<PAGE>   1

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

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
         OF 1934

                   For the fiscal year ended December 31, 2000

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
         ACT OF 1934

         For the transition period from _________ to __________

                         Commission file number 0-23637

                               THE WMA CORPORATION
                               -------------------
                 (Name of small business issuer in its charter)

                   Delaware                              58-2179041
                   --------                              ----------
(State or other jurisdiction of incorporation       (I.R.S. Employer
            or organization)                        Identification No.)

  11315 Johns Creek Parkway, Duluth, Georgia               30097
  ------------------------------------------               -----
   (Address of principal executive offices)              (Zip code)

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

Securities registered under Section 12(b) of the Exchange Act:

   Title of each class              Name of each exchange on which registered
        None                                         None
        ----                                         ----

Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, Par Value $.001
                          -----------------------------
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to filing requirements for the past 90 days. [X] Yes [ ] No

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

The issuer's revenues for 2000 were $30,042,810.

The aggregate market value of the common stock held by non-affiliates computed
on the basis of the price at which the stock was sold was $19,950,100. There is
no established market for the shares of common stock.

At March 9, 2001, there were 2,495,010 shares of common stock outstanding.

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


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                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                     <C>
PART I .............................................................................................     3

ITEM 1.   DESCRIPTION OF BUSINESS ..................................................................     3
ITEM 2.   DESCRIPTION OF PROPERTY ..................................................................    11
ITEM 3.   LEGAL PROCEEDINGS ........................................................................    12
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................................    12

PART II ............................................................................................    12

ITEM 5.   MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS .................................    12
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ................................    12
ITEM 7.   FINANCIAL STATEMENTS .....................................................................    24
ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE ....................................................................    24

PART III ...........................................................................................    24

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
           WITH SECTION 16(a) OF THE EXCHANGE ACT ..................................................    24
ITEM 10.  EXECUTIVE COMPENSATION ...................................................................    26
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...........................    27
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...........................................    28
ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K .........................................................    31
</TABLE>

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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

OVERVIEW

The WMA Corporation ("WMA Corporation"), through its subsidiary, WMA Life
Insurance Company Limited ("WMA Life"), reinsures certain life insurance
policies and annuities sold by "WMA Sales Associates", a network of independent
agents associated with "WMA Agency". Unless the context indicates otherwise,
"WMA Agency" refers to World Marketing Alliance, Inc., an insurance agency and
Georgia corporation, which operates an international financial services, sales
and marketing organization, and certain entities and persons with which it is
associated primarily for licensing purposes. "WMA Sales Associates" are
independent agents who market financial services products through WMA Agency and
often hold licenses as registered representatives for the sale of certain
securities products through another affiliate, WMA Securities, Inc. ("WMA
Securities"), a registered securities broker-dealer. S. Hubert Humphrey, Jr.
beneficially owns approximately 34.3% of the Company's common stock and 25.1% of
the Company's preferred stock. Mr. Humphrey also owns substantially all of World
Financial Group, Inc., a holding company that owns all of WMA Agency and WMA
Securities.

The WMA Corporation, incorporated in the state of Delaware in 1995, is a holding
company, owning all of the outstanding capital stock of WMA Life, a Bermuda life
insurance corporation. WMA Life, also formed during 1995, commenced its
reinsurance operations during 1996. The term "Company", as used in this
document, refers to WMA Corporation and WMA Life collectively, unless the
context requires otherwise.

The Company was formed principally to provide an opportunity for WMA Sales
Associates to participate indirectly in certain business produced by WMA Agency.
Ownership in the Company creates an incentive for the WMA Sales Associates to
place increasing amounts of profitable business, which is intended to enhance
the earnings of the Company. To enable certain WMA Sales Associates to purchase
the Company's common stock in its 1995 registered, non-underwritten offering,
WMA Agency loaned them funds to purchase the shares. These shares have been
pledged with WMA Agency as security for the loans and irrevocable voting proxies
have been executed in favor of WMA Agency until the loans are no longer
outstanding. Considering Mr. Humphrey owns substantially all of World Financial
Group, Inc., which owns WMA Agency, he is deemed to beneficially own the 355,927
shares of the Company's common stock pledged as collateral for these loans. The
loans are payable from the borrowers' personal funds in 60 equal monthly
installments. Many of the loans are scheduled to be paid in full by the end of
2001. As of December 31, 2000, the outstanding balance of these loans was
$551,533. At December 31, 2000, WMA Sales Associates and employees of WMA Agency
beneficially and directly owned substantially all of the outstanding common
stock of the Company.

Reinsurance is the transfer of the economic consequences of certain insurance
risks 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 life insurance policies and annuities that are reinsured by the Company are
underwritten and issued by three of the major life insurance companies with
which WMA Agency has a relationship. These companies, in turn, are subsidiaries
of three major international insurance organizations:

         -        Western Reserve Life Assurance Co. of Ohio ("Western
                  Reserve"), a subsidiary of AEGON USA, Inc., an indirect
                  subsidiary of AEGON N.V.;

         -        American Skandia Life Assurance Corporation ("American
                  Skandia"), an indirect subsidiary of Skandia Insurance
                  Company, Ltd.; and

         -        Kemper Investors Life Insurance Company ("Zurich Kemper"), an
                  indirect subsidiary of Zurich Insurance Company.


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<PAGE>   4

Western Reserve, American Skandia and Zurich Kemper are referred to collectively
as the "Ceding Life Companies". The Company's largest reinsurance relationship
is with Western Reserve.

For the year ended December 31, 2000, the Company earned $4.98 million on
revenues of $30.04 million. Total assets and stockholders' equity at December
31, 2000 were $56.62 million and $36.59 million, respectively. At December 31,
2000, the Company reinsured over 340,000 variable universal life insurance
("VUL") and variable annuity policies and riders and had life reinsurance in
force with an aggregate face amount of $9.38 billion.

POLICIES REINSURED

The Company currently reinsures only two types of insurance products: VUL
products and variable annuity products, including their associated riders. The
Company derives its life reinsurance revenues from VUL policies issued by
Western Reserve and Zurich Kemper and its variable annuity reinsurance revenues
from policies issued by Western Reserve and American Skandia.

         -        VUL is a flexible premium adjustable life insurance plan that
                  not only offers a form of permanent insurance to the
                  policyholder, but also enables the policyholder, within
                  certain limitations, to change the face amount or death
                  benefit and the timing and amount of the premium payments to
                  meet the policyholder's situation, even after the policy is
                  written. The death benefits and cash values in VUL policies
                  vary to reflect the investment experience of the policy's
                  fixed or separate accounts (i.e., a separate pool of assets,
                  typically mutual funds). The policy may have a guaranteed
                  minimum death benefit while cash values vary with the
                  investment performance of the fixed or separate account.

                  Premiums paid by the policyholder are placed in the insurance
                  company's fixed account or separate accounts for investment in
                  accordance with the policyholder's direction. In a VUL policy,
                  the policyholder retains the investment risk of the separate
                  account. The policyholder may specify, within limits and from
                  time to time, where the assets in the separate account are to
                  be invested. From these accounts, the insurance company
                  deducts charges for the cost of the mortality risk and
                  administrative expenses.

         -        Variable annuity contracts provide for flexible premium
                  payments and guarantee that the contract holder will receive a
                  series of periodic payments commencing at a specified date.
                  The amount of the annuity cash values will vary in accordance
                  with the investment experience of the policy's fixed or
                  separate account much in the same manner as a VUL policy.
                  Variable annuities may provide a guaranteed minimum death
                  benefit prior to the commencement of annuity benefit payments.

TYPES OF REINSURANCE AGREEMENTS

The Company, as a reinsurer, currently writes three types of reinsurance:
monthly renewable term ("MRT"), coinsurance, and modified coinsurance ("ModCo").

         -        Monthly Renewable Term. MRT, a variation of Yearly Renewable
                  Term, also referred to as risk premium reinsurance, is a plan
                  of reinsurance in which the premium rates are not directly
                  related to the premium rates on the original plan of
                  insurance. Under MRT reinsurance, the ceding company reinsures
                  the mortality risk with the reinsurer. 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. The
                  reinsurer establishes reserves specific to the mortality risk
                  reinsured.

                  The reinsurer is also subject to persistency risk, although it
                  is not part of the risk transferred. Persistency risk is
                  associated with the possibility that the reinsurer may not be
                  able to recover its acquisition expenses during the life of
                  the policy. MRT reinsurance involves limited risk compared to
                  other forms of reinsurance.


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<PAGE>   5

         -        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.

REINSURANCE RELATIONSHIPS

The Company provides reinsurance for VUL and variable annuity policies issued by
the Ceding Life Companies. 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
                                                   PRODUCT                             INITIAL POLICY    COMMENCEMENT
 CEDING COMPANY        REINSURED PRODUCT NAME       TYPE      REINSURANCE TYPE           ISSUE DATE          DATE
----------------      -------------------------    -------  ---------------------     -----------------  ------------
<S>                   <C>                          <C>      <C>                       <C>                <C>
Western Reserve       Freedom Equity Protector       VUL    MRT                        1/92 to 12/99         7/96

Western Reserve       Financial Freedom Builder      VUL    MRT                        8/97 to 3/98          8/97

Western Reserve       Financial Freedom Builder      VUL    Coinsurance and ModCo      4/98 to 12/98         4/98

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

Zurich Kemper         Power VUL                      VUL    MRT                        10/96 to present      10/96

American Skandia      Imperium                       VA     ModCo                      1/97 to present       1/97

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
</TABLE>

The agreements initiated in 1996 were written on an MRT basis, reinsuring a
portion of mortality risk under the VUL policies issued by the Ceding Life
Companies.

The agreements initiated in 1997 and 1998 were written primarily on a ModCo
basis with the fixed accounts of the Western Reserve policies being reinsured on
a coinsurance basis. This type of reinsurance allows the Company to participate
in revenues arising principally from charges for mortality and expenses, cost of
insurance, sales charges related to surrenders, credited interest rate spreads,
administrative charges and asset based allowances associated with the policies
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. 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.


