SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                    For Quarterly Period Ended March 31, 2001

                          Commission File Number 1-8538


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

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

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

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

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

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

YES  X               NO
    -------

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

YES  X               NO
    -------

Common Stock - Par Value $.01       6,500,000 Shares Outstanding at May 11, 2001



<PAGE>



                             ASCENT ASSURANCE, INC.
                               INDEX TO FORM 10-Q
<TABLE>




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

Item 1 - Financial Statements

<S>                                                                                      <C>
Ascent Assurance, Inc. Condensed Consolidated Balance Sheets at
     March 31, 2001 and December 31, 2000                                                 2

Ascent Assurance, Inc. Condensed Consolidated Statements of Operations
     for the Three Months Ended March 31, 2001 and March 31, 2000                         3

Ascent Assurance, Inc. Condensed Consolidated Statements of
     Comprehensive Income for the Three Months Ended March 31, 2001 and
     March 31, 2000                                                                       4

Ascent Assurance, Inc. Condensed Consolidated Statements of Cash Flows
     for the Three Months Ended March 31, 2001 and March 31, 2000                         5

Ascent Assurance, Inc. Consolidated Statement of Changes in Stockholders'
     Equity for the Three Months Ended March 31, 2001                                     6

Notes to Condensed Consolidated Financial Statements                                      7

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

General                                                                                  10

Business Overview                                                                        10

Operating Results                                                                        11

Financial Condition                                                                      13

Liquidity, Capital Resources and Statutory Capital and Surplus                           16

Forward-Looking Statements                                                               18

PART II - OTHER INFORMATION

Item 6 - Exhibits and Reports on Form 8-K                                                20
</TABLE>



<PAGE>


                             ASCENT ASSURANCE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>

                                                                                      March 31,          December 31,
                                                                                        2001                2000
                                                                                     (Unaudited)          (Audited)
                                                                                   ----------------    ----------------
                                                                                   (in thousands, except per share data)
Assets
Investments:
      Fixed Maturities:
         Available-for-sale, at market value (amortized cost $97,546 and
<S>                                                                                <C>                     <C>
            $104,081)                                                              $     96,509        $    100,590
      Equity securities, at market (cost $1,365)                                          1,346               1,335
      Other investments                                                                     430                 398
      Short-term investments                                                              7,601               7,254
                                                                                   ----------------    ----------------
            Total Investments                                                           105,886             109,577

Cash                                                                                      4,268               2,658
Accrued investment income                                                                 1,668               1,965
Receivables from agents, net of allowance for doubtful accounts of
      $4,007 and $3,711                                                                   8,338               8,737
Deferred policy acquisition costs                                                        25,828              24,711
Property and equipment, net of accumulated depreciation of $3,128
      and $2,683                                                                          6,340               6,375
Other assets                                                                              6,967               6,455
                                                                                   ----------------    ----------------
            Total Assets                                                           $    159,295        $    160,478
                                                                                   ================    ================

Liabilities, Preferred Stock and Stockholders' Equity
Liabilities:
      Policy liabilities and accruals:
         Future policy benefits                                                    $     62,543        $     61,306
         Claim reserves                                                                  39,700              42,778
                                                                                   ----------------    ----------------
            Total Policy Liabilities and Accruals                                       102,243             104,084

Accounts payable and other liabilities                                                   15,735              15,667
Notes payable                                                                             8,736               8,947
                                                                                   ----------------    ----------------
            Total Liabilities                                                           126,714             128,698
                                                                                   ----------------    ----------------

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

Stockholders' Equity:
      Common stock ($.01 par value, 30,000,000 shares authorized;
         6,500,000 shares issued)                                                            65                  65
      Capital in excess of par value                                                     27,716              27,620
      Accumulated other comprehensive income, net of tax                                 (1,056)             (2,324)
      Retained deficit                                                                  (21,849)            (21,286)
                                                                                   ----------------    ----------------
            Total Stockholders' Equity                                                    4,876               4,075
                                                                                   ----------------    ----------------

            Total Liabilities, Redeemable Convertible Preferred Stock
            And Stockholders' Equity                                               $    159,295        $    160,478
                                                                                   ================    ================
</TABLE>

        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>


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

<TABLE>

                                                         Three Months Ended
                                                                       March 31,
                                                --------------------------------------
                                                       2001                 2000
                                                -----------------    -----------------
                                                 (in thousands, except per share data)
Revenues:
     Premiums:
<S>                                             <C>                  <C>
        First-year                              $      7,825         $      6,709
        Renewal                                       24,149               22,296
                                                -----------------    -----------------
           Total premiums                             31,974               29,005

Net investment income                                  2,322                2,078
Fee, service and other income                          5,609                4,896
Net realized gain on investments                          42                   17
                                                -----------------    -----------------
           Total revenue                              39,947               35,996
                                                -----------------    -----------------

Benefits, claims and expenses:
     Benefits and claims                              24,817               23,682
     Increase in deferred acquisition costs           (1,117)              (1,709)
     Commissions                                       5,963                6,439
     General and administrative expenses              10,102                7,567
     Taxes, licenses and fees                          1,063                1,191
     Interest expense on notes payable                   170                   84
                                                -----------------    -----------------
           Total expenses                             40,998               37,254

Loss before income taxes                              (1,051)              (1,258)
Federal income tax benefit                                 -                  428
                                                -----------------    -----------------

           Net loss                             $     (1,051)        $       (830)

