##### Table of Contents



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UNITED STATES 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 1934For the quarterly period ended March 31, 2003oro
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For 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
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)


6455 EAST JOHNS CROSSING, SUITE 402
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.   Yes x    No o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes o    No x

As of May 12, 2003, there were 4,141,684 shares of common stock
outstanding.



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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                           
|ITEM 4. CONTROLS AND PROCEDURES                                                              
|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                                                                                   
|CERTIFICATION                                                                                
|EX-10.1 RENEWAL OF THE EMPLOYMENT AGREEMENT                                                  
|EX-10.2 RENEWAL OF THE EMPLOYMENT AGREEMENT                                                  
|EX-10.3 RENEWAL OF THE EMPLOYMENT AGREEMENT                                                  
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO                                                 
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO                                                 



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TABLE OF CONTENTS

PART I
    
    
    FINANCIAL INFORMATION
    
    
    3ITEM 1.
    
    
    FINANCIAL STATEMENTS
    
    
    3ITEM 2.
    
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    10ITEM 3.
    
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
    
    
    21ITEM 4.
    
    
    CONTROLS AND PROCEDURES
    
    
    22PART II
    
    
    OTHER INFORMATION
    
    
    22ITEM 1.
    
    
    LEGAL PROCEEDINGS
    
    
    22ITEM 2.
    
    
    CHANGES IN SECURITIES AND USE OF PROCEEDS
    
    
    22ITEM 3.
    
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    22ITEM 4.
    
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    22ITEM 5.
    
    
    OTHER INFORMATION
    
    
    22ITEM 6.
    
    
    EXHIBITS AND REPORTS ON FORM 8-K
    
    
    23


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PART I  FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

GLOBAL PREFERRED HOLDINGS, INC.Consolidated Balance Sheets

December 31,
    
    March 31,2002
    
    2003(Unaudited)AssetsFixed maturity securities  available for sale (amortized
cost of $2,673,762 and $2,222,454 for 2002 and 2003,
respectively)
    
    $
    2,798,190
    
    
    $
    2,325,836Cash and cash equivalents
    
    
    15,858,256
    
    
    
    19,877,786Investment income due and accrued
    
    
    80,882
    
    
    
    48,518Accounts receivable
    
    
    215,500
    
    
    
    104,000Reinsurance balances receivable
    
    
    3,078,949
    
    
    
    2,734,799Reinsured policy loans
    
    
    1,115,994
    
    
    
    1,177,247Deferred acquisition costs
    
    
    49,850,309
    
    
    
    48,799,570Prepaid expenses
    
    
    888,662
    
    
    
    750,654Current income tax recoverable
    
    
    172,500
    
    
    
    159,175Fixed assets (net of accumulated depreciation of $240,439 and
$264,321 for 2002 and 2003, respectively)
    
    
    215,095
    
    
    
    191,213Total assets
    
    $
    74,274,337
    
    
    $
    76,168,798Liabilities and Stockholders EquityLiabilities:Future policy benefits
    
    $
    16,923,775
    
    
    $
    18,159,834Reinsurance balances payable
    
    
    42,130
    
    
    
    80,706Accrued expenses and accounts payable
    
    
    473,636
    
    
    
    524,470Accrued interest payable
    
    
    158,219
    
    
    
    63,185Long term debt
    
    
    5,000,000
    
    
    
    5,000,000Deferred tax liability
    
    
    8,354,722
    
    
    
    8,571,698Total liabilities
    
    
    30,952,482
    
    
    
    32,399,893Stockholders equity:Common stock, par value $.001, 50,000,000 shares
authorized; 4,149,074 shares issued for 2002 and 2003,
respectively
    
    
    4,149
    
    
    
    4,149Additional paid-in capital
    
    
    23,326,026
    
    
    
    23,326,026Accumulated other comprehensive income
    
    
    82,125
    
    
    
    68,233Retained earnings
    
    
    19,958,822
    
    
    
    20,419,764Treasury stock, at cost (7,390 shares for 2002 and 2003,
respectively)
    
    
    (49,267
    )
    
    
    (49,267
    )Total stockholders equity
    
    
    43,321,855
    
    
    
    43,768,905Total liabilities and stockholders equity
    
    $
    74,274,337
    
    
    $
    76,168,798


See accompanying notes to consolidated financial statements.

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GLOBAL PREFERRED HOLDINGS, INC.

Consolidated Statements of Income
(Unaudited)

Three Months EndedMarch 31,2002
    
    2003Revenues:Premiums
    
    $
    4,557,410
    
    
    $
    4,388,495Reinsured policy revenues
    
    
    3,595,750
    
    
    
    3,231,844Net investment income
    
    
    214,351
    
    
    
    82,988Net realized gain on investments
    
    
    7,987
    
    
    
    Total revenues
    
    
    8,375,498
    
    
    
    7,703,327Benefits and expenses:Benefits, claims and settlement expenses
    
    
    2,033,763
    
    
    
    2,275,569Change in future policy benefits
    
    
    447,013
    
    
    
    310,751Reinsurance expense allowances, net
    
    
    2,209,704
    
    
    
    2,074,237Amortization of deferred acquisition costs
    
    
    1,118,705
    
    
    
    1,375,426Operating expenses
    
    
    726,704
    
    
    
    876,479Interest expense
    
    
    94,171
    
    
    
    92,466Total benefits and expenses
    
    
    6,630,060
    
    
    
    7,004,928Income before income tax
    
    
    1,745,438
    
    
    
    698,399Income tax expense
    
    
    (593,449
    )
    
    
    (237,457
    )Net income
    
    $
    1,151,989
    
    
    $
    460,942Basic earnings per share
    
    $
    0.28
    
    
    $
    0.11Diluted earnings per share
    
    $
    0.28
    
    
    $
    0.11Weighted-average common shares outstanding
    
    
    4,141,684
    
    
    
    4,141,684Total weighted-average common and common
equivalent shares outstanding
    
    
    4,141,684
    
    
    
    4,141,684


See accompanying notes to consolidated financial statements.