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During 1999, the Company was unable to secure additional financing at an
acceptable cost, which was required to continue reinsuring the VUL and variable
annuity business on a coinsurance and modified coinsurance basis at the levels
established in its agreements for new business. As a result, Western Reserve
recaptured the Financial Freedom Builder ("FFB") VUL policies and riders and 75%
of the Freedom Wealth Creator variable annuity policies, issued from January 1,
1999 through September 30, 1999, which were reinsured on a coinsurance and ModCo
basis. (The process of recapture enables a ceding company to remove policies
from the reinsurance agreement that have been previously ceded to the
reinsurer.) At the same time, WMA Life commenced reinsuring, on a MRT basis, the
FFB VUL policies and riders issued on or after January 1, 1999 (referred to
herein as the "FFB MRT Agreement"). FFB VUL policies and riders issued from
April 1, 1998 through December 31, 1998 will continue to be reinsured on a
coinsurance and ModCo basis and WMA Life continues to reinsure 10% of the
Freedom Wealth Creator variable annuity policies issued from January 1, 1999.
WMA Life also continues to reinsure 40% of the Freedom Wealth Creator variable
annuity policies issued from January 1, 1998 through December 31, 1998.

Similar to the reduction in the scale of new business reinsured in 1999,
effective January 1, 2000, WMA Life and American Skandia agreed to reduce the
reinsurance percentage, from 40% to 10%, on all reinsured Imperium variable
annuity policies issued from January 1, 2000 through December 31, 2000.
Beginning January 1, 2001, the reinsurance percentage will be 40% on all
reinsured Imperium variable annuity policies issued from January 1, 2001. WMA
Life will continue to reinsure 30% to 40% of the reinsured Imperium variable
annuity policies issued from January 1, 1997 through December 31, 1999.

WMA Life and Western Reserve jointly determined to discontinue the reinsurance
of Freedom Equity Protector VUL policies issued January 1, 2000 and thereafter
due to low sales volume, which is primarily due to the increased production of
the FFB VUL product introduced in August 1997. WMA Life will continue to
reinsure Freedom Equity Protector VUL policies issued from January 1992 through
December 1999.

Effective October 1, 2000, WMA Life and Western Reserve agreed to reinsure 10%
of the Freedom Premier variable annuity policies sold by WMA Sales Associates
and issued by Western Reserve. Reinsurance of the Freedom Premier product will
be conducted on substantially the same terms and conditions as that of the
Freedom Wealth Creator except for certain differences in the expense allowances
and in the maximum percentage that may be reinsured.

In 2000, the majority of the Company's reinsurance business was ceded by Western
Reserve. According to information provided by Western Reserve to the Company for
the year ended December 31, 2000, over 63% of the VUL premiums from policies
sold by WMA Sales Associates for Western Reserve came from five states, with 44%
coming from California alone. Similarly, in 2000, nearly 63% of all variable
annuity premiums from policies sold by WMA Sales Associates for Western Reserve
came from five states with over 30% coming from California alone. The Company
believes its geographic distribution of business bears a similar relationship.

MARKETING - WMA AGENCY

All of the Company's reinsurance business is indirectly the result of WMA
Agency's marketing efforts, through business placed with the Ceding Life
Companies. The Company does not use reinsurance intermediaries or engage in any
direct marketing activities. Therefore, the Company is dependent upon and
benefits from WMA Agency marketing those products that the Company reinsures.
WMA Agency consists of independent entities, including World Marketing Alliance
Inc., which are separate and apart from the Company and in which the Company has
no direct or indirect equity interest. The following information has been
compiled and provided to the Company by World Marketing Alliance, Inc. and WMA
Securities.

As of December 31, 2000, World Marketing Alliance Inc. had 349 employees and WMA
Securities had 103 employees. Both companies are located in Duluth, Georgia, a
northern suburb of Atlanta. WMA Agency currently markets a variety of life
insurance and annuity products in addition to VUL and variable annuities. These
products include ordinary life, term life, variable life, universal life, fixed
annuities, equity-indexed annuities, long term care, disability and health
insurance. WMA Agency markets products for numerous life insurance and annuity
companies, among them Western Reserve, American Skandia, Zurich Kemper, and
Pacific Life Insurance Company.


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WMA Agency contractually regulates all marketing and recruiting literature,
distributes product materials and agent bulletins for various insurance
companies, and provides administrative resources to WMA Securities for the
development of training programs and payment of commissions. WMA Agency
encourages WMA Sales Associates to use a variety of business materials it has
developed to achieve growth in product sales and distribution. Examples include
the Business Format System(C) and a weekly satellite network broadcast. The
Business Format System(C), which includes manuals, videotapes and audio tapes,
is provided to all new WMA Sales Associates by WMA Agency and offers suggestions
on how to build a sales organization. The weekly broadcast offers a one and
one-half hour motivational and training program, which is often conducted by
life insurance and annuity companies. WMA Sales Associates may also attend
various marketing meetings throughout the year and an annual convention
sponsored by WMA Agency.

WMA Sales Associates recruit both experienced agents and also individuals
without prior experience in the life insurance business. Newly licensed agents
typically remain at their previous occupations until they acquire sales
experience and develop an established income. As a result, a large portion of
the newly appointed WMA Sales Associates are initially part-time agents.

Upon joining WMA Agency, a new WMA Sales Associate is required to enter an
agency training program, which includes a number of courses related to product
training, sales compliance issues and financial service related topics. Most
levels of sales promotion require additional courses and training. Independent
parties approved by WMA Agency also provide pre-licensing classes for various
state insurance licenses and securities licenses.

WMA Agency's best selling product is VUL, an insurance product in which cash
values can accumulate on a tax-deferred basis, typically in the separate
accounts of a life insurance company. The separate accounts are managed by
outside fund managers. WMA Agency believes that the middle-income market in the
U.S. has been largely overlooked by the industry and that VUL is often the best
life insurance and retirement product for this market segment. WMA Agency has
developed a proprietary software program containing all of WMA Agency's
recruiting material, sales illustrations and product data for selected insurance
companies. This software includes the Financial Lifestyles Strategy(C) program,
which is a needs-based analysis program designed to address a client's
particular financial situation and incorporates multiple cross-selling
opportunities for WMA Sales Associates.

In order to sell VUL and variable annuity products, WMA Sales Associates must be
securities licensed and affiliated with WMA Securities. Additionally, they must
have reasonable grounds for believing that the purchase of a VUL or variable
annuity product is suitable for the customer based on the facts disclosed by the
customer. WMA Sales Associates are required to follow suitability guidelines,
developed by the National Association of Securities Dealers ("NASD"), which
identify a number of specific factors to be considered in determining product
suitability, including the customer's need for insurance coverage, age,
investment objectives, risk tolerance, financial condition, existing investment
products owned, occupation, and relationships with other broker-dealers. WMA
Sales Associates use a New Account Agreement in connection with the sale of
products to any customer, which provides for the collection of information with
respect to the customer's financial situation and investment objectives.
Customers' applications for VUL and variable annuity products submitted by WMA
Sales Associates are reviewed by registered principals of WMA Securities to
ensure proper registration and licensure of the representative and suitability
of the product based on the NASD guidelines. Additionally, many applications are
also reviewed by WMA Securities' home office personnel to identify any potential
sales practice violations, note any unacceptable marketing or solicitation
trends, reassess training initiatives, and develop and establish future controls
and procedures.

Regulation of WMA Agency and WMA Securities. WMA Agency and WMA Securities are
governed by various regulations relating to the sale and marketing of insurance
products and securities, including VUL and variable annuity products. The VUL
and variable annuity products marketed by WMA Agency have certain investment
features which cause these products to be treated as securities under federal
and some states' securities laws. In order to sell these products, a WMA Sales
Associate must be individually licensed by state insurance departments, some
states' securities agencies and the NASD, must be appointed by insurance
companies, and must become affiliated with a registered securities
broker-dealer. WMA Securities is a registered broker-dealer. All of the WMA
Sales Associates who are licensed to sell VUL and variable annuity products are
registered representatives of WMA Securities. WMA Securities also markets mutual
funds and discount brokerage services.


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As a registered broker-dealer, WMA Securities' operations are subject to
periodic examination and review by the NASD, the Securities and Exchange
Commission ("SEC"), a federal agency, and by state securities agencies. As a
licensed insurance agency, WMA Agency is subject to periodic examination and
review by state insurance departments.

In the ordinary course of business, considering the size and national scope of
WMA Securities and WMA Agency, it is expected that from time-to-time it will be
subject to investigation and possible sanctions by federal and state regulatory
agencies. Additionally, regulatory scrutiny and concerns about the adequacy of
the supervision of WMA Sales Associates may be further heightened by the status
of WMA Sales Associates as independent contractors and not employees of either
WMA Agency or WMA Securities. In recent years, the SEC, the NASD and various
state regulatory authorities have commenced a variety of regulatory
investigations of WMA Securities and WMA Agency raising concerns about their
compliance with applicable regulatory standards and appropriate supervision of
WMA Sales Associates. Adverse consequences from the investigations could cause a
significant interruption in the production of new business reinsured by the
Company because of the Company's dependence upon WMA Agency, WMA Securities and
WMA Sales Associates for the marketing of new VUL and variable annuity policies,
which the Company may thereafter reinsure.

The most significant of the ongoing investigations are summarized below.

SEC and NASD Regulation. In May 1998, the SEC issued a formal Order of
Investigation (the "Order") directed at certain alleged activities of WMA
Securities and persons employed by or associated with WMA Securities. This
investigation was initiated to determine whether any federal securities laws had
been violated. WMA Securities is cooperating with the SEC in this investigation.
If this investigation reveals one or more violations of the federal securities
laws, the Enforcement Division of the SEC may recommend the initiation of
administrative proceedings wherein the SEC would seek to prove the violation(s)
and further seek the imposition of sanctions against WMA Securities and other
culpable parties, which could limit the ability of WMA Securities or certain WMA
Sales Associates to conduct business.

