<PAGE>
                                                                    EXHIBIT 99.1

         SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS
              FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

You should consider the following factors in evaluating our business or an
investment in our common stock. If any of the following or other risks actually
occurs, our business, financial condition and results of operations could be
adversely affected. In such case, the value of our common stock could decline.

OUR BUSINESS IS CURRENTLY DEPENDENT UPON OUR RELATIONSHIPS WITH INDEPENDENT
AGENTS ASSOCIATED WITH WORLD FINANCIAL GROUP AND THE LOSS OF BUSINESS PROVIDED
BY THE INDEPENDENT AGENTS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR GROWTH
STRATEGIES AND BUSINESS.

      To date, all life insurance and annuity policies reinsured by us have been
written through the agents associated with the independent marketing
organization, World Financial Group or its predecessor. An independent marketing
organization ("IMO") is an organization of independent agents that contracts
with one or more insurance companies to distribute and market securities and
insurance products. Our growth in new business through World Financial Group is
significantly dependent on the continued willingness and ability of the agents
associated with that IMO to market and sell life insurance and annuity products
for life insurance companies that reinsure through us.

      We believe the ability of those agents to continue placing new business
with the life insurance companies that use us for reinsurance could be affected
by a number of factors, including:

      -      The ability of World Financial Group to retain agents who have the
            incentive to support us;

      -      The degree of market acceptance of the products offered by those
            agents;

      -      The relationship between the agents and the life insurance
            companies that use us for reinsurance; and

      -      The occurrence of regulatory actions or litigation that could
            restrict or prohibit sales activities by the agents or the life
            insurance companies.

      We do not direct or oversee the activities of these agents. We cannot
assure you that World Financial Group will be able to attract new agents or
retain key agents responsible for significant portions of production. The loss
of a substantial number of key agents could have a material adverse effect upon
the future sales of World Financial Group and the production of new business to
be reinsured by us.

      In recent years, the Securities and Exchange Commission, the National
Association of Securities Dealers ("NASD") and various state regulatory
authorities commenced various regulatory inquiries of the companies that were
the predecessors to World Financial Group and its affiliated registered
broker-dealer, World Group Securities, relating to compliance by those
predecessor companies with applicable regulatory standards and appropriate
supervision of their associated agents. We were informed that, in response to
such inquiries, the predecessor companies implemented corrective action plans
with respect to such alleged compliance issues and currently World Financial
Group and World Group Securities have responsibility for ongoing compliance
activities relating to the agents. If the regulatory authorities do not consider
such corrective actions and the ongoing compliance measures implemented by World
Financial Group and World Group Securities to be sufficient, then there could be
an adverse impact on the ability of those agents to generate additional life
insurance and annuity business for us to reinsure.

      If the business of World Financial Group, or any other IMO with which we
establish a relationship, is materially disrupted, it could have a material
adverse effect on our growth strategies and business. The business of an IMO
could be adversely affected by a change of control, loss of one or more key
agents, operational problems, regulatory compliance problems, litigation or
other factors.


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WE FACE CERTAIN SPECIALIZED RISKS COMMON TO ALL LIFE REINSURANCE COMPANIES;
HOWEVER, BECAUSE OF THE CONCENTRATION OF OUR BUSINESS WITH A SMALL NUMBER OF
LIFE INSURANCE COMPANIES, WE MAY HAVE A GREATER EXPOSURE TO THESE RISKS.

      We face certain specialized risks common to all life reinsurance
companies. However, because Western Reserve, American Skandia, Pacific Life and
Kemper issued all of the policies we currently reinsure, we may have a more
concentrated exposure to these risks than other life reinsurance companies.
These risks include the risk of mispricing by life insurance companies of the
coverage provided by the underlying policies, adverse insurance experience risk,
and risks relating to miscellaneous and external events. Adverse insurance
experience risks relate to the risks insured, which may include excessive
claims, poor persistency, inadequate investment results, and excessive expenses.
However, as long as the life insurance companies that issue the policies we
reinsure retain a proportionate share of the risk insured, they will have an
incentive to underwrite and price appropriately.