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GLOBAL PREFERRED HOLDINGS, INC.

Consolidated Statements of Cash Flows
(Unaudited)

Three Months EndedMarch 31,2002
    
    2003Cash flows from operating activities:Net income
    
    $
    1,151,989
    
    
    $
    460,942Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Amortization and depreciation
    
    
    1,126,087
    
    
    
    1,399,308Deferred tax expense
    
    
    593,449
    
    
    
    224,132Net realized gain on investments
    
    
    (7,987
    )
    
    
    Change in:Investment income due and accrued
    
    
    23,932
    
    
    
    32,364Accounts receivable
    
    
    
    
    
    
    111,500Reinsurance balances receivable
    
    
    767,598
    
    
    
    344,150Reinsured policy loans
    
    
    (58,507
    )
    
    
    (61,253
    )Deferred acquisition costs
    
    
    (10,637,919
    )
    
    
    (324,687
    )Prepaid expenses
    
    
    (511,161
    )
    
    
    138,008Current income tax recoverable
    
    
    (419,154
    )
    
    
    13,325Future policy benefits
    
    
    2,166,956
    
    
    
    1,236,059Reinsurance balances payable
    
    
    7,672,713
    
    
    
    38,576Accrued expenses and accounts payable
    
    
    251,967
    
    
    
    50,834Accrued interest payable
    
    
    (95,034
    )
    
    
    (95,034
    )Net cash provided by operating activities
    
    
    2,024,929
    
    
    
    3,568,224Cash flows from investing activities:Proceeds from sale of available-for-sale securities
    
    
    201,010
    
    
    
    Proceeds from principal payments on mortgage-backed
securities of available-for-sale securities
    
    
    204,552
    
    
    
    251,306Proceeds from maturity of available-for-sale securities
    
    
    
    
    
    
    200,000Purchase of fixed assets
    
    
    (35,454
    )
    
    
    Net cash provided by investing activities
    
    
    370,108
    
    
    
    451,306Net increase in cash and cash equivalents
    
    
    2,395,037
    
    
    
    4,019,530Cash and cash equivalents at beginning of period
    
    
    8,062,110
    
    
    
    15,858,256Cash and cash equivalents at end of period
    
    $
    10,457,147
    
    
    $
    19,877,786Supplemental disclosure of cash flow information:Interest paid
    
    $
    189,205
    
    
    $
    187,500Income taxes paid
    
    $
    419,154
    
    
    $
    


See accompanying notes to consolidated financial statements.

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GLOBAL PREFERRED HOLDINGS, INC.
Notes to Consolidated Financial Statements

March 31, 2003
(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 three months ended
March 31, 2003 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2003. The unaudited financial
statements should be read in conjunction with Global Preferreds audited
financial statements included in Global Preferreds 2002 Annual Report on Form
10-K, 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 March
31, 2003.

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 on securities as shown under the
equity section of the consolidated balance sheet. Total other comprehensive
income for the three months ended March 31, 2003 was $447,050 compared to total
other comprehensive income of $1,071,892 for the three months ended March 31,
2002.

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. Diluted earnings per share is computed based on the
total weighted-average number of common and common equivalent shares
outstanding during the period.

5.    Common Stock

Shares of convertible preferred stock issued in June and July 2000 were
converted to common stock on January 1, 2002. No other changes to our common
stock occurred during 2002 or 2003.

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

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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
2003, SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and
Hedging Activities, was issued. This statement amends and clarifies financial
accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under SFAS No. 133. The provisions of SFAS No. 149 are not expected to have a
material impact on Global Preferreds financial statements.

In February 2003, the Financial Accounting Standards Board (FASB)
revised its tentative guidance on SFAS No. 133 Issue No. B36, Bifurcation of
Embedded Credit Derivatives, to include modified coinsurance arrangements
involving fixed account products. Global Preferred does not have any modified
coinsurance reinsurance treaties involving fixed account products and therefore
this issue is not expected to have a material impact on Global Preferreds
financial statements.

In 2002, FASB issued SFAS No. 145, SFAS No. 146, SFAS No. 147 and SFAS No.
148 dealing with extinguishment of debt, exit and disposal activities,
acquisitions of financial institutions, and accounting for stock-based
compensation, respectively. The provisions of these standards do not have a
material impact on Global Preferreds financial statements.

Also in 2002, FASB issued Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Othersand in January 2003, FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities.The interpretations issued are
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 its
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 insurance policies on a
renewable term basis, which are reported below as Non-Universal Life-Type
Agreements and, as such, these revenues are classified as premium 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 insurance policies
on a coinsurance and modified coinsurance basis, which are reported below as
Universal Life-Type Agreements and, as such, these revenues 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, statutory receivables
and allocated surplus, which is consistent with Global Preferreds current
internal measurement process.