WMA Securities notified the NASD in September 1998 that it had not filed all
reportable events relating to its registered representatives in accordance with
NASD Conduct Rule 3070 on a timely basis. Following an investigation by the
Division of Enforcement of NASD Regulation, Inc., in August 2000, WMA Securities
signed a consent order and paid a fine in the amount of $125,000 to the NASD.
The NASD also required WMA Securities to have an outside consultant perform four
periodic reviews under Rule 3070 through June 2002. Aside from the violations
WMA Securities reported to the NASD, the NASD has increased the scope of its
initial inquiry to include a review of the licensing, sales and marketing
practices of WMA Securities and WMA Sales Associates. The Division of
Enforcement has requested the production of documents, from WMA Securities and
several of its registered representatives, to determine if compensation was paid
to unlicensed individuals for securities sales. The Division has also requested
testimony from registered representatives of WMA Securities as part of its
ongoing investigation that will likely continue throughout 2001. It is possible
that as a result of this investigation, the NASD could impose sanctions, which
could limit the ability of WMA Securities or certain WMA Sales Associates to
conduct business.

State Insurance and Securities Regulation. From time to time, WMA Agency and WMA
Securities have been and/or continue to be subject to investigations by various
state departments of insurance and other state regulatory authorities,
concerning their compliance and supervisory programs and the sales and marketing
activities of certain WMA Sales Associates.

State Franchise Law. In December 1998, the California Department of Corporations
issued to WMA Agency, WMA Securities and WMA Investment Advisors, Inc. ("WMA
Investment Advisors"), a Desist and Refrain Order ("Desist Order") to refrain
from further offers or sales of franchises in California. WMA Agency and
affiliates have challenged this order on the grounds that their activities do
not fall within the scope of the California franchise laws and are pursuing
available administrative and judicial remedies in an effort to resolve this
issue. While legal counsel to WMA Agency does not believe that the order was
validly issued, WMA Agency has reduced its initial processing fee charged to
individuals to an amount that it believes will fall within an exemption to the
California franchise law, if it is otherwise determined to be applicable. A
California Superior Court has upheld the issuance of the Desist Order and an
appeal of the Superior Court's decision is pending before a state appellate
court. If the Desist Order is


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ultimately upheld after all rights of appeal have been made, monetary penalties
could be imposed on WMA Agency and its affiliates and the manner in which they
conduct certain of their business activities could have to be modified. If WMA
Agency is fined or its manner of business modified, such a disruption could
cause a significant interruption in the production of new business reinsured by
the Company due to the Company's dependence upon WMA Agency, WMA Securities, and
WMA Sales Associates for the marketing of new VUL and variable annuity policies
which the Company may then reinsure.

WMA Securities and WMA Agency have advised the Company that they have been
actively engaged in the implementation of a significant number of initiatives
designed to improve the effectiveness of their operations and compliance with
regulatory requirements. These initiatives were formulated in response to
increased regulatory scrutiny and increased demand resulting from the growth of
WMA Agency's business. WMA Agency and WMA Securities have devoted and continue
to devote the financial and managerial resources that they believe are required
to achieve successful implementation and continued oversight of the initiatives.
However, there can be no assurance that: (i) the initiatives undertaken by WMA
Agency and WMA Securities will be viewed to be successfully implemented; (ii)
such initiatives will be viewed by applicable regulatory authorities to be
adequately responsive to regulatory concerns; or (iii) WMA Agency and WMA
Securities, regardless of the success and responsiveness of their initiatives,
will not be subject to substantial sanctions and penalties related to prior
conduct which could significantly affect the ability of WMA Agency and WMA
Securities to do business.

UNDERWRITING AND POLICY ADMINISTRATION

As an automatic reinsurer, the Company relies upon the underwriting of the
Ceding Life Companies on policies that the Company reinsures. The Company
reviews and monitors the underwriting standards and procedures of the Ceding
Life Companies, including rules used for policy continuations, changes,
re-entries, reinstatements and conversions.

The Ceding Life Companies administer policies reinsured by the Company and
provide the Company with all information necessary for processing the
reinsurance. Management may not have sufficient information to properly evaluate
the administration of the business reinsured by the Company or the accuracy of
the information provided by the Ceding Life Companies, as it has only conducted
a limited review of the administrative practices of the Ceding Life Companies.

The Company's reinsurance agreements give the Company the right to periodically
audit the books and records of the Ceding Life Companies to ensure that all
business is being properly ceded and administered. To observe the administrative
practices and procedures of the Ceding Life Companies, the Company's external
auditors have visited Western Reserve and are scheduled to visit American
Skandia in early 2001. Company management also communicates frequently with the
Ceding Life Companies regarding the administration of the business, business
policies and practices, underwriting procedures, quality of business
considerations and reinsured policy experience.

FUTURE POLICY BENEFITS

The provision for future policy benefits reflected in the Company's Consolidated
Financial Statements are calculated in accordance with generally accepted
accounting principles ("GAAP"). Liabilities for future policy benefits under the
MRT agreements include provisions for claims in the course of settlement, claims
incurred but not reported and expected future claims. The liability is estimated
using methods that include assumptions, such as estimates of expected investment
yields, mortality, terminations, and expenses, applicable at the time the
reinsurance contracts are executed including provision for the risk of adverse
deviation.

Liabilities for future policy benefits under the Company's coinsurance
agreements equal its contractual percentage of each Ceding Life Company's
policyholder obligations, including claims in course of settlement and provision
for claims incurred but not reported.

Liabilities for future policy benefits reflected in the Company's Consolidated
Financial Statements are based on information provided by the Ceding Life
Companies. The reserves established by the Company with respect to individual
risks or classes of business may not be the same as those established by Ceding
Life Companies due to differing risks and assumptions regarding mortality,
persistency, expenses and interest.


                                       9
<PAGE>   10

RETROCESSION

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 period to period. Actual mortality experience in a
particular period may be greater than expected mortality experience, and,
consequently, may adversely affect the Company's operating results for such
period.

As a partial hedge against the unpredictability of claims experience, the
Company entered into a pool retrocession agreement. Under the pool retrocession
agreement, multiple reinsurers participate in the risks ceded by WMA Life.
Standard mortality risks in excess of the Company's retention limit of $100,000
per life are retroceded to pool participants which include: ERC Life Reinsurance
Corporation, Swiss Re Life & Health America, Inc., The Lincoln National Life
Insurance Company and Transamerica Occidental Life Insurance Company.

INVESTMENTS

The Company's 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 the
Company to meet its obligations as a reinsurance company on a timely basis.

The Company utilizes an independent investment advisor and manager to invest the
Company's assets in accordance with its investment guidelines. Conning Asset
Management Inc. ("Conning") has been the Company's investment manager since June
1998. The performance of, and the fees paid to, Conning are reviewed
periodically, by the Company's Board of Directors. Conning has no affiliation
with the Company, WMA Agency, or WMA Securities, nor is the Company aware of any
affiliation with the Ceding Life Companies. The fees paid to Conning for
services rendered during 2000 totaled $62,500.

The state insurance laws in the United States restricting the investments of
insurance companies are not applicable to WMA Life. Unlike insurance regulations
in the United States, Bermuda law does not limit or regulate investments of WMA
Life provided that such investments are made for the Company's potential
benefit. The Company has developed specific investment guidelines that stress
diversification of risk, conservation of principal and liquidity. The Company's
investments, however, will be subject to market risks and fluctuations, as well
as to the risks inherent in particular securities. The Company's Board of
Directors has established an investment committee to periodically review the
guidelines and investment portfolio and to make recommendations to the Board of
Directors regarding any changes. The Company's Board of Directors reviews the
guidelines annually.

COMPETITION

The Company is dependent upon WMA Agency for the marketing of the VUL and
variable annuity products that the Company reinsures. WMA Agency faces intense
competition in the sale of these products from the independent and captive
agency forces and marketing organizations of major life insurance companies, as
well as from broker-dealers, financial institutions and other companies
marketing investment related products. Many of WMA Agency's competitors have
substantially greater financial and marketing resources than WMA Agency. The
Company believes that many large insurance companies have begun devoting
significant resources to the development and marketing of VUL and variable
annuity products that directly compete with those sold through WMA Agency and
reinsured by the Company. Competition for sales agents with demonstrated ability
is also intense.

The Company has made a considered decision to focus the Company's energies on
existing WMA Agency relationships, consistent with its business strategies,
rather than developing relationships with other independent entities. This
decision has had a positive impact on the Company, as it believes that it has
been able to secure more favorable reinsurance agreements than may have been
otherwise obtainable due to the leverage it has as a result of the WMA Agency
relationship. As the Company matures and develops more resources, it intends to
develop relationships with non-WMA Agency related entities.


                                       10
<PAGE>   11

REGULATION OF WMA LIFE

Bermuda. WMA Life is a Bermuda insurance company, registered as a long-term
insurer under the Insurance Act 1978, as Amended, (the "Insurance Act"), and is
subject to regulation and supervision in Bermuda. A long-term insurer is one
that issues life, annuity or accident and disability contracts for periods of
five years or more. An insurer is required to maintain a principal office in
Bermuda and to appoint and maintain a Principal Representative in Bermuda. WMA
Life's Principal Representative is CFM Insurance Managers Ltd., a member of the
Mutual Risk Management Ltd. group, and its principal office is located at 44
Church Street, Hamilton HM 12, Bermuda.

