##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 or
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-23637
 Global Preferred Holdings, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 DELAWARE
    
    58-2179041(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 C/O MORRIS, MANNING AND MARTIN LLP
3343 PEACHTREE ROAD, SUITE 1600
ATLANTA, GEORGIA 30326
(770) 248-3311  (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
 6455 EAST JOHNS CROSSING, SUITE 402
DULUTH, GEORGIA 30097
(770) 248-3311  (Former Address if Changed Since Last Report)
 
 þ o
 o þ
 þ o




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    3ITEM 1. FINANCIAL STATEMENTS
    
    
    3Condensed Consolidated Statement of Net Assets in Liquidation
    
    
    3Condensed Consolidated Balance Sheet (Going Concern Basis)
    
    
    4Condensed Consolidated Statement of Changes in Net Assets in Liquidation
    
    
    5Condensed Consolidated Statements of Income (Going Concern Basis)
    
    
    6Condensed Consolidated Statements of Cash Flows (Going Concern Basis)
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
    
    
    17ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    23ITEM 4. CONTROLS AND PROCEDURES
    
    
    23PART II  OTHER INFORMATION
    
    
    24ITEM 1. LEGAL PROCEEDINGS
    
    
    24ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    24ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    24ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    24ITEM 5. OTHER INFORMATION
    
    
    24ITEM 6. EXHIBITS
    
    
    24EX-10.1 SEPARATION AND RELEASE AGREEMENT WITH EDWARD F. MCKERNANEX-10.2 SEPARATION AND RELEASE AGREEMENT WITH BRADLEY E. BARKSEX-10.3 SEPARATION AND RELEASE AGREEMENT WITH DAVID W. MCLEROYEX-31.1 SECTION 302 CERTIFICATION OF THE CAOEX-32.1 SECTION 906 CERTIFICATION OF THE CAO
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statement of Net Assets in Liquidation
 (Unaudited)
 September 30,2005Estimated Values of Assets:Cash and cash equivalents
    
    $
    2,296,679Fixed maturity securities
    
    
    2,428,287Equity securities
    
    
    20,592Accounts receivable
    
    
    8,885Current income tax recoverable
    
    
    4,510Fixed assets
    
    
    6,936Estimated future investment income
    
    
    271,531Total estimated assets
    
    
    5,037,420Estimated Liabilities:Accrued expenses and accounts payable
    
    
    123Dividends payable
    
    
    20,876Estimated future operating costs and settlement reserves
during liquidation period
    
    
    5,016,421Total estimated liabilities
    
    
    5,037,420Net assets in liquidation
    
    $
    
  3




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GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Balance Sheet (Going Concern Basis)
 December 31,2004AssetsFixed maturity securities  available for sale (amortized cost
of $19,885,253)
    
    $
    20,071,625Other equity investments (cost of $500,000)
    
    
    548,819Cash and cash equivalents
    
    
    12,463,601Reinsured policy loans
    
    
    1,475,516Total invested assets
    
    
    34,559,561Investment income due and accrued
    
    
    234,220Accounts receivable
    
    
    11,357Reinsurance balances receivable
    
    
    2,567,121Deferred acquisition costs
    
    
    40,167,670Prepaid expenses
    
    
    223,973Fixed assets (net of accumulated depreciation of $433,046)
    
    
    43,095Total assets
    
    $
    77,806,997Liabilities and Stockholders EquityLiabilities:Future policy benefits
    
    $
    19,401,495Accrued expenses and accounts payable
    
    
    526,316Current income tax payable
    
    
    377,075Deferred tax liability
    
    
    8,236,127Total liabilities
    
    
    28,541,013Commitments and contingenciesStockholders equity:Preferred stock, par value $.001, 2,000,000 shares
authorized; no shares issued
    
    
    Common stock, par value $.001, 15,000,000 shares
authorized; 4,149,074 shares issued
    
