SECURITIES AND EXCHANGE COMMISSION
                                           WASHINGTON, D.C. 20549

# FORM 10-Q

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

For Quarterly Period Ended September 30, 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)

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

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; 50,606,876
shares outstanding at November 2, 2004.



---

# ASCENT ASSURANCE, INC. 

INDEX TO FORM 10-Q

---

|PART I  FINANCIAL INFORMATION | Page No.
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|PART II  OTHER INFORMATION    |         
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# ASCENT ASSURANCE, INC.CONDENSED CONSOLIDATED BALANCE SHEETS

|                                                                         |                                  | 
|------------------------------------------------------------------------ | -------------------------------- | 
|                                                                         | September 30,2004(Unaudited)     | 
|                                                                         |                                  | 
|                                                                         | (inthousands, except share data)
|Assets                                                                   |                                  | 
|Investments:                                                             |                                  | 
|Fixed Maturities:                                                        |                                  | 
|Available-for-sale, at market value (amortized cost $97,502 and $93,922) |                                  | 
|Short-term investments                                                   |                                  | 
|Other investments, at market value (cost $353 and $383)                  |                                  | 
|                                                                         |                                  | 
|Total Investments                                                        |                                  | 
|Cash                                                                     |                                  | 
|Accrued investment income                                                |                                  | 
|Receivables from agents, net of allowance for doubtful accounts          |                                  | 
|of $3,589 and $3,439                                                     |                                  | 
|Deferred policy acquisition costs, net                                   |                                  | 
|Property and equipment, net of accumulated depreciation                  |                                  | 
|of $5,765 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                                                    |                                  | 
|Notes payable to related party                                           |                                  | 
|                                                                         |                                  | 
|Total Liabilities                                                        |                                  | 
|                                                                         |                                  | 
|Stockholders' Equity:                                                    |                                  | 
|Redeemable convertible Series B preferred stock ($1,000                  |                                  | 
|stated value, 40,000 shares authorized, 37,504 shares                    |                                  | 
|issued and outstanding at December 31, 2003)                             |                                  | 
|Common stock ($0.01 par value, 75,000,000 and 30,000,000                 |                                  | 
|shares authorized; 50,606,876 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 EndedSeptember 30,       |  | Nine Months EndedSeptember 30,
|                                                  | 2004                                  |  | 2003                           |       
|                                                  |                                       |  |                                |       
|                                                  | (in thousands, except per share data)
|Revenues:                                         |                                       |  |                                |       
|Premiums:                                         |                                       | 
|First-year premium                                |                                       |  | $                              | 4,036 
|Renewal premium                                   |                                       |  |                                | 19,054
|                                                  |                                       |  |                                |       
|Total premiums                                    |                                       |  |                                | 23,090
|Net investment income                             |                                       |  |                                | 1,362 
|Fee and service income                            |                                       |  |                                | 882   
|Other insurance revenues                          |                                       |  |                                | 448   
|Net realized (loss) gain on investments           |                                       |  |                                | (15   
|                                                  |                                       |  |                                |       
|Total revenues                                    |                                       |  |                                | 25,767
|                                                  |                                       |  |                                |       
|Benefits, claims and expenses:                    |                                       | 
|Benefits and claims                               |                                       |  |                                | 14,842
|Change in deferred policy acquisition costs       |                                       |  |                                | 429   
|Commissions                                       |                                       |  |                                | 2,507 
|General and administrative expenses               |                                       |  |                                | 5,454 
|Fee and service operating expenses                |                                       |  |                                | 666   
|Special executive compensation and severance      |                                       |  |                                | 3,035 
|Taxes, licenses and fees                          |                                       |  |                                | 843   
|Interest expense on notes payable                 |                                       |  |                                | 260   
|Interest expense on redeemable preferred stock    |                                       |  |                                | -     
|                                                  |                                       |  |                                |       
|Total expenses                                    |                                       |  |                                | 28,036
|(Loss) income from continuing operations          |                                       | 
|before income taxes                               |                                       |  |                                | (2,269
|Federal income taxes                              |                                       |  |                                | -     
|                                                  |                                       |  |                                |       
|(Loss) income from continuing operations          |                                       |  |                                | (2,269
|                                                  |                                       |  |                                |       
|Loss from discontinued operations, including loss |                                       | 
|on disposal in 2004 of ($1,206)                   |                                       |  |                                | (1,458
|Federal income taxes                              |                                       |  |                                | -     
|                                                  |                                       |  |                                |       
|Loss from discontinued operations                 |                                       |  |                                | (1,458
|                                                  |                                       |  |                                |       
|Net loss                                          |                                       |  |                                | (3,727
|Preferred stock dividends                         |                                       |  |                                | -     
|                                                  |                                       |  |                                |       
|Loss applicable to common stockholders            |                                       |  | $                              | (3,727
|                                                  |                                       |  |                                |       
|Basic and diluted loss from continuing            |                                       | 
|operations                                        |                                       | 
|per common share                                  |                                       |  | $                              | (.04  
|                                                  |                                       |  |                                |       
|Basic and diluted loss per common share           |                                       |  | $                              | (.07  
|                                                  |                                       |  |                                |       
|Weighted average shares outstanding:              |                                       | 
|Basic and diluted                                 |                                       |  |                                | 50,561
|                                                  |                                       |  |                                |       