      We do not participate in the selection of the ceding life companies'
pricing assumptions or methodologies used in pricing the insurance products we
reinsure. We do, however, evaluate the following elements in pricing our
reinsurance agreements:

      -     Mortality. Mortality is the relative incidence of death experienced
            by insured lives taken as a group. We are subject to the risk that
            the mortality on the lives reinsured by us may be above the
            mortality assumed in pricing our reinsurance.

      -     Persistency. Persistency is the extent to which insurance policies
            are maintained by the policyholder. Policyholders may not pay
            premiums, causing their policies to lapse, or they may choose to
            surrender their policies for the cash surrender value. Policy lapses
            and surrenders will result in lost future revenues and may result in
            diminished profitability associated with the business reinsured.

      -     Investment. Investment income is based on the rate of return on
            invested assets. We are subject to (1) asset value risk, which is
            the risk that invested assets will decrease in value, (2)
            reinvestment risk, which is the risk that interest rates will
            decline and funds reinvested will earn lower rates, and (3)
            disintermediation risk, which is the risk that we may have to sell
            assets at a loss to fund cash outflows resulting from policyholder
            withdrawals. Additionally, our revenues on modified coinsurance may
            decline if policyholders' separate account values decline.

      -     Expenses. Expenses principally consist of our reinsurance expense
            allowances and internal operating expenses. Reinsurance expense
            allowances typically consist of reimbursements to the life insurance
            companies that sell the policies for commissions, issuance expenses
            and administrative expenses associated with the reinsured policies.
            In general, we are not at risk for variances in the life insurance
            companies' actual expenses from reinsurance expense allowances.
            However, we face the risk that our internal operating expenses may
            exceed the expenses assumed in pricing our reinsurance.

      We also face risks resulting from miscellaneous and external events that
are difficult to estimate prior to their occurrence, including litigation,
governmental and regulatory changes, tax law changes, product acceptance,
epidemics, catastrophic events, terrorist attacks, market trends, a significant
drop in the U.S. securities markets, a general economic downturn or negative
publicity related to IMOs with whom we have relationships, insurance companies
whose products we reinsure or products we reinsure. Any such events could have a
material adverse effect upon our business.

OUR BUSINESS IS DEPENDENT UPON A SMALL NUMBER OF REINSURANCE AGREEMENTS WITH A
LIMITED NUMBER OF UNAFFILIATED INSURANCE COMPANIES AND THE LOSS OF NEW BUSINESS
PROVIDED BY THEM COULD ADVERSELY AFFECT US.

      To date, we have derived all of our life reinsurance revenues from
variable universal life policies issued by Western Reserve, Pacific Life and
Kemper and all of our annuity reinsurance revenues from variable annuities
issued by Western Reserve and American Skandia.




                                      -2-
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      We have an agreement with Western Reserve that provides us with the first
rights to reinsure new products offered by Western Reserve or its U.S.
affiliates that are sold by agents associated with World Financial Group. These
contractual rights are subject to premium production requirements. These
agreements provide for automatic renewals following their initial terms, subject
to termination or non-renewal upon notice of at least 180 days.

      The termination, non-renewal or unfavorable renegotiation of the
reinsurance of new policies under these agreements would have a material adverse
effect on our growth; however, it would not affect our right to continue to
reinsure the policies already reinsured.

IF WE ARE UNABLE TO EXERCISE OUR CONTRACTUAL RIGHTS TO EXPAND THE SCOPE OF OUR
EXISTING REINSURANCE ARRANGEMENTS, OUR GROWTH STRATEGY AND BUSINESS COULD BE
AFFECTED.