Preferred stock dividends                                710                  651
                                                -----------------    -----------------
Loss applicable to common stockholders          $     (1,761)        $     (1,481)
                                                =================    =================

Basic and diluted loss per common share         $       (.27)        $       (.23)
                                                =================    =================

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


        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>



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

                                                                  Three Months Ended
                                                                       March 31,
                                                        --------------------------------------
                                                              2001                 2000
                                                        -----------------    -----------------
                                                                   (in thousands)
<S>                                                     <C>                  <C>
Net loss                                                $     (1,051)        $       (830)
Other comprehensive income:
     Unrealized holding gain arising during period,
        net of tax                                             1,310                  164
     Reclassification adjustment of gain on sales of
        investments included in net income, net of tax           (42)                 (11)
                                                        -----------------    -----------------

Comprehensive income (loss)                             $        217         $       (677)
                                                        =================    =================

</TABLE>

        See the Notes to the Condensed Consolidated Financial Statements.


<PAGE>


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

<TABLE>
                                                                                       Three Months Ended
                                                                                            March 31,
                                                                              ------------------------------------
                                                                                     2001                2000
                                                                              ----------------    ----------------
                                                                                         (in thousands)
Cash Flow From Operating Activities:

<S>                                                                           <C>                 <C>
Net loss                                                                      $      (1,051)      $        (830)
     Adjustments to reconcile net income to cash provided
        by (used for) operating activities
           Decrease in accrued investment income                                        297                 145
           Increase in deferred acquisition costs                                    (1,117)             (1,709)
           Decrease in receivables from agents                                          399                 373
           Increase in other assets                                                    (512)             (1,016)
           (Decrease) increase in policy liabilities and accruals                    (1,841)              2,785
           Increase (decrease) in accounts payable and other liabilities                 68              (2,637)
           Increase in deferred income taxes, net                                         -                (284)
           Other, net                                                                   (65)              1,552
                                                                              ----------------    ----------------
      Net Cash Used For Operating Activities                                         (3,822)             (1,621)
                                                                              ----------------    ----------------

Cash Flow From Investing Activities:

      Purchases of fixed maturity investments                                        (4,984)             (2,981)
      Sales of fixed maturity investments                                             9,041                 906
      Maturities and calls of fixed maturity investments                              2,379                 873
      Net (increase) decrease in short term and other investments                      (379)              3,041
      Property and equipment purchased                                                 (414)               (535)
                                                                              ----------------    ----------------
      Net Cash Provided By Investing Activities                                       5,643               1,304
                                                                              ----------------    ----------------

Cash Flow From Financing Activities:

      Issuance of notes payable                                                           -                 742
      Repayment of notes payable                                                       (211)               (140)
                                                                              ----------------    ----------------
      Net Cash (Used For) Provided By Financing Activities                             (211)                602
                                                                              ----------------    ----------------

      Increase In Cash During Period                                                  1,610                 285
      Cash At Beginning Of Period                                                     2,658               5,110
                                                                              ----------------    ----------------
      Cash At End Of Period                                                   $       4,268       $       5,395
                                                                              ================    ================

</TABLE>


        See the Notes to the Condensed Consolidated Financial Statements.



<PAGE>


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



<TABLE>

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

<S>                                          <C>         <C>      <C>          <C>            <C>           <C>
Balance at December 31, 2000                 6,500,000   $  65    $  27,620    $   (2,324)    $   (21,286)  $       4,075

      Net loss                                                                                     (1,051)         (1,051)
      Preferred Stock dividend                                                                       (710)           (710)
      Other comprehensive gain, net of tax                                          1,268           1,198           2,466
      Amortization of unearned compensation                              96                                            96
                                             ----------  ------   ------------ -------------  ------------  ---------------
Balance at March 31, 2001                    6,500,000   $  65    $  27,716    $   (1,056)    $   (21,849)  $       4,876
                                             ==========  ======   ============ =============  ============  ===============

</TABLE>




        See the Notes to the Condensed Consolidated Financial Statements.

<PAGE>


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


NOTE 1 - DESCRIPTION OF BUSINESS

Ascent Assurance,  Inc. ("Ascent"),  a Delaware company incorporated in 1982, is
an insurance holding company engaged in the development, marketing, underwriting
and  administration  of  medical  expense  and  supplemental   health  insurance
products, primarily to self-employed individuals and small business owners.

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

NOTE 2 - ACCOUNTING PRINCIPLES

Basis  of  Presentation.   The  accompanying  unaudited  condensed  consolidated
financial  statements of the Company have been  prepared in accordance  with the
instructions  to Form 10-Q and Rule 10-01 of  Regulation  S-X and do not include
all of the information and footnotes required by accounting principles generally
accepted  in the United  States  ("GAAP")  for  complete  financial  statements.
Financial  statements  prepared  in  accordance  with  GAAP  require  the use of
management estimates. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been included. Certain reclassifications have been made to 2000 amounts in order
to  conform  to  the  2001  financial  statement  presentation.   The  financial
statements  should  be read  in  conjunction  with  the  consolidated  financial
statements  and notes thereto  included in the  Company's  Annual Report on Form
10-K for the year ended December 31, 2000.