See
the Notes to the Condensed Consolidated Financial Statements.



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

|                                                     |                                 |  |                                |       
|---------------------------------------------------- | ------------------------------- |  | ------------------------------ | ------
|                                                     | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                                     | 2004                            |  | 2003                           |       
|                                                     |                                 |  |                                |       
|                                                     | (in thousands)                 
|                                                    
|Net loss                                             |                                 |  | $                              | (3,727
|Other comprehensive income (loss):                   |                                 | 
|Unrealized holding gain (loss) arising during period |                                 |  |                                | 2,464 
|Reclassification adjustment of loss (gain) on sales  |                                 | 
|of investments included in net loss                  |                                 |  |                                | 15    
|                                                     |                                 |  |                                |       
|Comprehensive loss                                   |                                 |  | $                              | (1,248
|                                                     |                                 |  |                                |       

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)

|                                                                                      |                                              |              |                          |                        |                   |                    |         |       
|------------------------------------------------------------------------------------- | -------------------------------------------- | ------------ | ------------------------ | ---------------------- | ----------------- | ------------------ | ------- | ------
|                                                                                      | RedeemableConvertibleSeries BPreferred Stock | Common Stock | Capital in Excess of Par | AccumulatedOther Comp. | Retained(Deficit) | TotalStockholders'
|                                                                                      |                                              |              |                          | Shares                 |                   |                    | Amount  |       
|                                                                                      |                                              |              |                          |                        |                   |                    |         |       
|Balance at January 1, 2004                                                            |                                              |              |                          | 37,504                 |                   | $                  | 37,504  |       
|Net loss                                                                              |                                              |              |                          |                        | (2,607            | )                  |         | (2,607
|Series B preferred stock dividends                                                    |                                              |              |                          |                        | 430               |                    |         |       
|Other comprehensive income                                                            |                                              |              |                          |                        | 131               |                    |         |       
|Amortization of unearned     compensation                                             |                                              |              |                          |                        | 1                 |                    |         |       
|Minority interest in subsidiary                                                       |                                              |              |                          |                        | (17               | )                  |         | (17   
|Common stock issued                                                                   |                                              |              |                          |                        | 79,750            |                    |         | 1     
|Conversion of Series B redeemable     convertible preferred stock     to common stock |                                              |              |                          | (37,504                | )                 |                    | (37,504 | )     
|                                                                                      |                                              |              |                          |                        |                   |                    |         |       
|Balance at September 30, 2004                                                         |                                              |              |                          | -                      |                   | $                  | -       |       
|                                                                                      |                                              |              |                          |                        |                   |                    |         |       



See the Notes to the
Condensed Consolidated Financial Statements.



