##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



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FORM 10-Q



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|  |  |                                                                                   
|- |  | ----------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  |  | For the quarterly period ended June 30, 2002                                      
|  |  |                                                                                   
|o |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  |  | For the transition period from  to                                                

Commission file number 0-23637

GLOBAL PREFERRED HOLDINGS, INC.(Exact Name of Registrant as Specified in its Charter)

|                                                               |  |                                        
|-------------------------------------------------------------- |  | ---------------------------------------
|DELAWARE                                                       |  | 58-2179041                             
|(State or other Jurisdiction of
Incorporation or Organization) |  | (I.R.S. Employer
Identification Number)

11315 JOHNS CREEK PARKWAY
DULUTH, GEORGIA 30097
(770) 248-3311(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)



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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.

x Yes        o No

As of July 31, 2002, there were 4,141,684 shares of common stock outstanding.

1



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TABLE OF CONTENTS



|                               |                                                                                               |  |  |  |  |  |  | 
|------------------------------ | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|PART II  OTHER INFORMATION   
|                               | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                               | ITEM 5. OTHER INFORMATION                                                                    
|                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                    



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##### Table of Contents



TABLE OF CONTENTS

|        |  |   |  |                                                                                       |  |   
|------- |  | - |  | ------------------------------------------------------------------------------------- |  | --
|PART I  |  |  |  | FINANCIAL INFORMATION                                                                 |  | 3 
|        |  |   |  |                                                                                       |  |   
|ITEM 1. |  |   |  | FINANCIAL STATEMENTS                                                                  |  | 3 
|        |  |   |  |                                                                                       |  |   
|ITEM 2. |  |   |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 9 
|        |  |   |  |                                                                                       |  |   
|ITEM 3. |  |   |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 19
|        |  |   |  |                                                                                       |  |   
|PART II |  |  |  | OTHER INFORMATION                                                                     |  | 19
|        |  |   |  |                                                                                       |  |   
|ITEM 1. |  |   |  | LEGAL PROCEEDINGS                                                                     |  | 19
|        |  |   |  |                                                                                       |  |   
|ITEM 2. |  |   |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                             |  | 19
|        |  |   |  |                                                                                       |  |   
|ITEM 3. |  |   |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 19
|        |  |   |  |                                                                                       |  |   
|ITEM 4. |  |   |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 19
|        |  |   |  |                                                                                       |  |   
|ITEM 5. |  |   |  | OTHER INFORMATION                                                                     |  | 20
|        |  |   |  |                                                                                       |  |   
|ITEM 6. |  |   |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |  | 20

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

GLOBAL PREFERRED HOLDINGS, INC.

Consolidated Balance Sheets

|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |            |            |             |  | 
|------------------------------------------------------------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ---------- | ---------- | ------------ | ---------- | ---------- | ---------- | ----------- |  | 
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            | December 31, |            | June 30,  
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            | 2001         |            | 2002      
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |            |            | (Unaudited)
|Assets                                                                                                                         |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|Fixed maturity securities  available for sale (amortized cost of
$11,840,749 and $10,893,954 for 2001 and 2002, respectively) |                                                                                                                                                                                     | $                          | 12,214,279 |            |            | $            | 11,322,790 |           
|Cash and cash equivalents                                                                                                      |                                                                                                                                                                                     |                            | 8,062,110  |            |            |              | 4,444,797  |           
|Investment income due and accrued                                                                                              |                                                                                                                                                                                     |                            | 172,055    |            |            |              | 145,074    |           
|Reinsurance balances receivable                                                                                                |                                                                                                                                                                                     |                            | 2,842,908  |            |            |              | 1,882,520  |           
|Reinsured policy loans                                                                                                         |                                                                                                                                                                                     |                            | 1,013,629  |            |            |              | 1,125,917  |           
|Deferred acquisition costs                                                                                                     |                                                                                                                                                                                     |                            | 42,800,269 |            |            |              | 53,088,021 |           
|Prepaid expenses                                                                                                               |                                                                                                                                                                                     |                            | 659,538    |            |            |              | 2,400,194  |           
|Current income tax recoverable                                                                                                 |                                                                                                                                                                                     |                            |           |            |            |              | 178,355    |           
|Fixed assets (net of accumulated depreciation of $147,750 and
$163,942 for 2001 and 2002, respectively)                        |                                                                                                                                                                                     |                            | 88,114     |            |            |              | 108,366    |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     | Total assets               |            | $          | 67,852,902 |              |            | $          | 74,696,034 |            
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|Liabilities and Stockholders Equity                                                                                           |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|Liabilities:                                                                                                                   |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               | Future policy benefits                                                                                                                                                              |                            | $          | 11,911,532 |            |              | $          | 15,242,756 |           
|                                                                                                                               | Reinsurance balances payable                                                                                                                                                        |                            |            | 188,818    |            |              |            | 740,701    |           
|                                                                                                                               | Accrued expenses and accounts payable                                                                                                                                               |                            |            | 544,683    |            |              |            | 876,874    |           
|                                                                                                                               | Accrued interest payable                                                                                                                                                            |                            |            | 158,219    |            |              |            | 156,678    |           
|                                                                                                                               | Current income tax payable                                                                                                                                                          |                            |            | 413,299    |            |              |            |           |           
|                                                                                                                               | Long term debt                                                                                                                                                                      |                            |            | 5,000,000  |            |              |            | 5,000,000  |           
|                                                                                                                               | Deferred tax liability                                                                                                                                                              |                            |            | 7,667,767  |            |              |            | 8,698,710  |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     | Total liabilities          |            |            | 25,884,318 |              |            |            | 30,715,719 |            
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|Stockholders equity:                                                                                                          |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               | Preferred stock, par value $2.00, 10,000,000 shares authorized;
Series A Preferred Stock, 1,000,000 shares authorized; 266,047
shares issued for 2001 and no shares issued for 2002 |                            |            | 532,094    |            |              |            |           |           
|                                                                                                                               | Common stock, par value $.001, 50,000,000 shares authorized;
3,750,000 shares and 4,149,074 shares issued for 2001 and 2002,
respectively                                           |                            |            | 3,750      |            |              |            | 4,149      |           
|                                                                                                                               | Additional paid-in capital                                                                                                                                                          |                            |            | 22,794,331 |            |              |            | 23,326,026 |           
|                                                                                                                               | Accumulated other comprehensive income                                                                                                                                              |                            |            | 246,531    |            |              |            | 283,035    |           
|                                                                                                                               | Retained earnings                                                                                                                                                                   |                            |            | 18,441,145 |            |              |            | 20,416,372 |           
|                                                                                                                               | Treasury stock, at cost (7,390 shares for 2001 and 2002,
respectively)                                                                                                              |                            |            | (49,267    | )          |              |            | (49,267    | )         
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|                                                                                                                               |                                                                                                                                                                                     | Total stockholders equity |            |            | 41,968,584 |              |            |            | 43,980,315 |            
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           
|Total liabilities and stockholders equity                                                                                     |                                                                                                                                                                                     | $                          | 67,852,902 |            |            | $            | 74,696,034 |           
|                                                                                                                               |                                                                                                                                                                                     |                            |            |            |            |              |            |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.Consolidated Statements of Income
(Unaudited)

|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |   |            |            | 
|---------------------------------------------------------------------- |  | ------------------------------------------ | ------------------------------------------- | - | ------------------ | --------- | ---------------- | - | --------- | --------- | --------- | - | ---------- | ---------- | --------- | - | ---------- | ---------- | 
|                                                                       |  |                                            |                                             |   | Three Months Ended |           | Six Months Ended
|                                                                       |  |                                            |                                             |   | June 30,           |           | June 30,        
|                                                                       |  |                                            |                                             |   |                    |           |                 
|                                                                       |  |                                            |                                             |   | 2001               |           | 2002             |   | 2001      |           | 2002     
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |          
|Revenues:                                                              |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  | Premiums                                   |                                             | $ | 4,796,161          |           |                  | $ | 4,532,290 |           |           | $ | 9,452,080  |            |           | $ | 9,089,700  |           
|                                                                       |  | Reinsured policy revenues                  |                                             |   | 2,806,558          |           |                  |   | 3,559,193 |           |           |   | 5,746,902  |            |           |   | 7,154,943  |           
|                                                                       |  | Net investment income                      |                                             |   | 205,705            |           |                  |   | 188,030   |           |           |   | 367,032    |            |           |   | 402,381    |           
|                                                                       |  | Net realized gain on investments           |                                             |   |                   |           |                  |   | (649      | )         |           |   | 5,634      |            |           |   | 7,338      |           
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            | Total revenue                               |   |                    | 7,808,424 |                  |   |           | 8,278,864 |           |   |            | 15,571,648 |           |   |            | 16,654,362 | 
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|Benefits and expenses:                                                 |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  | Benefits, claims and settlement
expenses   |                                             |   | 1,582,738          |           |                  |   | 2,638,067 |           |           |   | 3,085,477  |            |           |   | 4,671,831  |           
|                                                                       |  | Change in future policy benefits           |                                             |   | 547,936            |           |                  |   | 410,664   |           |           |   | 1,191,496  |            |           |   | 857,677    |           
|                                                                       |  | Reinsurance expense allowances, net        |                                             |   | 2,154,575          |           |                  |   | 2,124,752 |           |           |   | 4,250,411  |            |           |   | 4,334,456  |           
|                                                                       |  | Amortization of deferred
acquisition costs |                                             |   | 876,760            |           |                  |   | 1,071,799 |           |           |   | 1,879,098  |            |           |   | 2,190,504  |           
|                                                                       |  | Operating expenses                         |                                             |   | 361,819            |           |                  |   | 694,751   |           |           |   | 839,354    |            |           |   | 1,421,455  |           
|                                                                       |  | Interest expense                           |                                             |   | 93,493             |           |                  |   | 96,904    |           |           |   | 189,104    |            |           |   | 191,075    |           
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            | Total benefits and expenses                 |   |                    | 5,617,321 |                  |   |           | 7,036,937 |           |   |            | 11,434,940 |           |   |            | 13,666,998 | 
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            | Income before income tax                    |   |                    | 2,191,103 |                  |   |           | 1,241,927 |           |   |            | 4,136,708  |           |   |            | 2,987,364  | 
|                                                                       |  | Income tax expense                         |                                             |   | (742,852           | )         |                  |   | (418,688  | )         |           |   | (1,397,220 | )          |           |   | (1,012,137 | )         
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            | Net income                                  |   |                    | 1,448,251 |                  |   |           | 823,239   |           |   |            | 2,739,488  |           |   |            | 1,975,227  | 
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  | Preferred dividends                        |                                             |   | 68,881             |           |                  |   |          |           |           |   | 137,762    |            |           |   |           |           
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            | Net income available to common
shareholders |   | $                  | 1,379,370 |                  |   | $         | 823,239   |           |   | $          | 2,601,726  |           |   | $          | 1,975,227  | 
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|Basic earnings per share                                               |  | $                                          | 0.37                                        |   |                    | $         | 0.20             |   |           | $         | 0.69      |   |            | $          | 0.48      |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|Diluted earnings per share                                             |  | $                                          | 0.35                                        |   |                    | $         | 0.20             |   |           | $         | 0.66      |   |            | $          | 0.48      |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|Weighted-average common shares
outstanding                             |  |                                            | 3,742,610                                   |   |                    |           | 4,141,684        |   |           |           | 3,742,610 |   |            |            | 4,141,684 |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  
|Total weighted-average common and
common equivalent shares outstanding |  |                                            | 4,141,684                                   |   |                    |           | 4,141,684        |   |           |           | 4,141,684 |   |            |            | 4,141,684 |  
|                                                                       |  |                                            |                                             |   |                    |           |                  |   |           |           |           |   |            |            |           |  

See accompanying notes to consolidated financial statements.

