<PAGE>   1



                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549


                                   FORM 10-QSB


(MARK ONE)

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
         ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT FOR
         THE TRANSITION PERIOD FROM            TO
                                    ----------    ----------

                         COMMISSION FILE NUMBER 0-23637

                               THE WMA CORPORATION
        (Exact name of small business issuer as specified in its charter)

            DELAWARE                                58-2179041
   (State or other jurisdiction of     (IRS Employer Identification No.)
    incorporation or organization)

                11315 JOHNS CREEK PARKWAY, DULUTH, GEORGIA, 30097
                    (Address of principal executive offices)

                                 (770) 248-3311
                           (Issuer's telephone number)


                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                   PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [  ] No [  ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

As of July 31, 2001, there were 2,495,010 shares of common stock ($.001) par
value outstanding.

Transitional Small Business Disclosure Format (Check one):  Yes [ ] No [X]


<PAGE>   2

                                TABLE OF CONTENTS


<TABLE>
<S>      <C>                                                                  <C>
PART I - FINANCIAL INFORMATION.................................................3

ITEM 1.  FINANCIAL STATEMENTS..................................................3

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION............10

PART II - OTHER INFORMATION...................................................19

ITEM 1.  LEGAL PROCEEDINGS....................................................19

ITEM 2.  CHANGES IN SECURITIES................................................19

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES......................................19

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................19

ITEM 5.  OTHER INFORMATION....................................................19

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.....................................20
</TABLE>

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                                       2


<PAGE>   3


PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                               THE WMA CORPORATION
                           Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                        (Unaudited)
                                                                                          June 30,             December 31,
                                                                                            2001                   2000
                                                                                        ------------           ------------
<S>                                                                                     <C>                    <C>
                                Assets
Fixed maturity securities - available for sale (amortized cost of
  $12,829,886 and $5,817,900 for 2001 and 2000, respectively)                           $ 13,002,660           $  5,912,379
Cash and cash equivalents                                                                  1,310,751              4,259,153
Investment income due and accrued                                                            191,813                113,558
Reinsurance balances receivable                                                            2,892,216              2,632,949
Reinsured policy loans                                                                       981,492                867,023
Deferred acquisition costs                                                                43,271,411             42,752,339
Prepaid expenses                                                                             150,316                 31,210
Current income tax receivable                                                                130,095                     --
Fixed assets (net of accumulated depreciation of $127,522 and
  $102,992 for 2001 and 2000, respectively)                                                   24,276                 48,806
Other assets                                                                                   5,099                  5,099
                                                                                        ------------           ------------
         Total assets                                                                   $ 61,960,129           $ 56,622,516
                                                                                        ============           ============

                 Liabilities and Stockholders' Equity
Liabilities:
   Future policy benefits                                                               $  9,702,654           $  8,025,748
   Reinsurance balances payable                                                              534,606                388,016
   Accrued expenses and accounts payable                                                     131,725                140,118
   Accrued interest payable                                                                  156,678                161,356
   Dividend payable                                                                          150,007                 12,245
   Current income tax payable                                                                     --                410,530
   Short term debt                                                                                --                277,285
   Long term debt                                                                          5,000,000              5,000,000
   Deferred tax liability                                                                  7,042,125              5,618,285
                                                                                        ------------           ------------
      Total liabilities                                                                   22,717,795             20,033,583
                                                                                        ------------           ------------

Stockholders' equity:
   Preferred stock, par value $2.00, 10,000,000 shares authorized;
   7% Series A convertible preferred stock, 266,047 shares issued and
   outstanding                                                                               532,094                532,094
   Common stock, par value $.001, 50,000,000 shares authorized;
     2,500,000 shares issued                                                                   2,500                  2,500
   Additional paid-in capital                                                             22,795,581             22,795,581
   Accumulated other comprehensive income                                                    114,032                 62,357
   Retained earnings                                                                      15,848,027             13,246,301
   Treasury stock, at cost (4,990 shares)                                                    (49,900)               (49,900)
                                                                                        ------------           ------------
      Total stockholders' equity                                                          39,242,334             36,588,933
                                                                                        ------------           ------------
         Total liabilities and stockholders' equity                                     $ 61,960,129           $ 56,622,516
                                                                                        ============           ============
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       3
<PAGE>   4



                               THE WMA CORPORATION
                        Consolidated Statements of Income
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                           Three Months Ended                  Six Months Ended
                                                               June 30,                             June 30,
                                                         2001              2000              2001               2000
                                                     -----------       -----------       ------------       ------------
<S>                                                  <C>               <C>               <C>                <C>
Revenues:
  Premiums                                           $ 4,796,161       $ 4,086,881       $  9,452,080       $  7,763,054
  Reinsured policy revenues                            2,806,558         3,192,325          5,746,902          6,212,593
  Net investment income                                  205,705           148,586            367,032            219,228
  Net realized gain on investments                            --                --              5,634                 --
                                                     -----------       -----------       ------------       ------------
    Total revenues                                     7,808,424         7,427,792         15,571,648         14,194,875
Benefits and expenses:
  Benefits, claims and settlement expenses             1,582,738         1,844,690          3,085,477          3,680,307
  Change in future policy benefits                       547,936           412,972          1,191,496            848,525
  Reinsurance premium allowances, net                  2,154,575         1,799,013          4,250,411          3,365,409
  Amortization of deferred acquisition costs             876,760         1,105,138          1,879,098          2,191,281
  Operating expenses                                     361,819           285,375            839,354            610,829
  Interest expense                                        93,493           206,386            189,104            410,376
                                                     -----------       -----------       ------------       ------------
    Total benefits and expenses                        5,617,321         5,653,574         11,434,940         11,106,727
                                                     -----------       -----------       ------------       ------------
    Income before income taxes                         2,191,103         1,774,218          4,136,708          3,088,148
Income tax expense                                      (742,852)         (552,502)        (1,397,220)          (999,238)
                                                     -----------       -----------       ------------       ------------
    Net income                                         1,448,251         1,221,716          2,739,488          2,088,910
                                                     -----------       -----------       ------------       ------------


Preferred dividends                                       68,881               754            137,762                754
                                                     -----------       -----------       ------------       ------------
    Net income available to common shareholders      $ 1,379,370       $ 1,220,962       $  2,601,726       $  2,088,156
                                                     ===========       ===========       ============       ============

Basic earnings per share                             $      0.55       $      0.49       $       1.04       $       0.84
                                                     ===========       ===========       ============       ============

Diluted earnings per share                           $      0.52       $      0.49       $       0.99       $       0.84
                                                     ===========       ===========       ============       ============

Weighted-average common shares outstanding             2,495,010         2,495,010          2,495,010          2,495,010
                                                     ===========       ===========       ============       ============

Total weighted-average common and common
equivalent shares outstanding                          2,761,057         2,497,897          2,761,057          2,496,453
                                                     ===========       ===========       ============       ============
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       4
<PAGE>   5