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

|                                                            |                                 |  |                                |       
|----------------------------------------------------------- | ------------------------------- |  | ------------------------------ | ------
|                                                            | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                                            | 2004                            |  | 2003                           |       
|                                                            |                                 |  |                                |       
|                                                            | (in thousands)                 
|Cash Flows From Operating Activities:                       |                                 |  |                                |       
|Net loss                                                    |                                 |  | $                              | (3,727
|Adjustments to reconcile net loss to cash                   |                                 | 
|(used for) provided by operating activities:                |                                 | 
|(Increase) decrease in accrued investment income            |                                 |  |                                | (2    
|Decrease in deferred policy acquisition costs               |                                 |  |                                | 429   
|(Increase) decrease in receivables from agents              |                                 |  |                                | (70   
|Provision for uncollectible agent receivables               |                                 |  |                                | 37    
|(Increase) decrease in other assets                         |                                 |  |                                | (348  
|Decrease in policy liabilities and accruals                 |                                 |  |                                | (1,599
|Increase in accounts payable and other liabilities          |                                 |  |                                | 4,197 
|Interest expense on redeemable convertible                  |                                 | 
|preferred stock                                             |                                 |  |                                | -     
|Interest expense on note payable to related party           |                                 |  |                                | 245   
|Other, net                                                  |                                 |  |                                | 424   
|                                                            |                                 |  |                                |       
|Net Cash (Used for) Provided by Operating Activities        |                                 |  |                                | (414  
|                                                            |                                 |  |                                |       
|Cash Flows From Investing Activities:                       |                                 | 
|Purchases of fixed maturity investments                     |                                 |  |                                | (3,522
|Sales of fixed maturity investments                         |                                 |  |                                | 476   
|Maturities and calls of fixed maturity investments          |                                 |  |                                | 3,138 
|Cost of equity securities purchased                         |                                 |  |                                | -     
|Sale of equity securities                                   |                                 |  |                                | -     
|Net decrease (increase) in short-term and other investments |                                 |  |                                | 288   
|Property and equipment purchased                            |                                 |  |                                | (20   
|                                                            |                                 |  |                                |       
|Net Cash Provided by (Used for) Investing Activities        |                                 |  |                                | 360   
|                                                            |                                 |  |                                |       
|Cash Flows from Financing Activities:                       |                                 | 
|Retire Series B redeemable convertible preferred            |                                 | 
|stock upon conversion to 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) Increase in Cash During Period                   |                                 |  |                                | (54   
|Cash at Beginning of Period                                 |                                 |  |                                | 1,207 
|                                                            |                                 |  |                                |       
|Cash at End of Period                                       |                                 |  | $                              | 1,153 
|                                                            |                                 |  |                                |       

See
the Notes to the Condensed Consolidated Financial Statements.



ASCENT ASSURANCE, INC.NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 30, 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) and
AmeriCare Benefits, Inc. (ACB), also wholly-owned subsidiaries. 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 $3.9 million and $4.5 million at September 30, 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 September 30, 2004 and December 31, 2003, the
Companys allowances for uncollectible commission advances were $3.6 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 3 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 Company carries a 100%
valuation allowance, and therefore no income tax expense or benefit was recognized for the
third quarters of 2004 and 2003 and for the nine months ended September 30, 2004 and 2003.
Net deferred tax assets of $18.0 million and $18.4 million at September 30, 2004 and
December 31, 2003, respectively, were 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 stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings per share
reflect the potential dilution that could occur if securities or other contracts to issue
common stock were converted or exercised. For the nine months ended September 30, 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 and diluted earnings per share as of
March 15, 2004. To include the common shares attributable to the conversion of
Ascents preferred stock in the computation of diluted earnings per share from the
beginning of 2004 would have been anti-dilutive. For the nine months ended September 30,
2004, stock options of 5,680,919 were anti-dilutive and were not included in the
computation of diluted earnings per share because to do so would have been anti-dilutive.
For the nine months ended September 30, 2003, stock options of 926,650 and the conversion
of the preferred stock 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 EndedSeptember 30,                  |  | Nine Months EndedSeptember 30,
|                                                              | 2004                                             |  | 2003                           |        | 2004
|                                                              |                                                  |  |                                |        |     
|                                                              | (amounts in thousands, except per share amounts)
|(Loss) income from continuing operations                      |                                                  |  | $                              | (2,269 | )   
|Loss from discontinued operations                             |                                                  |  |                                | (1,458 | )   
|                                                              |                                                  |  |                                |        |     
|Net loss                                                      |                                                  |  |                                | (3,727 | )   
|Preferred stock dividends                                     |                                                  |  |                                | -      |     
|                                                              |                                                  |  |                                |        |     
|Loss applicable to common stockholders                        |                                                  |  | $                              | (3,727 | )   
|                                                              |                                                  |  |                                |        |     
|Weighted average shares outstanding:                          |                                                  | 
|Basic                                                         |                                                  |  |                                | 50,561 |     
|Diluted                                                       |                                                  |  |                                | 50,561 |     
|                                                             
|Basic and diluted loss per share from continuing operations   |                                                  |  |                                | (.04   | )   
|                                                              |                                                  |  |                                |        |     
|Basic and diluted loss per share from discontinued operations |                                                  |  | $                              | (.03   | )   
|                                                              |                                                  |  |                                |        |     
|Basic and diluted loss per common share                       |                                                  |  | $                              | (.07   | )   
|                                                              |                                                  |  |                                |        |     