    
    4,149Additional paid-in capital
    
    
    23,326,026Accumulated other comprehensive income
    
    
    123,007Retained earnings
    
    
    25,862,069Treasury stock, at cost (7,390 shares)
    
    
    (49,267
    )Total stockholders equity
    
    
    49,265,984Total liabilities and stockholders equity
    
    $
    77,806,997
  4




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GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statement of Changes in Net Assets in Liquidation
 (Unaudited)
 For the PeriodThree Months Ended
    
    
    May 26, 2005 throughSeptember 30, 2005
    
    
    September 30, 2005Accumulated Stockholders Equity as of May 25, 2005
    
    
    
    
    
    $
    50,413,081Adjustment of assets and liabilities to estimated fair
value
    
    
    
    
    
    
    8,444,710Estimated net assets in liquidation as of June 30, 2005
and May 26, 2005, respectively
    
    $
    57,957,136
    
    
    
    58,857,791AEGON N.V. shares distribution to stockholders
    
    
    (57,957,136
    )
    
    
    (57,957,136
    )Change in estimate of:Future operating costs and settlement
reserves during liquidation period
    
    
    (32,975
    )
    
    
    (37,207
    )Fair value of invested assets
    
    
    (14,096
    )
    
    
    (910,564
    )Future investment income
    
    
    45,745
    
    
    
    49,240Fixed assets
    
    
    1,326
    
    
    
    (2,124
    )Net change in net assets in liquidation
    
    
    (57,957,136
    )
    
    
    (58,857,791
    )Net assets in liquidation at September 30, 2005
    
    $
    
    
    
    $
    
  5




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##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statements of Income (Going Concern Basis)
 (Unaudited)
 For the PeriodThree Months
    
    
    Nine Months
    
    
    January 1, 2005Ended
    
    
    Ended
    
    
    throughSeptember 30,
    
    
    September 30,
    
    
    May 25, 20052004
    
    
    2004
    
    
    (145 Days)Revenues:Premiums
    
    $
    4,286,039
    
    
    $
    12,858,897
    
    
    $
    6,744,999Reinsured policy revenues
    
    
    3,190,516
    
    
    
    9,501,967
    
    
    
    4,655,164Net investment income
    
    
    222,035
    
    
    
    610,127
    
    
    
    425,770Net realized (loss) gain on
investments
    
    
    (1,739
    )
    
    
    (31,195
    )
    
    
    36,785Net unrealized gain on trading
investments
    
    
    41,439
    
    
    
    41,439
    
    
    
    16,923Other income
    
    
    
    
    
    
    6,981
    
    
    
    9,050Total revenues
    
    
    7,738,290
    
    
    
    22,988,216
    
    
    
    11,888,691Benefits and expenses:Benefits, claims and settlement
expenses
    
    
    1,766,934
    
    
    
    5,193,697
    
    
    
    3,541,827Change in future policy benefits
    
    
    140,554
    
    
    
    512,840
    
    
    
    189,068Reinsurance expense allowances,
net
    
    
    1,794,907
    
    
    
    5,761,247
    
    
    
    3,027,560Amortization of deferred
acquisition costs
    
    
    1,649,152
    
    
    
    4,553,159
    
    
    
    1,955,803Operating expenses
    
    
    792,063
    
    
    
    2,362,789
    
    
    
    1,601,076Interest expense
    
    
    29,794
    
    
    
    216,781
    
    
    
    Total benefits and expenses
    
    
    6,173,404
    
    
    
    18,600,513
    
    
    
    10,315,334Income before income tax
    
    
    1,564,886
    
    
    
    4,387,703
    
    
    
    1,573,357Income tax expense
    
    
    (362,637
    )
    
    
    (1,227,378
    )
    
    
    (360,941
    )Net income
    
    $
    1,202,249
    
    
    $
    3,160,325
    
    
    $
    1,212,416Basic earnings per share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29Diluted earnings per share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29Weighted-average common shares
outstanding
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,141,684Total weighted-average common and
common equivalent shares
outstanding
    
    
    4,159,339
    
    
    
    4,157,437
    
    
    
    4,197,857
  6




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GLOBAL
PREFERRED HOLDINGS, INC.
 