Future Policy Benefits.  Liabilities for future policy benefits not yet incurred
are computed  primarily using the net level premium method  including  actuarial
assumptions  as  to  investment  yield,   mortality,   morbidity,   withdrawals,
persistency  and  other  assumptions  which  were  appropriate  at the  time the
policies were issued.  Assumptions used are based on the Company's experience as
adjusted to provide for possible adverse deviation.  Generally,  these actuarial
assumptions are fixed and, absent material adverse benefit  experience,  are not
adjusted.

Claim  Reserves.  Claim reserves  represent the estimated  liabilities on claims
reported plus claims  incurred but not yet  reported.  The process of estimating
claim  reserves  involves  the active  participation  of  experienced  actuarial
consultants with input from the underwriting,  claims, and finance  departments.
The  inherent  uncertainty  in  estimating  claim  reserves  is  increased  when
significant  changes  occur.  Examples of such changes  include:  (1) changes in
economic  conditions;  (2)  changes  in state or federal  laws and  regulations,
particularly  insurance reform measures;  (3) changes in production  sources for
existing lines of business;  (4) writings of significant  blocks of new business
and (5)  significant  changes  in claims  payment  patterns.  As a result of the
implementation of a new claims  administration system in May 2000, the Company's
claims  payment  pattern  has  accelerated,  which  resulted  in  a  significant
reduction in pending claims inventory at March 31, 2001 from historical  levels.
This significant  change in the claims payment pattern has greatly increased the
inherent  uncertainty in estimating  claim reserves.  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.

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

As of March 31, 2001, the Company has reported  cumulative  pre-tax losses since
March 31,  1999,  the date it emerged from  Chapter 11  bankruptcy  proceedings.
Realization of the Company's  deferred tax asset is dependent upon the return of
the Company's  operations to  profitability.  Pre-tax losses during 2000 and the
first quarter of 2001 were principally attributable to adverse claims experience
for certain major medical products. Management believes that such product losses
can be  significantly  reduced  through  aggressive  rate  increase  management.
However,  projections of future profitability are significantly  discounted when
evaluating  the  recoverability  of deferred  tax assets and do not overcome the
negative evidence of cumulative losses under GAAP. Accordingly,  the Company has
increased  its deferred tax asset  valuation  allowance to fully reserve all net
deferred tax assets as of March 31, 2001.

Earnings  Per Share.  Under GAAP there are two  measures of earnings  per share:
"basic earnings per share" and "diluted earnings per share".  Basic earnings per
share is computed by dividing  income  applicable to common  shareholders by the
weighted average number of common shares outstanding during the period.  Diluted
earnings  per  share  reflects  the  potential  dilution  that  could  occur  if
securities or other contracts to issue common stock were converted or exercised.
Diluted weighted shares exclude all convertible securities for loss periods.


<PAGE>


The following table reflects the calculation of basic and diluted EPS:
<TABLE>

                                                     Three Months Ended
                                                          March 31,
                                                   2001               2000
                                            ----------------    ---------------
                                            (amounts in 000's, except per share
                                                          amounts)
<S>                                         <C>                 <C>
Net loss                                    $     (1,051)       $      (830)
Preferred Stock dividends                           (710)              (651)
                                            ----------------    ---------------
Loss applicable to common shareholders      $     (1,761)       $    (1,481)
                                            ================    ===============
Weighted average shares outstanding:
     Basic                                         6,500              6,500
     Diluted                                       6,500              6,500
Basic and diluted loss per share            $       (.27)       $      (.23)
                                            ================    ===============
</TABLE>


NOTE 3 - FINANCING OBTAINED IN APRIL 2001

During the first quarter of 2001, the Company  determined that continued adverse
claims  experience  for  the  Group  Preferred  Provider  Organization  ("GPPO")
product,  the principal  product  marketed by the Company from 1998 through June
2000,  would require Ascent to make capital  contributions to FLICA in excess of
those  originally  planned.  Ascent  obtained  debt  financing  (see  below) and
contributed  an additional $11 million to FLICA in April 2001 to enable FLICA to
comply with minimum  statutory capital and surplus  requirements  promulgated by
the  states  of  Texas  and  Florida.  To the  extent  that the  adverse  claims
experience  for the old GPPO product  exceeds  management's  current  estimates,
Ascent would be required to make additional  capital  contributions  to FLICA in
excess of those  currently  projected for 2001.  Additional  financing  would be
required by Ascent in order to make any such "excess"  contributions.  While the
Company has implemented  rate increases on the GPPO product that should begin to
reduce losses in mid-2001,  there can be no assurance  that such rate  increases
will be sufficient.

In April 2001,  Ascent  received  debt  financing  for the $11  million  capital
contribution  described  above from a loan made by Credit  Suisse  First  Boston
Management  Corporation,  which is an affiliate of Special Situations  Holdings,
Inc. -- Westbridge (Ascent's largest stockholder). The credit agreement relating
to that loan provided Ascent with total loan  commitments of $11 million (all of
which has been  drawn).  The loan bears  interest at a rate of 12% per annum and
matures in April 2004.  Absent any  acceleration  following an event of default,
the Company may elect to pay interest in kind by issuance of  additional  notes.
The credit  agreement  relating to the loan  provides for a facility fee of $1.5
million which is payable upon maturity or upon a change in control,  as defined.
Ascent's obligations are secured, pursuant to a guarantee and security agreement
and  pledge  agreements,  by  substantially  all of the assets of Ascent and its
subsidiaries  (excluding the capital stock and the assets of AICT,  FLICA,  NFL,
NFIC,  NCM,  Ascent Funding,  Inc. and Ascent  Management,  Inc., some or all of
which is pledged as collateral to LaSalle Bank NA  ("LaSalle")  for  receivables
financing).  Ascent's  subsidiaries  (other than those  listed  above) have also
guaranteed  Ascent's  obligations  under the credit  agreement  and the loan. In
connection  with the $11 million loan,  LaSalle waived certain events of default
and amended  various  agreements  related to receivables  financing  provided by
LaSalle.  Debt  covenants  under the  credit  agreement  related  to the new $11
million loan are  substantially  similar to those under the LaSalle  receivables
financing arrangements.