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##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.Consolidated Statements of Cash Flows
(Unaudited)

|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |            |             |            |  
|------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------- | --------------------------------------------------- | ---------- | ---------------- | ---------- | --------- | ---------- | ----------- | ---------- | -
|                                                  |                                                                                                                |                                       |                                                     |            | Six Months Ended
|                                                  |                                                                                                                |                                       |                                                     |            | June 30,        
|                                                  |                                                                                                                |                                       |                                                     |            |                 
|                                                  |                                                                                                                |                                       |                                                     |            | 2001             |            | 2002     
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |          
|Cash flows from operating activities:             |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Net income                                                                                                     |                                       | $                                                   | 2,739,488  |                  |            | $         | 1,975,227  |            
|                                                  | Adjustments to reconcile net income to net cash provided by
(used in) operating activities:                    |                                       |                                                     |            |                  |            |           |            |            
|                                                  |                                                                                                                | Amortization and depreciation         |                                                     |            | 1,903,628        |            |           |            | 2,206,696   |           
|                                                  |                                                                                                                | Deferred tax expense                  |                                                     |            | 1,397,220        |            |           |            | 1,012,137   |           
|                                                  |                                                                                                                | Net realized gain on investments      |                                                     |            | (5,634           | )          |           |            | (7,338      | )         
|                                                  | Change in:                                                                                                     |                                       |                                                     |            |                  |            |           |            |            
|                                                  |                                                                                                                | Investment income due and accrued     |                                                     |            | (78,255          | )          |           |            | 26,981      |           
|                                                  |                                                                                                                | Reinsurance balances receivable       |                                                     |            | (259,267         | )          |           |            | 960,388     |           
|                                                  |                                                                                                                | Reinsured policy loans                |                                                     |            | (114,469         | )          |           |            | (112,288    | )         
|                                                  |                                                                                                                | Deferred acquisition costs            |                                                     |            | (2,398,170       | )          |           |            | (12,478,256 | )         
|                                                  |                                                                                                                | Prepaid expenses                      |                                                     |            | (119,106         | )          |           |            | (128,710    | )         
|                                                  |                                                                                                                | Current income tax recoverable        |                                                     |            |                 |            |           |            | (178,355    | )         
|                                                  |                                                                                                                | Future policy benefits                |                                                     |            | 1,676,906        |            |           |            | 3,331,224   |           
|                                                  |                                                                                                                | Reinsurance balances payable          |                                                     |            | 146,590          |            |           |            | 551,883     |           
|                                                  |                                                                                                                | Accrued expenses and accounts payable |                                                     |            | (8,393           | )          |           |            | 332,191     |           
|                                                  |                                                                                                                | Accrued interest payable              |                                                     |            | (4,678           | )          |           |            | (1,541      | )         
|                                                  |                                                                                                                | Current income tax payable            |                                                     |            | (540,625         | )          |           |            | (413,299    | )         
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  |                                                                                                                |                                       | Net
cash provided by (used in) operating activities |            |                  | 4,335,235  |           |            |             | (2,923,060 | )
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|Cash flows from investing activities:             |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Proceeds from sale and maturity of available for sale
securities                                               |                                       |                                                     | 200,000    |                  |            |           | 1,572,284  |            
|                                                  | Proceeds from maturities and principal payments on
mortgage-backed securities of available for sale securities |                                       |                                                     | 166,063    |                  |            |           | 381,491    |            
|                                                  | Purchase of available-for-sale securities                                                                      |                                       |                                                     | (7,372,415 | )                |            |           | (999,638   | )          
|                                                  | Purchase of fixed assets                                                                                       |                                       |                                                     |           |                  |            |           | (36,444    | )          
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  |                                                                                                                |                                       | Net cash provided by (used in) investing activities |            |                  | (7,006,352 | )         |            |             | 917,693    |  
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|Cash flows from financing activities:             |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Repayment of long term debt                                                                                    |                                       |                                                     | (277,285   | )                |            |           |           |            
|                                                  | Prepaid
expenses  deferred offering costs                                                                     |                                       |                                                     |           |                  |            |           | (1,611,946 | )          
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  |                                                                                                                |                                       | Net cash used in financing activities               |            |                  | (277,285   | )         |            |             | (1,611,946 | )
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  |                                                                                                                |                                       | Net decrease in cash and cash equivalents           |            |                  | (2,948,402 | )         |            |             | (3,617,313 | )
|Cash and cash equivalents at beginning of period  |                                                                                                                |                                       | 4,259,153                                           |            |                  |            | 8,062,110 |           
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|Cash and cash equivalents at end of period        |                                                                                                                | $                                     | 1,310,751                                           |            |                  | $          | 4,444,797 |           
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|Supplemental disclosure of cash flow information: |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Interest paid                                                                                                  |                                       | $                                                   | 193,782    |                  |            | $         | 192,616    |            
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Income taxes paid                                                                                              |                                       | $                                                   | 540,625    |                  |            | $         | 591,654    |            
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           
|                                                  | Change in preferred dividend accrual                                                                           |                                       | $                                                   | 137,762    |                  |            | $         |           |            
|                                                  |                                                                                                                |                                       |                                                     |            |                  |            |           |           

See accompanying notes to consolidated financial statements.

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##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
Notes to Consolidated Financial Statements
June 30, 2002
(Unaudited)

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (GAAP) for interim financial information and with
the instructions for Form 10-Q of Regulation S-K. Accordingly, they do not
include all of the information and footnotes required by GAAP for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended
June 30, 2002 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2002. The unaudited financial
statements should be read in conjunction with Global Preferreds audited
financial statements included in Global Preferreds 2001 Form 10-K/A Annual
Report as filed with the Securities and Exchange Commission.

(2) Deferred Tax

Global Preferred uses the asset and liability method to record deferred
income taxes. Accordingly, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases using an effective federal income tax rate of 34%.
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxesspecifically excludes recognition of the small life insurance
company deduction available under Section 806 of the Internal Revenue Code for
qualifying life insurance companies. This special deduction can reduce the
effective federal income tax rate from 34% to less than 20% depending upon the
amount of taxable income. Consequently, the effective tax rate on Global
Preferreds earnings may ultimately prove to be less than the deferred income
tax liabilities and related expenses determined under SFAS No. 109, at June 30,
2002.

(3) Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The primary component of other
comprehensive income is the unrealized gain (loss) on securities as shown under
the equity section of the consolidated balance sheet. Total other
comprehensive income for the three months ended June 30, 2002 was $939,840
compared to $1,416,464 for the three months ended June 30, 2001. Total other
comprehensive income for the six months ended June 30, 2002 was $2,011,731
compared to $2,791,163 for the six months ended June 30, 2001.

(4) Earnings Per Share

Basic earnings per share is computed based on the weighted-average number
of common shares outstanding during the period, in accordance with SFAS No.
128, Earnings Per Share. Shares of convertible preferred stock issued in June
and July 2000 are included in the calculations of total weighted-average common
and common equivalent shares outstanding for the three months and six months
ended June 30, 2001. The dilution effect on earnings per share from the
issuance of convertible preferred stock is shown on the consolidated statements
of income. The preferred stock converted to common stock on January 1, 2002.

(5) Common Stock

On July 12, 2001, the board of directors declared a three-for-two stock
split in the form of a stock dividend, consisting of 1.25 million shares,
payable to stockholders of record at the close of business on August 24, 2001.
The stock dividend was distributed on September 7, 2001. Fractional shares
were adjusted up to the next whole share using shares of treasury stock.
Ninety-five treasury shares were issued as a result of such rounding. Share
and per-share amounts have been retroactively adjusted to reflect the stock
split on the consolidated statements of income.

6



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##### Table of Contents



(6) Accounting Pronouncements

SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended and interpreted, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities on the balance
sheet and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative will be included in either earnings or other
comprehensive income depending on the intended use of the derivative
instrument. The provisions of SFAS No. 133 do not have a material impact on
Global Preferreds financial statements.

In September 2000, the Financial Accounting Standards Board (FASB)
issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilitiesa replacement of FASB Statement No. 125.
This statement revises the standards for accounting for securitizations and
other transfers of financial assets and collateral and requires certain
disclosures, not previously required under SFAS No. 125. The provisions of
SFAS No. 140 do not have a material impact on Global Preferreds financial
statements.

The FASB issued four new accounting standards in 2001. SFAS No. 141, SFAS
No. 142, SFAS No. 143 and SFAS No. 144 primarily address the accounting for
goodwill, business combinations, and the impairment and disposition of
long-lived assets. The adoption of these standards in 2002 is not expected to
have a material impact on Global Preferreds financial statements.

The FASB recently issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
The provisions of this statement related to the rescission of SFAS No. 4 are
applicable in fiscal years beginning after May 15, 2002. The provisions of
this statement related to SFAS No. 13 are effective for transactions occurring
after May 15, 2002. All other provisions of this statement are effective for
financial statements issued on or after May 15, 2002. The
adoption of this statement is not expected to have a material impact on Global Preferreds
financial statements.

The FASB recently
issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities. The provisions of this statement
require companies to recognize costs associated with exit or disposal
activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. SFAS No. 146 is to be
applied prospectively to exit or disposal activities initiated after
December 31, 2002. The adoption of this statement is not
expected to have a material impact on Global Preferreds financial
statements.

(7) Segment Reporting

Global Preferred defines reportable segments based on the nature of our
reinsurance agreements and the accounting treatment used for the various
reinsurance agreements. Based on this definition, two reportable segments have
been identified: non-universal life-type agreements and universal life-type
agreements (as each is referenced in SFAS No. 97, Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and for Realized
Gains and Losses from the Sale of Investments, paragraphs 44 and 45). Global
Preferred reinsures certain variable universal life policies on a renewable
term basis, which are reported below as Non-Universal Life-Type Agreements and,
as such, revenues therefrom are classified as premiums revenue. Renewable term
reinsurance involves the reinsurance of mortality risk whereby premiums are not
directly related to the premium rates on the original plan of insurance. Global Preferreds renewable term agreements are accounted for
under SFAS No. 60 accounting principles. Global Preferred reinsures variable
annuity contracts and certain other variable universal life policies on a
coinsurance and modified coinsurance basis, which are reported below as
Universal Life-Type Agreements and, as such, revenues therefrom are classified
as reinsured policy revenues. Coinsurance involves the reinsurance of
mortality and investment risks on the same basis as that of the underlying
policies. The ceding life companies and Global Preferred share in these risks
on a pro rata basis. Global Preferreds existing coinsurance and modified
coinsurance agreements are accounted for under SFAS No. 97 accounting
principles.

Items not directly related to the business segments and unallocated
corporate items (i.e., other income, interest expense on corporate debt and
unallocated operating expenses) are shown separately, consistent with Global
Preferreds internal measurement process. Segment assets reported include
those assets directly attributable to the reinsurance agreements such as
reinsurance balances receivable, deferred acquisition costs, policy loans,
prepaid expenses, invested assets and cash. Cash and invested assets are
allocated to the agreements based upon statutory reserves, the letters of
credit posted in support of the statutory reserves held, and allocated surplus,
which is consistent with Global Preferreds internal measurement process.