                               THE WMA CORPORATION
                      Consolidated Statements of Cash Flows
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                              Six Months Ended
                                                                                  June 30,
                                                                            2001              2000
                                                                        -----------       -----------
<S>                                                                     <C>               <C>
Cash flows from operating activities:
  Net income                                                            $ 2,739,488       $ 2,088,910
  Adjustments to reconcile net income to cash provided by
  operating activities:
    Amortization and depreciation                                         1,903,628         2,214,965
    Deferred tax expense                                                  1,397,220           848,262
    Net realized gain on investments                                         (5,634)               --
    Change in:
       Investment income due and accrued                                    (78,255)          (73,563)
       Reinsurance balances receivable                                     (259,267)          978,025
       Reinsured policy loans                                              (114,469)         (314,721)
       Deferred acquisition costs                                        (2,398,170)       (4,438,800)
       Prepaid expenses                                                    (119,106)          269,715
       Current income tax receivable                                       (130,095)               --
       Other assets                                                              --           (25,657)
       Future policy benefits                                             1,676,906         1,608,190
       Reinsurance balances payable                                         146,590           284,377
       Accrued expenses and accounts payable                                 (8,393)          (34,835)
       Accrued interest payable                                              (4,678)         (454,133)
       Current income tax payable                                          (410,530)          150,411
                                                                        -----------       -----------
           Net cash provided by operating activities                      4,335,235         3,101,146
                                                                        -----------       -----------

Cash flows from investing activities:
  Proceeds from sale and maturity of available-for-sale securities          366,063            73,300
  Purchase of available-for-sale securities                              (7,372,415)       (3,785,509)
   Purchase of fixed assets                                                      --            (3,326)
                                                                        -----------       -----------
           Net cash used in investing activities                         (7,006,352)       (3,715,535)

Cash flows from financing activities:
  Repayment of principal on long term debt                                 (277,285)         (488,884)
  Issuance of preferred stock                                                    --         3,050,895
                                                                        -----------       -----------
           Net cash (used in) provided by financing activities             (277,285)        2,562,011
                                                                        -----------       -----------
           Net increase (decrease) in cash and cash equivalents          (2,948,402)        1,947,622
Cash and cash equivalents at beginning of period                          4,259,153         3,475,950
                                                                        -----------       -----------
Cash and cash equivalents at end of period                              $ 1,310,751       $ 5,423,572
                                                                        ===========       ===========


Supplemental disclosure of cash flow information:
           Interest paid                                                $   193,782       $   873,668
                                                                        ===========       ===========
           Income taxes paid                                            $   540,625       $        --
                                                                        ===========       ===========
           Preferred dividend accrual                                   $   137,762       $       754
                                                                        ===========       ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6


                               THE WMA CORPORATION
                   Notes to Consolidated Financial Statements
                                  June 30, 2001


(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-QSB of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended June
30, 2001 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2001. The unaudited financial statements should be
read in conjunction with the Company's audited financial statements included in
the Company's 2000 Form 10-KSB Annual Report as filed with the Securities and
Exchange Commission.

(2)      Deferred Tax

Deferred income tax liabilities and related expenses are determined in
accordance with Statement of Financial Accounting Standards (SFAS) No. 109,
Accounting for Income Taxes using an effective federal tax rate of 34%. SFAS No.
109 specifically 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 the Company's
earnings may ultimately prove to be less than the deferred income tax
liabilities and related expenses determined under SFAS No. 109, at June 30,
2001.

(3)      Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. The primary component of other
comprehensive income is the unrealized gain (loss) on securities as shown under
the equity section of the consolidated balance sheet. Total other comprehensive
income for the three months ended June 30, 2001 was $1,416,464 compared to
$1,219,493 for the three months ended June 30, 2000. Total other comprehensive
income for the six months ended June 30, 2001 was $2,791,163 compared to
$2,087,059 for the six months ended June 30, 2000.

(4)      Earnings Per Share

Basic earnings per share is computed based on the weighted-average number of
common shares outstanding during the period, in accordance with SFAS No. 128,
Earnings Per Share. Shares of convertible preferred stock issued in June and
July 2000 are included in the calculations of total weighted average common and
common equivalent shares outstanding. The dilution effect on earnings per share
from the issuance of convertible preferred stock is shown on the Consolidated
Statements of Income. In August 2000, the Company's stockholders ratified
amendments to the 1999 stock option plan and to the outstanding warrants
limiting the number of shares that can be purchased upon exercise of the options
or warrants, as determined by the amount of proceeds from the sale of stock
during the period from January 1, 2000 through January 1, 2002.

(5)      Accounting Pronouncements

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended and interpreted establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in 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 significant impact on the financial
statements of the Company.


                                       6
<PAGE>   7

In September 2000, FASB issued SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities--a replacement
of FASB Statement No. 125. This statement revises the standards for accounting
for securitizations and other transfers of financial assets and collateral and
requires certain disclosures, not previously required under SFAS No. 125. SFAS
No. 140 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after June 30, 2001. This statement is
effective for recognition and reclassification of collateral and for disclosures
relating to securitization transactions and collateral for fiscal years ending
after December 15, 2000. The provisions of SFAS No. 140 do not have a
significant impact on the financial statements of the Company.

In July 2001, FASB issued SFAS No. 141, Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 as well as all purchase method business combinations completed after
June 30, 2001. SFAS No. 141 also specifies criteria intangible assets acquired
in a purchase method business combination must meet to be recognized and
reported apart from goodwill, noting that any purchase price allocable to an
assembled workforce may not be accounted for separately. SFAS No. 142 will
require that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of SFAS No. 142. SFAS No. 142 will also require
that intangible assets with definite useful lives be amortized over their
respective estimated useful lives to their estimated residual values, and
reviewed for impairment in accordance with SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of. The
provisions of SFAS No. 142 are required to be applied starting with fiscal years
beginning after December 15, 2001. The provisions of SFAS Nos. 141 and 142 do
not have a significant impact on the financial statements of the Company.

(6)      Segment Reporting

The Company has two reportable segments: non-universal life-type agreements and
universal life-type agreements.* The reportable segments are determined based on
the nature of the reinsurance treaties and the accounting treatment used for the
various reinsurance treaties. The Company reinsures certain variable universal
life policies on a monthly renewable term ("MRT") basis. MRT reinsurance
involves the reinsurance of mortality risk whereby premiums are not directly
related to the premium rates on the original plan of insurance; the ceding
company retains all risks associated with policy benefits other than mortality
risk and may retain a portion of the mortality risk and the ceding company is
liable for the total net amount of risk of the policies reinsured. The Company's
MRT agreements are accounted for under SFAS No. 60 accounting principles. The
Company also reinsures certain variable annuity contracts and variable universal
life policies on a coinsurance and modified coinsurance basis. Coinsurance
involves the reinsurance of mortality and investment risks on the same basis as
that of the underlying policies. The ceding life companies and the Company share
in these risks in the same manner. The Company's existing 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 the Company's internal measurement
process. Segment assets reported include those assets directly attributable to
the reinsurance treaties such as reinsurance balances receivable, deferred
acquisition costs, policy loans, prepaid expenses, invested assets and cash.
Invested assets are allocated to the treaties consistent with the Company's
internal measurement process.


------------------
*  Non-universal life-type agreements and universal life-type
   agreements as 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.