# 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 the issuance of additional notes.
During the nine months ended September 30, 2004, Ascent issued $712,000 in additional
notes for payment of interest in kind which increased the notes payable balance to CSFBM
at September 30, 2004 to approximately $16.0 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 in Item 2  Managements Discussion and Analysis of Financial
Condition and Results of Operations). Ascents subsidiaries (other than those listed
above) have also guaranteed Ascents obligations under the CSFBM Credit Agreement. At
September 30, 2004, there were no events of default.

# NOTE 4  CONVERSION
OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 15, 2004, Ascents
common 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 were approximately $130 and $4,500 for the three months ended
September 30, 2004 and 2003, respectively, and $1,330 and $7,200 for the nine months ended
September 30, 2004 and September 30, 2003, respectively.

The following table illustrates the
effect on the loss to common stockholders 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 EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                        | 2004                            |  | 2003                           |       
|                                        |                                 |  |                                |       
|                                        |                                
|Loss applicable to common stockholders  |                                 |  | $                              | (3,727
|Total stock-based employee compensation |                                 | 
|expense determined under fair value     |                                 | 
|based method for all awards,            |                                 | 
|net of related tax effects              |                                 |  |                                | (6    
|                                        |                                 |  |                                |       
|Pro forma loss                          |                                 |  | $                              | (3,733
|                                        |                                 |  |                                |       
|Loss per share:                         |                                 | 
|Basic - as reported                     |                                 |  | $                              | (.07  
|                                        |                                 |  |                                |       
|Basic - pro forma                       |                                 |  | $                              | (.07  
|                                        |                                 |  |                                |       
|Diluted - as reported                   |                                 |  | $                              | (.07  
|                                        |                                 |  |                                |       
|Diluted - pro forma                     |                                 |  | $                              | (.07  
|                                        |                                 |  |                                |       

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 the loss to common stockholders 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 
DISCONTINUED OPERATIONS

During the third quarter of 2004,
Ascents management committed to a plan to sell its printing subsidiary, Westbridge
Printing Services, Inc. (WPS), and exit the printing business. Ascents
Board of Directors has approved such action. On October 29, 2004, Ascent entered into a
definitive sales agreement to sell the capital stock of WPS to an unrelated third party.
In accordance with Financial Accounting Standard No. 144 Accounting for the
Impairment or Disposal of Long-Lived Assets, the Companys printing subsidiary
is held for sale and is reported as discontinued operations as of September
30, 2004 in the accompanying consolidated condensed financial statements. The
Companys estimated loss from discontinued operations of approximately ($1.5) million
and ($1.8) million for the three and nine months ended September 30, 2004, respectively,
was comprised of an estimated ($1.2) million loss on the sale and a ($252,000) and
($637,000) operating loss from WPS for the three months and nine months ended September
30, 2004, respectively. Included in the estimated loss is a ($539,000) loss for a
contingency related to a long-term lease on which Ascent remains a lessee. The operating
losses of WPS for prior periods presented have been reflected in discontinued operations
for comparative purposes. The assets of $842,000 and liabilities of $305,000 included in
the accompanying balance sheet at September 30, 2004 that are to be transferred to the
purchaser in connection with the sale consists primarily of trade receivables, inventory,
equipment and trade payables.