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Segment ReportingThree Months Ended March 31,
    
    2002Non-Universal
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    Life-Type
    
    Other
    
    TotalPremiums
    
    $
    4,557
    
    
    $
    
    
    
    $
    
    
    
    $
    4,557Reinsured policy revenues
    
    
    
    
    
    
    3,596
    
    
    
    
    
    
    
    3,596Benefits, claims and settlement
expenses*
    
    
    1,999
    
    
    
    482
    
    
    
    
    
    
    
    2,481Reinsurance expense allowances, net
    
    
    1,612
    
    
    
    597
    
    
    
    
    
    
    
    2,209Amortization of deferred acquisition
costs
    
    
    25
    
    
    
    1,094
    
    
    
    
    
    
    
    1,119Underwriting profit
    
    
    921
    
    
    
    1,423
    
    
    
    
    
    
    
    2,344Net investment income
    
    
    38
    
    
    
    61
    
    
    
    115
    
    
    
    214Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8Other expenses
    
    
    26
    
    
    
    39
    
    
    
    756
    
    
    
    821Segment operating income (loss)
before income tax
    
    
    933
    
    
    
    1,445
    
    
    
    (633
    )
    
    
    1,745Income tax expense (benefit)
    
    
    317
    
    
    
    491
    
    
    
    (215
    )
    
    
    593Segment net income (loss)
    
    $
    616
    
    
    $
    954
    
    
    $
    (418
    )
    
    $
    1,152Segment assets
    
    $
    8,475
    
    
    $
    57,055
    
    
    $
    13,524
    
    
    $
    79,054




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

Segment ReportingThree Months Ended March 31,
    
    2003Non-Universal
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    Life-Type
    
    Other
    
    TotalPremiums
    
    $
    4,388
    
    
    $
    
    
    
    $
    
    
    
    $
    4,388Reinsured policy revenues
    
    
    
    
    
    
    3,232
    
    
    
    
    
    
    
    3,232Benefits, claims and settlement
expenses*
    
    
    1,997
    
    
    
    589
    
    
    
    
    
    
    
    2,586Reinsurance expense allowances, net
    
    
    1,530
    
    
    
    544
    
    
    
    
    
    
    
    2,074Amortization of deferred acquisition
costs
    
    
    94
    
    
    
    1,281
    
    
    
    
    
    
    
    1,375Underwriting profit
    
    
    767
    
    
    
    818
    
    
    
    
    
    
    
    1,585Net investment income
    
    
    2
    
    
    
    55
    
    
    
    26
    
    
    
    83Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other expenses
    
    
    43
    
    
    
    97
    
    
    
    830
    
    
    
    970Segment operating income (loss)
before income tax
    
    
    726
    
    
    
    776
    
    
    
    (804
    )
    
    
    698Income tax expense (benefit)
    
    
    247
    
    
    
    264
    
    
    
    (274
    )
    
    
    237Segment net income (loss)
    
    $
    479
    
    
    $
    512
    
    
    $
    (530
    )
    
    $
    461Segment assets
    
    $
    5,564
    
    
    $
    52,021
    
    
    $
    18,584
    
    
    $
    76,169




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

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During the three months ended March 31, 2002 and 2003, the percentages of
total premiums and reinsured policy revenues that related to business issued by
Western Reserve Life Assurance Co. of Ohio (Western Reserve) were 91% and
92%, respectively. The percentages of the total underwriting profit that
related to business issued by Western Reserve for the three months ended March
31, 2002 and 2003 were 89% and 93%, respectively.

8.    Reclassification

Global Preferred has reclassified the presentation of certain 2002
information to conform to the 2003 presentation.

9.    Employment Agreements

Global Preferreds executive officers, Edward F. McKernan, Bradley E.
Barks, Caryl P. Shepherd and Thomas J. Bobowski, are employed pursuant to
written employment agreements. Mr. McKernans employment agreement has an
initial term, which expires December 31, 2004 and is automatically renewed for
additional one-year periods unless either party provides written notice of
termination at least 60 days in advance of the expiration date of the current
term.

Mr. Barks, Ms. Shepherd and Mr. Bobowski have employment agreements, which
were renewed in April 2003, and now expire December 31, 2003. The agreements
are renewable by agreement of the parties for additional one-year periods. As
part of the renewal of their agreements, these three employees agreed to forego
rights under the employment agreements to receive certain option grants that
were conditioned upon Global Preferreds completion of a firm commitment,
underwritten public offering before December 31, 2003.

All executive officers are eligible for an annual bonus in an amount to be
determined by the board of directors. Each of the executive officers
employment agreements includes post-employment restrictive covenants not to
solicit Global Preferreds customers or recruit Global Preferreds employees.

10.    Stock Options

During April 2003, the board of directors approved option grants to
certain employees of Global Preferred. Employees are eligible to receive
options under the Global Preferred Holdings, Inc. Stock Incentive Plan, which
was adopted by the board in January 2002 and ratified by the stockholders in
July 2002. The boards approval of options included an initial grant and a
2003 grant. The initial grants are immediately vested at a rate of 10% of the
grant amount for each prior year of service, not to exceed 50% of the total
initial grant amount, with the balance vesting over 3 years. The 2003 grant
vests over 4 years. Under the terms of the Stock Incentive Plan, option grants
must be made pursuant to the terms of Stock Incentive Agreements approved by
the board and the date of grant is the date on which the following events have
taken place: approval of the form of the Stock Incentive Agreement by the
board, the recipients and the number shares are determined, and the board has
taken all other actions to complete the grants. The board has not yet approved
the form of Stock Incentive Agreement and, therefore, the date of grant has not
yet occurred. No expense has been recorded in association with the options as
of March 31, 2003.