NOTE 4 - PREFERRED STOCK

Dividends  on the  Company's  preferred  stock are  payable  in cash or  through
issuance of additional  shares of preferred stock, at the Company's  option.  At
March 31, 2001, the Company accrued preferred stock dividends of $709,941.

NOTE 5 - COMMITMENTS AND CONTINGENCIES

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

NOTE 6 - IMPLEMENTATION OF NEW ACCOUNTING PRONOUNCEMENTS

In 1998, the National  Association of Insurance  Commissioners  ("NAIC") adopted
the Codification of Statutory Accounting Principles guidance, which will replace
the current  Accounting  Practices and  Procedures  manual as the NAIC's primary
guidance on statutory  accounting.  The Codification provides guidance for areas
where  statutory  accounting  has been  silent  and  changes  current  statutory
accounting in certain areas.  The Insurance  Department of the State of Domicile
of the Company's Insurance  Subsidiaries has adopted the Codification  effective
January 1, 2001.  Codification  guidance  did not  materially  impact  statutory
surplus of the Company's Insurance Subsidiaries.

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

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


<PAGE>


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


GENERAL

The following discussion provides management's assessment of financial condition
at March 31, 2001 as compared to December 31, 2000 and results of operations for
the three months ended March 31, 2001 as compared to the comparable  2000 period
for the  Company.  This  discussion  updates the  "Management's  Discussion  and
Analysis of Financial Condition and Results of Operations" in the Company's 2000
Report on Form 10-K and should be read in conjunction therewith.

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

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

x    Comprehensive  major medical  products are generally  designed to reimburse
     insureds for eligible expenses incurred for hospital confinement,  surgical
     expenses,   physician  services,   outpatient  services  and  the  cost  of
     medicines.

x    Hospital/surgical major medical products are similar to comprehensive major
     medical  products  except that  benefits  are limited to  hospital/surgical
     services   (services  such  as  routine  well  care  physician  visits  and
     prescription drugs are excluded) and deductibles and coinsurance provisions
     are generally higher.

x    Supplemental  specified  disease  products include  indemnity  policies for
     hospital  confinement  and  convalescent  care for  treatment  of specified
     diseases and "event  specific"  policies,  which provide fixed  benefits or
     lump sum payments  upon  diagnosis of certain  types of internal  cancer or
     other catastrophic diseases.

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

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

x    further adverse claims  experience or other events adversely  impacting the
     Company's liquidity position,
x    actions that may be taken by insurance regulatory authorities,
x    adverse  developments  in the timing or results  of the  Company's  current
     strategic  business plan to return operations to profitability by improving
     claims experience and reducing overhead expenses,
x    the loss of key personnel,
x    and the  effect of  changing  economic  and market  conditions,  especially
     medical expense inflation and health care reform initiatives.

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

<PAGE>


OPERATING RESULTS

Results of  operations  for Ascent are reported for the three months ended March
31, 2001 and 2000. (In thousands except insurance operating ratios.)
<TABLE>

                                                              Three Months Ended
                                                                       March 31,
                                                     -------------------------------------
                                                           2001                 2000
                                                     -----------------    ----------------

<S>                                                  <C>                  <C>
Premiums                                             $     31,974         $    29,005


Other                                                         902                 685
                                                     -----------------    ----------------
Total insurance operating revenue                          32,876              29,690
                                                     -----------------    ----------------

Benefits and claims                                        24,817              23,682
Commissions                                                 4,861               4,575
Increase in deferred acquisition costs                     (1,117)             (1,707)
General and administrative expense                          7,191               5,876
Taxes, licenses and fees                                      905                 952
                                                     -----------------    ----------------

Total insurance operating expenses                         36,657              33,378

                                                     -----------------    ----------------
     Insurance Operating Results                           (3,781)             (3,688)
                                                     -----------------    ----------------

Fee and service income                                      4,707               4,211
Fee and service expenses                                   (4,171)             (3,792)
                                                     -----------------    ----------------

     Fee and Service Results                                  536                 419
                                                     -----------------    ----------------

Net investment income                                       2,322               2,078
Net realized gain on investments                               42                  17
Interest expense on notes payable                            (170)                (84)
                                                     -----------------    ----------------

     Loss Before Income Taxes                              (1,051)             (1,258)

Income tax benefit                                              -                 428
                                                     -----------------    ----------------

     Net Loss                                        $     (1,051)        $      (830)
                                                     =================    ================

Insurance operating ratios*
     Benefits and claims                                     77.6%               81.6%
     Commissions                                             15.2%               15.8%
     Increase in deferred acquisition costs                  (3.5%)              (5.9%)
     General and administrative expenses                     21.9%               19.8%
     Taxes, licenses and fees                                 2.8%                3.3%
</TABLE>
*Ratios are calculated as a percent of premium with the exception of the general
and  administrative  expense  ratio  which is  calculated  as a percent of total
insurance operating revenue.