      Due to our historical capital constraints, we have been unable to reinsure
the maximum available percentage under the Western Reserve variable universal
life reinsurance agreements and the Western Reserve variable annuity reinsurance
agreement. If, for any reason, whether for contractual reasons, lack of
sufficient capital or otherwise, we are unable to, or choose not to, exercise
the rights under these agreements to expand our reinsurance business, our growth
could be affected. We cannot assure you that we will exercise our rights under
these agreements.

IF WE ARE UNABLE TO DEVELOP NEW RELATIONSHIPS WITH IMOS, THE LONG-TERM GROWTH OF
OUR BUSINESS COULD BE MATERIALLY AFFECTED.

      Our growth strategy includes developing affiliations with new IMOs similar
to the one we have with World Financial Group. We intend to use various
financial incentives, which may include stock, warrants and other forms of
equity participation in our company, or by offering actuarial and management
advisory services, to form relationships with new IMOs. We cannot assure you
that we will be successful in our efforts to establish these relationships.
Furthermore, our inability to develop these relationships could materially
affect our growth strategy and business.

IF WE LOSE OR ARE UNABLE TO OBTAIN CERTAIN PERSONNEL, OUR ABILITY TO IMPLEMENT
OUR BUSINESS STRATEGY COULD BE DELAYED OR HINDERED.

      We are substantially dependent on a small number of employees. We have
written employment agreements with several of our executives. The loss of the
services of certain employees, or the inability to hire replacement personnel,
could adversely affect the quality and profitability of our business operations.
We do not currently maintain key employee insurance with respect to any of our
employees.

WE ANTICIPATE EXPERIENCING A PERIOD OF GROWTH THAT MAY PLACE A STRAIN ON OUR
RESOURCES.

      We expect to continue our growth by broadening our existing relationships
and forming new relationships with additional IMOs. Any growth of our business
would place additional demands on our management, operational capacity and
financial resources. Our inability to manage growth effectively could have a
material adverse effect on our business, financial condition and results of
operations. Additionally, we anticipate that we will need to recruit qualified
personnel in all areas of our operations, including management, actuarial
support, sales and marketing, to effectively manage and control additional
growth. If we are unable to attract and retain additional qualified personnel,
expand our operational capacity or otherwise manage our growth, our business,
financial condition and results of operations may be adversely affected.

WE RELY ON NUMEROUS THIRD PARTIES TO PROVIDE POLICY ADMINISTRATION, INVESTMENT
MANAGEMENT AND ADMINISTRATIVE SUPPORT SERVICES. IF THESE THIRD PARTIES DO NOT
PROVIDE SATISFACTORY SERVICE AND ACCURATE INFORMATION, OUR BUSINESS COULD BE
ADVERSELY AFFECTED.

      The policies we reinsure are administered by the life insurance companies
issuing the policies. The life insurance companies provide us with the
information necessary for managing our reinsurance business. We do not
participate in the underwriting or any of the direct administration



                                      -3-
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of the reinsured policies and have conducted only a limited review of the
administrative practices of the life insurance companies for which we provide
reinsurance. Therefore, management may not have sufficient or timely information
to evaluate the quality or the administration of the business reinsured by us or
the accuracy of the information provided by these life insurance companies,
though our agreements may provide us some limited oversight in the form of audit
rights.

      We utilize an independent investment manager to invest our assets in
accordance with our investment guidelines. Conning Asset Management Inc., a
subsidiary of Swiss Reinsurance Company, has been our investment manager since
June 1998. Conning has discretionary authority to manage our non-cash investment
portfolio. As a result, the performance of our aggregate investment portfolio
depends largely on the ability of Conning to select and manage appropriate
investments. We cannot assure you that Conning will be successful in meeting our
investment objectives. We also cannot assure you that Conning will not terminate
its agreement with us. The inability of Conning to perform adequately and
consistently with our expectations could significantly and negatively affect our
ability to conduct our business.