 Condensed Consolidated Statements of Cash Flows (Going Concern Basis)
(Unaudited)
 Nine Months
    
    
    For the PeriodEnded
    
    
    January 1, 2005September 30,
    
    
    through May 25, 20052004
    
    
    (145 Days)Cash flows from operating activities:Net income
    
    $
    3,160,325
    
    
    $
    1,212,416Adjustments to reconcile net income to net cash provided by operating activities:Amortization and depreciation
    
    
    4,738,804
    
    
    
    2,018,782Net realized loss (gain) on investments
    
    
    31,195
    
    
    
    (36,785
    )Net unrealized gain on trading investments
    
    
    (41,439
    )
    
    
    (16,923
    )Deferred tax expense
    
    
    (377,385
    )
    
    
    (279,238
    )Capitalization of deferred acquisition costs, net
    
    
    (608,972
    )
    
    
    (229,242
    )Loss on disposal of assets
    
    
    
    
    
    
    1,821Expense of stock option compensation
    
    
    
    
    
    
    6,534Change in:Investment income due and accrued
    
    
    (57,623
    )
    
    
    4,561Accounts receivable
    
    
    41,926
    
    
    
    4,723Reinsurance balances receivable
    
    
    (649,235
    )
    
    
    1,589,678Prepaid expenses
    
    
    203,047
    
    
    
    (763,182
    )Current income tax recoverable
    
    
    48,152
    
    
    
    (16,378
    )Future policy benefits
    
    
    460,891
    
    
    
    (268,597
    )Reinsurance balances payable
    
    
    (164,703
    )
    
    
    377,573Accrued expenses and accounts payable
    
    
    (85,035
    )
    
    
    (133,448
    )Accrued interest payable
    
    
    (158,219
    )
    
    
    Current income tax payable
    
    
    35,261
    
    
    
    (377,075
    )Net cash provided by operating activities
    
    
    6,576,990
    
    
    
    3,095,220Cash flows from investing activities:Proceeds from principal payments on mortgage-backed securities available-for-sale
    
    
    182,766
    
    
    
    231,240Proceeds from maturity of available-for-sale securities
    
    
    200,000
    
    
    
    750,000Proceeds from sale of equity securities
    
    
    2,009,731
    
    
    
    Proceeds from sale of fixed maturity securities available for sale
    
    
    529,185
    
    
    
    532,540Purchase of fixed maturity securities available for sale
    
    
    (6,254,029
    )
    
    
    Purchase of fixed assets
    
    
    (3,828
    )
    
    
    (3,629
    )Change in reinsured policy loans
    
    
    (163,718
    )
    
    
    (205,478
    )Net cash (used in) provided by investing activities
    
    
    (3,499,893
    )
    
    
    1,304,673Cash flows from financing activities:Repayment of current maturities of long-term debt
    
    
    (5,000,000
    )
    
    
    Issuance of stock
    
    
    
    
    
    
    11Net cash provided by (used in) financing activities
    
    
    (5,000,000
    )
    
    
    11Net (decrease) increase in cash and cash equivalents
    
    
    (1,922,903
    )
    
    
    4,399,904Cash and cash equivalents at beginning of period
    
    
    11,580,045
    
    
    
    12,463,601Cash and cash equivalents at end of period
    
    $
    9,657,142
    
    
    $
    16,863,505Supplemental disclosure of cash flow information:Interest paid
    
    $
    375,000
    
    
    $
    Income taxes paid
    
    $
    1,521,350
    
    
    $
    1,033,632
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GLOBAL PREFERRED HOLDINGS, INC.
 