Among other things, Bermuda statutes and regulations require WMA Life to
maintain a minimum level of statutory capital and surplus, meet prescribed
solvency standards, limit transfers of ownership of its capital shares, and
submit to annual examinations of its financial conditions. Furthermore, Bermuda
statutes limit the ability of WMA Life to pay dividends. These statutes and
regulations, to some extent, may restrict the ability of WMA Life to write
reinsurance policies and distribute funds to WMA Corporation. The Insurance Act
also grants the Minister of Finance powers to supervise, investigate and
intervene in the affairs of insurance companies. These statutes and regulations
are for the benefit of policyholders of insurance companies and not investors.

Bermuda law restricts the payment of dividends by WMA Life to WMA Corporation.
WMA Life may not declare or pay a dividend or make a distribution out of
contributed surplus if there are grounds for believing that (i) WMA Life is, or
after the payment would be, unable to pay its liabilities as they become due; or
(ii) the realizable value of WMA Life's assets would thereby be less than the
aggregate of its liabilities and its issued share capital and share premium
accounts. As approved by the directors of WMA Life, during fiscal year 2000, WMA
Life paid dividends of $3.4 million to WMA Corporation. WMA Life's 2000 Annual
Statutory Financial Statements and Statutory Financial Return are to be filed
with the Registrar of Companies in Bermuda on or before April 30, 2001.

United States. In general, reinsurers domiciled outside the United States
("alien reinsurers") are not subject to substantial direct regulation in the
United States. The insurance laws of each state of the United States generally
do not regulate the sale of reinsurance within their jurisdictions by non-U.S.
insurers. However, alien reinsurers, such as WMA Life, that provide reinsurance
to insurance companies domiciled or licensed in United States jurisdictions are
indirectly regulated by state "credit for reinsurance" laws. These laws operate
to deny statutory financial statement credit to ceding insurers unless the
unauthorized alien reinsurer posts acceptable security for ceded liabilities and
agrees to certain contract provisions.

Occasionally, there have been Congressional and other initiatives in the United
States regarding the supervision and regulation of the insurance industry,
including proposals to supervise and regulate alien reinsurers. While none of
these proposals have been adopted to date on either the federal or state level,
there can be no assurance that federal or state legislation will not be enacted
subjecting WMA Life to supervision and regulation in the United States. No
assurance can be given that if WMA Life were to become subject to any laws of
the United States or any state thereof, at any time in the future, it would be
in compliance with such laws, which could have a material adverse effect on WMA
Life's operations.

EMPLOYEES

The Company currently employs two executives and six professional and
administrative staff persons. Due to increasing complexities associated with the
growing business in force, the increasing duration of the reinsurance
agreements, and diversification of the business reinsured, Company management is
considering hiring additional employees during the year 2001.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company currently subleases on a triple net basis approximately 1,500 square
feet of office space in Duluth, Georgia from WMA Agency. The triple-net basis
requires the Company to pay its proportionate share of the taxes, insurance and
common area maintenance as well as a stipulated base rent. The sublease extends
through January 2008. The annual base rent until January 2003 is $18,675, which
is equivalent to the rate being paid by WMA Agency to its lessor. For the second
five-year period of the sublease, the annual base rent will be subject to
increase. The Company does not own or lease any other properties.


                                       11
<PAGE>   12

ITEM 3.  LEGAL PROCEEDINGS

As of December 31, 2000, the Company was not a party to any litigation or
arbitration. Except as disclosed in Item 1. Description of Business - Marketing
- WMA Agency, the Company is not aware of any legal proceedings that are likely
to have a material adverse effect on the Company's consolidated results of
operations or financial condition.

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

There were no matters submitted to a vote of security holders during the fourth
quarter of 2000.

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

No public trading market existed for the Company's common stock during 2000.

At December 31, 2000, the Company had 2,495,010 shares of common stock
outstanding and approximately 800 stockholders.

The Company did not pay or declare a dividend on its common stock during fiscal
year 2000.

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following analysis of the consolidated results of operations and financial
condition of The WMA Corporation should be read in conjunction with the
Company's Consolidated Financial Statements and the notes thereto, included
elsewhere herein.

OVERVIEW

The WMA Corporation is a holding company owning all of the outstanding capital
stock of WMA Life, a Bermuda life insurance corporation. WMA Life began
reinsurance operations in 1996. WMA Life presently provides reinsurance to
certain insurance companies with respect to VUL and variable annuity policies
sold by WMA Sales Associates through WMA Agency and WMA Securities.

All of the Company's reinsurance business is indirectly the result of the
marketing efforts of WMA Agency, through business placed with the Ceding Life
Companies. The Company does not use reinsurance intermediaries or engage in any
direct marketing activities. Therefore, the Company is dependent upon and
benefits from WMA Agency to market those products that the Company reinsures.

In February 2001, the Company was informed that AEGON Asset Management Services,
Inc., an indirect wholly owned subsidiary of AEGON N.V., is negotiating the
purchase of certain assets of the Company's affiliates, World Marketing
Alliance, Inc. and WMA Securities. No other details regarding the proposed
transaction have been disclosed pending the completion and execution of a
definitive agreement and approval of AEGON N.V.'s Board of Directors. The
proposed asset purchase does not include any assets or securities of the
Company. It is unclear what impact, if any, the proposed transaction will have
upon the reinsurance business of the Company.


                                       12
<PAGE>   13

The following tables show, by Ceding Life Company, the percentage of WMA Agency
business reinsured by the Company:

                         LIFE INSURANCE APPLICATIONS(1)

<TABLE>
<CAPTION>
      CEDING LIFE COMPANY                        2000      1999      1998
      -------------------                        ----      ----      ----
      <S>                                        <C>       <C>       <C>

      Western Reserve                              69%       78%       81%
      Zurich Kemper                                 1%        3%        4%
                                                 ----      ----      ----
      Total % Subject to Reinsurance               70%       81%       85%
      Total % Not Subject to Reinsurance           30%       19%       15%
                                                 ----      ----      ----
      Total % Applications Submitted              100%      100%      100%
</TABLE>

                            ANNUITY APPLICATIONS(1)

<TABLE>
<CAPTION>
      CEDING LIFE COMPANY                        2000      1999      1998
      -------------------                        ----      ----      ----
      <S>                                        <C>       <C>       <C>
      Western Reserve                              68%       66%       44%
      American Skandia                             12%       12%       16%
                                                 ----      ----      ----
      Total % Subject to Reinsurance               80%       78%       60%
      Total % Not Subject to Reinsurance           20%       22%       40%
                                                 ----      ----      ----
      Total % Applications Submitted              100%      100%      100%
</TABLE>

      (1) As reported to WMA Agency by life insurance companies, of applications
          for life insurance and annuity policies submitted by WMA Sales
          Associates, that are monitored by WMA Agency on a regular basis.

WMA Life's revenues do not and are not expected to bear any relationship to the
distribution of business placed by the companies with whom WMA Agency does
business as illustrated by the above tables. The reasons WMA Life's revenues
will diverge from the relationships noted above include, but are not limited to,
the nature, mix and pricing of the products reinsured; the terms of the various
reinsurance agreements; and the prescribed generally accepted accounting
principles for such products and reinsurance structures (e.g. MRT reinsurance
versus coinsurance).

The percentage of business reinsured by Ceding Life Company and product will
vary from period to period as a result of increases or decreases in sales of
products reinsured by the Company relative to products that are not reinsured by
the Company. By example, Western Reserve introduced a new VUL product, the WRL
Freedom Elite, in November 1999 for sale by WMA Sales Associates. The Company is
presently in negotiations on a reinsurance agreement for this product. However,
during 2000, sales of this product have progressively increased which has
resulted in a smaller portion of WMA Agency's total business reinsured by the
Company.

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 December 31, 2000, WMA Life's reinsurance in force on life insurance policies
and riders constituted 296,674 policies and riders with an aggregate face amount
of $9.38 billion. This is an increase of 36,318 life insurance policies and
riders, or 14%, and $1.35 billion of in force face amount, or 17%, from December
31, 1999.


                                       13
<PAGE>   14

At December 31, 2000, WMA Life had reinsurance in force with respect to variable
annuities for 43,819 policies with reinsured annuity benefits of $310.06
million. This represents an increase of 19,336 policies, or 79%, and a decrease
of $14.77 million of annuity contract benefits, or 5%, from December 31, 1999.
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 2000. Further, although overshadowed
by the underlying investment performance of the policies reinsured, growth in
the reinsured annuity contract benefits is lower than the increase in the number
of annuity policies because the reinsurance percentages on variable annuity
business reinsured during 2000 have been reduced from prior periods (see
"Coinsurance and Modified Coinsurance" below).

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

<TABLE>
<CAPTION>
CEDING LIFE COMPANY             2000      1999      1998
-------------------             ----      ----      ----
<S>                             <C>       <C>       <C>
Western Reserve                   88%       88%       89%
American Skandia                  10%        9%        9%
Zurich Kemper                      2%        3%        2%
                                ----      ----      ----
      Total                      100%      100%      100%
</TABLE>

MRT REINSURANCE

WMA Life's reinsurance indemnity agreements include three MRT agreements
relating to VUL policies. 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
                                                     INITIAL POLICY      COMMENCEMENT
CEDING COMPANY         REINSURED VUL PRODUCT NAME      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

                                                        10/96 to
Zurich Kemper          Power VUL                        present              10/96

                                                        1/99 to
Western Reserve        Financial Freedom Builder        present              10/99
</TABLE>

MRT reinsurance is a variation of Yearly Renewable Term Insurance. The
reinsurance of the VUL policies includes business previously and currently being
sold by WMA Sales Associates and issued by Western Reserve and Zurich Kemper.
Under the MRT reinsurance agreements, WMA Life assumes a portion of the
mortality risk related to the VUL policies written by Western Reserve and Zurich
Kemper. During 2000, the Western Reserve MRT agreements have been amended as
described below.