      Global Preferred Re has an insurance management agreement with
International Advisory Services, Ltd. ("IAS"), a subsidiary of IAS Global
Captive Group, Ltd., which provides professional insurance management services
to companies operating in Bermuda. C. Simon Scupham, a director of our company
and of Global Preferred Re, is a director of IAS Global Captive Group, Ltd.
Pursuant to this agreement, IAS acts as the managing agent and Principal
Representative under the Insurance Act 1978 for Global Preferred Re in Bermuda.
This agreement is for an unlimited duration, but may be terminated by either
party upon three months prior written notice or upon 30 days prior written
notice under specified circumstances.

IF THE LIFE AND ANNUITY PRODUCTS WE REINSURE DO NOT CONTINUE TO BE ACCEPTED IN
THE MARKETPLACE OR IF TAX REGULATIONS CHANGE WITH REGARD TO THOSE PRODUCTS, OUR
BUSINESS STRATEGY COULD BE SIGNIFICANTLY AND ADVERSELY AFFECTED.

      We currently reinsure variable universal life insurance and variable
annuity policies. No assurance can be given that variable universal life
insurance and variable annuity policies will continue to be accepted in the
marketplace or that we will be able to reinsure other insurance products in the
future. The acceptance of variable products could be adversely affected by a
substantial, prolonged decline or unusual volatility in the stock market.

      We believe that recent developments in the economy and financial markets
have had an adverse affect on the demand for financial products, including
variable universal life insurance and variable annuity products, which could
reduce our opportunity to reinsure those products. We cannot predict how long
these conditions will persist or the magnitude of their effect on our business.
Continued unfavorable economic conditions may have an adverse effect on our
financial operations or the growth of our business.

      Under the Internal Revenue Code of 1986, income tax payable by
policyholders on investment earnings is deferred during the accumulation period
of some life insurance and annuity products. To the extent that the Internal
Revenue Code is revised to reduce the tax-deferred status of life insurance and
annuity products or to increase the tax-deferred status of competing products,
all life insurance companies would be adversely affected with respect to their
ability to sell such products, and, depending on grandfathering provisions, the
surrenders of existing annuity and life insurance policies. In addition, life
insurance products are often used to fund estate tax obligations. Congress has
adopted legislation to reduce, and ultimately eliminate, the estate tax. Under
this legislation, the life insurance companies that issue the policies we
reinsure may face reduced demand for some of their life insurance products,
which in turn could negatively affect our future reinsurance opportunities. We
cannot predict what future tax initiatives may be proposed and enacted which
could affect us.

COMPARABLE COMPANIES IN OUR INDUSTRY HAVE RECENTLY SUFFERED FROM POOR FINANCIAL
PERFORMANCE, WHICH HAS ADVERSELY AFFECTED THE MARKET'S PERCEPTION OF OUR
INDUSTRY. THE MARKETS' PERCEPTION OF THESE COMPARABLE COMPANIES AND INDUSTRY MAY
ADVERSELY AFFECT OUR ABILITY TO ATTRACT AND RETAIN BUSINESS OR TO RAISE CAPITAL.

      Over recent years many companies in the life insurance and reinsurance
industry have exhibited poor financial performance. Weak financial results in
the life insurance and reinsurance industry have caused some market analysts and
investors to have a negative perception of the financial viability of the
industry and its members. Our status as a life reinsurance insurance company may
adversely affect the market's perception of our financial and business
capabilities and such a negative perception could adversely affect our ability
to attract and retain business or to raise additional capital.



                                      -4-
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WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT, WHICH COULD MAKE IT MORE
DIFFICULT FOR US TO ATTRACT AND RETAIN BUSINESS.

      We compete, and will continue to compete, with numerous national and
international reinsurance companies, primary insurance companies, underwriting
syndicates and other financial services providers, many of which are well
established, have significant operating histories and substantially greater
underwriting, marketing and administrative resources than we do. Our growth
strategy includes the expansion of our relationships with IMOs and other
distribution channels through the strategic use of financial incentives. Our
ability to compete with other reinsurers in this market will depend upon our
ability to successfully develop and maintain strong relationships with IMOs. We
cannot assure you that we will be able to successfully develop such
relationships. Furthermore, our inability to do so could have a material adverse
effect upon our ability to implement our strategies.