 Notes to Condensed Consolidated Financial Statements
          8




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As of(Dollars in Thousands)
    
    May 26, 2005Assets held for sale adjusted to estimated fair value
    
    $
    16,352.3Estimated future investment income
    
    
    236.8Elimination of prepaid expenses
    
    
    (934.5
    )Fixed assets adjusted to estimated fair value
    
    
    (17.1
    )Elimination of deferred tax asset, net
    
    
    (694.4
    )Reduction of accrued expenses
    
    
    196.6Estimated future operating costs and settlement reserves during liquidation
    
    
    (6,695.0
    )Total adjustment of assets and liabilities at estimated fair value
    
    $
    8,444.7
   9




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
    
    Cash and cash equivalents are stated at fair value. At times, cash balances held in
financial institutions may be in excess of federally insured amounts. Cash balances held
in money market funds are not insured. Cash equivalents consist of United States treasury
bills.
    
    Fixed maturity securities consist of United States treasury notes and represent
estimated net sales proceeds less the costs of disposal.
    
    Equity securities consist of 1,382 AEGON common shares, of which 896 shares are held on
behalf of stockholders who have not claimed their ownership and 486 shares are held for
liquidation to pay cash for fractional interests due to stockholders. The AEGON common
shares were valued at $13.07 per share as of the close of business on May 25, 2005 when
received by us pursuant to the Reorganization Agreement and are valued at $14.90 per share
as of September 30, 2005.
    
    Accounts receivable represents deposits due to Global Preferred by third-party service providers.
    
    Current income tax recoverable represents an overpayment of 2005 estimated taxes paid in 2005.
    
    Fixed assets are assets such as furniture and office equipment stated at net realizable value.
    
    Estimated future investment income was projected by management based upon prevailing
interest rates, anticipated investment portfolio composition and future expected cash
flows.
  
    
    Accrued expenses and accounts payable include all current amounts due that remain unpaid
for recurring administrative costs.
    
    Dividends payable include the AEGON common shares yet to be distributed (as discussed
above) as of September 30, 2005 at $14.90 per share and cash dividends received from those
remaining shares which are also to be distributed.
    
    Estimated future operating costs and settlement reserves during liquidation were
recorded on May 26, 2005 when Global Preferred adopted the liquidation basis of accounting
and include all estimated future amounts that remain unpaid for liquidation activities.
   Costs
    
    
    
    
    
    
    
    
    
    
    CostsIncurred
    
    
    
    
    
    
    
    
    
    
    Incurredas of
    
    
    
    
    
    
    Costs
    
    
    as ofMay 26,
    
    
    Change in
    
    
    Incurred
    
    
    September(Dollars in Thousands)
    
    2005
    
    
    Estimate
    
    
    and Paid
    
    
    30, 2005Employee compensation and benefits,
including severance payments
    
    $
    2,925.8
    
    
    
    ($73.2
    )
    
    $
    992.1
    
    
    $
    1,860.5Legal, audit and other professional
fees
    
    
    1,078.4
    
    
    
    187.9
    
    
    
    606.8
    
    
    
    659.5Other estimated costs of liquidation
    
    
    200.6
    
    
    
    16.7
    
    
    
    116.9
    
    
    
    100.4Settlement reserves
    
    
    2,490.2
    
    
    
    (94.2
    )
    
    
    
    
    
    
    2,396.0Total estimated future operating
costs and settlement reserves
    
    $
    6,695.0
    
    
    $
    37.2
    
    
    $
    1,715.8
    
    
    $
    5,016.4
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Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
  Three
    
    
    NineMonths
    
    
    MonthsEnded
    
    
    Ended
    
    
    145 DaysSeptember
    
    
    September
    
    
    Ended30,
    
    
    30,
    
    
    May 25,(In ThousandsExcept Per Share Amounts)
    
    2004
    
    
    2004
    
    
    2005Net income
    
    $
    1,202.2
    
    
    $
    3,160.3
    
    
    $
    1,212.4Less: Total stock-based employee
compensation expense determined under the
fair value method for all awards, net of
tax
    
    
    (2.7
    )
    
    
    (14.3
    )
    