Effective January 1, 2000, WMA Life ceased reinsuring Freedom Equity Protector
VUL policies issued January 1, 2000 and thereafter. WMA Life and Western Reserve
jointly determined to discontinue the reinsurance of Freedom Equity Protector
VUL policies issued January 1, 2000 and thereafter due to low sales volume,
which is primarily due to the increased production of the FFB VUL product
introduced in August 1997. WMA Life continues to reinsure in force Freedom
Equity Protector VUL policies issued from January 1992 through December 1999.

During the fourth quarter of 2000, WMA Life and Western Reserve amended the FFB
MRT Agreement extending the period upon which WMA Life may exercise its option
to convert the MRT reinsurance to coinsurance and ModCo reinsurance on all
business, issued and reinsured on or after January 1, 1999, until March 31,
2003. Among certain other considerations, WMA Life agreed to not irrevocably
retrocede the reinsured business to a third party, which would otherwise finance
the cost associated with the conversion of the MRT reinsurance to coinsurance
and ModCo.


                                       14
<PAGE>   15

COINSURANCE AND MODIFIED COINSURANCE

Under a coinsurance arrangement, the reinsurer assumes a proportionate share of
the risks and expenses and receives a proportionate share of the premiums and
revenues from the underlying policies. Additionally, under coinsurance the
reinsurer must establish a proportionate share of the policy reserves. Modified
coinsurance is a variation of coinsurance. ModCo is similar to coinsurance
except that the ceding company retains the reserves, and the assets related to
the reserves, which would otherwise be recorded and held by the reinsurer.

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 WMA Sales
Associates. WMA Life also has a coinsurance and modified coinsurance agreement
with Western Reserve reinsuring a portion of certain VUL policies. 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
                                               PRODUCT                          INITIAL POLICY   COMMENCEMENT
CEDING COMPANY      REINSURED PRODUCT NAME      TYPE    REINSURANCE TYPE          ISSUE DATE         DATE
----------------    -------------------------  -------  ---------------------   ---------------  ------------
<S>                 <C>                        <C>      <C>                     <C>              <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            1/98
                                                                                  present

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

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

Due to the nature of the VUL and variable annuity products reinsured, the
Company is significantly insulated from the impact of changes in investment
yields as the policyholders retain virtually all of the investment risks.
However, on an overall basis, a decline in investment yields is expected to
cause a decrease in the Company's revenues under its ModCo agreements, as the
account values upon which some of the Company's revenues are calculated would
presumably be lower. Accordingly, the Company's income will be smaller.
Conversely, an increase in investment yields is expected to have the opposite
effect. Business issued and in force, under the coinsurance and modified
coinsurance agreements, during 1998, 1999 and early 2000, have experienced
favorable investment yields, which have resulted in increased earnings during
these periods. Moreover, the increased asset base, greater than otherwise
assumed, has resulted in increased anticipated future gross profits as used in
amortizing the associated deferred acquisition costs (see "Accounting" below).
Conversely, a reduction in investment yields, as experienced in the latter half
of 2000, may result in a decrease in future revenues and anticipated future
gross profits from that otherwise assumed, thereby resulting in lower earnings
during future periods. If mortality experience is worse than assumed (i.e.,
higher claims), it is expected to cause a decrease in current and future
revenues that would have otherwise resulted from the policies reinsured.
Conversely, if mortality experience is better than assumed (i.e., lower claims),
it is expected to cause an increase in current and future revenues that would
have otherwise resulted from the policies reinsured.

During 2000, the coinsurance and modified coinsurance agreements have been
amended as described below.

Effective January 1, 2000, WMA Life and American Skandia agreed to reduce the
reinsurance percentage, from 40% to 10%, on all reinsured Imperium variable
annuity policies issued from January 1, 2000 through December 31, 2000.
Beginning January 1, 2001, the reinsurance percentage will be 40% on all
reinsured Imperium variable annuity policies issued from January 1, 2001. WMA
Life will continue to reinsure 30% to 40% of the reinsured Imperium variable
annuity policies issued from January 1, 1997 through December 31, 1999.

During the fourth quarter of 2000, WMA Life and Western Reserve amended the
variable annuity coinsurance and modified coinsurance agreement extending the
period upon which WMA Life may elect to increase the reinsurance percentages on
all variable annuity business, issued and reinsured on or after January 1, 1999,
until December 31, 2002. The reinsurance percentages may be increased up to a
maximum ranging from 40% to 50%. Among certain


                                       15

<PAGE>   16

other considerations, WMA Life agreed to not irrevocably retrocede the reinsured
business to a third party, which would otherwise finance the cost associated
with increasing the reinsurance percentage.

Effective October 1, 2000, WMA Life and Western Reserve agreed to reinsure 10%
of the Freedom Premier variable annuity policies sold by WMA Sales Associates
and issued by Western Reserve. Reinsurance of the Freedom Premier product will
be conducted on substantially the same terms and conditions as that of the
Freedom Wealth Creator except for certain differences in the expense allowances
and maximum percentage that may be reinsured.

In 2000, the majority of the Company's reinsurance business was ceded by Western
Reserve. According to information provided by Western Reserve to the Company for
the year ended December 31, 2000, over 63% of the VUL premiums from policies
sold by WMA Sales Associates for Western Reserve came from five states, with 44%
coming from California alone. Similarly, in 2000, nearly 63% of all variable
annuity premiums from policies sold by WMA Sales Associates for Western Reserve
came from five states with over 30% coming from California alone. The Company
believes its geographic distribution of business bears a similar relationship.

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 $42.75 million at December 31, 2000, an increase
of $3.00 million, or 8%, from December 31, 1999.

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.

The assumptions include provision for risk of adverse deviation. Original
assumptions continue to be used in subsequent accounting periods to determine
changes in the deferred acquisition costs unless a premium deficiency exists. (A
premium deficiency is recognized if the sum of expected claim costs, unamortized
acquisition costs, and maintenance costs exceed related unearned premiums. A
premium deficiency is first recognized by charging any unamortized acquisition
costs to expense, to the extent required to eliminate the deficiency. If the
premium deficiency is greater than unamortized acquisition costs, a liability
shall be accrued for the excess deficiency.) Management reviews, on a periodic
basis, evolving experience with regard to the Company's estimates of future
expected investment yields, mortality, persistency and expenses applicable to
the reinsured policies in force. Company management has concluded there is no
premium deficiency based on this analysis.

During 2000, the Company's mortality experience on business reinsured under its
MRT agreements resulted in lower earnings due to more claims than otherwise
anticipated. Actual death claims were approximately 104% of expected death
claims. However, due to the Company's limited experience, the results cannot be
viewed as credible


                                       16

<PAGE>   17

indicators of future experience. By example, this claim experience compares to
actual claims of approximately 75% of expected claims during 1999.

Although subject to a correction, the Company's persistency experience through
year-end 2000 was worse than anticipated by less than 1%. The variation of
experience from year to year is relatively minor and is expected to have little
impact on future revenues from business in force. However, due to the Company's
very limited experience, the results are not credible indicators of future
experience. It is not known whether the Company's recent experience is
temporary, due to normal random fluctuations or permanent.

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.

Variable Annuity Coinsurance and Modified Coinsurance Agreements. During the
period of observation, with regard to the Company's variable annuity
reinsurance, withdrawals, surrenders and investment yields were greater than the
Company's estimates for these items. On the other hand, death claims were less
than the Company's estimates. Considering the emerging experience, Company
management revised its future estimates of surrender and partial withdrawal
rates accordingly. The Company's best estimate with regard to future investment
yield experience was already reflected in the Company's calculation of
anticipated future gross profits. Accordingly, this assumption was not changed.

On the American Skandia variable annuity reinsurance, the number and amount of
death claims lie between 55% and 66% of expected claims; previous year claim
amounts were greater than expected, while the number of claims nearly equaled
the number of expected claims. Similarly, for the Western Reserve variable
annuity reinsurance, the number and amount of death claims lie between 25% and
46% of expected claims; previous year claim amounts were less than expected.
Nonetheless, variances in claim experience are to be expected considering the
number of variable annuity policies reinsured. Management believes the variances
in claim amounts are anomalies and do not justify a change in assumptions used
with regard to future experience.

The higher than expected surrender rates during 1999 and 2000 primarily reflect
activity through the first four durations of the American Skandia policies in
force, and the first three durations of the Western Reserve policies in force.
Considering the surrender rate activity continues to exhibit higher rates than
expected by the Company, management revised its assumptions for policy durations
one through seven with regard to business reinsured from Western Reserve, and
durations two through four with regard to the American Skandia reinsurance.
Company management believes its remaining future experience assumptions reflect
surrender rates consistent with the Company's experience and expectations.
Nonetheless, Company management will continue to evaluate its surrender rate
experience; especially considering prior activity greater than expected may be
attributed to the favorable market performance over the periods observed.

The higher than expected partial withdrawal rates have endured for several
years. Consistent with the Company's experience, management revised its
assumptions regarding anticipated partial withdrawal activity. Similar to the
Company's surrender rate experience, Company management will continue to
evaluate its partial withdrawal experience; especially considering that activity
which was greater than expected may be attributed to the favorable market
performance over the periods observed.

In addition to the above, the Company also revised its assumptions to reflect
lower acquisition expenses on the Western Reserve variable annuity reinsurance.


                                       17

<PAGE>   18

VUL Coinsurance and Modified Coinsurance Agreement. During the period of
observation, with regard to the Western Reserve VUL policies reinsured on a
coinsurance and ModCo basis, surrenders and investment yields were greater than
the Company's estimates for these items, and death claims were less than Company
estimates. Revenues from surrender charges, policy loads and cost of insurance
charges closely matched the Company's experience assumptions.