      Direct insurance companies that are licensed to underwrite insurance are
also licensed to underwrite reinsurance, making commercial entry into the
reinsurance business relatively uncomplicated. In addition, over the last
several years, capital markets participants, including exchanges and financial
intermediaries, have developed financial products intended to compete with
traditional reinsurance. We are unable to predict the extent to which new,
proposed or potential initiatives may affect the demand for our products.
Barriers to entry to the reinsurance industry for non-insurers are mainly the
time, capital and talent necessary to attract, underwrite and manage the
business. Increased competition could cause us and other reinsurance providers
to charge lower premium rates and obtain less favorable contract terms, which
could adversely affect our ability to generate revenue and grow our business.
Our business may be more susceptible to competition because we have a relatively
small number of clients.

WE MAY REQUIRE ADDITIONAL WORKING CAPITAL OR FINANCING TO FULLY IMPLEMENT OUR
STRATEGIES TO GROW OUR BUSINESS.

      To continue to fully implement our growth strategies, we may need to raise
additional funds through loans from financial institutions and the sale of
equity securities in private or underwritten public offerings. We cannot assure
you that such alternatives would be available to us at an acceptable cost, if at
all.

DUE TO THE TRANSACTIONS WE HAVE ENTERED INTO WITH ENTITIES THAT HAVE A COMMON
OWNERSHIP WITH WORLD FINANCIAL GROUP, CONFLICTS OF INTEREST MAY ARISE WITH
RESPECT TO OUR BUSINESS DEALINGS WHICH MAY HAVE AN ADVERSE EFFECT ON OUR FUTURE
BUSINESS OPERATIONS.

      In 1999, we issued a $5.0 million convertible note to Money Services,
Inc., which is due in full on July 29, 2004. The note is currently convertible
into 312,750 shares of our common stock. If Money Services were to convert the
note, it would own approximately 8% of our outstanding common stock. Each of
World Financial Group, Western Reserve and Money Services are subsidiaries of
AEGON USA, Inc. and may therefore be considered related to us due to Money
Services' ownership of a promissory note convertible into more than 5% of our
common stock.

      Due to the relationships among us, the independent agents associated with
World Financial Group, Western Reserve, Money Services, World Financial Group
and AEGON USA, conflicts of interest may arise with respect to existing and
future business dealings, including:

      -     The terms of World Financial Group's selling agreements (including
            commission arrangements) and our reinsurance relationships with life
            insurance companies;

      -     Agreements among us, World Financial Group, Western Reserve,
            Money Services, AEGON USA and their affiliates;

      -     Potential acquisitions of properties or businesses;

      -     Potential divestitures of properties or businesses; and

      -     The issuance of additional securities by us.



                                      -5-
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IF WE ARE UNABLE TO REALIZE OUR INVESTMENT OBJECTIVES, OUR FINANCIAL CONDITION
MAY BE ADVERSELY AFFECTED.

      Our operating results depend in part on the performance of our investment
portfolio. Our investments are selected with the objective of maximizing
investment returns consistent with appropriate credit, diversification, tax and
regulatory consideration, while providing sufficient liquidity to enable us to
meet our obligations as a reinsurance company on a timely basis. Our ability to
achieve our investment objectives is affected by general economic conditions
that are beyond our control.

      General economic conditions can adversely affect the markets for
interest-rate-sensitive securities, including the extent and timing of investor
participation in such markets, the level and volatility of interest rates and,
consequently, the value of fixed income securities. Interest rates are highly
sensitive to many factors, including governmental monetary policies, domestic
and international economic and political conditions and other factors beyond our
control. General economic conditions, stock market conditions and many other
factors can also adversely affect the equities market and, consequently, the
value of any equity securities we may own. We may not be able to realize our
investment objectives, which could reduce our net income significantly.