                                       7
<PAGE>   8
                                SEGMENT REPORTING

<TABLE>
<CAPTION>
        Three Months Ended June 30,                        2001                                        2000
----------------------------------------------------------------------------------------------------------------------------------
                                           Non-Universal Universal                      Non-Universal Universal
(Amounts shown in thousands)                  Life-type  Life-type   Other      Total     Life-type    Life-type   Other    Total
                                              ---------  ---------  -------     -----   ------------- ----------   -----   -------
<S>                                        <C>           <C>        <C>        <C>      <C>           <C>          <C>     <C>
Premiums                                        $4,796                          $ 4,796    $  4,087                        $ 4,087
Reinsured policy revenues                                  2,807                  2,807                  3,193               3,193
Benefits, claims and settlement expenses(1)      1,968       163                  2,131       1,987        271               2,258
Reinsurance premium allowances, net              1,693       462                  2,155       1,390        409               1,799
Amortization of deferred acquisition costs         100       776                    876          15      1,090               1,105
                                                ------   -------                -------    --------      -----              ------
Underwriting profit                              1,035     1,406                  2,441         695      1,423               2,118

Net investment income (expense)                     56        60         89         205          24         (1)     125        148
Other expenses                                      37        51        367         455          54         42      396        492
                                                ------   -------    -------     -------      ------    -------   ------    -------
Segment operating income (loss) before tax       1,054     1,415       (278)      2,191         665      1,380     (271)     1,774
Income tax expense (benefit)                       357       480        (94)        743         188        375      (11)       552
                                                ------   -------    -------     -------      ------    -------   ------    -------
Segment net income (loss)                       $  697       935       (184)    $ 1,448      $  477      1,005     (260)   $ 1,222
                                                ======    ======    =======     =======     =======    =======   ======    =======

Segment assets                                  $8,871    45,436      7,653     $61,960      $8,109     42,175    5,776    $56,060
                                                ======    ======    =======     =======      ======    =======   ======    =======


        Six Months Ended June 30,                          2001                                        2000
----------------------------------------------------------------------------------------------------------------------------------
                                           Non-Universal Universal                      Non-Universal Universal
(Amounts shown in thousands)                  Life-type  Life-type   Other      Total     Life-type    Life-type   Other    Total
                                           ------------  ---------  -------     -----   ------------- ----------   -----   -------
<S>                                        <C>           <C>        <C>        <C>      <C>           <C>          <C>     <C>

Premiums                                       $ 9,452                          $ 9,452     $ 7,763                        $ 7,763
Reinsured policy revenues                                  5,747                  5,747                  6,213               6,213
Benefits, claims and settlement expenses(1)      4,048       229                  4,277       4,012        517               4,529
Reinsurance premium allowances, net              3,346       905                  4,251       2,610        755               3,365
Amortization of deferred acquisition costs         185     1,694                  1,879          55      2,136               2,191
                                               -------   -------                -------     -------     ------             -------
Underwriting profit                              1,873     2,919                  4,792       1,086      2,805               3,891

Net investment income (expense)                    113       102        157         372          79         59       81        219
Other expenses                                      65       127        836       1,028          60         90      872      1,022
                                               -------   -------    -------     -------      ------    -------   ------    -------
Segment operating income (loss) before tax       1,921     2,894       (679)      4,136       1,105      2,774     (791)     3,088
Income tax expense (benefit)                       649       977       (229)      1,397         338        849     (188)       999
                                               -------   -------    -------     -------      ------    -------   ------    -------
Segment net income (loss)                      $ 1,272     1,917       (450)    $ 2,739      $  767      1,925     (603)   $ 2,089
                                               =======   =======    =======     =======      ======    =======   ======    =======

Segment assets                                 $ 8,871    45,436      7,653     $61,960      $8,109     42,175    5,776    $56,060
                                               =======   =======    =======     =======      ======    =======   ======    =======

</TABLE>




--------------------------

(1)      Benefits, claims and settlement expenses includes Change in future
         policy benefits.


                                       8
<PAGE>   9




Of the total premiums and reinsured policy revenues above, 89% and 87% relates
to business reinsured by Western Reserve Life Assurance Co. of Ohio ("Western
Reserve") for the quarter and six months ended June 30, 2001 and 2000,
respectively. Of the total underwriting profit above, 83% and 77% relates to
business reinsured by Western Reserve for the quarter ended June 30, 2001 and
2000, respectively. For the six months ended June 30, 2001 and 2000, 82% and 78%
of the total underwriting profit above relates to business reinsured by Western
Reserve, respectively.

(7)      Reclassification

The Company has reclassified the presentation of certain 2000 information to
conform to the 2001 presentation.



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                                       9

<PAGE>   10



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management's Discussion and Analysis or Plan of Operation ("MD&A") addresses the
financial condition of the Company as of June 30, 2001 compared with December
31, 2000, and its results of operations for the three months and six months
ended June 30, 2001, compared with the equivalent periods ended June 30, 2000.
This discussion should be read in conjunction with the MD&A and the Company's
Consolidated Financial Statements and notes thereto in the Company's 2000 Form
10-KSB Annual Report.

OVERVIEW

The WMA Corporation ("WMA Corporation"), incorporated in the state of Delaware
in 1995, is a holding company, owning all of the outstanding capital stock of
WMA Life Insurance Company Limited ("WMA Life"), a Bermuda life insurance
corporation. WMA Life, also formed during 1995, commenced its reinsurance
operations during 1996. WMA Life presently provides reinsurance to certain life
insurance companies ("Ceding Life Companies") with respect to variable universal
life ("VUL") and variable annuity policies. The term "Company", as used in this
document, refers to WMA Corporation and WMA Life collectively, unless the
context requires otherwise.

The Company reinsures certain life insurance policies and annuities sold by
"Sales Associates" of independent financial service companies and sales
organizations, including World Financial Group, Inc. ("World Financial Group")
and World Marketing Alliance, Inc. ("WMA Agency"). World Financial Group, an
affiliate of AEGON USA, Inc, which operates a financial services, sales and
marketing organization, purchased selected assets of WMA Agency in June 2001.
(See "Asset Purchase Agreement of Certain Assets of WMA Agency and WMA
Securities" below.) Most independent agents who market financial services
products through WMA Agency or World Financial Group currently hold licenses as
registered representatives for the sale of certain securities products through
an affiliate, WMA Securities, Inc. ("WMA Securities"), a registered securities
broker-dealer. WMA Agency, World Financial Group and WMA Securities are
collectively referred to herein as "Independent Marketing Organizations". Sales
Associates are independent agents who market financial services products through
the Independent Marketing Organizations.

All of the Company's reinsurance business has been indirectly the result of the
marketing efforts of the Independent Marketing Organizations, through business
placed with the Ceding Life Companies. The Company has not used reinsurance
intermediaries or actively initiated any direct marketing activities. Therefore,
the Company has been dependent upon and benefited from its relationships with
the Independent Marketing Organizations and their Sales Associates to market
those products that the Company reinsures. The Company is exploring strategies
to expand its reinsurance relationships beyond the present Independent Marketing
Organizations. Since the Company believes that it will be very difficult to
compete effectively in the same markets as the large commercial reinsurers, it
is exploring business strategies that will capitalize on niche markets.

