cash are for general and administrative expenses and
to make discretionary additional investments in its Insurance Subsidiaries in the form of
capital contributions to maintain desired statutory capital and surplus levels. Ascent
funded capital contributions to the Insurance Subsidiaries totaling approximately $252,000
during the first quarter of 2003 and made no contributions during the first quarter of
2004. As of March 31, 2004, Ascent had approximately $2.5 million in unrestricted cash and
invested assets.

Related Party
Financing. Ascent received debt financing to fund an $11 million capital
contribution to FLICA in April 2001 from Credit Suisse First Boston Management LLC,
(CSFBM), which is an affiliate of Special Situations Holdings, Inc. 
Westbridge (SSHW) (Ascents largest common stockholder), and a subsidiary
of Credit Suisse First Boston LLC (CSFB). The Credit Agreement relating to
that loan (CSFBM Credit Agreement) provided Ascent with total loan commitments
of $11 million, all of which were drawn in April 2001. Under restructured terms effective
December 31, 2003, the loan bears interest at a rate of 6% per annum and matures in March
2010. Absent any acceleration following an event of default, Ascent may elect to pay
interest in kind by issuance of additional notes. During the three months ended March 31,
2004, Ascent issued $233,000 in additional notes for payment of interest in kind which
increased the notes payable balance to CSFBM at March 31, 2004 to approximately $15.5
million. Ascents obligations to CSFBM 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 CSFBM Credit
Agreement. At March 31, 2004, there were no events of default.

Conversion of Related Party
Preferred Stock.On March 15, 2004, Ascents shareholders approved an
amendment to the Companys Certificate of Incorporation to increase the authorized
number of shares of common stock to 75 million shares from 30 million shares. The approval
of this amendment resulted in the automatic conversion of all 37,504 outstanding shares of
the Companys Series B convertible participating preferred stock (Series B
Preferred Stock) into 43,995,026 shares of common stock. All outstanding shares of
the Series B Preferred Stock were held by SSHW, the Companys largest shareholder.
The conversion of the Series B Preferred Stock increased the ownership percentage of SSHW
in the Companys common stock to approximately 93% from 49%.

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. On
December 31, 2003, AFI entered into a Credit Agreement (the Credit Agreement)
with Frost National Bank (Frost) that 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 March 31, 2004 and December 31, 2003,
$250,000 and $500,000, respectively, was outstanding under the Credit Agreement. The
Credit Agreement matures on January 15, 2005, at which time the outstanding principal and
interest will be due and payable. The Company maintains an agent receivable financing
arrangement to facilitate 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 March 31, 2004 are net agent receivables of $4.0 million.
In addition, NCM and Ascent have guaranteed AFIs obligation under the Credit
Agreement, and have pledged all of the issued and outstanding shares of the capital stock
of AFI, NFL, and FLICA as collateral for those guaranties (the Guaranty
Agreements). As of March 31, 2004, there were no events of default under the Credit
or Guaranty Agreements.

Inflation.    
          Inflation impacts claim costs and overall operating costs and, although
          inflation has been lower the last few years, hospital and medical costs have
          still increased at a higher rate than general inflation, especially prescription
          drug costs. New, more expensive and wider use of pharmaceuticals is inflating
          health care costs. The 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 health care
          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, 2003.

# 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 March 31, 2004, the end of the period 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 controls 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 March 31, 2004, the end of the
period 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 materially
affect, these controls during the period covered by this quarterly report.



# PART II

---

# ITEM 4  SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS

On March 15, 2004, Ascent Assurance,
Inc. (AAI) held its annual meeting of shareholders. At the meeting, the
shareholders approved an amendment to AAIs Certificate of Incorporation increasing
the number of authorized shares of AAIs common stock from 30,000,000 to 75,000,000.
The following reflects the results of the votes cast for approval of the amendment: In
favor 3,768,332; Against 0; Abstain 0; Total votes cast 3,768,332.

Also, the shareholders elected
Gregory M. Grimaldi, David G. Kaytes, and Patrick J. Mitchell to AAIs Board of
Directors for a three-year term expiring in 2007. The following table reflects votes cast
at the annual meeting:

|                    |     |          
|------------------- | --- | ---------
|                    | For |          
|Gregory M. Grimaldi |     | 3,768,250
|David G. Kaytes     |     | 3,768,250
|Patrick J. Mitchell |     | 3,768,250
|                   
|Total Votes Cast    |     | 3,768,250

Directors whose terms continued and
the years in which their term expires are as follows:

|                     | 
|-------------------- | 
|Director             | 
|Paul E. Suckow       | 
|Michael A. Kramer    | 
|George R. Hornig     | 
|Alan H. Freudenstein | 
|Gregory M. Grimaldi  | 
|David G. Kaytes      | 
|Patrick J. Mitchell  | 