7



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##### Table of Contents



SEGMENT REPORTING

|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|---------------------------------------------------------- |  | ------------- | ----- | --------- |  | ----- | ------ | ----- |  | --------- | ----- | --------- |  | ------------- | ------ | --------- |  | - | ----- |  |  | - | ------ |  |  | - | ----- | - |  | - | ------ | 
|Three Months Ended June 30,                                |  | 2001          |       | 2002     
|                                                           |  |               |       |          
|                                                           |  | Non-Universal |       | Universal |  |       |        |       |  |           |       |           |  | Non-Universal |        | Universal |  |   |       |  |  |   |        | 
|(Dollars in
thousands)                                     |  | Life-type     |       | Life-type |  | Other |        | Total |  | Life-type |       | Life-type |  | Other         |        | Total    
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |          
|Premiums                                                   |  | $             | 4,796 |           |  | $     |       |       |  | $         |      |           |  | $             | 4,796  |           |  | $ | 4,532 |  |  | $ |       |  |  | $ |      |   |  | $ | 4,532  | 
|Reinsured policy revenues                                  |  |               |      |           |  |       | 2,807  |       |  |           |      |           |  |               | 2,807  |           |  |   |      |  |  |   | 3,559  |  |  |   |      |   |  |   | 3,559  | 
|Benefits, claims and settlement expenses*                  |  |               | 1,968 |           |  |       | 163    |       |  |           |      |           |  |               | 2,131  |           |  |   | 2,409 |  |  |   | 640    |  |  |   |      |   |  |   | 3,049  | 
|Reinsurance expense allowances, net                        |  |               | 1,693 |           |  |       | 462    |       |  |           |      |           |  |               | 2,155  |           |  |   | 1,633 |  |  |   | 491    |  |  |   |      |   |  |   | 2,124  | 
|Amortization of deferred acquisition costs                 |  |               | 100   |           |  |       | 776    |       |  |           |      |           |  |               | 876    |           |  |   | 65    |  |  |   | 1,007  |  |  |   |      |   |  |   | 1,072  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Underwriting profit                                        |  |               | 1,035 |           |  |       | 1,406  |       |  |           |      |           |  |               | 2,441  |           |  |   | 425   |  |  |   | 1,421  |  |  |   |      |   |  |   | 1,846  | 
|Net investment income                                      |  |               | 56    |           |  |       | 60     |       |  |           | 89    |           |  |               | 205    |           |  |   | 36    |  |  |   | 73     |  |  |   | 79    |   |  |   | 188    | 
|Net realized gain on investments                           |  |               |      |           |  |       |       |       |  |           |      |           |  |               |       |           |  |   |      |  |  |   |       |  |  |   |      |   |  |   |       | 
|Other expenses                                             |  |               | 37    |           |  |       | 51     |       |  |           | 367   |           |  |               | 455    |           |  |   | 32    |  |  |   | 79     |  |  |   | 681   |   |  |   | 792    | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Segment operating income (loss) before tax                 |  |               | 1,054 |           |  |       | 1,415  |       |  |           | (278  | )         |  |               | 2,191  |           |  |   | 429   |  |  |   | 1,415  |  |  |   | (602  | ) |  |   | 1,242  | 
|Income tax expense (benefit)                               |  |               | 357   |           |  |       | 480    |       |  |           | (94   | )         |  |               | 743    |           |  |   | 145   |  |  |   | 477    |  |  |   | (203  | ) |  |   | 419    | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Segment net income (loss)                                  |  | $             | 697   |           |  | $     | 935    |       |  | $         | (184  | )         |  | $             | 1,448  |           |  | $ | 284   |  |  | $ | 938    |  |  | $ | (399  | ) |  | $ | 823    | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Preferred dividends                                        |  |               |      |           |  |       |       |       |  |           | 69    |           |  |               | 69     |           |  |   |      |  |  |   |       |  |  |   |      |   |  |   |       | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Segment net income (loss) available to
common stockholders |  | $             | 697   |           |  | $     | 935    |       |  | $         | (253  | )         |  | $             | 1,379  |           |  | $ | 284   |  |  | $ | 938    |  |  | $ | (399  | ) |  | $ | 823    | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 
|Segment assets                                             |  | $             | 8,871 |           |  | $     | 45,436 |       |  | $         | 7,653 |           |  | $             | 61,960 |           |  | $ | 7,832 |  |  | $ | 60,184 |  |  | $ | 6,680 |   |  | $ | 74,696 | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |       |   |  |   |        | 

|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|---------------------------------------------------------- |  | ------------- | ----- | --------- |  | ----- | ------ | ----- |  | --------- | ----- | --------- |  | ------------- | ------ | --------- |  | - | ----- |  |  | - | ------ |  |  | - | ------ | - |  | - | ------ | 
|Six Months Ended June 30,                                  |  | 2001          |       | 2002     
|                                                           |  |               |       |          
|                                                           |  | Non-Universal |       | Universal |  |       |        |       |  |           |       |           |  | Non-Universal |        | Universal |  |   |       |  |  |   |        | 
|(Dollars in
thousands)                                     |  | Life-type     |       | Life-type |  | Other |        | Total |  | Life-type |       | Life-type |  | Other         |        | Total    
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |          
|Premiums                                                   |  | $             | 9,452 |           |  | $     |       |       |  | $         |      |           |  | $             | 9,452  |           |  | $ | 9,090 |  |  | $ |       |  |  | $ |       |   |  | $ | 9,090  | 
|Reinsured policy revenues                                  |  |               |      |           |  |       | 5,747  |       |  |           |      |           |  |               | 5,747  |           |  |   |       |  |  |   | 7,155  |  |  |   |       |   |  |   | 7,155  | 
|Benefits, claims and settlement expenses*                  |  |               | 4,048 |           |  |       | 229    |       |  |           |      |           |  |               | 4,277  |           |  |   | 4,408 |  |  |   | 1,121  |  |  |   |       |   |  |   | 5,529  | 
|Reinsurance expense allowances, net                        |  |               | 3,346 |           |  |       | 905    |       |  |           |      |           |  |               | 4,251  |           |  |   | 3,202 |  |  |   | 1,133  |  |  |   |       |   |  |   | 4,335  | 
|Amortization of deferred acquisition costs                 |  |               | 185   |           |  |       | 1,694  |       |  |           |      |           |  |               | 1,879  |           |  |   | 73    |  |  |   | 2,118  |  |  |   |       |   |  |   | 2,191  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Underwriting profit                                        |  |               | 1,873 |           |  |       | 2,919  |       |  |           |      |           |  |               | 4,792  |           |  |   | 1,407 |  |  |   | 2,783  |  |  |   |       |   |  |   | 4,190  | 
|Net investment income                                      |  |               | 113   |           |  |       | 102    |       |  |           | 157   |           |  |               | 372    |           |  |   | 73    |  |  |   | 133    |  |  |   | 196    |   |  |   | 402    | 
|Net realized gain on investments                           |  |               |      |           |  |       |       |       |  |           |      |           |  |               |       |           |  |   |      |  |  |   |       |  |  |   | 7      |   |  |   | 7      | 
|Other expenses                                             |  |               | 65    |           |  |       | 127    |       |  |           | 836   |           |  |               | 1,028  |           |  |   | 58    |  |  |   | 117    |  |  |   | 1,437  |   |  |   | 1,612  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Segment operating income (loss) before tax                 |  |               | 1,921 |           |  |       | 2,894  |       |  |           | (679  | )         |  |               | 4,136  |           |  |   | 1,422 |  |  |   | 2,799  |  |  |   | (1,234 | ) |  |   | 2,987  | 
|Income tax expense (benefit)                               |  |               | 649   |           |  |       | 977    |       |  |           | (229  | )         |  |               | 1,397  |           |  |   | 482   |  |  |   | 948    |  |  |   | (418   | ) |  |   | 1,012  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Segment net income (loss)                                  |  | $             | 1,272 |           |  | $     | 1,917  |       |  | $         | (450  | )         |  | $             | 2,739  |           |  | $ | 940   |  |  | $ | 1,851  |  |  | $ | (816   | ) |  | $ | 1,975  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Preferred dividends                                        |  |               |      |           |  |       |       |       |  |           | 138   |           |  |               | 138    |           |  |   |      |  |  |   |       |  |  |   |       |   |  |   |       | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Segment net income (loss) available to
common stockholders |  | $             | 1,272 |           |  | $     | 1,917  |       |  | $         | (588  | )         |  | $             | 2,601  |           |  | $ | 940   |  |  | $ | 1,851  |  |  | $ | (816   | ) |  | $ | 1,975  | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 
|Segment assets                                             |  | $             | 8,871 |           |  | $     | 45,436 |       |  | $         | 7,653 |           |  | $             | 61,960 |           |  | $ | 7,832 |  |  | $ | 60,184 |  |  | $ | 6,680  |   |  | $ | 74,696 | 
|                                                           |  |               |       |           |  |       |        |       |  |           |       |           |  |               |        |           |  |   |       |  |  |   |        |  |  |   |        |   |  |   |        | 



---

|* |  | Benefits, claims and settlement expenses includes change in future policy
benefits.
|- |  | -----------------------------------------------------------------------------------

Of the total premiums
and reinsured policy revenues above for the quarters ended
June 30, 2001 and 2002, 89% and 90%, respectively, relates to
business issued by Western Reserve Life Assurance Co. of Ohio
(Western Reserve). Of the total premiums and reinsured
policy revenues above for the six months ended June 30, 2001 and
2002, 89% and 91%, respectively, relates to business issued by Western
Reserve. Of the total underwriting profit above for the quarters ended
June 30, 2001 and 2002, 83% and 85%, respectively, relates to
business issued by Western Reserve. Of the total underwriting profit
above for the six months ended June 30, 2001 and 2002, 82% and
87%, respectively, relates to business issued by Western Reserve.

(8) Reclassification

Global Preferred has reclassified the presentation of certain 2001
information to conform to the 2002 presentation.

8



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##### Table of Contents






ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Managements Discussion and Analysis of Financial Condition and Results of
Operations (MD&A) addresses the financial condition of Global Preferred as of
June 30, 2002 compared with December 31, 2001, and its results of operations
for the three months and six months ended June 30, 2002, compared with the
three months and six months ended June 30, 2001. This discussion should be read
in conjunction with the MD&A and Global Preferreds consolidated financial
statements and notes thereto in Global Preferreds 2001 Annual Report on Form
10-K, as amended.

Overview

Global Preferred Holdings, Inc. was incorporated in Delaware in 1995 as a
holding company, owning all of the outstanding capital stock of Global
Preferred Re Limited, a Bermuda company registered as a long-term insurer under
the Bermuda Insurance Act 1978 (Global Preferred Re). Global Preferred Re,
formed during 1995 under the name of WMA Life Insurance Company Limited,
commenced its reinsurance operations during 1996. In the third quarter of 2001,
we changed our name from The WMA Corporation to Global Preferred Holdings, Inc.
and our subsidiary changed its name from WMA Life Insurance Company Limited to
Global Preferred Re Limited. References in this report to Global Preferred,
we, us, our and our company refer to Global Preferred Holdings, Inc.
and, unless the context otherwise requires or otherwise as expressly stated,
our Bermuda subsidiary, Global Preferred Re.

We were formed principally to provide an opportunity for the independent
agents associated with an independent marketing organization to participate
indirectly in the reinsurance of the policies they sold. An independent
marketing organization (IMO) is an organization of independent agents that
contracts with one or more insurance companies to distribute and market
securities and insurance products. Many of the individual agents that purchased
equity in Global Preferred are currently associated with World Financial Group,
Inc., an affiliate of AEGON USA, Inc., and currently, control a majority of the
outstanding common stock of Global Preferred.

Global Preferred, through Global Preferred Re, provides reinsurance for
life insurance and annuity products. The strength of our reinsurance business
is based on our historical relationship with the independent agents of World
Financial Group, which is an IMO that markets the products we currently
reinsure. As of April 12, 2002, World Financial Group had over 7,800 associated
independent registered agents licensed to sell securities and insurance
products.