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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
Holdings, Inc. as of March 31, 2003 compared with December 31, 2002, and its
results of operations for the three months ended March 31, 2003, compared with
the three months ended March 31, 2002. This discussion should be read in
conjunction with the consolidated financial statements and accompanying notes
included elsewhere in this report and with the MD&A and Global Preferreds
consolidated financial statements and notes thereto included in Global
Preferreds 2002 Annual Report on Form 10-K.

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, commenced its reinsurance operations during 1996.
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.

Global Preferred, through Global Preferred Re, provides reinsurance for
life insurance and annuity products. Our principal business objective is to
align the long-term interests between independent marketing organizations and
life insurance companies. 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. Through
these collaborative relationships, we believe both the IMOs and insurers
benefit from mutually rewarding relationships based on parallel interests, a
dedication to quality business, and a focus on managing insurance and
distribution risk for long-term economic rewards.

Our in force business has resulted from a relationship with the
independent agents of an IMO member of the AEGON group that markets the
products we currently reinsure. Although our reinsurance business is directed
to us through these independent agent relationships, the life insurance and
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, a subsidiary of AEGON
USA, Inc. (Western Reserve);
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | American Skandia Life Assurance Corporation, a subsidiary of
Prudential Financial, Inc. (American Skandia);
| | - |  | -------------------------------------------------------------------------------------------------------------



| |  |  | Pacific Life Insurance Company (Pacific Life); and
| | - |  | ----------------------------------------------------



| |  |  | Kemper Investors Life Insurance Company, an affiliate of Zurich 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.

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.

10



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During the first quarter of 2003, Global Preferred formed two wholly-owned
subsidiaries, Global Preferred Solutions, Inc. and Global Preferred Resources,
Inc. Global Preferred Solutions will provide actuarial and management advisory
services to marketing organizations and life insurers. Global Preferred
Solutions principal focus will be to aid clients in their assessment of the
strategic and structural benefits of sharing the economics of the business
produced through their distributor-insurer relationships. Global Preferred
Solutions will also offer product development, pricing, valuation, and risk
management consulting services for life insurers and marketing organizations.

Global Preferred Resources will offer its management support structure to
marketing organizations, banks, broker/dealers, and insurance companies who are
considering the formation of, or have formed, a producer-owned reinsurance
enterprise. The objective of Global Preferred Resources is to leverage the
core competencies and economies of scale of Global Preferred Holdings and
enable companies to bring best practices and independent objectivity to their
reinsurance enterprise.

Types of Reinsurance

We currently write three types of reinsurance on a quota share basis:
renewable term (consisting of monthly renewable term and yearly 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. The ceding life company establishes
the policy reserves, which are reduced for the mortality risk reinsured with
us, and pays all policy benefits, commissions and expenses involved in issuing
and maintaining the business and, correspondingly, we establish reserves
specific to the mortality risk reinsured.

Under renewable term reinsurance, we may also be subject to risks as a
result of persistency risk. Persistency risk is the risk that a policyholder
either stops paying premiums, which would cause the policy to lapse, or chooses
to surrender the policy for the cash surrender value. The effect of
persistency risk on us is that possible future revenue will be reduced,
potentially reducing profits.

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
contractual expense allowances to the ceding life company to pay for the
expenses associated with the reinsured policies. Expenses include commissions
and costs associated with underwriting, marketing, policy issue, and
maintenance. We also pay our proportionate share of death benefits and other
policy benefits to the ceding life company. 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.

Under coinsurance and modified coinsurance agreements, our reinsurance
premiums are materially higher than premiums paid on the renewable term
reinsurance since we are reinsuring more risks. 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. Consequently, our net cash outlays could be
as much as, or more than, the first year life insurance premiums and as much as
10% of 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.

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Financial Statement Impact of Reinsurance

The Securities and Exchange Commissions Financial Reporting Release No.
60 requires all companies to include a discussion of critical accounting
policies used in the preparation of financial statements. Additional
information included elsewhere herein and in Note 2 to the consolidated
financial statements in our Annual Report on Form 10-K, for the year ended
December 31, 2002, which includes a summary of the accounting policies 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 payment
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 the gross revenues received by the ceding life company
over the payment 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, the change in claims in course of settlement, and the change in
claims incurred but not reported; (2) expense allowances paid to the ceding
life company for expenses associated with the reinsured policies, 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.

Net Income.Our profitability, in part, depends on the volume of policies
reinsured and experience of the reinsured policies. Factors that affect the
experience of the business include reinsured policy persistency, death claims,
and investment performance of the separate account balances. While death
claims are reasonably predictable over a period of years, claims become less
predictable over shorter periods, and are subject to fluctuation from quarter
to quarter and year to year. Similarly, separate account investment returns,
upon which a portion of our revenues depend, have relatively stable returns
over a period of years but can be volatile over shorter periods. A
considerable amount of separate account balances is invested in equities;
therefore, prolonged deterioration in the equity markets will result in a
decrease in account balances and, correspondingly, a decrease in our current
and future income.

Balance Sheet Impact

Deferred Acquisition Costs.We capitalize and defer costs that vary with
and are primarily related to 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 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.

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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 normal 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.

A material component of variable life and annuity product revenues is
derived from the asset-based fees that have been assessed against the policy
account balances, of which a considerable portion is invested in the equity
markets. The volatility of equity market returns over the short-term can be
significant without materially impacting long-term equity market returns.
Historical equity market performance shows equity market volatility is much
higher over short-term horizons as compared to long-term horizons. The
short-term volatility of the policy fund value will result in the short-term
volatility being applied to all future expected gross profits if no adjustments
are made to account for the differences between long-term and short-term
volatility. We utilize a credibility approach to account for the differences
between long-term and short-term volatility. Under this approach, the
estimates of future expected gross profits are revised to recognize the effects
short-term volatility and market yields have upon long-term yield expectations.
We review our approach annually to determine if additional adjustments to
amortization are necessary as a result of prolonged and/or severe negative or
positive equity market performance. In such instances, the equity market
performance must be sufficiently high or low to justify a belief that the
effect of current market conditions on future expected gross profits should be
more permanently reflected.