Reflecting favorable experience over the observation period from October 1, 1999
through September 30, 2000 death claims were approximately 83% of expected.
Cumulative death claim experience on this specific business is approximately 98%
of expected claim amounts. Although subject to a correction, the Company's
persistency experience through year-end 2000 was worse than anticipated by less
than 5%. Recognizing the Company's revision of its surrender rates assumptions
during 1999, and experience emerging under the Company's MRT agreements,
management believes the variances in surrender rates during the observation
period are anomalies and do not justify a change in assumptions used with regard
to future experience at this time. In addition to the above, the Company also
revised its assumptions to reflect lower acquisition expenses on the Western
Reserve VUL coinsurance and ModCo reinsurance. The Company's best estimate with
regard to future investment yield experience was already reflected in the
Company's calculation of anticipated future gross profits. Accordingly, this
assumption was not changed.

Recognizing the changes in the Company's future experience assumptions, under
its coinsurance and modified coinsurance agreements, resulted in an increase in
the amortization of the Company's deferred acquisition cost during 2000 by
approximately $315,000, or 4%. To date, management believes the assumptions used
regarding its estimate for anticipated future gross profits are appropriate for
its circumstances.

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 $8.03 million at December 31, 2000,
an increase of $3.53 million, or 79%, compared to the same period in 1999. The
liability at December 31, 2000 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

Twelve Months Ended December 31, 2000 Compared to Twelve Months Ended December
31, 1999.

Revenues. Revenues increased by $7.38 million, or 33%, for the twelve months
ended December 31, 2000 compared to the same period in 1999. The increase was
primarily attributable to the growth in premiums associated with the MRT
agreements.

Premiums. Premiums increased by $6.93 million, or 71%, for the twelve months
ended December 31, 2000 compared to the same period in 1999. Policies and riders
reinsured on a MRT basis increased by 40,627, or 19%, to 257,307 at December 31,
2000 from 216,680 at December 31, 1999. The majority of the increase is
attributable to the FFB MRT Agreement entered into with Western Reserve in
October 1999. The increase in premiums due to the FFB MRT Agreement was $6.62
million for the year ended December 31, 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.


                                       18

<PAGE>   19

Reinsured Policy Revenues. Reinsured policy revenues decreased by $612,000, or
5%, for the twelve months ended December 31, 2000 compared to the same period in
1999. 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 attributable to the VUL coinsurance and ModCo agreement
with Western Reserve. Of the $12.89 million Reinsured policy revenues for the
twelve months ended December 31, 2000, $6.19 million was attributable to the VUL
coinsurance and ModCo agreement with Western Reserve compared to $9.02 million
for the same period in 1999, a decrease of $2.83 million, or 31%. As illustrated
by the following table, revenues for the twelve months ended December 31, 1999
included revenues associated with VUL policies issued and reinsured during 1999,
which are no longer reinsured by the Company on a coinsurance and modified
coinsurance basis. Thus, although revenues are increasing on in force
reinsurance associated with policies issued during 1998, the comparative
decrease reflects the recapture effective October 1, 1999, of VUL policies
issued and reinsured during 1999. (The process of recapture enables the ceding
company to remove policies, or a portion of the policies, from the reinsurance
agreement previously ceded to the reinsurer.)

                      COINSURANCE AND MODIFIED COINSURANCE
                          REINSURED VUL POLICY REVENUES

<TABLE>
<CAPTION>
                                     TWELVE MONTHS ENDED       TWELVE MONTHS ENDED
POLICY ISSUE DATES                    DECEMBER 31, 2000         DECEMBER 31, 1999         CHANGE IN REVENUES
------------------                   -------------------       -------------------        ------------------
<S>                                  <C>                       <C>                        <C>
Policies Issued During 1998               $ 6,194,956              $ 5,854,058               $    340,898
Policies Issued During 1999                        --                3,166,148               $ (3,166,148)
                                          -----------              -----------               ------------
      Total                               $ 6,194,956              $ 9,020,206               $ (2,825,250)
                                          ===========              ===========               ============
</TABLE>

The remaining $6.70 million of Reinsured policy revenues was attributable to the
variable annuity reinsurance agreements compared to $4.49 million for the same
period in 1999, an increase of $2.21 million, or 49%. Comparatively, revenues
for the twelve months ended December 31, 1999 also included $520,000 of revenues
associated with a portion of the Western Reserve variable annuity policies no
longer reinsured by the Company. (Effective October 1, 1999, Western Reserve
recaptured 75% of the variable annuity policies issued and reinsured by the
Company from January 1, 1999 through September 30, 1999.) Thus, although
mitigated by the recapture of certain variable annuity business by Western
Reserve during 1999, the Company's Reinsured policy revenues resulting from the
variable annuity reinsurance have continued to increase due to the remaining
business in force and new business reinsured under the Western Reserve and
American Skandia coinsurance and modified coinsurance agreements.

Net Investment Income and Net Realized Gain (Loss) on Investments. Net
investment income increased by $178,000, or 51%, for the twelve months ended
December 31, 2000 compared to the same period in 1999. Investment income is
earned from investments in fixed income securities and cash equivalents.
Investment expenses of $68,000 and $72,000 for the twelve month periods ended
December 31, 2000 and 1999, 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 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 twelve months ended December 31, 2000 resulted in a Net
realized gain on investments of $2,606 compared to the Net realized loss on
investments of $66,000 reported for the same period in 1999. 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.

Loss on Recapture of Business. The recapture of business by Western Reserve
during the fourth quarter of 1999 resulted in a loss of $823,000 for the twelve
months ended December 31, 1999. This loss related to the recapture of the
Financial Freedom Builder VUL policies and riders and 75% of the Freedom Wealth
Creator variable annuity policies, issued from January 1, 1999 through September
30, 1999, which were reinsured on a coinsurance and ModCo basis with Western
Reserve. Of the $823,000 Loss on recapture of business, $556,000 related to the
VUL coinsurance and modified coinsurance business. The balance of $267,000,
related to the variable annuity coinsurance and ModCo business. No recapture
occurred during 2000.


                                       19

<PAGE>   20

Benefits, Claims and Settlement Expenses. Benefits, claims and settlement
expenses increased by $3.05 million, or 68%, for the twelve months ended
December 31, 2000 compared to the same period in 1999. The increase was the
result of greater claims activity than otherwise expected, an increase in volume
of business in force, and increasing age of the business in force. The amount of
business in force at December 31, 2000 was $9.38 billion compared to $8.03
billion at December 31, 1999, which represented a $1.35 billion, or 17%
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. Claims paid plus those
incurred in 2000 were approximately 5% higher than otherwise expected based upon
management estimates and prior claims activity. Management estimates net income
was $200,000 lower for the year due to this higher than expected claims
activity. Comparatively, claims paid plus those incurred in 1999 were
approximately 15-20% lower than otherwise expected based on management estimates
and prior claims activity. Accordingly, estimated additional net income was
$750,000 higher for 1999 due to the lower than expected claims activity.
Management believes that this activity is not indicative of future experience,
as there is no sustained pattern of demonstrative loss and because of normal
random fluctuation in claims activity.

Change in Future Policy Benefits. Change in future policy benefits increased by
$1.74 million, or 554%, for the twelve months ended December 31, 2000 compared
to the same period in 1999. The liability for future policy benefits under the
Company's MRT reinsurance agreements increased by $2.05 million, or 188%, from
$1.09 million at December 31, 1999 to $3.14 million at December 31, 2000. The
increase primarily resulted from the FFB MRT Agreement the Company entered into
with Western Reserve in the fourth quarter of 1999 to reinsure 20% of the FFB
VUL policies issued January 1, 1999 and after.

Reinsurance Premium Allowances, Net. Net reinsurance premium allowances
increased by $2.18 million, or 41%, for the twelve months ended December 31,
2000 compared to the same period in 1999. 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, placement of the variable annuity business
reinsured on a coinsurance and ModCo basis, and the MRT premiums in force.

Amortization of Deferred Acquisition Costs. Amortization of deferred acquisition
costs increased by $227,000, or 6%, for the twelve months ended December 31,
2000 compared to the same period in 1999. The increase in amortization of
deferred acquisition costs was attributable to increased reinsured policy
revenues on variable annuity business reinsured and the placement of new
business.

Amortization for business reinsured on a coinsurance and ModCo basis was $3.90
million for the twelve months ended December 31, 2000 as compared to $3.62
million for the same period in 1999, an increase of $282,000 or 8%. The increase
in amortization is attributable to an increase in gross profits during 2000 from
business in force and new business reinsured. Comparatively, the amortization
recorded for 1999 included amortization of deferred acquisition expenses
associated with the Western Reserve VUL coinsurance and modified coinsurance
business which was recaptured on October 1, 1999 and is no longer included.
Amortization includes unlocking of future experience assumptions used in the
calculation of the amortization of deferred acquisition costs on universal life
type contracts (see further discussion above in "Accounting").

Amortization of deferred acquisition costs for business reinsured on a MRT basis
was $116,000 for the twelve months ended December 31, 2000 as compared to
$171,000 for the same period in 1999, a decrease of $55,000 or 32%. The rate of
amortization will fluctuate from period to period because of variations in
policy persistency. While persistency in 1999 was better than in 2000, in
aggregate, the decrease in 2000 may be attributable to


                                       20

<PAGE>   21

variations in the mix of business. Premiums on the MRT business were $16.62
million for the twelve months ended December 31, 2000 compared to $9.69 million
for the same period in 1999, an increase of 72%. Amortization on MRT business is
decreasing relative to total MRT premiums. Amortization was 0.7% of premium
revenues for the twelve months ended December 31, 2000 versus 1.8% for the same
period in 1999. The Company expects this decrease in MRT amortization relative
to total MRT premiums to continue as there are no deferred acquisition costs
associated with the FFB MRT Agreement.

Professional Fees and Other Expenses. Professional fees and other expenses
increased by $273,000, or 29%, for the twelve months ended December 31, 2000
compared to the same period in 1999. Expenses include professional fees for
legal, actuarial and accounting expenses incurred, operating expenses, and other
miscellaneous expenses. The increase in expenses was primarily associated with
an increase in salaries due to the employment of additional staff in 2000. The
increase was also attributable to increases in legal, accounting and actuarial
fees for general corporate activities, tax consulting and actuarial consulting
services.