<PAGE>


Overview.  For the first quarter of 2001,  the loss before income taxes was $1.1
million   compared  to  loss  before  income  taxes  of  $1.3  million  for  the
corresponding 2000 period.  Pre-tax operating losses for both first quarter 2001
and  2000  were  attributable  to  losses  from  the  Group  Preferred  Provider
Organization  ("GPPO") product,  the principal major medical product marketed by
FLICA from 1998 to July 2000.  Losses  from the GPPO  product  were  principally
driven  by  higher  than  expected  claims  frequency.  While  the  Company  has
implemented  rate  increases  on the GPPO  product  that should  begin to reduce
losses in mid-2001,  there can be no assurance  that such rate increases will be
sufficient.  Due to losses from the GPPO product, FLICA has required significant
capital  contributions during 2000 and 2001 to comply with statutory capital and
surplus  requirements.  Continued adverse claims experience for the GPPO product
could  have a  material  adverse  impact  on  FLICA's  ability  to meet  minimum
statutory  capital  and  surplus  requirements  and  maintain  its new  business
production at current levels (see  "Liquidity,  Capital  Resources and Statutory
Capital and Surplus").

Since July 2000, the Company has been successfully marketing a new major medical
policy in all  significant  marketing  regions.  The new major medical policy is
designed to produce a  substantially  lower benefits and claims to premium ratio
than the old GPPO product.  At March 31, 2001,  annualized premiums in force for
the new major medical policy were $13.8 million.

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

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

                                                     Three Months Ended
                                                            March 31,
                                              ----------------------------------
                                                    2001               2000
                                              ----------------    --------------

   Major medical:
        First-year                            $     7,178         $     6,218
        Renewal                                    12,108               8,564
                                              ----------------    --------------
           Subtotal                                19,286              14,782
                                              ----------------    --------------

   Supplemental specified disease:
        First-year                                    246                 374
        Renewal                                     6,595               6,801
                                              ----------------    --------------
           Subtotal                                 6,841               7,175
                                              ----------------    --------------

   Medicare supplement:
        First-year                                      -                   -
        Renewal                                     5,183               6,469
                                              ----------------    --------------
           Subtotal                                 5,183               6,469
                                              ----------------    --------------

   Other                                              664                 579
                                              ----------------    --------------
   Consolidated Premium Revenue               $    31,974         $    29,005
                                              ================    ==============

Total  premiums  increased by $3.0 million,  or 10.2%,  for the first quarter of
2001 as  compared  to the  first  quarter  of 2000  as new  business  production
exceeded the expected decline in renewal  premiums from older,  closed blocks of
business.  Premiums from the GPPO major medical product, for which marketing was
discontinued  in July 2000,  were $10.2  million and $8.0  million for the three
months ended March 31, 2001 and 2000,  respectively.  The Company is principally
marketing  major medical  products.  No Medicare  Supplement  products are being
marketed.



<PAGE>


Benefits and Claims.  Benefits and claims are comprised of (1) claims paid,  (2)
changes in the claim reserves for claims incurred (whether or not reported), and
(3) changes in future policy benefit reserves.  The ratio of benefits and claims
to  premiums  decreased  for the first  quarter  of 2001  compared  to the first
quarter of 2000 due primarily to improved experience for supplemental  products.
Incurred benefit and claims  experience for the GPPO major medical product,  for
which  marketing was  discontinued in July 2000, was  significantly  higher than
pricing  assumptions for both the first quarter of 2001 and 2000. Adverse claims
experience  for the old GPPO  product  has been  primarily  due to  higher  than
expected claims frequency.  Continued adverse claims experience for the old GPPO
product could have a material  adverse impact on FLICA's ability to meet minimum
statutory capital and surplus requirements (See "Liquidity,  Capital,  Resources
and Statutory Capital and Surplus").

General and Administrative  Expense.  For the first quarter of 2001, general and
administrative  expenses  increased  over  the  comparable  2000  period  by 2.1
percentage points which reduced insurance operating results by approximately $.7
million.  The increase was due  principally to amortization of the Company's new
policy  administration  and claims data processing  systems and increases in the
allowance for agent balances.

FINANCIAL CONDITION

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

                                               March 31, 2001                   December 31, 2000
                                        -----------------------------    ------------------------------
                                            Market                          Market
Fixed Maturity Securities                    Value            %              Value              %
--------------------------------------- -------------    ------------    --------------    ------------
                                        (in thousands)                   (in thousands)
U.S. Government and governmental
     agencies and authorities (except
<S>                                     <C>                 <C>          <C>                   <C>
     mortgage-backed)                   $   10,597          11.0         $    10,462           10.4
Finance                                     23,164          24.0              23,445           23.3
Public utilities                             6,382           6.6               6,787            6.7
Mortgage-backed                             11,155          11.6              13,302           13.2
States, municipalities and political
     subdivisions                            2,006           2.1               1,982            2.0
All other corporate bonds                   43,205          44.7              44,612           44.4
                                        -------------    ------------    --------------    --------------
        Total fixed maturity securities $   96,509         100.0         $   100,590          100.0
                                        =============    ============    ==============    ==============
</TABLE>

The following  table  indicates by rating the composition of the Company's fixed
maturity securities portfolio, excluding short-term investments and certificates
of  deposit.  Ratings  are the lower of those  assigned by Standard & Poor's and
Moody's, when available,  and are shown in the table using the Standard & Poor's
rating scale.  Unrated  securities are assigned  ratings based on the applicable
NAIC's  designation or the rating assigned to comparable debt outstanding of the
same issuer.  NAIC 1 fixed maturity  securities have been classified as "A" (and
above) and NAIC 2 fixed maturity securities have been classified as "BBB".