In addition, certain variable annuity policies we reinsure include a
guaranteed minimum death benefit that will guarantee a death benefit typically
equal to a return of premium or the highest level the fund values had
accumulated over certain prescribed periods under the annuity policy. These
policies represent less than 10% of our revenues. Upon the death of an annuity
policyholder, we will incur a claims expense equal to the excess of the amount
guaranteed under this provision over the then current policy fund value. This
expense increases when equity markets decline and decreases as equity markets
increase. We utilize an implicit approach to account for guaranteed minimum
death benefits. Under this approach, future expected gross profits are
decreased to account for future expected claims expenses. The short-term
volatility of the policy fund value will result in significant volatility in
the expected claims expense if no recognition is made to acknowledge
differences between long-term yields and short-term volatility. Using a
credibility approach, we implicitly recognize the effect of long-term versus
short-term volatility when accounting for guaranteed minimum death benefits.

Future Policy Benefits.Liabilities for future benefits on life insurance
policies are established in an amount we estimate is adequate to meet the
estimated future obligations on the policies in effect. Policy 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 life insurance and annuity policies. With regard to the separate
account benefits reinsured on a modified coinsurance basis, we record the
liabilities as an offset to related assets as our 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 under
variable life insurance or variable annuity policies do not permit us to
reinsure those benefits on a coinsurance basis. We currently reinsure the
fixed account portion of life
insurance and annuity 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 maturity securities and equity
securities as available-for-sale. Such securities are reported at fair value.
Fixed maturity securities available-for-sale 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 and fixed maturity securities
available-for-sale, less applicable deferred income taxes, are reported as a
separate component of accumulated other comprehensive income 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 yields
of invested assets in support of future policy benefit obligations.

Reinsurance Relationships

Current Reinsurance Business

We currently provide reinsurance for variable universal life and variable
annuity policies issued by four large life insurance companies. Our
reinsurance agreements with these ceding life companies provide for our
assumption of a portion of defined risks associated with specified products
sold by certain independent agents with which we have a relationship.
Reinsurance under these agreements is automatic, meaning we are required to
accept the business ceded to us so long as the ceding life companies satisfy
the terms of the reinsurance agreements.

The following table indicates, by ceding life company, the types of
policies we are currently reinsuring and the type of reinsurance applicable to
each.

Type of ReinsuranceCeding Life Company
    
    Renewable Term
    
    Coinsurance
    
    Modified CoinsuranceWestern ReserveVariable universal life
    
    
    ü
    
    
    
    ü
    
    
    
    üVariable annuity
    
    
    
    
    
    
    ü
    
    
    
    üAmerican SkandiaVariable annuity
    
    
    
    
    
    
    
    
    
    
    üPacific LifeVariable universal life
    
    
    üZurich KemperVariable universal life
    
    
    ü


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We have four separate reinsurance agreements with Western Reserve that
cover variable universal life insurance and variable annuity policies issued by
Western Reserve on or after January 1, 1992, which are sold by the agents of
World Financial Group, Inc., an indirect subsidiary of AEGON USA, Inc., and its
predecessor. These agreements were entered into on July 1, 1996, January 1,
1998, April 1, 1998, and October 1, 1999, respectively. The agreement with
American Skandia began on January 1, 1997 and covers policies on an American
Skandia variable annuity product issued between January 1, 1997 and December
31, 2002 sold by those same agents. The Zurich Kemper agreement was effective
September 1, 1996 and covers all policies on a Kemper variable universal life
product issued between September 1, 1996 and March 31, 2001 sold by those
agents. Our agreement with Pacific Life was signed on June 25, 2001 and covers
policies on a variable universal life product issued on or after January 1,
2001, sold by those agents.

We believe that the terms of our reinsurance arrangements are favorable
for our industry and that we were able to obtain these terms in part because of
our relationships with the agents that sell the policies we reinsure. Our
right to reinsure new business under our reinsurance agreements generally
extends for an initial term of 3 to 5 years, with automatic renewals and
one-year notices of termination following the initial term. Termination of our
right to reinsure new business does not, however, affect our right to continue
to reinsure the policies reinsured at the time of termination. Under our
agreements, we have the right to continue to reinsure a policy for as long as
it remains in effect or until the ceding life company otherwise recaptures it.
A ceding life company may have the right to recapture a reinsured policy only
upon certain defaults or after a period of 10 years or longer, depending on the
terms of the relevant reinsurance agreement.