Under a reinsurance agreement, the economic consequences of certain insurance
risks are transferred from the ceding company to the reinsurer. Depending upon
the type of reinsurance agreement, these risks may include: mortality,
persistency, expense and investment. Key considerations in evaluating the risks
include: industry experience, the ceding company's pricing and assumptions, the
type of product, the ceding company's underwriting practices and procedures, the
type of distribution system, the ceding 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. In addition, the Ceding Life Companies administer the reinsurance
contracts and, on a monthly basis, provide WMA Life with information regarding
premiums, reserves, benefits, claims and settlement expenses for policies
reinsured.

At June 30, 2001, WMA Life's reinsurance in force on life insurance policies and
riders constituted 295,496 policies and riders with an aggregate face amount of
$9.36 billion. This is a decrease of 1,178 life insurance policies and riders,
or 0.4%, and $0.02 billion of inforce face amount, or 0.2%, from December 31,
2000.


                                       10
<PAGE>   11

At June 30, 2001, WMA Life had reinsurance in force with respect to variable
annuities for 46,801 policies with reinsured annuity benefits of $287.41
million. This represents an increase of 2,982 policies, or 7%, and a decrease of
$22.65 million of annuity contract benefits, or 7%, from December 31, 2000.
Policyholders have directed most of their assets to be invested in the separate
accounts of the reinsured policies, with a majority invested in equities.
Accordingly, the decrease in reinsured annuity contract benefits is reflective
of decreases in the equity markets during early 2001. Correspondingly, policies
in force increased by 1,318, or 3%, and reinsured annuity contract benefits
increased by $19.77 million, or 7%, from March 31, 2001 suggesting an
improvement in the market performance of the underlying separate accounts of the
reinsured policies during second quarter.

The following table indicates the percentage of WMA Life's reinsurance revenues
derived from each Ceding Life Company:

<TABLE>
<CAPTION>
                                                                               SIX MONTHS
                                                                                  ENDED
                                                                                 JUNE 30,
                                                                                 --------
 CEDING LIFE COMPANY                                                               2001          2000          1999
 -------------------                                                               ----          ----          ----
<S>                                                                            <C>               <C>           <C>
 Western Reserve Life Assurance Co. of Ohio ("Western Reserve")                     89%           88%           88%
 American Skandia Life Assurance Corporation ("American Skandia")                    9%           10%             9%
 Kemper Investors Life Insurance Company ("Zurich Kemper")                           2%            2%             3%
 Pacific Life Insurance Company ("Pacific Life")                                     0%          N/A            N/A
                                                                                  ----           ---            ---
          Total                                                                    100%          100%          100%
</TABLE>


ASSET PURCHASE AGREEMENT OF CERTAIN ASSETS OF WMA AGENCY AND WMA SECURITIES

On May 7, 2001, AEGON Asset Management Services, Inc. ("AAMSI"), an indirect,
wholly owned subsidiary of AEGON USA, Inc., announced it entered into an Asset
Purchase Agreement to acquire selected assets of the Company's affiliates, WMA
Agency and WMA Securities. S. Hubert Humphrey, Jr., who owns substantially all
of World Marketing Alliance, Inc. and WMA Securities, is the Company's chairman
and CEO and beneficially owns approximately 23.7% of the Company's common stock
and 25.1% of the Company's preferred stock. In June 2001, World Financial Group,
a subsidiary of AAMSI, closed the purchase of selected assets of WMA Agency. As
a result of the asset acquisition, substantially all qualified, licensed agents
of WMA Agency have transferred, or are in the process of transferring, to World
Financial Group. It is also anticipated that, subject to regulatory approval,
AAMSI will set up a new broker/dealer to house World Financial Group's future
securities activities. Until the new broker/dealer has obtained the necessary
regulatory approvals, securities transactions by Sales Associates will continue
to be processed by WMA Securities. The asset purchase does not include any
assets or securities of the Company, nor does it interfere with the continued
reinsurance of business in force or the reinsurance of new policies subject to
the terms of the Company's existing reinsurance agreements.

In 1998, the Company and WMA Agency entered into a formal agreement whereby WMA
Agency agreed to use its "best efforts" ("Best Efforts Agreement") to encourage
life insurance companies to reinsure policies, sold by its sales
representatives, with the Company. WMA Agency no longer has an active insurance
sales force as a result of the closing of the Asset Purchase Agreement, since
substantially all qualified, licensed agents have transferred, or are in the
process of transferring, to the new insurance agency. World Financial Group has
assumed the Best Efforts Agreement between the Company and WMA Agency, with
certain amendments. Under the amended agreement, World Financial Group will use
its best efforts to assist the Company in attaining the opportunity to reinsure
all insurance products, sold by its sales representatives, with insurance
companies World Financial Group has selling agreements other than Western
Reserve, and its affiliates. Western Reserve, World Financial Group and AAMSI
are members of the AEGON Group. Such "best efforts" includes but are not limited
to, cooperating with WMA Corporation in its negotiations with life insurance
companies, with which World Financial Group has selling agreements, to enter
into reinsurance agreements with WMA Life and providing certain benefits to the
Ceding Life Companies, not otherwise available to non-Ceding Life Companies.


                                       11
<PAGE>   12

A majority of the Company's reinsurance business is derived from policies issued
by Western Reserve, an indirect, wholly owned subsidiary of AEGON USA, Inc. and
an affiliate of AAMSI. Concurrent with the assumption of the amended Best
Efforts Agreement by World Financial Group, the Company entered into an
agreement ("First Right Agreement") with Western Reserve providing WMA Life a
first right to reinsure certain business sold by sales representatives of World
Financial Group. The First Right Agreement provides WMA Life with options
exercisable under certain circumstances, some of which are described below, to
reinsure VUL and variable annuity policies sold by sales representatives of
World Financial Group. WMA Life may elect to reinsure the VUL business issued by
Western Reserve on either a coinsurance or monthly renewable term ("MRT") basis.
Similarly, WMA Life may elect to reinsure the variable annuity business issued
by Western Reserve on a coinsurance basis. (See "Monthly Renewable Term
Insurance" and "Coinsurance and Modified Coinsurance" below.)

As to the VUL business, subject to certain sales volume limitations, WMA Life
has the option under the First Right Agreement to reinsure up to 20% of all
single life VUL products introduced for sale following execution of the
agreement:

         -        On a coinsurance basis for all policies issued through March
                  31, 2003, and

         -        On a MRT basis for all policies issued through March 31, 2006.

Western Reserve introduced a new VUL product, the WRL Freedom Elite Builder
("FEB"), for distribution in July 2001, which is intended to replace the WRL
Financial Freedom Builder ("FFB") VUL and WRL Freedom Elite ("Freedom Elite")
VUL products currently issued by Western Reserve. WMA Life currently reinsures
the FFB VUL product. In November 1999, Western Reserve introduced the Freedom
Elite, which the Company does not reinsure. In September 2000, the Company
commenced negotiations with Western Reserve to secure a reinsurance agreement
for the Freedom Elite product because of its increasing volume of sales by the
Sales Associates. These negotiations continued into 2001. However, pursuant to
the First Right Agreement, WMA Life will relinquish its option to reinsure the
Freedom Elite product if it is withdrawn, on a state-by-state basis, within 60
days following availability of the FEB VUL product, that WMA Life may otherwise
reinsure.