# NOTE 7  SPECIAL
EXECUTIVE COMPENSATION AND SEVERANCE

Effective September 1, 2004, Benjamin
Cutler, former Chairman of Assurance Health (previously Fortis Health), was appointed
Chairman and Chief Executive Officer of Ascent. In connection with Mr. Cutlers
employment agreement, Ascent recorded a $2 million liability for deferred compensation and
$308,000 in employment expenses for the third quarter of 2004. Under the employment
agreement, Mr. Cutler also is to receive options to purchase 5,025,619 shares of
Ascents common stock and receive a liquidity performance bonus. The exercise price
of the options equals the fair market value of Ascents common shares as determined
by Ascents Board of Directors in good faith based on generally accepted industry
valuation methodologies on the Early Exercise Date as defined in Mr. Cutlers
employment agreement.

In addition, the Company paid
severance expense of approximately $727,000 to its former Chairman.

# NOTE 8 
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.

# ITEM 2 
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 September 30, 2004 as compared to
December 31, 2003 and results of operations for the three and nine months ended September
30, 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) and AmeriCare Benefits,
Inc. (ACB), also wholly-owned subsidiaries. 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 ACB 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 Financial Condition and
Results of Operation, 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 and nine months ended September 30, 2004 and 2003.
(In thousands except insurance operating ratios.)

|                                                  |                                 |  |                                |         |     
|------------------------------------------------- | ------------------------------- |  | ------------------------------ | ------- | ----
|                                                  | Three Months EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                                  | 2004                            |  | 2003                           |         | 2004
|                                                  |                                 |  |                                |         |     
|Premiums                                          |                                 |  | $                              | 23,090  |     
|Other insurance revenues                          |                                 |  |                                | 448     |     
|Net investment income                             |                                 |  |                                | 1,362   |     
|                                                  |                                 |  |                                |         |     
|Total insurance revenues                          |                                 |  |                                | 24,900  |     
|Benefits and claims                               |                                 |  |                                | 14,842  |     
|Commissions                                       |                                 |  |                                | 2,507   |     
|Change in deferred policy acquisition costs       |                                 |  |                                | 429     |     
|General and administrative expense                |                                 |  |                                | 5,454   |     
|Special executive compensation and severance      |                                 |  |                                | 3,035   |     
|Taxes, licenses and fees                          |                                 |  |                                | 843     |     
|Interest expense on bank facilities               |                                 |  |                                | 15      |     
|Interest expense on note payable to related party |                                 |  |                                | 245     |     
|Interest expense on redeemable preferred stock    |                                 |  |                                | -       |     
|                                                  |                                 |  |                                |         |     
|Total insurance operating expenses                |                                 |  |                                | 27,370  |     
|                                                  |                                 |  |                                |         |     
|Insurance operating results                       |                                 |  |                                | (2,470  | )   
|                                                  |                                 |  |                                |         |     
|Fee and service income                            |                                 |  |                                | 882     |     
|Fee and service expenses                          |                                 |  |                                | 666     |     
|                                                  |                                 |  |                                |         |     
|Fee and service results                           |                                 |  |                                | 216     |     
|                                                  |                                 |  |                                |         |     
|Net realized (loss) gain on investments           |                                 |  |                                | (15     | )   
|                                                  |                                 |  |                                |         |     
|(Loss) income from continuing operations          |                                 | 
|before income taxes                               |                                 |  |                                | (2,269  | )   
|Federal income taxes                              |                                 |  |                                | -       |     
|                                                  |                                 |  |                                |         |     
|(Loss) income from continuing operations          |                                 |  |                                | (2,269) |     
|                                                  |                                 |  |                                |         |     
|Loss from discontinued operations,including       |                                 | 
|loss on disposal in 2004 of ($1,206)              |                                 |  |                                | (1,458  | )   
|Federal income taxes                              |                                 |  |                                | -       |     
|                                                  |                                 |  |                                |         |     
|Loss from discontinued operations                 |                                 |  |                                | (1,458  | )   
|                                                  |                                 |  |                                |         |     
|Net loss                                          |                                 |  |                                | (3,727  | )   
|Preferred stock dividends                         |                                 |  |                                | -       |     
|                                                  |                                 |  |                                |         |     
|Loss applicable to common stockholders            |                                 |  | $                              | (3,727  | )   
|                                                  |                                 |  |                                |         |     
|                                                 
|Insurance operating ratios*                       |                                 |  |                                |         |     
|Benefits and claims                               |                                 |  |                                | 64.3%   |     
|Commissions                                       |                                 |  |                                | 10.9%   |     
|Change in deferred policy acquisition costs       |                                 |  |                                | 1.9%    |     
|General and administrative expenses               |                                 |  |                                | 23.2%   |     
|Taxes, licenses and fees                          |                                 |  |                                | 3.7%    |     