Fees to World Marketing Alliance, Inc. Fees to World Marketing Alliance, Inc.
remained the same for the twelve months ended December 31, 2000 compared to the
same period in 1999. Fees to World Marketing Alliance, Inc. consist of corporate
services and rent expenses. The Company has a sublease agreement with World
Marketing Alliance, Inc. pursuant to which the Company pays annual rent of
$18,675 for 1,500 square feet of office space. The Company also has a Corporate
Services Agreement whereby WMA Agency provides corporate services to the Company
for a fixed monthly fee of $2,250, adjusted as necessary on an annual basis.

Interest Expense. Interest expense decreased by $489,000, or 42%, for the twelve
months ended December 31, 2000 compared to the same period in 1999. During the
corresponding period in 1999, Interest expense included reinsurance fees
associated with the deferred settlements on the variable annuity and VUL
policies which are no longer applicable. The decrease is also due to debt
principal repayments totaling $5.03 million on the line of credit and, to a
lesser extent, the restructuring in 1999 on the debt owed to Money Services,
Inc., which included a decrease in the interest rate from 9% to 7.5%.

Income Taxes. Income taxes decreased by $405,000, or 18%, for the twelve months
ended December 31, 2000 compared to the same period in 1999. Taxable income
(calculated on a statutory basis) emerged during 2000, which is attributable to
the reduction in new business reinsured under the Company's coinsurance and
ModCo agreements. The Company's effective tax rate was 26% and 34% for 2000 and
1999, respectively. Current tax expense of $411,000 was payable as of December
31, 2000. The remaining Income tax expense for the twelve months ended December
31, 2000 as well as the Income tax expense for all of 1999 was deferred in
accordance with GAAP.

Net Income. As a result of the foregoing, Net income for the twelve months ended
December 31, 2000 was $5.13 million compared to $4.32 million for the twelve
months ended December 31, 1999, an increase of $813,000, or 19%.

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 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.


                                       21
<PAGE>   22

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 2000, other than those associated with the private placement offering,
which were netted against the proceeds from the offering.

Net cash flows provided by operating activities were $6.42 million for the year
ended December 31, 2000, compared to $10.71 million used in operating activities
for the year ended December 31, 1999. The reversal of the net cash flows was
primarily due to lower cash requirements to reimburse Western Reserve and
American Skandia for first year reinsurance allowances due to the reduction in
the percentage of the variable annuity business reinsured and the reinsurance of
new VUL business on an MRT basis rather than a coinsurance and ModCo basis. The
Company projects to realize net positive cash flows from its existing
reinsurance operations in 2001.

The Company has established a $10 million line of credit with Money Services,
Inc. ("MSI"), a subsidiary of AEGON USA, Inc. As of December 31, 2000, the total
amount due under this line of credit included an outstanding principal balance
of $277,285 and accrued interest of $3,137. Interest accrues at the rate of 9%
per annum. Under the terms of the line of credit, as amended, payments on the
outstanding balance and related accrued interest are due on the 45th day after
the close of each calendar quarter until the entire outstanding balance and
accrued interest is paid in full. In November 2000, the Company made a payment
of $750,000. At December 31, 2000, the outstanding balance under this line of
credit is classified as short-term debt. The final payment of $283,566,
including principal and accrued interest was paid in February 2001.

On July 30, 1999, the Company issued a $5 million, five-year term note to MSI
due on July 29, 2004. Proceeds of this note were used to reduce the outstanding
principal balance on the line of credit, from 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. As of December 31, 2000, regarding the term note, the Company had an
outstanding principal balance of $5 million and accrued interest of $158,219.

In August 2000, the Company closed its offering of Series A convertible
preferred stock, which resulted in approximately $4 million of gross proceeds to
the Company. The Company issued 266,047 shares of its Series A convertible
preferred stock to the investors in this offering. The net proceeds were loaned
to WMA Life, which were applied toward repayment of the line of credit with MSI.
In December 2000, the Company paid a 7% annual dividend to the preferred
stockholders in the amount of $279,349. Sources of funds to pay the dividend
included interest of $136,396 from the offering escrow account and $142,953 from
operational income. For the year ended December 31, 2000, preferred dividend
expense includes an accrual of $12,245 for the dividend due on December 15,
2001. In September 2000, the Company closed its private placement offering of
common stock to certain institutional investors with no sales under that
offering.

The Company's primary source of liquidity was $4.26 million in Cash and cash
equivalents at December 31, 2000. The effective duration of the Company's fixed
income portfolio is 3.3 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 twelve months ended December
31, 2000 was $3.71 million as compared to $7.27 million provided by investing
activities for the year ended December 31, 1999. During 2000, the Company
purchased over $4 million of fixed income securities. As a result, the Company
increased the percentage


                                       22
<PAGE>   23

of corporate fixed income securities held in its portfolio from 14% at December
31, 1999 to 39% at December 31, 2000. Net cash provided by investing activities
for the year ended December 31, 1999 resulted primarily from sales of fixed
income securities used to reimburse the Ceding Life Companies for allowances
associated with the reinsurance agreements.

Net cash used in financing activities was $1.93 million for the twelve months
ended December 31, 2000 as compared to $303,562 provided by financing activities
for the same period in 1999. The reversal of the net cash flow of financing
activities during 2000 was primarily the result of debt principal repayments of
$5.03 million on the MSI line of credit offset by the net proceeds from the
preferred stock offering. Net cash provided by financing activities in 1999 was
due to the capitalization of interest on the MSI line of credit in the second
quarter of 1999 and to the issuance of a $5 million term note, the proceeds of
which were applied to reduce the outstanding principal balance of the short-term
debt during the third quarter of 1999.

WMA Corporation is a holding company with no direct operations, and its
principal asset is the capital stock of WMA Life and $443,000 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 2000, WMA Life paid dividends of $3.4 million
to WMA Corporation to meet cash requirements, including payment of principal and
interest on the loans from MSI for the benefit of WMA Life. It is anticipated
that WMA Corporation will rely primarily on interest and loan repayments from
WMA Life to meet ongoing cash requirements during 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. In February 2000, the Company entered into a custodial agreement with
Comerica Bank ("Comerica") under which the Company transferred its invested
assets to Comerica. Comerica initially issued LOCs to Western Reserve and Zurich
Kemper in the amounts of $4.75 million and $140,000, respectively. In December
2000, the Company increased the LOC for the benefit of Western Reserve to $6
million.

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," 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 WMA Agency, 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 Agency and WMA
Securities, the impact (if any) of the ongoing negotiations with AEGON, 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.


                                       23
<PAGE>   24

ITEM 7.  FINANCIAL STATEMENTS

The following financial statements are attached hereto commencing on page F-1.

         -        Independent Auditors' Report (December 31, 2000 and 1999)
         -        Consolidated Balance Sheets at December 31, 2000 and 1999
         -        Consolidated Statements of Income for the years ended December
                  31, 2000, 1999, and 1998
         -        Consolidated Statements of Stockholders' Equity and
                  Comprehensive Income for the years ended December 31, 2000,
                  1999, and 1998
         -        Consolidated Statements of Cash Flows for the years ended
                  December 31, 2000, 1999, and 1998
         -        Notes to Consolidated Financial Statements for the years ended
                  December 31, 2000, 1999, and 1998

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

No change in or disagreement with accountants occurred during 2000.

                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

EXECUTIVE OFFICERS AND DIRECTORS

<TABLE>
<CAPTION>
NAME                        AGE     TITLE(S)
----                        ---     --------

<S>                         <C>     <C>
S. Hubert Humphrey, Jr....  57      Chairman and Chief Executive Officer of the
                                    Company since December 12, 2000 and Director
                                    since March 9, 1995; Director of WMA Life
                                    since August 7, 1995, and Chairman and Chief
                                    Executive Officer since December 29, 2000

Edward F. McKernan........  45      President of the Company since December 12,
                                    2000, Chief Financial Officer since December
                                    9, 1997, Director since August 11, 1997; and
                                    President of WMA Life since December 29,
                                    2000

Thomas W. Montgomery......  52      Executive Vice President, Secretary and
                                    Director of the Company since March 9, 1995;
                                    Director of WMA Life since August 7, 1995,
                                    and Executive Vice President since December
                                    29, 2000

C. Simon Scupham..........  46      Director of the Company since April 1, 1996;
                                    and Director of WMA Life since August 7,
                                    1995

Joseph F. Barone..........  64      Director of the Company since June 1, 1998

Caryl P. Shepherd.........  31      Vice President and Assistant Secretary of
                                    the Company since December 12, 2000,
                                    Treasurer since December 9, 1997; and Vice
                                    President and Treasurer of WMA Life since
                                    December 29, 2000
</TABLE>


                                       24
<PAGE>   25

The following is additional information concerning each of the executive
officers and directors of the Company.

S. HUBERT HUMPHREY, JR.

Mr. Humphrey is Chairman, Chief Executive Officer and Director of the Company
and of WMA Life. Mr. Humphrey is President and a Director of World Financial
Group, Inc., a financial services holding company.

Mr. Humphrey also holds the following positions with the various subsidiaries of
World Financial Group, Inc.

         -        Chief Executive Officer, Treasurer and a Director of World
                  Marketing Alliance, Inc.;
         -        President and a Director of WMA Management Services, Inc., a
                  corporation providing executive management services;
         -        Chairman and a Director of WMA Investment Advisors, Inc., a
                  registered investment advisor engaged in providing investment
                  advice to customers; and
         -        President and a Director of WMA Advisory Services, Inc., a
                  registered investment advisor engaged in providing asset
                  allocation modeling investment advisory services.

Mr. Humphrey is also Chairman and a Director of World Internet Holdings, Inc.
and its subsidiaries, DotPlanet.com Inc., an internet service provider, and
Broadband Marketing Corporation and its subsidiary, Zillionaire.com, Inc., an
internet marketing company.