To exercise its right to reinsure business on a MRT basis, WMA Life must agree
to charge reinsurance premium rates no greater than 105% of blended commercial
net premium rates otherwise secured by Western Reserve on the same business and
reinsurance basis. There can be no assurance WMA Life will exercise its right to
reinsure on a MRT basis due to the seasonal competitive nature of the
reinsurance marketplace. However, WMA Life may, at any time through March 2003,
exercise its option (provided it can demonstrate sufficient capacity) to
reinsure this business on a coinsurance basis. WMA Life may reinsure up to 20%
(not to exceed the percentage of business if otherwise first reinsured on a MRT
basis) on all single life VUL products introduced for sale after the execution
of the agreement and issued since the beginning of the prior calendar year to
the date on which the option is exercised. Sufficient capacity is defined as
having unassigned invested securities and anticipated cash flows in an amount
sufficient to meet expected reinsurance settlements with regard to the converted
reinsurance.

As to the variable annuity business, WMA Life has the option under the First
Right Agreement to reinsure up to:

         -        40% from products introduced after December 31, 2000 and
                  issued through December 31, 2002 and written by sales
                  associates of World Financial Group if the previous calendar
                  year's direct written variable annuity premiums issued by
                  Western Reserve, or its affiliates, is at least $100 million,
                  but not more than $249 million; or

         -        50% from products introduced after December 31, 2000 and
                  issued through December 31, 2002 and written by sales
                  associates of World Financial Group if the previous calendar
                  year's direct written variable annuity premiums issued by
                  Western Reserve, or its affiliates, is at least $250 million.

Once a policy is reinsured, it will remain reinsured for a period ranging from
20 to 30 years depending on the nature of the reinsurance agreement. The
expiration dates of WMA Life's options shall be continued on a year-to-year
basis after the exercise dates described above, subject to cancellation by
either party upon sufficient notice.


                                       12
<PAGE>   13

To exercise certain of these options, WMA Life will need substantially greater
amounts of cash to support the increased amounts of reinsurance. Accordingly,
the Company is considering available alternatives to increase WMA Life's
capacity through the acquisition of additional financing or other means. There
can be no assurance that the Company can obtain at an acceptable cost and terms,
if at all, the additional financing necessary to exercise certain options under
the agreement.

MONTHLY RENEWABLE TERM REINSURANCE

WMA Life's reinsurance indemnity agreements include four MRT agreements relating
to VUL policies. MRT reinsurance is a variation of Yearly Renewable Term
Insurance. Under MRT reinsurance, the ceding company reinsures the mortality
risk with WMA Life. The amount reinsured in any one month is not based on the
face amount of the policy, but rather on the net amount of risk. The net amount
of risk is typically defined as the difference between the death benefit and the
cash value of a policy. The ceding company retains responsibility for
establishing the policy reserves (reduced for the mortality risk reinsured) as
well as the payment of all policy benefits, commissions and expenses involved in
issuing and maintaining the business. WMA Life establishes reserves specific to
the mortality risk reinsured.

The reinsurance of the VUL policies includes business previously and currently
being sold by Sales Associates and issued by Pacific Life, Western Reserve and
Zurich Kemper. The following table indicates the Ceding Life Companies that
issue the policies underlying the MRT reinsurance, the names of the insurance
products currently reinsured by the Company, policies reinsured under each
agreement, and the commencement date of the reinsurance.

<TABLE>
<CAPTION>
                                                                                         REINSURANCE
                                                                                         COMMENCEMENT
CEDING COMPANY           REINSURED VUL PRODUCT NAME         INITIAL POLICY ISSUE DATE    DATE
--------------           --------------------------         -------------------------    -----------------
<S>                      <C>                                    <C>                      <C>
Western Reserve          Freedom Equity Protector               1/92 to 12/99            7/96
                         Financial Freedom Builder              8/97 to 3/98             8/97

Zurich Kemper            Power VUL                              10/96 to 3/01            10/96

Western Reserve          Financial Freedom Builder              1/99 to present          10/99

Pacific Life             Select Exec II VUL                     1/01 to present          1/01
</TABLE>

Effective January 1, 2001, WMA Life entered into a new reinsurance agreement
with Pacific Life. The new agreement provides MRT reinsurance for certain
permanent ordinary life plans, including Pacific Life's Select Exec II VUL
insurance policies, issued by Pacific Life on or after January 1, 2001 and sold
by the Sales Associates. The agreement provides for reinsurance of 20% of the
mortality risk, up to $100,000 per policy.

COINSURANCE AND MODIFIED COINSURANCE

Under a coinsurance arrangement, the insured risks are ceded to the reinsurer on
essentially the same basis underwritten by the ceding company. The ceded risks
include mortality, lapse, cash surrender and investment risk. The ceding company
and the reinsurer share these risks in the same manner. The reinsurer receives a
proportionate share of gross premiums from the ceding company and provides
expense allowances to the ceding company in recognition of expenses associated
with the reinsured policies. Expenses include commissions and costs associated
with underwriting, marketing, policy issue and maintenance. The reinsurer also
pays the ceding company its proportionate share of death benefits and other
policy benefits. The reserves on the ceded portion of the policy are obligations
of, and held by, the reinsurer.

Modified coinsurance ("ModCo") is a variation of coinsurance. ModCo is similar
to coinsurance except the ceding company retains the reserves, and the assets
related to the reserves, otherwise recorded and held by the reinsurer. ModCo is
used primarily for products that develop cash values and allows the ceding
company to retain the associated assets for investment purposes.


                                       13
<PAGE>   14

The following table indicates the Ceding Life Companies that issue the policies
underlying the reinsurance, the names and types of insurance products currently
reinsured by the Company, the type of reinsurance agreement applicable to each,
policies reinsured under each agreement, and the commencement date of the
reinsurance.

<TABLE>
<CAPTION>
                                                                                                         REINSURANCE
 CEDING                                          PRODUCT                             INITIAL POLICY      COMMENCEMENT
 COMPANY              REINSURED PRODUCT NAME     TYPE       REINSURANCE TYPE         ISSUE DATE          DATE
 -------              ----------------------     ----       ----------------         ----------          -----------------
<S>                   <C>                        <C>        <C>                      <S>                 <C>
 Western Reserve      Financial Freedom Builder  VUL        Coinsurance and ModCo    4/98 to 12/98       4/98


 Western Reserve      Freedom Wealth Creator     VA         Coinsurance and ModCo    1/98 to present     1/98



 Western Reserve      Freedom Premier            VA         Coinsurance and ModCo    10/00 to present    10/00


 American Skandia     Imperium                   VA         ModCo                    1/97 to present     1/97
</TABLE>

WMA Life has a ModCo agreement with American Skandia and a coinsurance and
modified coinsurance agreement with Western Reserve, both providing for the
reinsurance of a portion of certain variable annuity policies sold by the Sales
Associates. WMA Life also has a coinsurance and modified coinsurance agreement
with Western Reserve reinsuring a portion of certain VUL policies.

ACCOUNTING

WMA Life generally recognizes premiums as earned on MRT reinsurance for the
mortality risk reinsured. Reinsured policy revenues that are reported in the
period reflect policy mortality and expense charges, policy administration
charges, asset-based allowances and deferred sales charges that have been
assessed against the reinsured policy account balances under the coinsurance and
modified coinsurance agreements, as they relate to universal life-type
contracts.