Rights to Increase Business under Existing Contracts

Reinsurance of In Force Business and New Business with Western Reserve.
In June 2001, we entered into a First Right Agreement with Western Reserve that
provides us a first right to reinsure certain new products issued by Western
Reserve or its U.S. affiliates that are sold by agents associated with World
Financial Group, as follows:



| |  |  | We have the contractual right, through December 31, 2003, to
commence reinsurance of the Freedom Elite Builder variable universal
life insurance polices and riders issued by Western Reserve from
January 1, 2002 through December 31, 2002, and, through March 31, 2004,
to commence reinsurance of the Freedom Elite Builder variable universal
life insurance policies and riders issued by Western Reserve from
January 1, 2003 through March 31, 2004, on a coinsurance and modified
coinsurance basis.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have the right, subject to minimum sales volume thresholds, to
reinsure up to 20% of all new single life variable universal life
insurance products introduced for sale after January 1, 2002, on a
coinsurance and modified coinsurance basis for all policies issued
through March 31, 2004 and prospectively on a monthly renewable term
basis for all policies issued through March 31, 2006.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We have the contractual right to prospectively increase our
reinsurance quota share percentages, up to a maximum ranging from 40%
to 50%, on certain new variable annuity products issued through
December 31, 2003.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | These rights automatically extend for one-year renewal periods
unless either party gives notice of termination 180 days prior to the
expiration of the applicable term. Our decision to exercise these
contractual rights will be made from time to time during the term of
the First Right Agreement and such decisions will be based on a number
of relevant factors, including the attractiveness of the reinsurance
rates prescribed by the agreement, the volume of business, and our
available capital capacity.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Expand Reinsurance of Our In Force Business by Exercising Contractual
Rights. We had the contractual right to convert our monthly renewable term
reinsurance of the Financial Freedom Builder variable universal life insurance
policies and riders issued by Western Reserve from January 1, 1999 through
March 31, 2003 to coinsurance and modified coinsurance. This right expired on
March 31, 2003.

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Reinsurance of New Business with Other Insurance Companies

We intend to enter into reinsurance agreements with other insurance
companies from time to time and such decisions will be based on a number of
relevant factors, including the attractiveness of the reinsurance rates
prescribed by the agreement, the volume of business, our relationship with the
insurance company, our relationship with the IMO, and our available capital
capacity.

We intend to enter into agreements with other IMOs similar to a directed
reinsurance agreement we have with World Financial Group, pursuant to which
World Financial Group has agreed to use commercially reasonable efforts to
assist us in attaining the opportunity to reinsure all insurance products sold
by its agents for insurance companies with which it has selling agreements,
other than Western Reserve and Western Reserves affiliates. Additionally, the
agreement provides that World Financial Group will use commercially reasonable
efforts to cooperate with us in our negotiations to establish reinsurance
relationships with life insurance companies and provide certain benefits to the
companies that reinsure their business through us.

Our Current Reinsurance Agreements

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

ThreeYear Ended
    
    Months EndedDecember 31,
    
    March 31,2001
    
    2002
    
    2003Western Reserve
    
    
    89
    %
    
    
    91
    %
    
    
    92
    %American Skandia
    
    
    9
    %
    
    
    8
    %
    
    
    7
    %Zurich Life
    
    
    2
    %
    
    
    1
    %
    
    
    1
    %Pacific Life(1)
    
    
    
    (2)
    
    
    
    (2)
    
    
    
    (2)Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %




---

|(1) |  | This agreement was effective as of January 1, 2001.
|--- |  | ---------------------------------------------------
|(2) |  | Less than 1%.                                      

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.

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

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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.
The policies we reinsure on a renewable term basis represented 58% of our
reinsurance revenues for the quarter ended March 31, 2003. The policies we
reinsure on a coinsurance and modified coinsurance basis represented 42% of our
reinsurance revenues for the same period. Of the 42%, 25% relates to variable
life insurance policies and 17% relates to variable annuity policies.

Results of Operations

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

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

Three Months EndedMarch 31,2002
    
    2003(As a percentage of total revenue)Consolidated Statements of Income Data:Revenues:Premiums
    
    
    54
    %
    
    
    57
    %Reinsured policy revenues
    
    
    43
    
    
    
    42Net investment income
    
    
    3
    
    
    
    1Net realized gain (loss) on investments
    
    
    
    
    
    
    Total revenues
    
    
    100
    %
    
    
    100
    %Benefits and expenses:Benefits, claims and settlement expenses
    
    
    24
    
    
    
    30Change in future policy benefits
    
    
    5
    
    
    
    4Reinsurance expense allowances, net
    
    
    27
    
    
    
    27Amortization of deferred acquisition costs
    
    
    13
    
    
    
    18Operating expenses
    
    
    9
    
    
    
    11Interest expense
    
    
    1
    
    
    
    1Total benefits and expenses
    
    
    79
    
    
    
    91Income (loss) before income tax
    
    
    21
    
    
    
    9Income tax benefit (expense)
    
    
    (7
    )
    
    
    (3
    )Net income (loss)
    
    
    14
    %
    
    
    6
    %


Revenues

Premiums.Premiums decreased $169,000, or 4%, from $4.6 million for the
three months ended March 31, 2002 to $4.4 million for the comparable period in
2003. The majority of the premium decrease was due to the decreasing business
in force under the renewable term agreements. Policies in force are
decreasing because the number of policy surrenders and lapses
currently exceed the number of new policies reinsured.

Reinsured Policy Revenues.Reinsured policy revenues decreased $364,000,
or 10%, from $3.6 million for the three months ended March 31, 2002 to $3.2
million for the comparable period in 2003. This decrease was primarily
attributable to revenues associated with our variable annuity coinsurance and
modified coinsurance agreements, which declined from $1.5 million for the three
months ended March 31, 2002 to $1.3 million for the same period in 2003, a
decrease of $223,000, or 15%. Decreasing revenues for both variable universal
life and variable annuity business have resulted from lapses and a decline in
mortality and expense charges and asset-based allowances associated with lower
account values, due to the decline in the equity markets.