    
    (0.1
    )Pro-forma net income
    
    $
    1,199.5
    
    
    $
    3,146.0
    
    
    $
    1,212.3Reported basic earnings per common share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29Reported diluted earnings per common share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29Pro-forma basic earnings per common share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29Pro-forma diluted earnings per common
share
    
    $
    0.29
    
    
    $
    0.76
    
    
    $
    0.29
  11




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Shares Available
    
    
    Number of
    
    
    Weighted Average(Shares in Thousands)
    
    for Options
    
    
    Shares
    
    
    Exercise PriceDecember 31, 2003
    
    
    1,530.7
    
    
    
    245.4
    
    
    $
    10.46Grants
    
    
    (44.4
    )
    
    
    44.4
    
    
    $
    10.94Cancellations
    
    
    
    
    
    
    (6.8
    )
    
    $
    10.46(1.1
    )
    
    $
    10.94December 31, 2004
    
    
    1,486.3
    
    
    
    238.6
    
    
    $
    10.4643.3
    
    
    $
    10.94Grants
    
    
    
    
    
    
    1.3
    
    
    $
    10.460.4
    
    
    $
    10.94Cancellations
    
    
    
    
    
    
    (18.1
    )
    
    $
    10.46(5.5
    )
    
    $
    10.94Exercised
    
    
    
    
    
    
    (221.8
    )
    
    $
    10.46(38.2
    )
    
    $
    10.94June 30, 2005
    
    
    1,486.3
    
    
    
    
    
    
    
    N/AOptions exercisable at:December 31, 2002
    
    
    
    
    
    
    
    
    
    
    N/ADecember 31, 2003
    
    
    
    
    
    
    81.2
    
    
    $
    10.46December 31, 2004
    
    
    
    
    
    
    128.0
    
    
    $
    10.46
     Reporting Comprehensive Income
  Earnings Per Share
 12




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Accounting for Stock-Based Compensation, Share-Based Payment
  Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments Accounting and Reporting by Insurance Enterprises
  13




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Three Months Ended September 30, 2004Non-Universal
    
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    TotalPremiums
    
    $
    4,286
    
    
    $
    
    
    
    $
    
    
    
    $
    4,286Reinsured policy revenues
    
    
    
    
    
    
    3,191
    
    
    
    
    
    
    
    3,191Benefits, claims and settlement expenses*
    
    
    1,701
    
    
    
    207
    
    
    
    
    
    
    
    1,908Reinsurance expense allowances, net
    
    
    1,465
    
    
    
    330
    
    
    
    
    
    
    
    1,795Amortization of deferred acquisition costs
    
    
    54
    
    
    
    1,595
    
    
    
    
    
    
    
    1,649Underwriting profit
    
    
    1,066
    
    
    
    1,059
    
    
    
    
    
    
    
    2,125Net investment income
    
    
    12
    
    
    
    28
    
    
    
    182
    
    
    
    222Net realized loss on investments
    
    
    
    
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Net unrealized gain on trading Investments
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41Other expenses
    
    
    41
    
    
    
    89
    
    
    
    692
    
    
    
    822Segment operating income (loss) before
income tax
    
    
    1,037
    
    
    
    998
    
    
    
    (470
    )
    
    
    1,565Income tax expense (benefit)
    
    
    241
    
    
    
    231
    
    
    
    (109
    )
    
    
    363Segment net income (loss)
    
    $
    796
    
    
    $
    767
    
    
    $
    (361
    )
    
    $
    1,202Segment assets
    
    $
    5,942
    
    
    $
    44,718
    
    
    $
    26,533
    
    
    $
    77,193
 
 *
    
    Benefits, claims and settlement expenses include changes in future policy benefits. Nine Months Ended September 30, 2004
    
    
    145 Days ended May 25, 2005Non-Universal
    
    
    Universal
    
    
    
    
    
    
    
    
    
    
    Non-Universal
    
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    Total
    
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    TotalPremiums
    
    $
    12,859
    
    
    $
    
    
    
    $
    
    
    