Although our reinsurance business is directed to us through our IMO
relationship, the variable universal life insurance and variable annuity
policies that we currently reinsure are underwritten and issued by various
ceding life companies. In the insurance industry, the term ceding refers to
the use of reinsurance to transfer from one insurance company to another some
or all of the risks associated with one or more insurance policies. We often
refer to the life insurance companies that reinsure life insurance and annuity
policies through us as the ceding life companies. The ceding life companies
who issue the policies we reinsure are:



| |  |  | Western Reserve Life Assurance Co. of Ohio (Western
Reserve);  
| | - |  | -----------------------------------------------------------------
|
| |  |  | American Skandia Life Assurance Corporation (American
Skandia);
|
| |  |  | Pacific Life Insurance Company (Pacific Life); and             
|
| |  |  | Kemper Investors Life Insurance Company (Zurich Life).         

Under a reinsurance agreement, the economic consequences of certain
insurance risks are transferred from the ceding life company to the reinsurer.
Depending upon the type of reinsurance agreement, these risks may include
mortality, persistency, investment and expense. Key considerations in
evaluating the risks include industry experience, the ceding life companys
pricing and assumptions, the type of product, the ceding life companys
underwriting practices and procedures, the type of distribution system, the
ceding life companys recent experience and the market for the product.

9



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##### Table of Contents



The ceding life companies retain responsibility for the payment of all
claims, surrender values, commissions and expenses involved in issuing and
maintaining the policies we reinsure. In addition, the ceding life companies
administer the reinsurance contracts and, on a monthly and quarterly basis,
provide us with information regarding premiums, reserves and benefits and the
amounts we owe to the ceding life company for claims and settlement expenses on
the policies we reinsure.

Types of Reinsurance

We currently write three types of reinsurance: renewable term (consisting
of yearly renewable term and monthly renewable term), coinsurance and modified
coinsurance.

Renewable Term. Renewable term, also referred to as risk premium
reinsurance, which includes monthly renewable term and yearly renewable term,
is a plan of reinsurance in which the premium rates are not directly related to
the premium rates on the original plan of insurance. Under renewable term
reinsurance, the ceding life company reinsures a portion of the mortality risk
with us. The amount reinsured in any one period is not based on the face amount
of the policy, but rather on the portion of the net amount of risk we reinsure.
The net amount of risk is typically defined as the difference between the death
benefit and the cash value of a policy.

Coinsurance.Under a coinsurance arrangement, the insured risks are ceded
to us on essentially the same basis as underwritten by the ceding life company.
The ceded risks include mortality, persistency, investment and expense. We
share the risks pro rata with the ceding life company. We receive a
proportionate share of gross premiums from the ceding life company and provide
expense allowances to the ceding life company to pay for the expenses
associated with the reinsured policies. We also pay our proportionate share of
death benefits and other policy benefits. The reserves on the ceded portion of
the policy are held by us and are our obligations. Correspondingly, we invest
the assets related to the reserves and receive investment income from those
assets.

Modified Coinsurance. Modified coinsurance is similar to coinsurance
except the ceding life company retains the reserves and the assets related to
the reserves. Modified coinsurance is used primarily for products that develop
cash values and allows the ceding life company to retain the associated assets
for investment purposes.

Financial Statement Impact of Reinsurance

Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation
of financial statements. Additional information is shown above in the notes to
consolidated financial statements and in Note 2 to the consolidated financial
statements in our Annual Report on Form 10-K, as amended for the year ended December 31,
2001, which includes a summary of the methods used in the preparation of our
consolidated financial statements.

Income Statement Impact

Reinsurance Revenues. For renewable term reinsurance, we record as
premiums the amount of reinsurance premiums we receive over the paying
periods of the reinsured policies. For policies reinsured on a coinsurance or
modified coinsurance basis, we record as reinsured policy revenues our
proportionate share of gross revenues received by the ceding life company over
the paying periods of the reinsured policies. These revenues represent the
policy mortality and expense charges, asset-based allowances and deferred sales
charges that have been assessed against the reinsured policy account balances.

If we elect to convert coverage on certain policies that we currently
reinsure on a renewable term basis to a coinsurance or modified coinsurance
basis, the associated premium revenues for those policies will discontinue, and
our proportionate share of the associated mortality and expense charges, asset
based allowances and deferred sales charges will be recorded as reinsured
policy revenues.

Reinsurance Expenses. Regardless of the type of reinsurance, our related
expenses may include: (1) benefits, claims and settlement expenses, which
represent our share of the payments made under the reinsured policies during
the period, (2) expense allowances paid to the ceding life company for expenses
associated with the reinsured policies,

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including commissions and costs associated with underwriting, marketing, policy
issue and maintenance, and (3) amortization of deferred acquisition costs,
which are discussed in more detail below.

The Companys profitability, in part, depends on the volume of policies
written and on the death claims incurred. While death claims are reasonably
predictable over a period of many years, claims become less predictable over
shorter periods, and are subject to fluctuation from quarter to quarter and
year to year.

Balance Sheet Impact

Deferred Acquisition Costs. We capitalize and defer costs that vary with,
and are directly associated with, the acquisition of the reinsured policies.
These expenses are deferred to the extent that such costs are deemed
recoverable from future policy revenues and are recorded as deferred
acquisition costs on the balance sheet. Such costs include reinsurance
commission and expense allowances paid to ceding life companies, and may
include other underwriting costs such as actuarial, legal and accounting fees.

Deferred acquisition costs are amortized over the lives of the underlying
policies, in conformity with the terms of the reinsurance agreement. Under the
renewable term agreements, the rate of amortization depends on the approach
utilized, static or dynamic, and is based upon assumptions applicable at the
time the policies are reinsured, such as estimates of expected investment
yields, mortality, persistency and expenses. Under the static approach, the
amortization is in proportion to the ratio of premiums collected during the
then current period to total anticipated premiums. Often the static approach is
used in the first policy year or until the business is sufficiently large to
warrant the complexity of the dynamic approach. Under the dynamic approach, the
amortization under the static approach is adjusted to reflect actual
persistency of the insurance in effect. To the extent fewer policies persist
than otherwise anticipated, the amortization will be greater under the dynamic
approach than under the static approach. Conversely, to the extent more
policies persist than otherwise anticipated, the amortization will be smaller.
Currently, we use the dynamic amortization approach for all our policies
reinsured under our renewable term agreements.

Under the coinsurance and modified coinsurance agreements, the
amortization of the deferred acquisition costs is in proportion to the ratio of
gross profits recognized during the then current period to total anticipated
future gross profits. During each accounting period, assumptions used in
calculating the amortization of the deferred acquisition expense reflect actual
experience for the then current accounting period. We also review, on a
periodic basis, our evolving experience with regard to our assumptions
concerning future experience as to mortality, persistency, investment yields
and expenses in determining our estimate of anticipated future gross profits.
This periodic review is commonly referred to as unlocking. Our period of
observation is from October 1 of the previous calendar year through September
30 of the current calendar year. If we believe variances from expected
assumptions are permanent, we will change the assumptions we use with regard to
future experience. Upon adoption of any change in assumptions used with regard
to future experience, the amortization of the deferred acquisition cost will be
recalculated and reflected during the then current accounting period.

Future Policy Benefits. Liabilities for future benefits on life insurance
policies are established in an amount adequate to meet the estimated future
obligations on the policies in effect. Policy and contract reserves are
included in future policy benefits on the consolidated balance sheet.

Liabilities for future policy benefits under the renewable term agreements
include provisions for claims in the course of settlement, claims incurred but
not reported and expected future claims. The liability is estimated using
assumptions such as estimates of expected investment yields, mortality,
persistency and expenses applicable at the time the reinsurance contracts are
executed.

Liabilities for future policy benefits under coinsurance and modified
coinsurance agreements equal reinsured policy account balances on the
underlying variable universal life policies and variable annuity contracts.
With regard to the separate account benefits reinsured on a modified
coinsurance basis, we record the liabilities as an offset to related assets as
intentions and rights under the agreements with the ceding life companies meet
the appropriate conditions governing rights of setoff. The nature of separate
account benefits does not permit us to reinsure those benefits on a coinsurance
basis. We currently reinsure the fixed portion of variable annuity contracts
and variable universal life policies only on a coinsurance basis and,
accordingly, the liabilities for that portion of the reinsurance are recorded
as future policy benefits.

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Liabilities for future policy benefits reflected in the consolidated
financial statements are based on information provided to us by the ceding life
companies. Reserves established by us with respect to individual risks or
classes of business may not be the same as those established by ceding life
companies due to differing risks and assumptions regarding mortality,
persistency, investment and expenses.

Fair Value Disclosure

Investments. We classify all fixed maturities and equity securities as
available for sale. Such securities are reported at fair value. Fixed
maturities available are so classified based upon the possibility that such
securities could be sold prior to maturity if that action enables us to execute
our investment philosophy and appropriately match investment results to
operating and liquidity needs. Unrealized gains and losses on marketable equity
securities available for sale, less applicable income taxes, are reported as a
separate component of accumulated other comprehensive income (loss) within
stockholders equity.

Investment income is recognized as it accrues or becomes legally due.
Realized gains or losses on sales of investments are included in income, as are
write-downs of securities where declines in value are deemed to be other than
temporary. The cost of investment securities sold is determined based upon the
specific identification method.

Other Financial Assets and Liabilities.The carrying value of cash and
cash equivalents, reinsurance receivables and payables, short-term debt,
accrued expenses and accounts payable approximate their fair values due to the
short-term nature of these accounts. The carrying value of future policy
benefits approximates its fair value as credited interest approximates current
market rates.

Our Current Reinsurance Agreements

The life insurance and annuity policies that we have reinsured to date are
underwritten and issued by Western Reserve Life, American Skandia, Zurich Life
and Pacific Life. The following table indicates the percentage of our
reinsurance revenues derived from our ceding life companies:

|                 |  |              |     |          |  |      |     |   |  |            |     |  
|---------------- |  | ------------ | --- | -------- |  | ---- | --- | - |  | ---------- | --- | -
|                 |  |              |     |          |  |      |     |   |  | Six Months
|                 |  | Year Ended   |     | Ended   
|                 |  | December 31, |     | June 30,
|                 |  | 2000         |     | 2001     |  | 2002
|                 |  |              |     |          |  |     
|Western Reserve  |  |              | 88  | %        |  |      | 89  | % |  |            | 91  | %
|American Skandia |  |              | 10  | %        |  |      | 9   | % |  |            | 8   | %
|Zurich Life      |  |              | 2   | %        |  |      | 2   | % |  |            | 1   | %
|Pacific Life(1)  |  |              |    |          |  |      | 0   | % |  |            | 0   | %
|                 |  |              |     |          |  |      |     |   |  |            |     |  
|Total            |  |              | 100 | %        |  |      | 100 | % |  |            | 100 | %
|                 |  |              |     |          |  |      |     |   |  |            |     |  



---

|(1) |  | This agreement was effective as of January 1, 2001.
|--- |  | ---------------------------------------------------

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The following table indicates, by ceding life company: (1) the names and
types of insurance products we currently reinsure; (2) the type of reinsurance
agreement applicable to each; (3) policy issue dates reinsured under each
agreement; and (4) the commencement date of the reinsurance.

|                    |  |                           |  |         |  |             |  |                  |  |             
|------------------- |  | ------------------------- |  | ------- |  | ----------- |  | ---------------- |  | ------------
|                    |  |                           |  |         |  |             |  |                  |  | Reinsurance 
|                    |  |                           |  | Product |  | Reinsurance |  | Policy Issue     |  | Commencement
|Ceding Life Company |  | Reinsured Product Name    |  | Type(1) |  | Type(2)     |  | Dates            |  | Date        
|Western Reserve     |  | Freedom Equity Protector  |  | VUL     |  | MRT         |  | 1/92 to 12/99    |  | 7/96        
|Western Reserve     |  | Financial Freedom Builder |  | VUL     |  | MRT         |  | 7/97 to 3/98     |  | 7/97        
|Western Reserve     |  | Financial Freedom Builder |  | VUL     |  | Co/Modco    |  | 4/98 to 12/98    |  | 4/98        
|Western Reserve     |  | Financial Freedom Builder |  | VUL     |  | MRT         |  | 1/99 to 3/01     |  | 10/99       
|Western Reserve     |  | Financial Freedom Builder |  | VUL     |  | Co/Modco    |  | 4/01 to 12/01    |  | 01/02       
|Western Reserve     |  | Financial Freedom Builder |  | VUL     |  | MRT         |  | 1/02 to present  |  | 10/99       
|Western Reserve     |  | Freedom Elite Builder     |  | VUL     |  | Co/Modco    |  | 7/01 to 12/01    |  | 1/02        
|Zurich Life         |  | Power VUL                 |  | VUL     |  | MRT         |  | 9/96 to 3/01     |  | 9/96        
|Pacific Life        |  | Select Exec II            |  | VUL     |  | YRT         |  | 1/01 to present  |  | 1/01        
|American Skandia    |  | Imperium                  |  | VA      |  | Modco       |  | 1/97 to present  |  | 1/97        
|Western Reserve     |  | Freedom Wealth Creator    |  | VA      |  | Co/Modco    |  | 1/98 to 12/01    |  | 1/98        
|Western Reserve     |  | Freedom Premier           |  | VA      |  | Co/Modco    |  | 10/00 to present |  | 10/00       



---

|(1) |  | VUL means variable universal life product. VA means variable
annuity product.                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | MRT means monthly renewable term. YRT means yearly renewable term.
Co/Modco means coinsurance and modified coinsurance.