Net Investment Income and Net Realized Gain on Investments.Net
investment income decreased $131,000, or 61%, from $214,000 for the three
months ended March 31, 2002 to $83,000 for the comparable period in 2003,
primarily due to the decreased size of our fixed maturity securities portfolio.
The decrease in our fixed maturity

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securities portfolio resulted from the sale of $9.9 million of fixed maturity
securities in 2002, with the majority being sold in December 2002. The proceeds
from these sales were held in cash and cash equivalents. There were no sales
of fixed maturity securities for the three months ended March 31, 2003, thus no
gains or losses were realized. The sale of fixed maturity securities for the
three months ended March 31, 2002 resulted in a net realized gain on
investments of $8,000. The gains in 2002 were caused by a decline in market
yields, which resulted in an increase in the fair value of the fixed maturity
securities in our portfolio.

Benefits and Expenses

Benefits, Claims and Settlement Expenses.Benefits, claims and settlement
expenses increased $242,000, or 12%, from $2.0 million for the three months
ended March 31, 2002 to $2.3 million for the comparable period in 2003. The
increase was primarily associated with a lower incidence of life insurance
death claims in the first three months of 2002 compared to the incidence of
death claims in the same period in 2003, the increasing age of the policies
reinsured and an increase in variable annuity death claims. The aggregate face
value of insurance underlying the policies we reinsured at March 31, 2002 was
$9.2 billion compared to $8.2 billion at March 31, 2003.

Change in Future Policy Benefits.Change in future policy benefits
decreased $136,000, or 30%, from $447,000 for the three months ended March 31,
2002 to $311,000 for the comparable period in 2003. 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 $135,000, or 6%, from $2.2 million for the three months ended March
31, 2002 to $2.1 million for the comparable period in 2003. These amounts
reflect the decrease in business in force due to lapse and surrender activity
and the decline in the equity markets.

Amortization of Deferred Acquisition Costs.Amortization of deferred
acquisition costs increased $257,000, or 23%, from $1.1 million for the three
months ended March 31, 2002 to $1.4 million for the comparable period in 2003.
The increase in amortization resulted from lower than expected equity market
performance of the separate account balances for the three months ended March
31, 2003, as compared to the same period in 2002.

Under current assumptions, and all else being equal, if separate account
fund yields exceed 5% for 2003, we do not expect that there would be increased
amortization in 2003 from unlocking due to lower than expected equity market
performance. If separate account fund yields are 0% for 2003 we would expect
additional amortization of approximately $500,000 for 2003 from unlocking due
to lower than expected equity market performance.

Operating Expenses.Operating expenses increased $149,000, or 20%, from
$727,000 for the three months ended March 31, 2002 to $876,000 for the
comparable period in 2003. These expenses include salaries and benefits,
professional fees for legal, actuarial and accounting expenses and other
operating expenses. The majority of the increase for the quarter ended March
31, 2003 was attributable to a $123,000 increase in our directors and officers
insurance premiums, a $56,000 increase in legal fees, a $27,000 increase in
rent expense, a $25,000 increase in actuarial consulting fees and a $25,000
increase in our state of Delaware franchise tax, offset by a $111,000 decrease
in salaries, bonuses and benefits due to a reduction in employee bonuses.

Interest Expense.Interest expense decreased $2,000, or 2%, from $94,000
for the three months ended March 31, 2002 to $92,000 for the comparable period
in 2003. The decrease 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 $356,000, or 60%, from $593,000 for the three months ended
March 31, 2002 to $237,000 for the comparable period in 2003. Income before
income taxes is comprised of income subject to taxes that is recognized and due
in the current period and income subject to taxes that is recognized during the
current period but is 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

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the amount of current taxable income. As of March 31, 2002, we had no current
taxable income and, as a result, we were unable to take advantage of any of the
small life insurance company deduction. As of March 31, 2003, we had $13,000
of current taxable income which was due to the alternative minimum tax. We had
no other current taxable income and as a result, we were unable to take
advantage of any of the small life insurance company deduction. During 2002
and 2003 our effective tax rate was 34%.

In accordance with SFAS No. 109, Accounting for Income Taxes, we have $7.7
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

To grow our life and annuity business, we use cash to pay for the initial
marketing and underwriting expenses of the policies we reinsure. These same
policies thereafter provide cash from premiums, policy charges and policy fees
over their lifetime. We also use cash to pay for policy claims, policy benefits
and operating expenses which include: salaries and benefits, and professional
fees for management, legal, investment, custodial, accounting, tax and
consulting services. In addition to operating cash flows, cash is provided by
and used in financing activities we undertake to increase our capital position
and through activities associated with our invested assets.

Our primary source of liquidity was $19.9 million in consolidated cash and
cash equivalents at March 31, 2003. The effective duration of our fixed
maturity portfolio is 1.2 years with 100% of the fixed maturity securities
having an effective maturity of less than 5 years. Our fixed maturity portfolio
represents all of our invested assets, and has an average Moodys quality
rating of Aa2.

Our capital structure consists of long-term debt and equity. Our long-term
debt is comprised of 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 would receive 6.255 shares of common
stock for each $100 of the outstanding principal amount of the note, for a
total of 312,750 shares, which reflects our three-for-two stock split in 2001.
We have the option to redeem the note, in whole or in part, before maturity.
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 March 31, 2003, we had an
outstanding principal balance on the term note of $5 million and accrued
interest of $63,000.

Operating Cash Flows.Under the renewable term reinsurance agreements,
premiums typically vary in proportion with 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.

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Net cash flows provided by operating activities were $2.0 million and $3.6
million for the three months ended March 31, 2002 and 2003, 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 provided by operating activities increased in 2003 because we
utilized less cash to acquire new reinsurance business.