Net investment income is the gross income earned from the invested assets less
the applicable investment management expenses and custodial fees.

WMA Life defers costs that vary with and are directly associated with the
acquisition of the reinsured policies. These expenses are deferred to the extent
that such costs are deemed recoverable from future policy revenues in accordance
with GAAP and are recorded as deferred acquisition costs on the balance sheet.
Deferred acquisition costs were $43.27 million at June 30, 2001, an increase of
$519,000, or 1%, from December 31, 2000.

Deferred acquisition costs are amortized over the lives of the underlying
policies (with regard to the terms of the reinsurance agreement). Under the MRT
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. Under the dynamic approach, the amortization under
the static approach is adjusted to reflect actual insurance in force. To the
extent fewer policies persist than otherwise anticipated the amortization will
be greater, as compared to the static approach. Conversely, to the extent more
policies persist than otherwise anticipated, the amortization will be smaller.

Under the coinsurance and ModCo 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
Company's deferred acquisition expense reflect actual experience for the then
current accounting period. Management also reviews, on a periodic basis,
evolving experience with regard to the Company's assumptions, concerning future
experience with regard to mortality, persistency, investment yields and
expenses, in determining its estimate of anticipated future gross profits. The
period of observation is from October 1 of the previous calendar year through
September 30 of the current calendar year. If management believes variances from
expected assumptions are permanent, assumptions used with regard to future
experience will be changed. Upon adoption of any change in assumptions used with
regard to future experience, the amortization of the Company's deferred
acquisition cost will be recalculated and reflected during the then current
accounting period.


                                       14
<PAGE>   15

Life insurance claims settled, claims reported and changes in estimates of
claims incurred but not reported related to reinsured VUL policies are recorded
as Benefits, claims and settlement expenses on the Consolidated Financial
Statements. The change in the liability for future policy benefits is recorded
separately as Change in future policy benefits in the Consolidated Financial
Statements.

The liability for future policy benefits was $9.70 million at June 30, 2001, an
increase of $1.68 million, or 21%, from December 31, 2000. The liability at June
30, 2001 is comprised of two components: (i) liabilities under the Company's MRT
reinsurance agreements, and (ii) liabilities related to the coinsurance of VUL
and variable annuity policyholder obligations. The liability, with regard to the
MRT reinsurance, represents the present value of future benefits to be paid and
related expenses, less the present value of future net premiums (that portion of
the premium required to provide for all benefits and expenses). The liability
for the fixed account portion of the reinsured Western Reserve VUL and variable
annuity policies is equal to reinsured policy account balances. The separate
account portions of the Western Reserve VUL and the Western Reserve and American
Skandia variable annuity policies are reinsured on a modified coinsurance basis
and, accordingly, the ceding companies retain the reserves and the assets
related to the reserves in their respective separate accounts. To date,
management believes the assumptions used regarding its liability for future
policy benefits are appropriate for its circumstances.

RESULTS OF OPERATIONS

Quarter and Six Months Ended June 30, 2001 Compared to Quarter and Six Months
Ended June 30, 2000.

Revenues. Revenues increased by $381,000, or 5%, and $1.38 million, or 10%, for
the quarter and the six months ended June 30, 2001, respectively, compared to
the same periods in 2000. The increase was primarily attributable to the growth
in premiums associated with the MRT agreements.

Premiums. Premiums increased by $709,000, or 17%, and $1.69 million, or 22%, for
the quarter and the six months ended June 30, 2001, respectively, compared to
the same periods in 2000. The majority of the premium increase was due to
increasing reinsured business in force under the Western Reserve Financial
Freedom Builder ("FFB") MRT Agreement. Inforce volume under the FFB MRT
Agreement increased $0.78 billion, or 21%, for the six months ended June 30,
2001 compared to the same period in 2000. The remaining increase in premiums was
attributable to the increasing duration of the policies in force, since the
reinsurance premiums increase with the advancing age of the insured.

Reinsured Policy Revenues. Reinsured policy revenues decreased by $386,000, or
12%, and $466,000, or 8%, for the quarter and the six months ended June 30,
2001, respectively, compared to the same periods in 2000. These revenues reflect
policy cost of insurance charges, mortality and expense charges, policy
administration, asset based allowances and deferred sales charges under the
coinsurance and ModCo agreements, as they relate to universal life-type
contracts.

The revenue decrease was primarily attributable to the variable annuity
coinsurance and modified coinsurance agreements. Of the $5.75 million Reinsured
policy revenues for the six months ended June 30, 2001, $2.90 million of
Reinsured policy revenues was attributable to the variable annuity reinsurance
agreements compared to $3.16 million for the same period in 2000, a decrease of
$263,000, or 8%. The remaining $2.85 million was attributable to the VUL
coinsurance and ModCo agreement with Western Reserve compared to $3.05 million
for the same period in 2000, a decrease of $203,000, or 7%. Decreasing revenues
for both VUL and variable annuity business have resulted primarily because of a
decrease in collected mortality and expense charges associated with the lower
account values, due to the decrease in the equity markets. Further, the VUL
coinsurance and ModCo business is a closed block, which has resulted in a
declining in force due to normal policy lapses and surrenders.

Net Investment Income and Net Realized Gain on Investments. Net investment
income increased by $57,000, or 38%, and $148,000, or 67%, for the quarter and
the six months ended June 30, 2001, respectively, compared to the same periods
in 2000. Investment income is earned from investments in fixed income securities
and cash equivalents. Investment expenses of $22,000 and $35,000 for the six
months ended June 30, 2001 and 2000, respectively, related to investment advisor
fees and custodial fees and were netted with gross investment income excluding
realized gains and losses. The increase in net investment income was primarily
due to the increased size


                                       15
<PAGE>   16

of the Company's portfolio and increasing investment yields on new purchases of
fixed income securities. The sale of the fixed income securities for the six
months ended June 30, 2001 resulted in a Net realized gain on investments of
$5,634. No net realized gains or losses on investments were reported for the
period ended June 30, 2000. A Net realized gain is the result of selling
securities after a decrease in market yields subsequent to their purchase; a
decrease in market yields causes an increase in the market value of invested
securities.

Benefits, Claims and Settlement Expenses. Benefits, claims and settlement
expenses decreased by $262,000, or 14%, and $595,000, or 16%, for the quarter
and six months ended June 30, 2001, respectively, compared to the same periods
in 2000. The decrease was primarily the result of lower claims activity. The
amount of business in force at June 30, 2001 was $9.36 billion compared to $9.07
billion at June 30, 2000, which represented a $0.29 billion, or 3% increase.

The Company's profitability, in part, depends on the volume and amount of death
claims incurred. While death claims are reasonably predictable over a period of
many years, claims become less predictable over shorter periods, and are subject
to fluctuation from quarter to quarter and year to year. Overall, claims paid
plus those incurred have averaged 75-80% of management estimates. Claims paid
plus those incurred for the quarter ended June 30, 2001 were approximately 25%
lower than otherwise expected based upon management estimates and prior claims
activity. Management estimates net income was $350,000 higher for the quarter
ended June 30, 2001, than otherwise expected, due to this lower than expected
claims activity. Comparatively, claims paid plus those incurred for the quarter
ended June 30, 2000 were approximately 10% greater than expected.