<PAGE>


<TABLE>

                                                       March 31, 2001                  December 31, 2000
                                              ------------------------------    -----------------------------
Composition of Fixed Maturity                    Market                            Market
Securities by Rating                              Value             %               Value             %
--------------------------------------------- -------------    -------------    --------------   ------------
                                              (in thousands)                    (in thousands)
Ratings
-------
Investment grade:
<S>                                           <C>                  <C>          <C>               <C>
     U.S. Government and agencies             $   20,232           21.0         $   22,754          22.6
     AAA                                           3,396            3.5              2,885           2.9
     AA                                            7,597            7.9              8,305           8.3
     A                                            35,989           37.3             38,552          38.3
     BBB                                          27,798           28.8             27,168          27.0
Non-Investment grade:
     BB                                              658            0.7                674           0.7
     B and below                                     839            0.8                252           0.2
                                              -------------    -------------    -------------    ------------
        Total fixed maturity securities       $   96,509          100.0         $  100,590         100.0
                                              =============    =============    =============    ============
</TABLE>

The scheduled contractual maturities of the Company's fixed maturity securities,
excluding short-term  investments and certificates of deposit, at March 31, 2001
and  December  31, 2000 are shown in the table below.  Expected  maturities  may
differ from contractual  maturities because borrowers may have the right to call
or prepay obligations with or without penalties.
<TABLE>

                                                     March 31, 2001                 December 31, 2000
                                              ----------------------------    ----------------------------
Composition of Fixed Maturity                     Market                          Market
Securities by Maturity                             Value            %              Value           %
--------------------------------------------- -------------    -----------    -------------    -----------
                                              (in thousands)                  (in thousands)
Scheduled Maturity

<S>                                           <C>                 <C>        <C>                 <C>
Due in one year or less                       $    6,888            7.1       $    7,073            7.0
Due after one year through five years             27,334           28.3           28,877           28.7
Due after five years through ten years            26,240           27.2           26,327           26.2
Due after ten years                               24,892           25.8           25,011           24.9
Mortgage-backed and asset-backed securities       11,155           11.6           13,302           13.2
                                              -------------    -----------    -------------    -----------
        Total fixed maturity securities       $   96,509          100.0       $  100,590          100.0
                                              =============    ===========    =============    ===========
</TABLE>


Claim  Reserves.  Claim  reserves  are  established  by the  Company for benefit
payments which have already been incurred by the policyholder but which have not
been paid by the Company. Claim reserves totaled $39.7 million at March 31, 2001
as compared to $42.8  million at December  31, 2000.  The process of  estimating
claim  reserves  involves  the active  participation  of  experienced  actuarial
consultants with input from the underwriting,  claims, and finance  departments.
The  inherent  uncertainty  in  estimating  claim  reserves  is  increased  when
significant  changes  occur.  Examples of such changes  include:  (1) changes in
economic  conditions;  (2)  changes  in state or federal  laws and  regulations,
particularly  insurance reform measures;  (3) changes in production  sources for
existing lines of business;  (4) writings of significant  blocks of new business
and (5)  significant  changes  in claims  payment  patterns.  As a result of the
implementation of a new claims  administration system in May 2000, the Company's
claims  payment  pattern  has  accelerated,  which  resulted  in  a  significant
reduction in pending claims inventory at March 31, 2001 from historical  levels.
This significant  change in the claims payment pattern has greatly increased the
inherent  uncertainty in estimating  claim reserves.  Because claim reserves are
estimates,  management  monitors  reserve  adequacy  over time,  evaluating  new
information as it becomes  available and adjusting  claim reserves as necessary.
Such adjustments are reflected in current operations.

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

Future Policy Benefit  Reserves.  Future policy benefit reserves are established
by the Company for benefit  payments  that have not been  incurred but which are
estimated to be incurred in the future.  Future policy benefit  reserves totaled
$62.5  million at March 31, 2001 as compared  to $61.3  million at December  31,
2000.  Future policy benefit reserves are calculated  according to the net level
premium  reserve  method and are equal to the  discounted  present  value of the
Company's  expected future  policyholder  benefits minus the discounted  present
value of its expected  future net premiums.  These present value  determinations
are based upon assumed fixed investment yields, the age of the insured(s) at the
time of policy issuance,  expected morbidity and persistency rates, and expected
future  policyholder  benefits.  Except for  purposes of  reporting to insurance
regulatory  authorities  and for tax filing,  the Company's  claim  reserves and
policy benefit reserves are determined in accordance with GAAP.

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

The Company's  policy benefit reserve  requirements are also  interrelated  with
product  pricing and  profitability.  The Company  must price its  products at a
level sufficient to fund its policyholders benefits and still remain profitable.
Because the  Company's  claim and  policyholder  benefits  represent  the single
largest category of its operating expenses, inaccuracies in the assumptions used
to estimate  the amount of such  benefits  can result in the Company  failing to
price its products appropriately and to generate sufficient premiums to fund the
payment thereof. The increases in claim ratios experienced by the Company during
2000 and into  2001 were  indicative  of  inadequate  pricing  in the  Company's
principal major medical product marketed through June 2000.