At this time we are exploring financing strategies to fund transactions to
assume new business. The amount, timing, receipt and cost of additional capital
will, in part, determine the extent to which we will be able to increase
business reinsured.

Investment Cash Flows.We generally receive premiums in advance of paying
related benefits and claims. In addition, some policies we reinsure require
that we credit interest on funds that are deposited with us. We invest these
assets in securities that will provide a return and cash flow stream that are
consistent with these benefits. Investment cash flows are the result of buying,
selling and holding these securities in addition to activities relating to
buying and selling fixed assets.

Net cash flows provided by investing activities were $370,000 and $451,000
for the three months ended March 31, 2002 and 2003, respectively. The cash
flows provided by investing activities of $451,000 in 2003 primarily related to
the proceeds from the maturity of available-for-sale securities and from the
principal payments on mortgage-backed securities. The cash flows provided by
investing activities of $370,000 in 2002 were the result of proceeds generated
from the sale of available-for-sale securities and from the principal payments
on mortgage-backed securities. We have incurred no significant capital
expenditures during 2003.

Financing Cash Flows.Financing cash flows relate primarily to activities
associated with our capital position. No financing activities occurred during
the three months ended March 31, 2002 and 2003.

Restrictions.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 March
31, 2003. Global Preferred Holdings, Inc. relies primarily on funds retained
at the holding company level, debt service on amounts loaned to Global
Preferred Re, service fees 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 three
months ended March 31, 2003, 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
$5.5 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.

Forward-Looking Statements

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the use
of estimates and assumptions developed by our management. Any adjustments to
reported bases of assets or liabilities resulting from changes in estimates are
reflected in earnings in the period the estimates are revised.

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

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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:



| |  |  | 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;
| | - |  | --------------------------------------



| |  |  | A decrease in the level of demand for our reinsurance business, or increased competition in the industry;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | Our cash requirements;
| | - |  | ----------------------



| |  |  | Availability of capital on acceptable terms;
| | - |  | --------------------------------------------



| |  |  | The amount, timing, receipt, and cost of additional capital to fund
our exercise of the rights to increase our reinsurance business with
Western Reserve;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 and equity
market conditions, which could affect our investment portfolio and
reinsured policy revenues.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

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 Exhibit 99.3 titled Factors That May
Affect Future Results in our 2002 Annual Report on Form 10-K. 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.




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

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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.

Our investment portfolio includes investments that are subject to changes
in market values due to changes in interest rates. 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 0.2%,
or approximately $44,000, on a portfolio valued at approximately $20.8 million
at March 31, 2003. 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 0.2%, or approximately $36,000. The
foregoing reflects the use of an immediate time horizon. Credit spreads are
assumed to remain constant in these hypothetical examples.




ITEM 4.    CONTROLS AND PROCEDURES

Within the 90-day period prior to the date of this report, we carried out
an evaluation of the effectiveness of our disclosure controls and procedures
(as defined by Rule 13a-14(c) of the Securities Exchange Act of 1934) under the
supervision and with the participation of our chief executive officer and chief
financial officer. Based on and as of the date of such evaluation, the
aforementioned officers have concluded that our disclosure controls and
procedures were effective, in all material aspects, to ensure that information
required to be disclosed in the reports we file with the Securities and
Exchange Commission is recorded, processed, summarized, and reported as and
when required.

There were no significant changes in our internal controls or other
factors that could significantly affect these controls subsequent to the date
our chief executive officer and chief financial officer carried out their
evaluation. There were not significant deficiencies or material weaknesses
identified in the evaluation and, therefore, no corrective actions were taken.




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 March
31, 2003.




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

During the first quarter of 2003, no matters were submitted to our
security holders for a vote.




ITEM 5.    OTHER INFORMATION

On May 1, 2003, Prudential Financial, Inc. completed its purchase of
American Skandia Life Assurance Corporation. It is unclear what impact the
announced transaction will have upon the reinsurance business between American
Skandia and Global Preferred.

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ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K



|(a) |  | Exhibits
|--- |  | --------

10.1
    
    Renewal of the Employment Agreement by and between the Registrant and
Bradley E. Barks, effective March 1, 2003.10.2
    
    Renewal of the Employment Agreement by and between the Registrant and Caryl P. Shepherd, effective February 1, 2003.10.3
    
    Renewal of the Employment Agreement by and between the Registrant and Thomas J. Bobowski, effective March 4, 2003.99.1
    
    Certification by Edward F. McKernan, Chief Executive Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.99.2
    
    Certification by Bradley E. Barks, Chief Financial Officer, Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| |  | A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on March 12, 2003 to disclose the formation of two new
subsidiaries of Global Preferred Holdings, Inc.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 15th day of May, 2003.

GLOBAL PREFERRED HOLDINGS, INCBy:
    
    /s/ EDWARD F. MCKERNANEdward F. McKernanChief Executive Officer and President and DirectorBy:
    
    /s/ BRADLEY E. BARKSBradley E. BarksChief Financial Officer and Senior Vice President  Finance


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CERTIFICATION

Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Edward F. McKernan, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Global Preferred
Holdings, Inc.;
|-- |  | --------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003/s/ Edward F. McKernanEdward F. McKernanChief Executive Officer


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CERTIFICATION
Pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Bradley E. Barks, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Global Preferred
Holdings, Inc.;
|-- |  | --------------------------------------------------------------------------------------



|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. |  | The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. |  | The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



|6. |  | The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: May 15, 2003/s/ Bradley E. BarksBradley E. BarksChief Financial Officer


26