    $
    12,859
    
    
    $
    6,745
    
    
    $
    
    
    
    $
    
    
    
    $
    6,745Reinsured policy revenues
    
    
    
    
    
    
    9,502
    
    
    
    
    
    
    
    9,502
    
    
    
    
    
    
    
    4,655
    
    
    
    
    
    
    
    4,655Benefits, claims and
settlement expenses*
    
    
    4,761
    
    
    
    945
    
    
    
    
    
    
    
    5,706
    
    
    
    3,075
    
    
    
    656
    
    
    
    
    
    
    
    3,731Reinsurance expense
allowances, net
    
    
    4,412
    
    
    
    1,349
    
    
    
    
    
    
    
    5,761
    
    
    
    2,308
    
    
    
    720
    
    
    
    
    
    
    
    3,028Amortization of deferred
acquisition costs
    
    
    127
    
    
    
    4,426
    
    
    
    
    
    
    
    4,553
    
    
    
    73
    
    
    
    1,883
    
    
    
    
    
    
    
    1,956Underwriting profit
    
    
    3,559
    
    
    
    2,782
    
    
    
    
    
    
    
    6,341
    
    
    
    1,289
    
    
    
    1,396
    
    
    
    
    
    
    
    2,685Net investment income
    
    
    27
    
    
    
    75
    
    
    
    508
    
    
    
    610
    
    
    
    30
    
    
    
    46
    
    
    
    350
    
    
    
    426Net realized (loss) gain on
investments
    
    
    
    
    
    
    
    
    
    
    (31
    )
    
    
    (31
    )
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    37Net unrealized gain on
trading Investments
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17Other income
    
    
    
    
    
    
    
    
    
    
    7
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Other expenses
    
    
    120
    
    
    
    280
    
    
    
    2,180
    
    
    
    2,580
    
    
    
    86
    
    
    
    183
    
    
    
    1,332
    
    
    
    1,601Segment operating income
(loss) before income tax
    
    
    3,466
    
    
    
    2,577
    
    
    
    (1,655
    )
    
    
    4,388
    
    
    
    1,233
    
    
    
    1,259
    
    
    
    (919
    )
    
    
    1,573Income tax expense (benefit)
    
    
    970
    
    
    
    721
    
    
    
    (463
    )
    
    
    1,228
    
    
    
    283
    
    
    
    289
    
    
    
    (211
    )
    
    
    361Segment net income (loss)
    
    $
    2,496
    
    
    $
    1,856
    
    
    $
    (1,192
    )
    
    $
    3,160
    
    
    $
    950
    
    
    $
    970
    
    
    $
    (708
    )
    
    $
    1,212Segment assets
    
    $
    5,942
    
    
    $
    44,718
    
    
    $
    26,533
    
    
    $
    77,193
    
    
    $
    5,738
    
    
    $
    38,801
    
    
    $
    33,697
    
    
    $
    78,236
 
 *
    
    Benefits, claims and settlement expenses include changes in future policy benefits. 14




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##### Table of Contents



(Dollars in Thousands)
    
    Fair ValueFixed maturity securities:U.S. government agency obligations
    
    $
    2,428,287Equity securities
    
    
    20,592Total fixed maturity and equity securities
    
    $
    2,448,879
    15




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16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A)
addresses the financial condition of Global Preferred Holdings, Inc. as of September 30, 2005
compared with December 31, 2004. The results of operations for the 145 day period ended May 25,
2005, were compared with the three and six month periods ended June 30, 2004, in Global Preferreds
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2005. Due to the conversion
of Global Preferreds financial accounting to liquidation basis accounting beginning on May 26,
2005,and the fundamentally different nature of Global Preferreds operations following that date, a
comparison of the results of operations for the periods ended September 30, 2005 to the periods
ended September 30, 2004 would be immaterial. This discussion should be read in conjunction with
the unaudited condensed 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 2004 Annual Report on Form 10-K, as amended.
 Overview
  Plan of Liquidation
     17