---

|* |  | 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 revenues
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Overview.    For the third quarter of 2004, net loss was ($3.7) million compared to a
                    net loss of ($1.0) million for the corresponding period in 2003. The ($2.7)
                    million increase in the net loss was principally due to non-recurring charges of
                    ($3.0) million for executive compensation and severance and a ($1.2) million
                    increase in loss from discontinued operations offset by a $1.3 million decrease
                    in interest expenses on notes payable to and redeemable preferred stock held by
                    related parties. For the nine months ended September 30, 2004, the net loss was
                    ($2.6) million compared to a net loss of ($477,000) for the corresponding period
                    in 2003. The ($2.1) million increase in the net loss was principally due to
                    non-recurring charges of ($3.0) million for executive compensation and severance
                    and a ($1.1) million increase in loss from discontinued operations offset by a
                    $2.0 million decrease in interest expenses on notes payable to and redeemable
                    preferred stock held by related parties.

Effective September 1, 2004, Benjamin
M. Cutler was appointed Chairman and Chief Executive Officer of the Company. In connection
with Mr. Cutlers employment agreement, the Company recorded a $2.0 million liability
for deferred compensation and $308,000 in employment expenses. In addition, the Company
paid severance expense of approximately $727,000 to its former Chairman.

In August 2004, the Company decided
to exit the printing business and subsequently entered into definitive agreement to sell
its printing subsidiary effective October 29, 2004. The loss from discontinued operations
of ($1.5) million for the third quarter of 2004 is comprised of a ($1.2) million loss on
sale of the printing subsidiary and a ($252,000) operating loss compared to a ($305,000)
operating loss for the third quarter of 2003. The loss from discontinued operations of
($1.8) million for the nine months ended September 30, 2004 is comprised of a ($1.2)
million loss on sale of the printing subsidiary and a ($637,000) operating loss compared
to a ($757,000) operating loss for the nine months ended September 30, 2003.

Interest expense on the note payable
to related party decreased due to the restructuring of the note payable on December 31,
2003 that reduced the interest rate from 12% to 6% per annum. The Companys preferred
stock was converted to common stock on March 15, 2004.

The Company reported no income tax
expense or benefit for the third quarters of 2004 and 2003 and for the nine months ended
September 30, 2004 and 2003 as the Company maintains a 100% valuation allowance for its
net deferred tax asset (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 and eliminated the requirement to
pay preferred stock dividends. 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 EndedSeptember 30, |  | Nine Months EndedSeptember 30,
|                                | 2004                            |  | 2003                           |       
|                                |                                 |  |                                |       
|Major medical:                  |                                 |  |                                |       
|First-year                      |                                 |  | $                              | 3,887 
|Renewal                         |                                 |  |                                | 10,811
|                                |                                 |  |                                |       
|Subtotal                        |                                 |  |                                | 14,698
|Supplemental specified disease: |                                 | 
|First-year                      |                                 |  |                                | 67    
|Renewal                         |                                 |  |                                | 4,908 
|                                |                                 |  |                                |       
|Subtotal                        |                                 |  |                                | 4,975 
|Medicare supplement:            |                                 | 
|Renewal                         |                                 |  |                                | 2,942 
|                                |                                 |  |                                |       
|Subtotal                        |                                 |  |                                | 2,942 
|Other                           |                                 |  |                                | 475   
|                                |                                 |  |                                |       
|Consolidated Premium Revenue    |                                 |  | $                              | 23,090
|                                |                                 |  |                                |       

Total premiums decreased ($2.5)
million, or (9.7%), for the third quarter of 2004 as compared to the third quarter of
2003. Total premiums decreased ($7.4) million, or (9.6%), for the nine months ended
September 30, 2004 as compared to the 2003 corresponding period. 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.