Under our reinsurance agreements with the ceding life companies, we
currently reinsure variable life insurance and variable annuity policies on
either a renewable term basis or a coinsurance and modified coinsurance basis.
For the three months and six months ended June 30, 2002, the policies we
reinsured on a renewable term basis represented 56% of our reinsurance revenues
and the policies we reinsured on a coinsurance and modified coinsurance basis
represented 44% of our reinsurance revenues.

Recent Amendments to Western Reserve Reinsurance Agreements

Consistent with our business plan, effective as of January 1, 2002, we
amended certain of our reinsurance agreements with Western Reserve to:



| |  |  | Convert our reinsurance of all Western Reserve Financial
Freedom Builder variable universal life policies and riders
issued from April 1, 2001 through December 31, 2001, which
had been reinsured by us on a monthly renewable term basis,
under which we assumed only mortality risks on the reinsured
policies, to a coinsurance and modified coinsurance basis,
under which we assumed a portion of all of the insured risks
that the life insurance company has on the reinsured
policies. The percentage of the risks assumed by us on
policies reinsured after this conversion, which is referred
to as the quota share rate, is 20%;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Begin reinsuring, on a coinsurance and modified coinsurance
basis at a quota share rate of 20%, Western Reserve Freedom
Elite Builder variable universal life policies sold by the
agents associated with World Financial Group and issued from
July 1, 2001 through December 31, 2001;                                                                                                                                                                                                                                                                                                                                                       
|
| |  |  | Increase our reinsurance on a coinsurance and modified
coinsurance basis, from a 10% quota share rate to a 14% quota
share rate, of all Western Reserve variable annuity policies
sold by the agents associated with World Financial Group and
issued from January 1, 1999 through December 31, 2001;                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Begin reinsuring, on a coinsurance and modified coinsurance
basis at a quota share rate of 14%, all Western Reserve
variable annuity policies sold by the agents associated with
World Financial Group and issued on or after January 1, 2002;
and                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Cease our reinsurance of the Western Reserve Freedom Wealth
Creator variable annuity products sold, after January 1,
2002, by the agents associated with World Financial Group,
due to the limited volume of new policies we anticipate to be
written for this product; however, we will continue to
reinsure all Freedom Wealth Creator policies we reinsured as
of December 31, 2001.                                                                                                                                                                                                                                                       

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Results of Operations

Three Months and Six Months Ended June 30, 2002 Compared to Three Months and
Six Months Ended June 30, 2001

The following table sets forth certain operating data as a percentage of
total revenue for the periods indicated:

|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |    |    |  
|--------------------------------------- | ------------------------------------------ | ------------ | --- | --------------------------------- | --- | ---------------- | --- | ---- | -- | ---- | --- | -- | -- | - | --- | -- | -- | -
|                                        |                                            |              |     | Three Months Ended                |     | Six Months Ended
|                                        |                                            |              |     | June 30,                          |     | June 30,        
|                                        |                                            |              |     |                                   |     |                 
|                                        |                                            |              |     | 2001                              |     | 2002             |     | 2001 |    | 2002
|                                        |                                            |              |     |                                   |     |                  |     |      |    |     
|                                        |                                            |              |     | (As a
Percentage ofTotal Revenue)
|Consolidated Statements of Income Data: |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Revenues:                               |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|                                        | Premiums                                   |              |     | 61                                | %   |                  |     | 55   | %  |      |     | 61 | %  |   |     | 55 | % 
|                                        | Reinsured policy revenues                  |              |     | 36                                |     |                  |     | 43   |    |      |     | 37 |    |   |     | 43 |   
|                                        | Net investment income                      |              |     | 3                                 |     |                  |     | 2    |    |      |     | 2  |    |   |     | 2  |   
|                                        | Net realized gain (loss) on investments    |              |     |                                  |     |                  |     |     |    |      |     |   |    |   |     |   |   
|                                        | Loss on recapture of business              |              |     |                                  |     |                  |     |     |    |      |     |   |    |   |     |   |   
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Total revenue                           |                                            |              | 100 | %                                 |     |                  | 100 | %    |    |      | 100 | %  |    |   | 100 | % 
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Benefits and expenses:                  |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|                                        | Benefits, claims and settlement expenses   |              |     | 20                                |     |                  |     | 32   |    |      |     | 20 |    |   |     | 28 |   
|                                        | Change in future policy benefits           |              |     | 7                                 |     |                  |     | 5    |    |      |     | 8  |    |   |     | 5  |   
|                                        | Reinsurance expense allowances, net        |              |     | 28                                |     |                  |     | 26   |    |      |     | 27 |    |   |     | 26 |   
|                                        | Amortization of deferred acquisition costs |              |     | 11                                |     |                  |     | 13   |    |      |     | 12 |    |   |     | 13 |   
|                                        | Operating expenses                         |              |     | 5                                 |     |                  |     | 8    |    |      |     | 5  |    |   |     | 9  |   
|                                        | Interest expense                           |              |     | 1                                 |     |                  |     | 1    |    |      |     | 1  |    |   |     | 1  |   
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Total benefits and expenses             |                                            |              | 72  |                                   |     |                  | 85  |      |    |      | 73  |    |    |   | 82  |   
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Income before income taxes              |                                            |              | 28  |                                   |     |                  | 15  |      |    |      | 27  |    |    |   | 18  |   
|                                        |                                            | Income taxes |     |                                   | (10 | )                |     |      | (5 | )    |     |    | (9 | ) |     |    | (6 | )
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   
|Net income                              |                                            |              | 18  | %                                 |     |                  | 10  | %    |    |      | 18  | %  |    |   | 12  | % 
|                                        |                                            |              |     |                                   |     |                  |     |      |    |      |     |    |    |   |     |   

Revenues

Premiums. Premiums decreased by $264,000, or 6%, and $362,000, or 4%, for
the quarter and the six months ended June 30, 2002, respectively, compared to
the same periods in 2001. The majority of this decrease was due to the
conversion of all Western Reserve Financial Freedom Builder variable universal
life policies and riders, issued from April 1, 2001 through December 31, 2001,
which had been reinsured by us on a monthly renewable term basis, to a
coinsurance and modified coinsurance basis, effective January 1, 2002.

Reinsured Policy Revenues. Reinsured policy revenues increased $753,000,
or 27%, and $1.4 million, or 25%, for the quarter and the six months ended June
30, 2002, respectively, compared to the same periods in 2001. This increase was
due to: (1) the conversion of certain Financial Freedom Builder variable
universal life policies and riders, as described above; (2) the reinsurance of
the Western Reserve Freedom Elite Builder variable universal life policies at a
quota share rate of 20%, sold by the agents associated with World Financial
Group and issued from July 1, 2001 through December 31, 2001; and (3) the
increase in our reinsurance on a coinsurance and modified coinsurance basis,
from a 10% quota share rate to a 14% quota share rate, of all Western Reserve
variable annuity policies sold by the agents associated with World Financial
Group and issued from January 1, 1999 through December 31, 2001. In addition,
surrender revenues increased due to higher surrender rates in 2002 compared to
2001.

Net Investment
Income and Net Realized Gain on Investments. Net investment
income increased $35,000, or 10%, for the six months ended June 30, 2002 for
the comparable period in 2001, primarily due to the increase in the average
size of our portfolio for the six-month period of 2001 compared to 2002. Net
investment income decreased $18,000, or 9%, for the quarter ended June 30, 2002
from the comparable period in 2001, primarily due to the decreased size of our
portfolio, because of the $7.2 million payment to Western Reserve in April
2002 relating to the amendments to our reinsurance agreements
effective January 1, 2002, and
also due to a greater proportion of our assets being invested in cash and cash
equivalents in 2002.

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The sale of fixed maturity securities for the six months ended June 30,
2002 resulted in a net realized gain on investments of $7,000 compared to a net
realized gain on investments of $6,000 for the comparable period in 2001. These
gains were caused by a decline in market yields, which resulted in an increase
in the fair value of invested securities.

Benefits and Expenses

Benefits, Claims and Settlement Expenses. Benefits, claims and settlement
expenses increased $1.1 million, or 67%, and $1.6 million, or 51%, for the
quarter and six months ended June 30, 2002, compared to the same periods in
2001, respectively. The increase was primarily associated with a lower than
expected incidence of death claims in 2001 combined with a higher than expected
incidence of death claims in 2002 and the increasing age of the policies
reinsured. Death claim experience for the quarter ended June 30, 2002 was about
10% higher than original pricing expectations. Considering historical
experience has been favorable as compared to original pricing expectations, we
believe this level of claims is a near-term fluctuation. The aggregate face
value of insurance underlying the policies we reinsured at June 30, 2001 was
$9.4 billion compared to $9.0 billion at June 30, 2002.

Change in Future Policy Benefits. Change in future policy benefits
decreased $137,000, or 25%, and $334,000, or 28%, for the quarter and the six
months ended June 30, 2002, respectively compared to the same periods in 2001.
The majority of this decrease was due to the conversion of all Western Reserve
Financial Freedom Builder variable universal life policies and riders, issued
from April 1, 2001 through December 31, 2001, which had been reinsured by us on
a monthly renewable term basis, to a coinsurance and modified coinsurance
basis, effective January 1, 2002.

Reinsurance Expense Allowances, Net. Net reinsurance expense allowances
decreased $30,000, or 1%, and increased $84,000, or 2%, for the quarter and the
six months ended June 30, 2002, respectively, compared to the same periods in
2001. These amounts are reflective of the increase in business in force
primarily attributable to the amendments to our reinsurance agreements
effective January 1, 2002 offset by the decrease in business in
force due to normal lapse and surrender activity.

Amortization of Deferred Acquisition Costs. Amortization of deferred
acquisition costs increased $195,000, or 22%, and $311,000, or 17%, for the
quarter and the six months ended June 30, 2002, respectively, compared to the
same periods in 2001. The increase in amortization of deferred acquisition
costs was attributable to an increase in the deferred acquisition costs due to
the amendments to our reinsurance agreements effective January 1, 2002, and an
increase in our rate of amortization, which resulted from our annual unlocking
of future experience assumptions that occurred as of December 31, 2001, in
conjunction with an increase in reinsured policy revenues.