      The state insurance laws in the United States restricting the investments
of insurance companies are not directly applicable to Global Preferred Re.
Unlike insurance regulations in the United States, Bermuda law does not limit or
regulate investments of Global Preferred Re as a long-term insurer provided that
such investments are made for its potential benefit and Global Preferred Re
maintains the minimum solvency margin prescribed under the Bermuda Insurance Act
1978. We have developed specific investment guidelines that stress
diversification of risk, conservation of principal and liquidity, which are
reviewed periodically by the Investment Committee of the board of directors.

CHANGES IN INVESTMENT MARKETS COULD CAUSE A DECLINE IN THE REVENUES WE EARN
UNDER OUR COINSURANCE AND MODIFIED COINSURANCE AGREEMENTS.

      Due to the nature of the variable universal life and variable annuity
products we reinsure, we are generally insulated from the direct impact of
changes in the investment yields of these products. However, on an overall
basis, a decline in investment yields is expected to cause a decrease in our
revenues under our coinsurance and modified coinsurance agreements because the
funds upon which some of our revenues are calculated would presumably be lower,
resulting in a corresponding decrease in our income and a decrease in
anticipated future gross profits as used in amortizing the associated deferred
acquisition costs and lower earnings during future periods. Conversely, an
increase in investment yields is expected to result in increased anticipated
future gross profits as used in amortizing the associated deferred acquisition
costs.

OUR INABILITY TO PROVIDE SATISFACTORY FINANCIAL SECURITY TO LIFE INSURANCE
COMPANIES THAT REINSURE THROUGH US COULD SIGNIFICANTLY AND NEGATIVELY AFFECT
OUR ABILITY TO IMPLEMENT OUR BUSINESS STRATEGY.

      Because we are not required to be licensed or admitted as an insurer in
any jurisdiction other than Bermuda and because many jurisdictions do not permit
insurance companies to take credit for reinsurance obtained from unlicensed or
non-admitted insurers on their statutory financial statements unless appropriate
security measures are in place, the majority of our reinsurance customers
typically require us to obtain a letter of credit or provide other collateral
through funds withheld or trust arrangements. Our letters of credit are
collateralized with fixed income securities. If we are unable to increase our
letter of credit capacity or are unable to do so on commercially acceptable
terms or are unable to arrange for other collateral through funds withheld or
trust arrangements, our ability to implement our business strategy would be
significantly and negatively affected.

      As we grow, we will need additional letter of credit capacity, or other
acceptable forms of security. If we are unable to increase our letter of credit
capacity, or are unable to do so on commercially acceptable terms or are unable
to arrange for other collateral through funds withheld or trust arrangements,
our ability to implement our business strategy would be significantly and
negatively affected.

DUE TO THE ABSENCE OF A FINANCIAL STRENGTH RATING, IT MAY BE MORE DIFFICULT FOR
US TO ENTER NEW MARKETS.

      We are not currently rated by any insurance company rating service and
have not sought any rating because the absence of a financial rating has not, to
date, interfered with the implementation of our business strategy. However,
development of our future business may be affected by the absence of such a
rating.



                                      -6-
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Accordingly, we will seek a rating if we believe obtaining such a rating will
enhance our business opportunities. We cannot assure you that we would receive
a favorable rating.

OUR RESULTS OF OPERATIONS MAY FLUCTUATE FROM QUARTER TO QUARTER AND MAY NOT BE
INDICATIVE OF OUR LONG-TERM PROSPECTS.

Our results of operations may fluctuate significantly from quarter to quarter.
Fluctuations may result from a variety of factors, including the volume and mix
of reinsurance products we write, claim experience, policy persistency, timing
of expenses and the performance of our investment portfolio. In particular, we
seek to underwrite products and make investments to achieve long-term results.
Accordingly, our short-term results of operations may not be indicative of our
long-term prospects.