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 decrease in the benefits and claims ratio from 68.3%
for the third quarter of 2003 to 64.3% for the third quarter of 2004 and from 68.1% for
year to date September 30, 2003 to 65.8% for year to date September 30, 2004 is
principally attributable to improved large claim experience for 2004.

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 .3 and .8 percentage points in
          third quarter 2004 and year to date September 30, 2004, respectively, as
          compared to the corresponding prior year periods 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.

|                                                  |                    |  |                   |            
|------------------------------------------------- | ------------------ |  | ----------------- | -----------
|                                                  | September 30, 2004 |  | December 31, 2003 |            
|Fixed Maturity Securities                         |                    |  |                   | MarketValue
|                                                  |                    |  |                   |            
|                                                  | (in 000's)         |  |                   | (in 000's) 
|U.S. Government and governmental agencies         |                    |  |                   |            
|and authorities (except mortgage backed)          |                    |  | $                 | 10,644     
|Finance companies                                 |                    |  |                   | 21,325     
|Public utilities                                  |                    |  |                   | 11,358     
|Mortgage-backed securities                        |                    |  |                   | 18,875     
|States, municipalities and political subdivisions |                    |  |                   | 2,318      
|All other corporate bonds                         |                    |  |                   | 36,149     
|                                                  |                    |  |                   |            
|Total fixed maturity securities                   |                    |  | $                 | 100,669    
|                                                  |                    |  |                   |            

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

|                                                   |                    |  |                   |            
|-------------------------------------------------- | ------------------ |  | ----------------- | -----------
|                                                   | September 30, 2004 |  | December 31, 2003 |            
|Composition of Fixed Maturity Securities by Rating |                    |  |                   | MarketValue
|                                                   |                    |  |                   |            
|                                                   | (in 000's)         |  |                   | (in 000's) 
|Ratings                                            |                    | 
|Investment grade:                                  |                    | 
|U.S. Government and agencies                       |                    |  | $                 | 17,668     
|AAA                                                |                    |  |                   | 14,079     
|AA                                                 |                    |  |                   | 4,089      
|A                                                  |                    |  |                   | 33,734     
|BBB                                                |                    |  |                   | 29,272     
|Non-Investment grade:                              |                    | 
|BB                                                 |                    |  |                   | 1,293      
|B and below                                        |                    |  |                   | 534        
|                                                   |                    |  |                   |            
|Total fixed maturity securities                    |                    |  | $                 | 100,669    
|                                                   |                    |  |                   |            

The Company monitors the financial
condition and operations of securities rated below investment grade and of certain
investment grade securities on which there are concerns regarding credit quality. In
evaluating fixed maturities to determine whether any of the unrealized losses are other
than temporary, managements assessments as to the nature of declines in fair values
are based upon historical operating trends, business prospects, status of the industry in
which the company operates, analyst ratings on the issuer and sector, the quality of the
investments, the severity and duration of the unrealized losses and the Companys
ability or intent to hold the investments. If fair value is less than the carrying value
and the decline is determined to be other than temporary, an appropriate write-down is
recorded. The scheduled contractual maturities of the Companys fixed maturity
securities, excluding short-term investments and certificates of deposit, at September 30,
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.

|                                                     |                    |  |                   |            
|---------------------------------------------------- | ------------------ |  | ----------------- | -----------
|                                                     | September 30, 2004 |  | December 31, 2003 |            
|Composition of Fixed Maturity Securities by Maturity |                    |  |                   | MarketValue
|                                                     |                    |  |                   |            
|                                                     | (in 000's)         |  |                   | (in 000's) 
|Scheduled Maturity                                   |                    |  |                   |            
|Due in one year or less                              |                    |  | $                 | 1,428      
|Due after one year through five years                |                    |  |                   | 28,528     
|Due after five years through ten years               |                    |  |                   | 35,180     
|Due after ten years                                  |                    |  |                   | 16,658     
|Mortgage-backed and asset-backed                     |                    | 
|securities                                           |                    |  |                   | 18,875     
|                                                     |                    |  |                   |            
|Total fixed maturity securities                      |                    |  | $                 | 100,669    
|                                                     |                    |  |                   |            