Operating Expenses. Operating expenses increased $333,000, or 92%, and
$582,000, or 69%, for the quarter and the six months ended June 30, 2002,
respectively, compared to the same periods in 2001. These expenses include
salaries and benefits, professional fees for legal, actuarial and accounting
expenses and other operating expenses. The increase for the six months ended
June 30, 2002 was attributable to a $544,000 increase in salaries, bonuses,
benefits and recruiting expenses due to the employment of additional staff, a
$84,000 increase in our directors and officers insurance costs, a $31,000
increase in directors fees and consulting fees, offset by a decrease in our
franchise tax for the State of Delaware as a result of the stock split in third
quarter of 2001.

Interest Expense. Interest expense increased $3,000, or 4%, and $2,000, or
1%, for the quarter and the six months ended June 30, 2002, respectively,
compared to the same periods in 2001. The increase was due to the interest
associated with the $7.2 million settlement paid to Western Reserve on April 2,
2002 to fund the reinsurance amendments that were effective January 1, 2002.

Income Taxes. Due to lower levels of income before income taxes, income
taxes decreased $324,000, or 44%, and $385,000, or 28%, for the quarter and the
six months ended June 30, 2002, respectively, compared to the same periods in
2001. Income before income taxes is comprised of income subject to taxes which
are both recognized and due in the current period and income subject to taxes
which are recognized during the current period but are due in future periods.
The small life insurance company deduction available under Section 806 of the
Internal Revenue Code for qualifying life insurance companies can reduce the
effective federal income tax rate from 34% to less than 20% depending upon the
amount of current taxable income. As of June 30, 2001 and 2002, we had no current
taxable income

15



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##### Table of Contents



and as a result, we were unable to take advantage of any of the small life
insurance company deduction. During 2001 and 2002 our effective tax rate was
34%.

In accordance with SFAS No. 109, Accounting for Income Taxes, we have $8.8
million of net operating loss carryforwards which begin to expire in 2018.
These net operating loss carryforwards at a 34% effective tax rate are included
as an offset to the deferred tax liability. It is our belief that it is more
likely than not that the deferred tax assets will be realized as an offset
against future taxable income, however, if we do not have sufficient taxable
income in the future to utilize this asset, a write-off may result thereby
reducing our net income.

Liquidity and Capital Resources

Our principal sources of cash flow have been premiums received from the
ceding life companies, investment income, proceeds from the sale of invested
assets, issuance of common and preferred stock, and short- and long-term
financing. In addition to cash flow to meet operating expenses, our liquidity
requirements relate primarily to the payment of gross reinsurance allowances,
investment purchases, debt service and reinsurance claims.

We generally receive premiums in advance of our making related benefits
and claims payments. Under the renewable term reinsurance agreements, premiums
typically vary in proportion to the expected mortality claims reinsured. Our
cash inflows under the renewable term agreements are premiums for the mortality
risk reinsured. Our cash outflows are reinsurance expense allowances and death
benefit claims. The reinsurance expense allowances represent our share of
acquisition and maintenance expenses incurred by the ceding life company that
are attributable to the risks reinsured by us.

Under the coinsurance and modified coinsurance agreements, since we are
reinsuring risks on essentially the same basis as that of the original policy,
reinsurance premiums are materially greater than premiums received on the
renewable term reinsurance. During the first year in which a policy is
reinsured on a coinsurance basis, we are required to reimburse the ceding life
company for our share of acquisition costs, including first year commissions
and issuance expenses. Thereafter, we reimburse the ceding life company for our
share of renewal commissions and maintenance expenses. Further, under modified
coinsurance, we allow the ceding life company to retain assets related to
reserves in support of reinsured policy benefits (e.g., cash values).
Accordingly, because of the type of reinsurance and the basis reinsured, the
net first year cash outlays could be as much as, or more than, that years
premiums paid for variable universal life insurance, and as much as 10% of
variable annuity premiums. In year two and beyond, however, our cash outlays
for reinsurance allowances are significantly lower than in the first year of a
policy.

Consistent with our business plan, effective as of January 1, 2002, we
amended certain of our reinsurance agreements with Western Reserve to: (1)
convert our reinsurance of certain existing variable universal life policies
from a monthly renewable term basis to a coinsurance and modified coinsurance
basis; (2) increase our reinsurance quota share on certain variable annuity
policies; and (3) begin reinsuring certain newly issued variable universal life
and variable annuity policies. This is the first set in a series of similar
transactions we seek to complete using the proceeds we may receive from the
financing activities that we are undertaking. If, however, we are unsuccessful
at raising adequate additional capital, as described in the next paragraph,
during the next six months, then we do not anticipate completing these
additional, similar transactions.

On May 16, 2002, Global Preferred Holdings and the managing underwriters
for its currently pending public offering determined to postpone the offering
due to unfavorable market conditions. Associated with the activities from the public
offering, as of June 30, 2002, we have $2.2 million of deferred offering costs
to be offset against the proceeds we may receive from the offering. We have not
withdrawn the registration statement and we continue to strive toward the
completion of the registration process. We are also pursuing alternative
interim sources of capital. In the event the public offering is not successful
or we are not able to raise capital from alternative financing activities at an
acceptable cost, a write-off of those deferred offering costs may result as
early as the third quarter, 2002. The deferred offering costs are shown as an
asset under prepaid expenses on the consolidated balance sheet.

Our cash requirements for operating and investment expenses consist of:
salaries and benefits; management service fees; investment management and
custodial fees; accounting and consulting services fees; expenses related to
regulatory issues and compliance with corporate and tax matters; and other
incidental administrative expenses. We have incurred no capital expenditures
during 2002.

16



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Net cash flows provided by (used in) operating activities were $4.3
million and ($2.9 million) for the six months ended June 30, 2001 and 2002,
respectively. Changes in cash provided by operating activities primarily relate
to: amounts of reinsurance premiums and policy revenues received; claims,
reinsurance expense allowances and operating expenses paid; and changes in
working capital. Cash flows were used in operating activities in 2002 primarily
because of the $7.2 million settlement paid to Western Reserve to fund the
reinsurance amendments. Cash flows were provided by operations in 2001 because
we utilized less cash to acquire new reinsurance business.

On July 30, 1999, we issued a $5 million, five-year convertible term note
to Money Services, Inc. due on July 29, 2004. Money Services is a subsidiary of
AEGON USA, Inc. Proceeds of this note were used to reduce a portion of the
outstanding principal balance on a line of credit with Money Services from $10
million to $5 million. Interest is payable on the note at 7.5% per annum
(except in the event of redemption), on the 29th of each succeeding January and
July through and including July 29, 2004. Money Services has the right to
convert the outstanding principal balance of this note into common stock at any
time. Upon conversion, Money Services will receive 6.25 shares of common stock
for each $100 of the outstanding principal amount of the note, which reflects
our three-for-two stock split in 2001. Global Preferred has the option to
redeem the note, in whole or in part, between July 29, 2002 and July 29, 2004.
To redeem the note before maturity, we must pay all principal, plus interest
accrued from the date of the note through the redemption date at a higher
effective interest rate of 9% per annum. As of June 30, 2002, we had an
outstanding principal balance on the term note of $5 million and accrued
interest of $156,678.

In addition, we had a $5 million line of credit with Money Services that
we paid in full, together with the related accrued interest, on February 15,
2001. Principal payments totaled $277,285 during 2001.

Our primary source of liquidity was $4.4 million in consolidated cash and
cash equivalents at June 30, 2002. The effective duration of our fixed maturity
portfolio is 2.8 years with 100% of the fixed maturity securities having an
effective maturity of less than 10 years. Our fixed maturity portfolio
represents all of our total invested assets, and has an average Moodys quality
rating of Aa2. On April 2, 2002, a majority of our cash and cash equivalents
balance was used to pay $7.2 million to Western Reserve to fund the reinsurance
amendments effective January 1, 2002.

Net cash flows (used in) provided by investing activities were ($7.0
million) and $935,000 for the six months ended June 30, 2001 and 2002,
respectively. Changes in cash used in investing activities are generally a
result of our investment of excess capital generated by operating activities to
purchase fixed maturity securities. The $7.0 million of cash used in investing
activities in 2001 primarily relates to our purchase of fixed maturity
securities. Net cash flows provided by investing activities of $900,000 in 2002
were the result of proceeds generated from the sale and maturity of available
for sale securities and from the principal payments on mortgage-backed
securities.

Net cash flows used in financing activities were $277,285 and $1.6 million
for the six months ended June 30, 2001 and 2002, respectively. Changes in cash
used in financing activities in 2002 related to the cash paid for activities
related to the pending public offering (deferred offering costs), which are
recorded as prepaid expenses on the consolidated balance sheet and can be
offset against the proceeds we may receive from the offering. Changes in cash
used in financing activities in 2001 related to principal payments on the Money
Services line of credit, which was paid in full in February 2001.

Global Preferred Holdings, Inc. is a holding company with no direct
operations, and whose principal assets are the capital stock of Global
Preferred Re and $2.5 million of cash and invested assets, as of June 30, 2002.
Global Preferred Holdings, Inc. relies primarily on funds retained at the
holding company level, debt service on amounts loaned to Global Preferred Re
and potential dividends from Global Preferred Re to meet ongoing cash
requirements. The ability of Global Preferred Re to pay dividends to Global
Preferred Holdings, Inc. is subject to, among other things, regulatory
restrictions under the insurance laws of Bermuda. During the six months ended
June 30, 2002, Global Preferred Re paid no dividends to Global Preferred
Holdings, Inc.

Under our reinsurance agreements, we are required to provide security
through a letter of credit for the benefit of the ceding life companies. We
have three letters of credit issued by Comerica Bank, our custodian, for the
benefit of Western Reserve, Pacific Life and Zurich Life, in the amounts of
$8.5 million, $50,000 and $300,000, respectively. We assess our letter of
credit needs in support of each reinsurance agreement. If determined to be
necessary, we will undertake to develop facilities for future letters of credit
and trust arrangements in support of additional reinsurance agreements.