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



LIQUIDITY, CAPITAL RESOURCES AND STATUTORY CAPITAL AND SURPLUS

Ascent.   Ascent's  principal  assets  consist  of  the  capital  stock  of  its
subsidiaries  and invested  assets.  Accordingly,  Ascent's sources of funds are
primarily  comprised of dividends and advances from non-insurance  subsidiaries.
The  Company's  principal  uses of cash  are for  capital  contributions  to its
Insurance  Subsidiaries  and general and  administrative  expenses.  The Company
funded  capital  contributions  to its  Insurance  Subsidiaries  of $4.3 million
during the three months ended March 31, 2001 as compared to $2.0 million for the
corresponding prior year period. As of March 31, 2001, Ascent held approximately
$1.7 million in unrestricted cash and invested assets.

During the first quarter 2001, the Company  determined  that  continued  adverse
claims  experience for the old GPPO product would require Ascent to make capital
contributions  to FLICA in excess of those originally  planned.  Ascent obtained
financing  (see below) and  contributed  an  additional  $11 million to FLICA in
April 2001 to enable FLICA to comply with minimum  statutory capital and surplus
requirements  promulgated  by the states of Texas and  Florida.  If the  adverse
claims  experience  for  the  old  GPPO  product  exceeds  management's  current
estimates,  Ascent would be required to make additional capital contributions to
FLICA in excess of those  currently  projected  for 2001.  Additional  financing
would be required by Ascent in order to make any such "excess" contributions. As
a result,  continued adverse claims experience for the old GPPO product or other
products  written by the Insurance  Subsidiaries  could have a material  adverse
effect on  Ascent's  liquidity  and  capital  resources  and,  due to  potential
restrictions on the ability of FLICA to underwrite new policies,  its results of
operations.

Ascent  received  debt  financing  for  the  $11  million  capital  contribution
described  above  from a loan  made by Credit  Suisse  First  Boston  Management
Corporation,  which is an  affiliate  of Special  Situations  Holdings,  Inc. --
Westbridge (Ascent's largest stockholder). The credit agreement relating to that
loan provided  Ascent with total loan  commitments  of $11 million (all of which
has been drawn).  The loan bears interest at a rate of 12% per annum and matures
in April,  2004.  Absent any  acceleration  following  an event of default,  the
Company may elect to pay interest in kind by issuance of additional  notes.  The
credit  agreement  relating  to the loan  provides  for a  facility  fee of $1.5
million which is payable upon maturity or upon a change in control,  as defined.
Ascent's obligations are secured, pursuant to a guarantee and security agreement
and  pledge  agreements,  by  substantially  all of the assets of Ascent and its
subsidiaries  (excluding the capital stock and the assets of AICT,  FLICA,  NFL,
NFIC, NCM, Ascent Funding  Corporation and Ascent Management,  Inc., some or all
of which is pledged as collateral for receivables  financing  described  below).
Ascent's  subsidiaries  (other than those  listed  above)  have also  guaranteed
Ascent's  obligations under the credit agreement and the loan. Continued adverse
claims  experience  for the old GPPO  product  could result in events of default
under the credit agreement and related agreements.

Dividends on Ascent's Redeemable Convertible Preferred Stock ("Preferred Stock")
may be paid in cash or by issuance of additional  shares of Preferred  Stock, at
the Company's option. For the three months ended March 31, 2001, preferred stock
dividends of approximately $710,000 were accrued.

Insurance   Subsidiaries.   The  primary  sources  of  cash  for  the  Insurance
Subsidiaries  are  premiums,   sales  and  maturities  of  invested  assets  and
investment  income  while the  primary  uses of cash are  benefits  and  claims,
commissions,  general and administrative expenses, and taxes, licenses and fees.
Cash  contributions of $15.3 million were funded in 2001, through April 2001, by
Ascent to its  Insurance  Subsidiaries  to maintain  capital  and  surplus  (see
"Ascent"  discussion  above).  The  Company's  Insurance  Subsidiaries  recorded
combined  statutory  losses of $9.7 million for the first quarter 2001 and $17.0
million for the twelve  months ended  December 31, 2000.  The  statutory  losses
resulted from 1) higher than expected claims and benefits for the old GPPO major
medical product (see "Operating Results") and 2) costs associated with increased
new business  production which must be expensed under statutory  accounting (for
GAAP, such costs are deferred and amortized as related premiums are recorded).

Dividends  paid by the Company's  Insurance  Subsidiaries  are determined by and
subject to the  regulations of the insurance laws and practices of the insurance
department of the state of domicile.  The Insurance  Subsidiaries  are precluded
from  paying  dividends  during  2001  without  the prior  approval of the Texas
Insurance Commissioner as the Companies' earned surplus is negative.

Inflation will affect claim costs on the Company's Medicare supplement and major
medical  products.  Costs  associated  with a  hospital  stay  and  the  amounts
reimbursed by the Medicare  program are each  determined,  in part, based on the
rate of inflation.  If hospital and other  medical costs that are  reimbursed by
the Medicare program increase,  claim costs on the Medicare  supplement products
will  increase.  Similarly,  as the hospital and other medical  costs  increase,
claim  costs on the major  medical  products  will  increase.  The  Company  has
somewhat   mitigated  its  exposure  to  inflation  by   incorporating   certain
limitations on the maximum  benefits which may be paid under its policies and by
filing for premium rate increases as necessary.