THE NATURE OF OUR BUSINESS REQUIRES OUR MANAGEMENT TO MAKE ESTIMATES AND
ASSUMPTIONS THAT AFFECT OUR PRICING, RISK ASSESSMENT AND FINANCIAL STATEMENTS.

      The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Accounts that we deem to be sensitive to changes in
estimates include deferred policy acquisition costs and future policy benefits.
In addition, management is required to make estimates and assumptions that
affect our pricing and risk assessments. In all instances, actual results could
differ from management's estimates and have an adverse impact on our financial
condition and business operations.

WE HAVE NO SIGNIFICANT OPERATIONS OTHER THAN OUR OWNERSHIP OF GLOBAL PREFERRED
RE, WHICH IS REGULATED WITH RESPECT TO DECLARING OR PAYING DIVIDENDS.
RESTRICTIONS ON OUR SUBSIDIARY'S ABILITY TO DECLARE AND PAY DIVIDENDS MAY HAVE A
MATERIAL ADVERSE AFFECT ON OUR OPERATIONS.

      We are a holding company with no direct operations, and our principal
asset is the capital stock of Global Preferred Re. Dividends and other permitted
payments from our subsidiary are expected to be our sole source of funds to meet
ongoing cash requirements, including debt service payments. Global Preferred
Re's declaration and payment of dividends and making of distributions to us is
limited under Bermuda law and regulations. Under the Insurance Act 1978 of
Bermuda and related regulations, Global Preferred Re must maintain specified
minimum solvency levels and is prohibited from declaring or paying dividends
that would result in non-compliance. Further as a long-term insurer, Global
Preferred Re must maintain long-term assets with a value of at least $250,000
more than its long-term liabilities and is prohibited from declaring or paying
dividends that would result in noncompliance or if, among other things, it has
reasonable grounds for believing that after making such payment it would not be
able to pay its liabilities as they become due. Accordingly, we cannot assure
you that Global Preferred Re will declare or pay dividends or make distributions
in the future. The inability of Global Preferred Re to pay dividends in an
amount sufficient to enable us to meet our cash requirements at the holding
company level could have a material adverse effect on our operations. Global
Preferred Re paid no dividends to Global Preferred during the fiscal year.

OUR BUSINESS IS GEOGRAPHICALLY CONCENTRATED; THEREFORE, OUR OPERATIONS MAY BE
AFFECTED BY REGULATORY, ECONOMIC, DEMOGRAPHIC AND OTHER CONDITIONS SPECIFIC
TO A SMALL NUMBER OF STATES.

      Historically, a substantial portion of the policies we have reinsured were
sold in a few states. Much of our reinsurance premiums and reinsured policy
revenues were derived from Western Reserve. According to information provided to
us by Western Reserve, of the variable universal life and variable annuity
premiums from policies sold by agents associated with World Financial Group and
its predecessor, on behalf of Western Reserve, most policies were sold in
California. We believe that the geographic distribution of the policies we
reinsure bears a similar geographic concentration. As a result of such
concentration, our operations may be significantly affected by regulatory,
economic, demographic and other conditions specific to California and a small
number of other states.




                                      -7-
<PAGE>




OUR RELIANCE ON PAYMENTS FROM LIFE INSURANCE COMPANIES UNDER OUR REINSURANCE
AGREEMENTS EXPOSES US TO CREDIT RISK.

      We are exposed to credit risk with respect to the payments owed to us by
the life insurance companies under our reinsurance agreements. Our operating
cash flow is derived entirely from reinsurance premiums and revenues those
companies pay to us. An adverse change in the financial condition of a life
insurance company for which we provide reinsurance, especially Western Reserve,
could impair our ability to collect these balances as a general creditor, which,
in turn, could result in a material, adverse effect upon our financial
condition.

TERRORIST ATTACKS MAY NEGATIVELY AFFECT OUR OPERATIONS.