Change in Future Policy Benefits. Change in future policy benefits increased by
$135,000 from $413,000, and $343,000 from $848,000, for the quarter and the six
months ended June 30, 2001, respectively, compared to the same periods in 2000.
The increase primarily resulted from the growth in policies in force under the
Western Reserve FFB MRT Agreement. Inforce policies and riders reinsured under
the Western Reserve FFB MRT Agreement increased by 24,516, or 24%, from 102,384
policies and riders at June 30, 2000 to 126,900 policies and riders at June 30,
2001.

Reinsurance Premium Allowances, Net. Net reinsurance premium allowances
increased by $356,000, or 20%, and $885,000, or 26%, for the quarter and the six
months ended June 30, 2001, respectively, compared to the same periods in 2000.
Gross reinsurance premium allowances represent a portion of reinsurance premiums
paid or allowed by WMA Life to the Ceding Life Companies for each policy
reinsured. A certain portion of the gross reinsurance allowances, with regard to
the production of new business was related to the Company's share of
commissions, underwriting costs and other expenses from the production of new
business incurred by the Ceding Life Companies on the business reinsured. These
amounts have been deferred to the extent that such costs are deemed recoverable
from future policy revenue in accordance with GAAP. The balance of those amounts
not deferred is reflected as net reinsurance premium allowances and are often a
level percentage of individual policy revenues. Similar to the increase in
revenues, the increase in net reinsurance premium allowances was due to an
increase in the business placed under the FFB MRT Agreement and the MRT premiums
in force.

Amortization of Deferred Acquisition Costs. Amortization of deferred acquisition
costs decreased by $228,000, or 21%, and $312,000, or 14%, for the quarter and
the six months ended June 30, 2001, respectively, compared to the same periods
in 2000. The decrease in amortization of deferred acquisition costs was
primarily attributable to a decrease in the rate of amortization which resulted
from the Company's unlocking of future experience assumptions as reported
December 31, 2000. (See further discussion above in "Accounting" for additional
factors.)

Operating Expenses. Operating expenses increased by $76,000, or 27%, and
$229,000, or 37%, for the quarter and the six months ended June 30, 2001,
respectively, compared to the same periods in 2000. Expenses include salary
expense, professional fees for legal, actuarial and accounting expenses
incurred, and other operating expenses. The increase in expenses was primarily
associated with an increase in salary expense of $75,000, due to the employment
of additional staff in 2001 as compared to the same period in 2000. The increase
was also attributable to legal and accounting fees, which increased by $65,000
from June 30, 2000 due to an increase in legal fees for corporate matters, audit
fees and additional tax consulting services. The remainder of the increase was
due to the annual corporate franchise tax and outside director fees.


                                       16
<PAGE>   17

Interest Expense. Interest expense decreased by $113,000, or 55%, and $221,000,
or 54%, for the quarter and the six months ended June 30, 2001, respectively,
compared to the same periods in 2000. The decrease is due to the full repayment
of the $5.30 million debt on a line of credit. The final payment of principal
and interest in the amount of $283,566 was paid in February 2001.

Income Taxes. Income taxes increased by $190,000, or 34%, and $398,000, or 40%,
for the quarter and the six months ended June 30, 2001, respectively, compared
to the same periods in 2000 due to higher levels of Income before income taxes.
The Company's effective tax rates were 34% and 31% for the quarters ended June
30, 2001 and 2000, respectively. The effective tax rates for the six months
ended June 30, 2001 and 2000 were 34% and 32%, respectively. Taxable income
calculated on a statutory basis was emerging during the quarter and six months
ended June 30, 2000. As a result, the effective tax rates for the 2000 periods
were less than 34% because of the "small life insurance company deduction"
available to the Company on the then current taxable income.

The Income tax expense for the quarter and the six months ended June 30, 2001
was deferred in accordance with GAAP. No current tax expense was payable as of
June 30, 2001. As of June 30, 2000, Income tax expense of $150,000 was payable.
The remaining Income tax expense for the six months ended June 30, 2000 was
deferred in accordance with GAAP.

Net Income. As a result of the foregoing, Net income for the quarter ended June
30, 2001 was $1.45 million compared to $1.22 million for the quarter ended June
30, 2000, an increase of $227,000, or 19%. Net income for the six months ended
June 30, 2001 was $2.74 million compared to $2.09 million for the six months
ended June 30, 2000, an increase of $651,000, or 31%.

LIQUIDITY AND CAPITAL RESOURCES

The principal sources of the Company's cash flow have been premiums received
from the Ceding Life Companies, investment income, proceeds from the sale of
invested assets, issuance of the Company's common and preferred stock, and short
and long term financing. In addition to the need for cash flow to meet operating
expenses, the liquidity requirements of the Company relate primarily to the
payment of gross reinsurance allowances, investment purchases, debt service and
reinsurance claims.

Premiums are generally received in advance of related benefits and claims
payments. Under the MRT reinsurance agreements, premiums typically vary in
proportion to the expected mortality claims reinsured. The Company's cash
inflows under the MRT agreements are premiums for the mortality risk reinsured.
The Company's cash outflows are reinsurance expense allowances, policy benefits
and death benefit claims. The reinsurance expense allowances represent the
Company's share of acquisition and maintenance expenses incurred by the Ceding
Life Company that are attributable to the risks reinsured.

Under the coinsurance and modified coinsurance agreements, since the Company is
reinsuring risks on essentially the same plan as that of the original policy,
reinsurance premiums are materially greater than premiums paid on the MRT
reinsurance. During the first year in which a policy is reinsured on a
coinsurance basis, the Company is required to reimburse the Ceding Life Company
for its share of acquisition costs, including first year commissions and
issuance expenses. Thereafter, the Company reimburses the Ceding Life Company
for its share of renewal commissions and maintenance expenses. Further, under
modified coinsurance, the Company will 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 plan reinsured,
the net cash outlays could be as much as, or more than the first year premiums
paid for life insurance, and as much as 10% of annuity premiums.

The Company's cash requirements for operating and investment expenses consist
of: salaries and benefits; management service fees; investment management and
custodial fees; accounting and consulting services fees; expenses related to
regulatory issues and compliance with corporate and tax matters; and other
incidental administrative expenses. The Company incurred no capital expenditures
during 2001.


                                       17
<PAGE>   18

Net cash flows provided by operating activities were $4.34 million for the six
months ended June 30, 2001, compared to $3.10 million provided by operating
activities for same period in 2000. The net cash flows provided by operating
activities were primarily due to the reinsurance revenues, under the Company's
MRT agreements and its Co/ModCo Agreements with Western Reserve on the FFB and
Creator products, in excess of its reinsurance settlements paid under the
coinsurance and modified coinsurance agreements on the Western Reserve Premier
and American Skandia Imperium variable annuity products. The Company projects to
realize net positive cash flows from its existing reinsurance operations for the
remainder of 2001, except as might otherwise be applied for the purpose of
exercising its options to increase business reinsured under the Western Reserve
agreements.