Consolidated.  The Company's  consolidated net cash used for operations  totaled
$3.8  million  and  $1.6  million  for  the  first  quarter  of 2001  and  2000,
respectively.   The  decrease  in  cash  flow  from   operations  was  primarily
attributable  to an increase  in the cash basis ratio of benefits  and claims to
premiums.  Net cash  provided by investing  activities  for the first quarter of
2001 and 2000 totaled $5.6 million and $1.3 million, respectively. Cash provided
by investing activities was used primarily to fund operational activities.

Net cash (used for) provided by financing  activities totaled $(0.2) million and
$0.6  million for the first  quarter of 2001 and 2000,  respectively.  Financing
activities  during  the  first  quarter  of 2001  include  $0.1  million  in net
repayments  related to the  Company's  Receivables  Financing  Program  (defined
below)  and $0.1  million  in  repayments  related  to the term  loan  facility.
Financing  activities for the corresponding period in 2000 included $0.7 million
of borrowings  related to the Company's  Receivables  Financing Program and $0.1
million of repayments under the term loan facility.

In the ordinary course of business, the Company advances commissions on policies
written by its general agencies and their agents.  The Company is reimbursed for
these advances from the  commissions  earned over the respective  policy's life.
The Company finances the majority of its obligations to make commission advances
through Ascent Funding Corporation  ("AFI"), an indirect wholly owned subsidiary
of Ascent. AFI has entered into a Credit Agreement (the "Credit Agreement") with
LaSalle Bank, NA ("LaSalle")  which  currently  provides AFI with a $7.5 million
revolving loan facility (the "Receivables Financing"), the proceeds of which are
used to  purchase  agent  advance  receivables  from  FLICA and NFL and  certain
affiliated  marketing  companies.  The Credit Agreement expires June 5, 2002, at
which time the  outstanding  principal and interest will be due and payable.  At
March 31,  2001,  approximately  $6.1 million was  outstanding  under the Credit
Agreement.

AFI's  obligations  under  the  Credit  Agreement  are  secured  by  liens  upon
substantially all of AFI's assets.  The Company has guaranteed AFI's obligations
under the Credit  Agreement,  and has pledged all of the issued and  outstanding
shares of the capital stock of AFI, NFL,  FLICA and NFIC as collateral  for that
guaranty (the "Guaranty Agreement"). As of May 11, 2001, there were no events of
default  under the Credit or Guaranty  Agreements.  However,  continued  adverse
claims  experience for the old GPPO major medical product could result in events
of default under the Guaranty Agreement, Credit Agreement and term loan facility
discussed below.

In July 1999, Ascent  Management,  Inc. ("AMI") entered into a $3.3 million term
loan  facility  with  LaSalle,  proceeds  of  which  were  used to  fund  system
replacement  costs.  Advances  under  the term  loan  facility  are  secured  by
substantially all of AMI's assets and the Guaranty Agreement. Under the terms of
the loan,  principal  is  payable  in 60 equal  monthly  installments  beginning
January 31, 2000. At March 31, 2001,  approximately $2.6 million was outstanding
under the term loan facility.




<PAGE>


                             ASCENT ASSURANCE, INC.

                                     PART II

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

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

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

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

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

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

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

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

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

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

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

10.3 1999  Stock  Option  Plan  dated  as of March  24,  1999  (incorporated  by
     reference to the Company's  Schedule 14A filed with the Commission on April
     30, 1999).

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

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

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

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

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

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

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

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

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

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

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

10.15Credit  Agreement dated April 17, 2001 between Ascent  Assurance,  Inc. and
     Credit  Suisse  First  Boston  Management   Corporation   (incorporated  by
     reference to Exhibit 10.1 to the Company's Form 8-K filed April 25, 2001).

10.16Guaranty  and  Security  Agreement  dated April 17,  2001 among  Foundation
     Financial  Services,  Inc.,   NationalCare(R)Marketing,   Inc.,  LifeStyles
     marketing Group,  Inc.,  Precision Dialing Service,  Inc., Senior Benefits,
     L.L.C.,  and  Westbridge  Printing  Services,  Inc. and Credit Suisse First
     Boston management Corporation (incorporated by reference to Exhibit 10.2 to
     the Company's Form 8-K filed April 25, 2001).

10.17Pledge  Agreement dated April 17, 2001 between Ascent  Assurance,  Inc. and
     Credit  Suisse  First  Boston  Management   Corporation   (incorporated  by
     reference to Exhibit 10.3 to the Company's Form 8-K filed April 25, 2001).

10.18Sixth  Amendment  to  Guaranty  Agreement  and Waiver  dated April 17, 2001
     between  Ascent  Assurance  Inc.  and  LaSalle  Bank  National  Association
     (incorporated  by reference to Exhibit 10.4 to the Company's Form 8-K filed
     April 25, 2001).

10.19Fourth  Amendment to Credit  Agreement  dated April 17, 2001 between Ascent
     Funding,  Inc.  and LaSalle  Bank  National  Association  (incorporated  by
     reference to Exhibit 10.5 to the Company's Form 8-K filed April 25, 2001).

(b) Reports on Form 8-K

No Reports on Form 8-K were filed during the quarter ended March 31, 2001.




<PAGE>






                                                                       Form 10-Q



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



                                   ASCENT ASSURANCE, INC.




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
















Dated at Fort Worth, Texas
May 11, 2001