      There can be no assurance that there will not be further terrorist attacks
against the United States or United States businesses. As a result of terrorism,
the United States has entered into an armed conflict which could have a further
impact on our business. Political and economic instability in some regions of
the world may also result and could negatively impact our business. The
consequences of further terrorist attacks and these armed conflicts are
unpredictable, and we may not be able to foresee events that could have an
adverse affect on our business.

IF WE BECOME SUBJECT TO INSURANCE STATUTES AND REGULATIONS IN JURISDICTIONS
OTHER THAN BERMUDA OR THERE IS A CHANGE TO A BERMUDA LAW OR APPLICATION OF
BERMUDA LAW, THERE COULD BE A SIGNIFICANT AND NEGATIVE IMPACT ON OUR BUSINESS.

      Global Preferred Re, our wholly owned operating subsidiary, is registered
in Bermuda as a long-term insurer. It is subject to regulation and supervision
in Bermuda. These statutes and regulations may restrict our ability to write
reinsurance policies, to distribute funds and to pursue our investment strategy.
Bermuda insurance statutes, regulations and policies of the Bermuda Monetary
Authority and the Minister of Finance require Global Preferred Re to, among
other things:

      -     Maintain a minimum level of capital, surplus and liquidity;

      -     Satisfy solvency standards;

      -     Restrict dividends and distributions;

      -     Obtain prior approval of ownership and transfers of shares;

      -     Maintain a principal office and appoint and maintain a Principal
            Representative in Bermuda; and

      -     Provide for the performance of certain periodic examinations of
            Global Preferred Re and its financial condition.

      In general, reinsurers domiciled outside the United States are not subject
to substantial direct regulation in the United States. However, most, if not
all, states within the United States do not permit life insurance companies to
take credit on their statutory financial statements for reinsurance obtained
from unlicensed or unadmitted reinsurers, such as Global Preferred Re, unless
appropriate security measures exist. In order for life insurance companies to
receive credit for reinsurance written, Global Preferred Re has had to post
letters of credit with those life insurance companies whose policies we
reinsure. If Global Preferred Re should encounter difficulty in obtaining such
letters of credit or alternative security in the future, our ability to operate
and expand our business would be severely limited.

      Generally, Bermuda insurance statutes and regulations applicable to Global
Preferred Re are less restrictive than those that would be applicable if Global
Preferred Re were subject to the insurance laws of any state in the United
States. In the past, there have been congressional and other initiatives in the
United States regarding proposals to supervise and regulate insurers domiciled
outside the United States. If in the future we became subject to any insurance
laws of the United States or any state thereof or of any other jurisdiction, we
cannot assure you that we would be in compliance with those laws or that coming
into compliance with those laws would not have a significant and negative effect
on our business.



                                      -8-
<PAGE>

      If we choose to attempt to become licensed in another jurisdiction other
than Bermuda, we may not be able to become licensed as the process of obtaining
licenses is very time consuming and costly. The modification of the conduct of
our business resulting from our becoming licensed in certain jurisdictions could
significantly and negatively affect our business. In addition, our inability to
comply with insurance statutes and regulations could significantly and adversely
affect our business by limiting our ability to conduct business as well as
subjecting us to penalties and fines.

GLOBAL PREFERRED RE MAY BECOME SUBJECT TO TAXES IN BERMUDA AFTER 2016, WHICH MAY
HAVE A MATERIAL ADVERSE EFFECT ON OUR FINANCIAL CONDITION.

      The Bermuda Minister of Finance, under The Exempted Undertakings Tax
Protection Act 1966 of Bermuda, has given us assurance that if any legislation
is enacted in Bermuda that would impose tax on profits or income, or computed on
any capital asset, gain or appreciation, or any tax in the nature of estate duty
or inheritance tax, then the imposition of any such tax will not be applicable
to us or to any of our operations or our shares, debentures or other obligations
until March 28, 2016. We cannot assure you that Global Preferred Re will not be
subject to any Bermuda tax after that date.



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