# ITEM 6  EXHIBITS
AND REPORTS ON FORM 8-K

# (a) Exhibits:

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

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

|3.2 |  | Amended and Restated By-Laws of Ascents, effective as of March 24, 1999
(incorporated by reference to Exhibit 3.2 to Ascent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 Ascents Quarterly Report on Form 10-Q for the quarter
ended June 30, 2000)
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.4 |  | Certificate of Elimination of Series A Preferred  Stock of Ascent  Assurance,  Inc. dated December 31, 2003  (incorporated  by
         reference to Exhibit 3.1 to Ascent's 8-K filed on January 6, 2004).
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.5 |  | Certificate of Designation for Series B Convertible  Participating  Preferred Stock of Ascent  Assurance,  Inc. dated December
         31, 2003 (incorporated by reference to Exhibit 3.2 to Ascent's 8-K filed on January 6, 2004).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|10.9 |  | First Amendment to Pledge Agreement, dated as of November 30, 2000, by and among Ascent
Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to
Exhibit 10.22 to Ascents Annual Report on Form 10-K for the year ended December 31,
2000).
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.10 |  | Fifth Amendment to Guaranty Agreement, dated as of November 30, 2000, by and among Ascent
Assurance, Inc. and LaSalle Bank National Association (incorporated by reference to
Exhibit 10.23 to Ascents Annual Report on Form 10-K for the year ended December 31,
2000).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.11 |  | 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).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.12 |  | 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).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.13 |  | 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).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.14 |  | Guaranty and Security  Agreement dated April 17, 2001 among Foundation  Financial  Services,  Inc.,  NationalCare(R)Marketing,
         Inc.,  LifeStyles  Marketing Group,  Inc.,  Precision Dialing Services,  Inc., Senior Benefits L.L.C. and Westbridge  Printing
         Services,  Inc., and Credit Suisse First Boston Management Corporation  (incorporated by reference to Exhibit 10.2 to Ascent's
         Form 8-K filed April 25, 2001).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.15 |  | 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).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.16 |  | 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).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.17 |  | 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).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.18 |  | 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).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.19 |  | 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).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.20 |  | 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).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.21 |  | 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).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.22 |  | 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).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.23 |  | 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).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.24 |  | 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).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.25 |  | 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).
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.26 |  | 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).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.27 |  | 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).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.28 |  | 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).
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.29 |  | 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).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.30 |  | 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).
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.31 |  | Ninth Amendment to Credit Agreement dated July 25, 2003 between Ascent Funding, Inc. and
LaSalle Bank National Association (incorporated by reference to Exhibit 10.35 to
Ascents Quarterly Report on Form 10-Q for the quarter ended June 30, 2003).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.32 |  | Termination Agreement Dated November 25, 2003 between Ascent Funding, Inc. and LaSalle
Bank National Association (Incorporated by reference to Exhibit 10.43 to Ascents
10-K for the year ended December 31, 2003).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.33 |  | Exchange Agreement Among Ascent Assurance, Inc., Credit Suisse First Boston Management,
LLC, and Special Situations Holdings, Inc.  Westbridge dated December 31, 2003
(incorporated by reference to Exhibit 10.1 to Ascents 8-K filed on January 6, 2004).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.34 |  | First Amendment to Registration Rights Agreement between Ascent Assurance, Inc. and
Special Situations Holdings, Inc.  Westbridge dated December 31, 2003 (incorporated
by reference to Exhibit 10.2 to Ascents 8-K filed on January 6, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.35 |  | Second Amendment to Credit Agreement dated December 31, 2003 between Ascent Assurance,
Inc. and Credit Suisse First Boston Management, LLC (incorporated by reference to Exhibit
10.3 to Ascents 8-K filed on January 6, 2004).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.36 |  | First Amendment and Waiver to Guaranty and Security Agreement dated December 31, 2003 between Foundation  Financial  Services,
         Inc.,  NationalCare(R)Marketing,  Inc.,  Lifestyles Marketing Group, Inc., Precision Dialing Services,  Inc., Senior Benefits,
         LLC, and Westbridge  Printing  Services,  Inc. and Credit Suisse First Boston  Management,  LLC  (incorporated by reference to Exhibit
10.4 to Ascents 8-K filed on January 6, 2004)
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.37 |  | Intercreditor and Subordination Agreement among the Frost National Bank, Credit Suisse
First Boston Management, LLC, and Ascent Assurance, Inc. and named subsidiaries dated
December 31, 2003 (incorporated by reference to Exhibit 10.5 to Ascents 8-K filed on
January 6, 2004).
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.38 |  | Credit Agreement dated as of December 31, 2003 among Ascent Funding, Inc., Ascent
Assurance, Inc., NationalCare®Marketing, Inc. and the Frost National Bank
including exhibits to such agreement, Pledge and Security Agreement dated December 31,
2003 between NationalCare® Marketing, Inc. and Frost National Bank, Pledge
and Security Agreement dated December 31, 2003 between Ascent Assurance, Inc. and Frost
National Bank, Revolving Promissory Note dated December 31, 2003 between Ascent Funding,
Inc. and Frost National Bank, Security Agreement dated December 31, 2003 between Ascent
Funding, Inc. and Frost National Bank, Waiver of Jury Trial and Notice of Final Agreement
dated December 31, 2003 between Ascent Funding, Inc. and Frost National Bank and
Intercreditor and Subordination Agreement among Frost National Bank, Credit Suisse First
Boston Management, LLC and Ascent Assurance, Inc. and named subsidiaries dated December
31, 2003 (Incorporated by reference to Exhibit 10.49 to Ascents 10-K for the year
ended December 31, 2003).
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.39* |  | Extension of Employment Agreement dated as of March 16, 2004 by and between Ascent, Ascent Management, Inc. and Mr. Patrick J. Mitchell.
|------ |  | ----------------------------------------------------------------------------------------------------------------------------------------

|10.40* |  | Extension of Employment Agreement dated as of March 16, 2004 by and between Ascent, Ascent Management, Inc. and Mr. Patrick H. O'Neill.
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------

|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

On January 6, 2004, the registrant
filed a report on Form 8-K dated December 31, 2003 reporting information regarding the
restructuring of Ascents preferred stock and note payable.

The registrant filed a Report on Form
8-K dated February 26, 2004 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
fourth quarter of 2003.

On March 16, 2004, the registrant
filed a report on Form 8-K reporting the conversion of Ascents Series B Preferred
Stock to common stock.



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. KoenigSenior Vice President,Chief Financial Officer and Treasurer(Principal Financial and Accounting Officer)
| | ----------------------------------------------------------------------------------------------------------------------------------------------

Dated at Fort Worth, TexasMay
5, 2004