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##### Table of Contents



As of(Dollars in Thousands)
    
    September 30, 2005Employee compensation and benefits, including severance
    
    $
    1,860.5Legal, audit and other professional services
    
    
    659.5Other estimated costs of liquidation
    
    
    100.4Settlement reserve
    
    
    2,396.0Total
    
    $
    5,016.4
 Status of Liquidation
   18




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##### Table of Contents



Business Operations Prior to Asset Sale
   
    
    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
    
    Federal Kemper Life Assurance Company, a subsidiary of J.P. Morgan Chase & Co. (Kemper).
   Critical Accounting Policies and Estimates
  19




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##### Table of Contents



Reinsurance Agreements under Global Preferred Re
  145 DaysYear Ended
    
    Year Ended
    
    EndedDecember 31,
    
    December 31,
    
    May 25,2003
    
    2004
    
    2005Western Reserve
    
    
    92
    %
    
    
    92
    %
    
    
    92
    %American Skandia
    
    
    7
    
    
    
    6
    
    
    
    6Kemper
    
    
    1
    
    
    
    1
    
    
    
    1Pacific Life
    
    
    
    (1)
    
    
    1
    
    
    
    1Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Less than 1%.  Results of Operations
   20




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##### Table of Contents



Three Months
    
    Nine MonthsEnded
    
    EndedSeptember 30,
    
    September 30,
    
    145 Days Ended2004
    
    2004
    
    May 25, 2005(As a percentage of total revenue)Consolidated Statements of Income Data:Revenues:Premiums
    
    
    55
    %
    
    
    56
    %
    
    
    57
    %Reinsured policy revenues
    
    
    41
    
    
    
    41
    
    
    
    39Net investment income
    
    
    3
    
    
    
    3
    
    
    
    4Net unrealized gain on investments
    
    
    1
    
    
    
    
    
    
    
    Total revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Benefits and expenses:Benefits, claims and settlement expenses
    
    
    23
    
    
    
    23
    
    
    
    30Change in future policy benefits
    
    
    2
    
    
    
    2
    
    
    
    2Reinsurance expense allowances, net
    
    
    23
    
    
    
    25
    
    
    
    26Amortization of deferred acquisition costs
    
    
    21
    
    
    
    20
    
    
    
    16Operating expenses
    
    
    10
    
    
    
    10
    
    
    
    13Interest expense
    
    
    1
    
    
    
    1
    
    
    
    Total benefits and expenses
    
    
    80
    
    
    
    81
    
    
    
    87Income before income tax
    
    
    20
    
    
    
    19
    
    
    
    13Income tax expense
    
    
    (4
    )
    
    
    (5
    )
    
    
    (3
    )Net income
    
    
    16
    %
    
    
    14
    %
    
    
    10
    %
 Liquidity and Capital Resources
    21




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Contractual Obligations and Commitments
  (In Thousands)
    
    Total
    
    
    2005
    
    
    2006Severance payments and
benefits
    
    $
    1,651.6
    
    
    $
    450.8
    
    
    $
    1,200.8
 Forward-Looking Statements
  
    
    The distribution of the remaining AEGON shares and cash, if any,
prior to payment of liquidation expenses;
    
    Estimates of our cash requirements and costs of liquidation;
    
    Estimates of our asset values, including future investment income;
    
    Estimates of our settlement reserve during liquidation;
    
    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.
  22




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
 ITEM 4. CONTROLS AND PROCEDURES
   23




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PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY 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
 10.1
    
    Separation and Release Agreement with Edward F. McKernan dated August 19, 2005.10.2
    
    Separation and Release Agreement with Bradley E. Barks dated August 19, 2005.10.3
    
    Separation and Release Agreement with David W. McLeroy dated August 25, 2005.31.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 24




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SIGNATURES
 st
 GLOBAL PREFERRED HOLDINGS, INC.By:
    /s/   CARYL P. SHEPHERDCaryl P. ShepherdChief Accounting Officer, Vice President and Treasurer 25