Claim Reserves.    
Claim reserves are established by the Insurance Subsidiaries for benefit payments which
have already been incurred by the policyholder but which have not been paid by the
applicable Insurance Subsidiary. Claim reserves totaled $25.3 million at September 30,
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 $53.6
million at September 30, 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 (used for) provided by operations totaled ($414,000) and $1.8 million for
          the three and nine months ended September 30, 2004, and totaled $213,000 and
          $1.2 million for the three and nine months ended September 30, 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
Subsidiaries 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 $0.7
million during the nine months ended September 30, 2003 and made no contributions during
the nine months ended September 30, 2004. As of September 30, 2004, Ascent had
approximately $3.0 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 nine months ended September
30, 2004, Ascent issued $712,000 in additional notes for payment of interest in kind which
increased the notes payable balance to CSFBM at September 30, 2004 to approximately $16.0
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 September 30, 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 and ACB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, ACB and other affiliates. As of September 30, 2004 and
December 31, 2003, $250,000 and $500,000, respectively, were 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 September 30, 2004 are net agent receivables of $3.9
million. In addition, NCM, ACB 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 September 30, 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 September 30, 2004, the end of the period covered by this report. Based
on such evaluation, Ascents Chief Executive Officer and Chief Financial Officer have
concluded that, as of September 30, 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 control
over financial reporting.    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 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. (Incorporated by reference to Exhibit 10.39
to Ascents 10Q for the quarter ended March 31, 2004.)
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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. (Incorporated by reference to Exhibit
10.40 to Ascents 10Q for the quarter ended March 31, 2004.)
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.41* |  | First  Amendment To Credit  Agreement And Security  Agreement dated as of July 6, 2004 between Ascent  Funding,  Inc.,  Ascent
         Assurance,  Inc., NationalCare®Marketing,  Inc., AmeriCare Benefits, Inc. and Frost National Bank including exhibits to such
         agreement,  Guaranty  Agreement between AmeriCare  Benefits,  Inc. and Frost National Bank; First Restated Guaranty  Agreement
         between  NationalCare®Marketing,  Inc. and Frost  National Bank dated July 6, 2004;  First  Amendment to  Intercreditor  and
         Subordination Agreement among Frost National Bank, Credit Suisse First Boston Management,  LLC and Ascent Assurance,  Inc. and
         named subsidiaries dated as of July 6, 2004.
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.42* |  | Employment Agreement dated as of September 1, 2004 by and between Ascent Assurance, Inc. and Mr. Benjamin M. Cutler.
|------ |  | --------------------------------------------------------------------------------------------------------------------

|10.43* |  | Third  Amendment to Credit  Agreement dated  September 1, 2004 between Ascent  Assurance,  Inc. and Credit Suisse First Boston
         Management, LLC.
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

|10.44* |  | First  Amendment to Pledge  Agreement  dated October 28, 2004 between  Ascent  Assurance,  Inc. and Credit Suisse First Boston
         Management, LLC.
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------

|10.45* |  | Second  Amendment  and Consent to Guaranty  and  Security  Agreement  dated  October 28,  2004  between  Foundation  Financial
         Services,  Inc.,  NationalCare®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.
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.46* |  | Sale and Purchase Agreement dated October 29, 2004 between Ascent Assurance, Inc. and Printers Alliance, Inc.
|------ |  | -------------------------------------------------------------------------------------------------------------

|31.1* |  | Certification  of Benjamin M.  Cutler,  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 Benjamin M. Cutler, Chairman and Chief Executive Officer and Cynthia B.
Koenig, Senior Vice President, Chief Financial Officer and Treasurer of the Company
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# (b) Reports on Form 8-K

The registrant filed a Report on Form
8-K dated August 3, 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 second
quarter of 2004.

The registrant filed a Report on Form
8-K dated September 1, 2004 reporting a material definitive agreement under Item 1.01;
reporting the departure of directors or principal officers, election of directors,
appointment of principal officers under item 5.02; and attaching a copy of the
Companys press release related to the aforementioned items under Item 9.01.

* Filed Herewith



Form 10-Q

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

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



Dated at Fort Worth, TexasNovember
5, 2004