On July 30, 1999, the Company issued a $5 million, five-year convertible term
note to Money Services, Inc. ("MSI"), a subsidiary of AEGON USA, Inc., due on
July 29, 2004. Proceeds of this note were used to reduce a portion of the
outstanding principal balance on a line of credit, with MSI, from $10 million to
$5 million, of which WMA Life was beneficiary. Interest is payable 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. MSI may convert the
outstanding principal balance of this note into Common Stock of the Company. As
of June 30, 2001, regarding the term note, the Company had an outstanding
principal balance of $5 million and accrued interest of $156,678.

The Company's primary source of liquidity was $1.31 million in Cash and cash
equivalents at June 30, 2001. The effective duration of the Company's fixed
income portfolio is 3.4 years with 100% of the fixed income securities having an
effective maturity of less than 10 years. The Company's fixed income portfolio
represents all of the total invested assets, and has an average quality rating
of Aa3 by Moody's.

The net cash used in investing activities for the six months ended June 30, 2001
was $7.01 million, compared to $3.72 million used in investing activities for
the same period in 2000. During 2001, the Company purchased over $7.37 million
of fixed income securities. As a result, the Company increased the percentage of
corporate fixed income securities held in its portfolio from 36% at June 30,
2000 to 59% at June 30, 2001. Net cash used in investing activities for the six
months ended June 30, 2000 resulted primarily from $3.79 million of purchases of
fixed income securities.

Net cash used in financing activities for the six months ended June 30, 2001 was
$277,000, compared to $2.56 million provided by financing activities for the
same period in 2000. The net cash used in financing activities during 2001 was
the final principal payment on the MSI line of credit. The net cash provided by
financing activities during the first six months of 2000 was due to the issuance
of 262,674 shares of preferred stock to accredited investors. The net cash
provided by financing activities in 2000 was reduced by the principal payments
to MSI on the line of credit.

WMA Corporation is a holding company with no direct operations, and its
principal asset is the capital stock of WMA Life and $3.13 million of cash and
invested assets. WMA Corporation relies primarily on funds retained at the
holding company level, loan repayments and potential dividends from WMA Life to
meet ongoing cash requirements. The ability of WMA Life to pay dividends to WMA
Corporation is subject to, among other things, regulatory restrictions under the
insurance laws of Bermuda. During the quarter ended June 30, 2001, WMA Life paid
no dividends to WMA Corporation. It is anticipated that WMA Corporation will
rely primarily on interest and loan repayments from WMA Life to meet ongoing
cash requirements during the remainder of 2001.

Under the Company's reinsurance agreements, the Company is required to provide
security through a Letter of Credit ("LOC") for the benefit of the Ceding Life
Companies. The Company has two LOCs issued by Comerica Bank, the Company's
custodian, for the benefit of Western Reserve and Zurich Kemper, in the amounts
of $6 million and $140,000, respectively.


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<PAGE>   19



FORWARD LOOKING STATEMENTS

Certain statements made in this report are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995 and are
subject to the safe-harbor provision of that Act. 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," "proposed," "anticipates,"
"intends," "plans," "estimates," "projects," "speculates," or similar
expressions. 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: changes in the
Company's relationship with the Independent Marketing Organizations, success of
the Independent Marketing Organizations, adverse reinsurance experience,
increased competition from within the insurance industry, the extent to which
the Company is able to develop new reinsurance programs and markets for its
reinsurance, negotiation of reinsurance agreements, changes in the control of
the Company, the Company's cash requirements, the rate of growth in the
Company's reinsured business, the outcome of regulatory examinations and
investigations into WMA Securities, and the availability of capital on
acceptable terms and other factors discussed in this report. These
forward-looking statements are subject to change and uncertainty, which are
beyond the Company's control and have been made based upon management's
expectations and beliefs concerning future developments and their potential
effect on the Company. There can be no assurance that future developments will
be in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management. Actual
results could differ materially from those expected by the Company, depending
upon the outcome of certain factors, including those described in the
forward-looking statements.


PART II - OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

As of June 30, 2001, the Company was not a party to any litigation or
arbitration. Except as disclosed below in Item 5. Other Information, the Company
is not aware of any litigation or arbitration that is likely to have a material
adverse effect on the Company's consolidated results of operations or financial
condition.

ITEM 2.  CHANGES IN SECURITIES

There were no changes in securities during the six months ended June 30, 2001.

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

There were no matters submitted to a vote of security holders during the six
months ended June 30, 2001.

ITEM 5.  OTHER INFORMATION

In the past several years, WMA Securities has been and/or continues to be
subject to investigations by the Securities and Exchange Commission, the
National Association of Securities Dealers, and other regulatory authorities,
concerning their compliance and supervisory programs and the sales and marketing
activities of certain Sales Associates. WMA Securities and certain Sales
Associates may also be subject to litigation or arbitration from time to time
during the normal course of business. WMA Securities has not advised the Company
of any changes in the status of the any regulatory investigations or litigation
during the current period from that previously disclosed that could be viewed
material to the Company.


                                       19
<PAGE>   20

On December 18, 1998, the California Department of Corporations issued to WMA
Agency, WMA Securities and WMA Investment Advisors, Inc., a Desist and Refrain
Order ("Desist Order") to refrain from further offers or sales of franchises in
California. WMA Agency and affiliates challenged this order on the grounds that
their activities do not fall within the scope of the California franchise laws
and pursued available administrative remedies to resolve the issue. In 1999, an
administrative judge upheld the California Department of Corporation's Desist
Order. WMA Agency and affiliates then exercised their right to a judicial review
of the administrative law judge's decision and filed the appropriate action in
Superior Court. The California Superior Court upheld the issuance of the Desist
Order and an appeal of the Superior Court's decision was filed in the
appropriate state appellate courts. On June 20, 2001, the California appellate
court reversed the District Court's decision upholding the Desist order and
directed the District Court to order the California Department of Corporations
to vacate the Desist Order.

Conning Asset Management, Inc. ("Conning"), the Company's investment manager
since 1998, informed the Company that on April 25, 2001, Swiss Reinsurance
Company ("Swiss Re") entered into an agreement to acquire Conning. The
acquisition was completed on July 2, 2001. Terms of the transaction were not
disclosed. Swiss Re is a life reinsurance company. The Company has no
affiliation with Swiss Re.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

The Company filed an 8-K report on July 16, 2001 regarding the press release
announcing the Company's best efforts agreement with World Financial Group, Inc.
on July 12, 2001.

The Company filed an 8-K report on July 16, 2001 regarding the press release
announcing the Company's first right agreement with Western Reserve on July 12,
2001.

<TABLE>
<CAPTION>
        EXHIBIT
        NUMBER    DESCRIPTION OF EXHIBIT
        ------    ----------------------

         <S>      <C>
         10.1     Third Amendment and Joinder to the Directed Reinsurance
                  Agreement between The WMA Corporation, World Marketing
                  Alliance, Inc. and World Financial Group, Inc. dated July 12,
                  2001 (Attached)

         10.2     First Right Agreement between The WMA Corporation and Western
                  Reserve Life Assurance Co. of Ohio dated July 12, 2001
                  (Attached)
</TABLE>




                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]



                                       20
<PAGE>   21



                                   SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


     THE WMA CORPORATION  (REGISTRANT)




By:    /s/ Edward F. McKernan                              Date: August 13, 2001
     ------------------------------------------------
     Edward F. McKernan
     President, Chief Financial Officer and Director


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