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Forward-Looking Statements

Certain statements made in this report are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 and
are subject to the safe-harbor provisions of that Act. Additionally, any
written or oral statements made by us or on our behalf may include
forward-looking statements that reflect our current views with respect to
future events and financial performance. These statements may include, but are
not limited to statements relating to reinsurance revenues, gross profits, cash
flows and net income in future periods. Such statements often include the words
believes, expects, assumes, predicts, continue, potential,
should, could, can, may, will, proposes, anticipates, intends,
plans, estimates, projects, and variations or negations of such
expressions or similar expressions. When we make forward-looking statements, we
are basing them on our managements beliefs and assumptions, using information
currently available to us. Because such forward-looking statements involve
risks, both known and unknown, and uncertainties, there are important factors
that could cause actual results to differ materially from those expressed or
implied by such forward-looking statements, including but not limited to:



| |  |  | Successful completion by Global Preferred of the initial
public offering of its common stock;                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | A decrease in the level of demand for our reinsurance
business, or increased competition in the industry;                                                                                                             
|
| |  |  | Extent to which we are able to develop new reinsurance
programs;                                                                                                                                                      
|
| |  |  | Adverse reinsurance experience, including death claims and
surrenders;                                                                                                                                                
|
| |  |  | Estimates of reserves;                                                                                                                                                                                                
|
| |  |  | Assumptions used in accounting for deferred acquisition
costs;                                                                                                                                                        
|
| |  |  | Negotiation of reinsurance agreements;                                                                                                                                                                                
|
| |  |  | Our cash requirements;                                                                                                                                                                                                
|
| |  |  | Availability of capital on acceptable terms;                                                                                                                                                                          
|
| |  |  | The passage of federal or state legislation subjecting our
business to additional supervision or regulation, including
additional tax regulation, in the United States or other
jurisdictions in which we operate; and
|
| |  |  | Changes in economic conditions, including interest rate
conditions, which could affect our investment portfolio.                                                                                                      

These forward-looking statements are subject to change and uncertainty
that are beyond our control and have been made based upon our expectations and
beliefs concerning future developments and their potential effect on our
business. We cannot assure you that future developments will be in accordance
with our expectations or that the effect of future developments will be those
we anticipate. Actual results could differ materially from those we expect,
depending upon the outcome of certain factors, including those described in the
forward-looking statements and in the section titled Factors That May Affect
Future Results in our 2001 Annual Report on Form 10-K, as amended. We caution
readers not to place undue reliance on these forward-looking statements, which
speak only as of their dates. Except as otherwise required by federal
securities laws, we undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

18



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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We seek to earn a favorable risk-adjusted total return on our assets by
engaging in an investment strategy that employs strategies to manage investment
risk. We attempt to maintain adequate liquidity in our fixed income portfolio
to fund operations and protect against unexpected events. We have diversified
our portfolio to reduce volatility. We seek to manage our credit risk through
industry and issuer diversification, and interest rate risk by monitoring the
duration and structure of our investment portfolio relative to the duration and
structure of our liability portfolio. We are exposed to potential loss from
various market risks, primarily changes in interest rates and equity prices.
Accordingly, earnings would be affected by these changes. We manage our market
risk based on investment policies approved by our board of directors.

We do not directly control the allocation of our assets to strategies or
underlying funds, nor do we control the manner in which they are invested by
underlying fund managers. We utilize an independent investment manager to
invest our assets in accordance with our investment guidelines. Conning Asset
Management Inc., a subsidiary of Swiss Reinsurance Company, has been our
investment manager since June 1998. Conning has discretionary authority to
manage our non-cash investment portfolio. As a result, the performance of our
aggregate investment portfolio depends largely on the ability of Conning to
select and manage appropriate investments. However, we consistently and
systematically monitor the strategies and funds in which we are invested, and
we believe our overall risk is limited as a result of our selected strategy. We
do not have, nor have we ever had, an affiliation with Conning, nor has Conning
disclosed any affiliation with the ceding life companies.

At June 30, 2002, the impact on our investment portfolio from an immediate
100 basis point increase in market interest rates would have resulted in an
estimated decrease in fair value of 1.9%, or approximately $283,000, and the
impact on our investment portfolio from an immediate 100 basis point decrease
in market interest rates would have resulted in an estimated increase in fair
value of 1.5%, or approximately $234,000.




PART II  OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

There were no changes in securities during the three months ended June 30,
2002.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

There have been no defaults in the payment of principal or interest of any
indebtedness of the issuer.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a) The Annual Meeting of Stockholders (the Annual Meeting) of the
Company was held on July 30, 2002. There were present at the Annual Meeting, in
person or by proxy, holders of 2,152,018 shares (or approximately 52%) of the
common stock entitled to vote.

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(b)  The following directors were elected to hold office for a term
expiring at the 2003 Annual Meeting, or until their successors are elected and
qualified, with the vote for each director being reflected below:

|                       |  |           |           |                |  |  |         | 
|---------------------- |  | --------- | --------- | -------------- |  |  | ------- | 
|Name                   |  | Votes For |           | Votes Withheld
|                       |  |           |           |               
|Joseph F. Barone       |  |           | 2,121,394 |                |  |  | 30,624  | 
|Edward F. McKernan     |  |           | 2,121,394 |                |  |  | 30,624  | 
|Eugene M. Howerdd, Jr. |  |           | 2,121,094 |                |  |  | 30,924  | 
|Thomas W. Montgomery   |  |           | 1,485,543 |                |  |  | 666,475 | 
|Milan M. Radonich      |  |           | 2,121,394 |                |  |  | 30,624  | 
|C. Simon Scupham       |  |           | 2,121,094 |                |  |  | 30,924  | 

The affirmative vote of the holders of a plurality of the outstanding
shares of common stock represented at the Annual Meeting was required to elect
each director.

(c)  The proposal to ratify the Global Preferred Holdings, Inc. Stock
Incentive Plan and the options granted thereunder was approved with 1,769,021
affirmative votes cast, 379,116 negative votes cast and 3,881 abstentions. The
affirmative vote of the holders of a majority of the outstanding shares of
common stock represented at the Annual Meeting was required to approve the
proposal.

(d)  The proposal to ratify the Global Preferred Holdings, Inc. Directors
Stock Option Plan and the options granted thereunder was approved with
1,595,699 affirmative votes cast, 385,420 negative votes cast and 170,899
abstentions. The affirmative vote of the holders of a majority of the
outstanding shares of common stock represented at the Annual Meeting was
required to approve the proposal.

(e)  The proposal to ratify the grant of options to S. Hubert Humphrey, Jr.
was approved with 1,319,779 affirmative votes cast, 815,793 negative votes cast
and 16,446 abstentions. The affirmative vote of the holders of a majority of
the outstanding shares of common stock represented at the Annual Meeting was
required to approve the proposal.

(f)  The proposal to ratify the appointment of KPMG, LLP as the Companys
independent auditors for the year ending December 31, 2002 was approved with
2,137,923 affirmative votes cast, 8,250 negative votes cast and 5,845
abstentions. The affirmative vote of the holders of a majority of the
outstanding shares of common stock represented at the Annual Meeting was
required to approve the proposal.




ITEM 5. OTHER INFORMATION

None.




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

|        |  |                                                                                                                                                                                                                                                                                                                                                    
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                    
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                    
|3.1     |  | Certificate of Incorporation of the Registrant, as amended
(incorporated by reference to Exhibit 3.1 to Registrants Registration
Statement on Form SB-2 filed on June 28, 1995)                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                    
|3.1.1   |  | Amendment to Certificate of Incorporation of the Registrant, changing
the name of the Company to The WMA Corporation (incorporated by
reference to Exhibit 3.1.1 to Registrants Quarterly Report on Form
10-QSB for the quarter ended March 31, 1998, filed on May 15, 1998)                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                    
|3.1.2   |  | Amendment to Certificate of Incorporation of the Registrant,
increasing the number of authorized shares of common stock and
creating a new class of authorized shares of preferred stock
(incorporated by reference to Exhibit 3.1.1 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1999, filed on
August 16, 1999)

20



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|      |  |                                                                                                                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1.3 |  | Certificate of Amendment to Certificate of Incorporation of the
Registrant, changing the name of the Company to Global Preferred
Holdings, Inc. (incorporated by reference to Exhibit 3.1 to
Registrants Quarterly Report on Form 10-QSB for the quarter ended
September 30, 2001, filed on November 14, 2001)              
|      |  |                                                                                                                                                                                                                                                                                                                                
|3.2   |  | Amended and Restated Bylaws of the Registrant (incorporated by
reference to Exhibit 3.2 to Registrants Registration Statement on
Form S-1 filed on February 22, 2002)                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                
|4.1   |  | Revised Specimen Stock Certificate (incorporated by reference to
Exhibit 4.1 to Registrants Registration Statement on Form S-1/A filed
on April 19, 2002)                                                                                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                
|4.2   |  | Subscription Agreement (incorporated by reference to Exhibit 4.3 to
Registrants Registration Statement on Form SB-2 filed on November 17,
1995)                                                                                                                                                                               
|      |  |                                                                                                                                                                                                                                                                                                                                
|4.3   |  | Revised Specimen Warrant (incorporated by reference to Exhibit 4.4 to
Registrants Registration Statement on Form SB-2 filed on December 29,
1995)                                                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                
|4.4   |  | Loan Agreement between World Marketing Alliance, Inc. and Offering
Subscribers (incorporated by reference to Exhibit 4.5 to Registrants
Registration Statement on Form SB-2 filed on November 17, 1995)                                                                                                                       
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.1  |  | Form of Escrow Agreement between Registrant and Fidelity National Bank
as Escrow Agent (incorporated by reference to Exhibit 10.1 to
Registrants Registration Statement on Form SB-2 filed on September
22, 1995)                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.2  |  | Form of Promotional Share Escrow Agreement (incorporated by reference
to Exhibit 10.2 to Registrants Registration Statement on Form SB-2
filed on November 17, 1995)                                                                                                                                                          
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.3  |  | Loan Agreement with Money Services, Inc. (incorporated by reference to
Exhibit 10.3 to Registrants Registration Statement on Form SB-2 filed
on November 17, 1995)                                                                                                                                                            
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.4  |  | Loan Agreement between Money Services, Inc. and World Marketing
Alliance, Inc. (incorporated by reference to Exhibit 10.4 to
Registrants Registration Statement on Form SB-2 filed on November 17,
1995)                                                                                                                      
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.5  |  | Management Agreement with WMA Management Services, Inc. (incorporated by reference to
Exhibit 10.5 to Registrants Registration Statement on Form SB-2 filed
on November 17, 1995)                                                                                                                                             
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.6  |  | Modification of Loan & Security Agreement between Money Services, Inc.
and World Marketing Alliance, Inc. (incorporated by reference to
Exhibit 10.2 to Registrants Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1998, filed on May 15, 1998)                                                              
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.7  |  | Reinsurance Agreement No. 1 between WMA Life Insurance Company Limited
and Western Reserve Life Assurance Co. of Ohio, dated July 9, 1996
(incorporated by reference to Exhibit 10.4 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1998,filed on
May 15, 1998)                               
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.8  |  | Corporate Services Agreement with World Marketing Alliance, Inc.
(incorporated by reference to Exhibit 10.3 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 1998, filed on
August 14, 1998)                                                                                                     
|      |  |                                                                                                                                                                                                                                                                                                                                
|10.9* |  | Automatic Variable Annuity Reinsurance Agreement between Western
Reserve Life Assurance Co. of Ohio and WMA Life Insurance Company
Limited, effective January 1, 1998 (incorporated by reference to
Exhibit 10.5 to Registrants Quarterly Report on Form 10-QSB for the
quarter ended June 30, 1998, filed on August 14, 1998)

21



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10* |  | Automatic Flexible Premium Variable Life Reinsurance Agreement Number
2 between Western Reserve Life Assurance Co. of Ohio and WMA Life
Insurance Company Limited, effective April 1, 1998 (incorporated by
reference to Exhibit 10.6 to Registrants Quarterly Report on Form
10-QSB for the quarter ended June 30, 1998, filed on August 14, 1998)                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.11  |  | Sublease Agreement by and between World Marketing Alliance, Inc. and
The WMA Corporation, dated as of January 21, 1998 (incorporated by
reference to Exhibit 10.5 to Registrants Annual Report on Form
10-KSB/A for the year ended December 31, 1997, filed on October 1,
1998)                                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.12  |  | Management Agreement dated August 2, 1995 between CFM Insurance
Managers, Ltd. and WMA Life (incorporated by reference to Exhibit 10.7
to Registrants Annual Report on Form 10-KSB/A for the year ended
December 31, 1997, filed on October 1, 1998)                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.13  |  | Form of Pledge and Security Agreement and Irrevocable Proxy between
Debtor and World Marketing Alliance, Inc. (incorporated by reference
to Exhibit 10.8 to Registrants Annual Report on Form 10-KSB/A for the
year ended December 31, 1997, filed on October 1, 1998)                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.14  |  | Revolving Line of Credit Loan Agreement between The WMA Corporation
and Money Services, Inc., dated September 30, 1998 (incorporated by
reference to Exhibit 10.1 to Registrants Quarterly Report on Form
10-QSB for the quarter ended September 30, 1998, filed on November 16,
1998)                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.15  |  | Revolving Line of Credit Promissory Note issued by The WMA Corporation
on September 30,1998 to Money Services, Inc. in the principal sum of
$10,000,000 (incorporated by reference to Exhibit 10.2 to Registrants
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1998, filed on November 16, 1998)                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.16  |  | Directed Reinsurance Agreement between WMA Life and World Marketing
Alliance, Inc., dated June 8, 1998 (incorporated by reference to
Exhibit 10.3 to Registrants Quarterly Report on Form 10-QSB for the
quarter ended September 30, 1998, filed on November 16, 1998)                                                                                                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.17  |  | First Amendment of Revolving Line of Credit Promissory Note between
The WMA Corporation and Money Services, Inc., dated January 29, 1999
(incorporated by reference to Exhibit 10.5 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended March 31, 1999, filed on
May 17, 1999)                                                                                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.18  |  | 1999 Stock Option Plan and Stock Option Agreement Form of the
Registrant (incorporated by reference to Exhibit A to Registrants
Definitive Proxy Statement, filed on August 3, 1999)                                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.19  |  | Amendment Number 1 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 2 between Western Reserve Life Assurance
Co. of Ohio and WMA Life Insurance Company Limited, effective January
1, 1999 (incorporated by reference to Exhibit 10.1 to Registrants
Quarterly Report on Form 10-QSB for the quarter ended September 30,
1999, filed on November 15, 1999)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.20  |  | Amendment Number 1 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve Life Assurance Co. of Ohio and WMA
Life Insurance Company Limited, effective January 1, 1999
(incorporated by reference to Exhibit 10.1 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1999, filed
on November 15, 1999)                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                        
|10.21  |  | Third Amendment of Revolving Line of Credit Promissory Note between
The WMA Corporation and Money Services, Inc., dated July 30, 1999
(incorporated by reference to Exhibit 10.2 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended September 30, 1999, filed
on November 15, 1999)                                                                                 

22



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22  |  | Five Year Term Note issued by The WMA Corporation to Money Services,
Inc. on July 30, 1999 (incorporated by reference to Exhibit 10.3 to
Registrants Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999, filed on November 15, 1999)                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.23  |  | Fourth Amendment of Revolving Line of Credit Promissory Note between
The WMA Corporation and Money Services, Inc., effective December 31,
1999 (incorporated by reference to Exhibit 10.1 to Registrants Annual
Report on Form 10-KSB for the year ended December 31, 1999, filed on
March 20, 2000)                                                                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.24* |  | Amendment Number 2 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 2 between Western Reserve Life Assurance
Co. of Ohio and WMA Life Insurance Company Limited, effective October
1, 1999 (incorporated by reference to Exhibit 10.2 to Registrants
Annual Report on Form 10-KSB/A for the year ended December 31, 1999,
filed on March 30, 2000) 
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.25* |  | Automatic Flexible Premium Variable Life Reinsurance Agreement Number
3 between Western Reserve Life Assurance Co. of Ohio and WMA Life
Insurance Company Limited, effective October 1, 1999 (incorporated by
reference to Exhibit 10.3 to Registrants Annual Report on Form
10-KSB/A for the year ended December 31, 1999, filed on March 30,
2000)                           
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.26* |  | Amendment Number 2 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve Life Assurance Co. of Ohio and WMA
Life Insurance Company Limited, effective October 1, 1999
(incorporated by reference to Exhibit 10.4 to Registrants Annual
Report on Form 10-KSB/A for the year ended December 31, 1999, filed on
March 30, 2000)                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.27  |  | Amendment Number 3 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 2 between Western Reserve Life Assurance
Co. of Ohio and WMA Life Insurance Company Limited, effective February
1, 2000 (incorporated by reference to Exhibit 10.5 to Registrants
Annual Report on Form 10-KSB/A for the year ended December 31, 1999,
filed on March 30, 2000)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.28  |  | Amendment Number 3 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve Life Assurance Co. of Ohio and WMA
Life Insurance Company Limited, effective February 1, 2000
(incorporated by reference to Exhibit 10.6 to Registrants Annual
Report on Form 10-KSB/A for the year ended December 31, 1999, filed on
March 30, 2000)                       
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.29* |  | Amendment Number 4 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 2 between Western Reserve and WMA Life,
effective January 1, 2000 (incorporated by reference to Exhibit 10.1
to Registrants Annual Report on Form 10-KSB for the year ended
December 31, 2000, filed on March 20, 2001)                                                        
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.30* |  | Amendment Number 5 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve and WMA Life, effective January 1,
2000 (incorporated by reference to Exhibit 10.2 to Registrants Annual
Report on Form 10-KSB for the year ended December 31, 2000, filed on
March 20, 2001)                                                                               
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.31  |  | Third Amendment and Joinder to the Directed Reinsurance Agreement
between The WMA Corporation, World Marketing Alliance, Inc. and World
Financial Group, Inc. dated July 12, 2001 (incorporated by reference
to Exhibit 10.1 to Registrants Quarterly Report on Form 10-QSB for
the quarter ended June 30, 2001, filed on August 13, 2001)                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.32  |  | First Right Agreement between The WMA Corporation and Western Reserve
Life Assurance Co. of Ohio dated July 12, 2001 (incorporated by
reference to Exhibit 10.2 to Registrants Quarterly Report on Form
10-QSB for the quarter ended June 30, 2001, filed on August 13, 2001)                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                                                 
|10.33  |  | Amendment Number 3 to the Automatic Reinsurance Agreement between
Western Reserve Life Assurance Co. of Ohio and WMA Life Insurance
Company Limited, effective as of September 18, 2001 (incorporated by
reference to Exhibit 10.33 to Registrants Registration Statement on
Form S-1, filed on February 22, 2002)                                                             

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##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                      
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.34  |  | Amendment Number 5 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 2 between Western Reserve and WMA Life,
effective September 18, 2001 (incorporated by reference to Exhibit
10.34 to Registrants Registration Statement on Form S-1, filed on
February 22, 2002)                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.35* |  | Amendment Number 6 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement between Western Reserve Life Assurance Co. of
Ohio and WMA Life Insurance Company Limited, effective September 18,
2001(incorporated by reference to Exhibit 10.35 to Registrants
Registration Statement on Form S-1/A, filed on May 8, 2002)              
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.36  |  | Amendment Number 2 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 3 between Western Reserve Life Assurance
Co. of Ohio and WMA Life Insurance Company Limited, effective
September 18, 2001 (incorporated by reference to Exhibit 10.36 to
Registrants Registration Statement on Form S-1, filed on February 22,
2002)
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.37  |  | Amendment Number 6 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve Life Assurance Co. of Ohio and WMA
Life Insurance Company Limited, effective September 18,
2001(incorporated by reference to Exhibit 10.37 to Registrants
Registration Statement on Form S-1, filed on February 22, 2002)                        
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.38  |  | Global Preferred Holdings, Inc. Stock Incentive Plan and Form of Stock
Option Grant Certificate (incorporated by reference to Exhibit 10.38
to Registrants Registration Statement on Form S-1, filed on February
22, 2002)                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.39  |  | Global Preferred Holdings, Inc. Directors Stock Option Plan and Form
of Stock Option Grant Certificate (incorporated by reference to
Exhibit 10.39 to Registrants Registration Statement on Form S-1,
filed on February 22, 2002)                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.40  |  | Form of Officer and Director Indemnification Agreement (incorporated
by reference to Exhibit 10.40 to Registrants Registration Statement
on Form S-1, filed on February 22, 2002)                                                                                                                                                                   
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.41  |  | Employment Agreement by and between the Registrant and Edward F.
McKernan, effective January 1, 2002 (incorporated by reference to
Exhibit 10.41 to Registrants Registration Statement on Form S-1,
filed on February 22, 2002)                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.42  |  | Employment Agreement by and between the Registrant and Caryl P.
Shepherd, effective February 1, 2002 (incorporated by reference to
Exhibit 10.42 to Registrants Registration Statement on Form S-1/A,
filed on March 29, 2002)                                                                                                                      
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.43  |  | Resignation of S. Hubert Humphrey, Jr., dated December 28, 2001
(incorporated by reference to Exhibit 10.1 to Registrants Form 8-K,
filed on February 22, 2002)                                                                                                                                                                                     
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.44  |  | Form of Stock Option Grant Certificate for S. Hubert Humphrey, Jr.
(incorporated by reference to Exhibit 10.2 to Registrants Form 8-K,
filed on February 22, 2002)                                                                                                                                                                                  
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.45  |  | Employment Agreement by and between the Registrant and Bradley E.
Barks, effective March 4, 2002 (incorporated by reference to Exhibit
10.45 to Registrants Registration Statement on Form S-1/A, filed on
March 29, 2002)                                                                                                                          
|       |  |                                                                                                                                                                                                                                                                                                                                                      
|10.46  |  | Employment Agreement by and between the Registrant and Thomas
Bobowski, effective March 4, 2002 (incorporated by reference to
Exhibit 10.46 to Registrants Registration Statement on Form S-1/A,
filed on March 29, 2002)                                                                                                                           

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##### Table of Contents



|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.47* |  | Automatic Pool Reinsurance Agreement, effective April 1, 1998, among
WMA Life Insurance Company Limited, American Phoenix Life and
Reinsurance Company, Swiss Re Life & Health America, Inc., The Lincoln
National Life Insurance Company and Transamerica Occidental Life
Insurance Company (incorporated by reference to Exhibit 10.47 to
Registrants Registration Statement on Form S-1/A, filed on May 8,
2002)
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.48  |  | Amendment Number 7 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement between Western Reserve Life Assurance Co. of
Ohio and Global Preferred Re Limited, f/k/a WMA Life Insurance Company
Limited, effective January 1, 2002 (incorporated by reference to
Exhibit 10.48 to Registrants Registration Statement on Form S-1/A,
filed on April 19, 2002)                                         
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.49  |  | Amendment Number 3 to the Automatic Flexible Premium Variable Life
Reinsurance Agreement Number 3 between Western Reserve Life Assurance
Co. of Ohio and Global Preferred Re Limited, f/k/a WMA Life Insurance
Company Limited, effective January 1, 2002 (incorporated by reference
to Exhibit 10.49 to Registrants Registration Statement on Form S-1/A,
filed on April 19, 2002)                                
|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.50  |  | Amendment Number 7 to the Automatic Variable Annuity Reinsurance
Agreement between Western Reserve Life Assurance Co. of Ohio and
Global Preferred Re Limited, f/k/a WMA Life Insurance Company Limited,
effective January 1, 2002 (incorporated by reference to Exhibit 10.50
to Registrants Registration Statement on Form S-1/A, filed on April
19, 2002)                                                       



---

|* |  | Confidential Treatment was previously requested with respect to
portions of these documents. The omitted portions of these documents
were filed separately with the Securities and Exchange Commission.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

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, in the City of Duluth, State of Georgia
on the 14th day of August 2002.

| |  |                                 |  |                                                            
| |  | ------------------------------- |  | -----------------------------------------------------------
| |  | GLOBAL PREFERRED HOLDINGS, INC.
| |  |                                 |  |                                                            
| |  | By:                             |  | /s/ EDWARD F. MCKERNAN                                     
| |  |                                 |  |                                                            
| |  |                                 |  | Edward F. McKernan                                         
| |  |                                 |  | Chief Executive Officer and President and Director         
| |  |                                 |  |                                                            
| |  | By:                             |  | /s/ BRADLEY E. BARKS                                       
| |  |                                 |  |                                                            
| |  |                                 |  | Bradley E. Barks                                           
| |  |                                 |  | Chief Financial Officer and Senior Vice President  Finance

26