Mr. Humphrey has been in the financial services field for over 20 years. He was
a Senior National Sales Director of the A. L. Williams & Associates and an
executive officer and director of A. L. Williams Corporation, a life reinsurance
company affiliated with A. L. Williams & Associates.

EDWARD F. McKERNAN

Mr. McKernan is President, Chief Financial Officer, and Director of the Company
and President and Actuary of WMA Life. Mr. McKernan is also a Senior Vice
President and Actuary of WMA Agency. Prior to joining the Company, he was a
Senior Manager in the Life Actuarial Consulting Practice of KPMG LLP. From
August 1990 through September 1993, Mr. McKernan was the Marketing Actuary of
U.S. Operations for Seaboard Life Insurance Company. Prior to his tenure with
Seaboard Life, Mr. McKernan was employed by Tillinghast, a Towers Perrin
company, an international actuarial consulting firm. He is a Fellow of the
Society of Actuaries (1988) and a Member of the American Academy of Actuaries
(1985).

THOMAS W. MONTGOMERY

Mr. Montgomery is Executive Vice President, Secretary, and a Director of the
Company and Executive Vice President and a Director of WMA Life. Mr. Montgomery
also serves as Executive Vice President, Treasurer and a Director of World
Financial Group, Inc.

Mr. Montgomery holds the following positions with various subsidiaries of World
Financial Group, Inc.

         -        President of World Marketing Alliance, Inc.;
         -        Vice President, Secretary and a Director of WMA Management
                  Services, Inc.;
         -        Executive Vice President and a Director of WMA Investment
                  Advisors, Inc.; and
         -        Vice President, Secretary and a Director of WMA Advisory
                  Services, Inc.

Mr. Montgomery is also Chairman, President and a Director of WMA Consumer
Services, Inc, a consumer financial services firm; Secretary and a Director of
World Internet Holdings, Inc., DotPlanet.com, Inc., Broadband Marketing
Corporation and Zillionaire.com, Inc.


                                       25
<PAGE>   26

Mr. Montgomery is a certified public accountant and was an audit and tax partner
in the accounting firms of Richter & Company, P.C. and Davis, Crittenden,
Richter & Fletcher. Prior to joining WMA Agency, Mr. Montgomery represented Mr.
Humphrey and his various business interests, including WMA Agency, between 1982
and 1994.

C. SIMON SCUPHAM

Mr. Scupham is a Director of the Company and of WMA Life. Since 1988, Mr.
Scupham has been President of CFM Insurance Managers Ltd. ("CFM"), a member of
the Mutual Risk Management Ltd. group, which provides professional management
services to international companies operating in Bermuda. Prior to joining CFM,
Mr. Scupham served as the director of Bermuda operations of the Kemper Group. He
is a qualified Chartered Accountant and Associate Fellow of the Institute of
Mathematics and its Applications. Mr. Scupham is also Chairman of Mutual Risk
Captive Group Ltd. and Shoreline Mutual Management (Bermuda) Ltd.

JOSEPH F. BARONE

Mr. Barone is a Director of the Company. Since July 1997, Mr. Barone has been
Managing Director of Research for Firemark Investments of Morristown, NJ, a
private investment firm. From January 1992 through June 1997, he was a Senior
Vice President with Swiss Re Insurance. Prior to his tenure with Swiss Re, Mr.
Barone was a Managing Director of Investment Banking for the insurance industry
at Bear Stearns & Company, Inc. Mr. Barone is a Chartered Financial Analyst and
a member of the New York Society of Security Analysts and the Association of
Insurance and Financial Analysts.

CARYL P. SHEPHERD

Ms. Shepherd is Vice President, Treasurer, Assistant Secretary and Controller of
the Company, and Vice President and Treasurer of WMA Life. Ms. Shepherd joined
the Company in November 1997 as Controller and was soon after named Treasurer.
From April 1995 through October 1997, Ms. Shepherd was a Senior Accountant with
Western Reserve. Prior to her tenure with Western Reserve, Ms. Shepherd was a
Senior Auditor for the public accounting firm of Ernst & Young LLP specializing
in life insurance. Ms. Shepherd is a certified public accountant and member of
the American Institute of Certified Public Accountants.

ITEM 10. EXECUTIVE COMPENSATION

<TABLE>
<CAPTION>
                                                                                        LONG TERM COMPENSATION
                                                                                      RESTRICTED       SECURITIES
                                                                                        STOCK          UNDERLYING
                                                    ANNUAL COMPENSATION                AWARDS(2)       OPTIONS(#)
NAME AND PRINCIPAL POSITION                   YEAR       SALARY       OTHER
<S>                                           <C>       <C>        <C>                <C>              <C>

S. Hubert Humphrey, Jr.                       2000                 $ 48,992(1)        $1,412,878         300,000
Chairman and Chief Executive Officer          1999                   48,851(1)
                                              1998                  240,708(1)

Edward F. McKernan                            2000      $203,347   $ 42,000           $  164,836          35,000
President and                                 1999       181,867
Chief Financial Officer                       1998        78,806
</TABLE>

---------------
(1)      Amounts shown represent payments made by the Company to entities
         controlled by Mr. Humphrey pursuant to written agreements between these
         entities and the Company. Such payments, while not paid directly to Mr.
         Humphrey, may be deemed to be indirect compensation to Mr. Humphrey.
(2)      The dollar value of the options, and their underlying shares of common
         stock, cannot be determined since there is no public market presently
         for the common stock. A variant of the Black-Scholes option-pricing
         model was used to estimate the value of the restricted stock awards.

Independent directors receive compensation for Board meetings, committee
meetings and for advisory services on other Company matters as deemed necessary.
Compensation paid to the independent directors totaled $8,000 and $11,500 for
the years ended December 31, 2000 and 1999, respectively.


                                       26
<PAGE>   27

STOCK OPTIONS

On June 15, 1999 the Company's Board of Directors authorized a 1999 stock option
plan for the directors, officers and employees of the Company (the "Plan") that
contemplated the issuance of up to 700,000 shares of the Company's authorized,
but unissued, common stock upon the exercise of options granted under the 1999
Plan. On that same date, the Board of Directors granted options under the 1999
Plan to purchase 450,000 shares of common stock. The Company's stockholders
ratified the Plan at the Annual Meeting held on August 16, 1999. No new capital
was raised by the Company on or before December 31, 1999; therefore, the
outstanding options could not, by their terms, be exercised.

On May 12, 2000, the Board of Directors approved an amendment to the Plan
extending the December 31, 1999 deadline to January 1, 2002. Additionally, the
amendment limits the number of shares that can be purchased upon exercise of the
options to an amount to be determined by the amount of capital raised by the
Company from the sale of common and preferred stock during the period from
January 1, 2000 through January 1, 2002. If less than $15 million is raised
through the sale of stock, the outstanding options would lapse and no options
would be exercisable. If more than $75 million is raised through the sale of
stock, the number of shares exercisable would be one times the number of shares
subject to the option. If an amount between $15 million and $75 million is
raised through the sale of stock during the same period, the number of shares
exercisable would be a formula amount as shown below:

<TABLE>
<S>                   <C> <C>                     <C>  <C>
Number of shares to   =      Number of shares     X    Proceeds raised from sale of stock
    be issued             subject to the option        ----------------------------------
                                                                  $75,000,000
</TABLE>

The Plan will be administered by the Audit and Compensation Committee created by
the Board of Directors. The Board of Directors may amend or terminate the Plan
at any time except that stockholder approval of any amendment must be obtained
whenever necessary to comply with applicable legal requirements. The Company
will receive no monetary consideration for granting these options.

The Board of Directors felt this limitation would encourage the officers of the
Company to continue to direct their attention to the Company's capital needs.
The shares owned by the optionees upon exercise of their options will not be
registered and shall be considered restricted shares, which may only be resold
pursuant to an effective registration statement, an exemption from registration,
or Rule 144.

The stockholders ratified and approved the amendment to the 1999 Stock Option
Plan at their August 14, 2000 Annual Meeting.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership as of December 31, 2000,
of the directors and executive officers of the Company and those persons known
by the Company to beneficially own more than 5% of its common stock. There is
presently no public market for shares of the common stock. The determination of
"beneficial ownership" is made pursuant to Rule 13(d)(3) under the 1934 Act.
Such Rule provides that shares shall be deemed to be "beneficially owned" where
a person or group has, either solely or in conjunction with others, the power to
vote or direct the voting of shares and/or the power to dispose, or to direct
the disposition of shares, or where a person or group has the right to acquire
any such power within 60 days after the date such beneficial ownership is
determined.


                                       27
<PAGE>   28

<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER              NUMBER OF SHARES(1)    PERCENT OF CLASS
------------------------------------              --------------------   ----------------
<S>                                               <C>                    <C>
S. Hubert Humphrey, Jr.
11315 Johns Creek Parkway
Duluth, GA 30097                                       855,927(2)              34.3%

Thomas W. Montgomery
11315 Johns Creek Parkway
Duluth, GA 30097                                         9,908(3)               0.4%

Edward F. McKernan
11315 Johns Creek Parkway
Duluth, GA 30097                                         5,000(4)               0.2%

Monte Holm(5)
312 Mesquite Blvd., Ste. 11
Mesquite, NV 89027                                     160,726(6)               6.4%

Richard Thawley(5)
1110 W. Kettleman, Ste. 24
Lodi, CA 95240                                         200,000(7)               8.0%
                                                       -------                 ----

All directors and executive officers as a
group                                                  870,835                 34.9%
</TABLE>

---------------
(1)      All shares are owned individually of record unless otherwise indicated
         below.
(2)      Includes 355,927 shares of common stock for which WMA Agency (of which
         Mr. Humphrey is the principal stockholder) holds voting proxies. Mr.
         Humphrey has pledged 500,000 shares of his common stock as security for
         several loans. Does not reflect options for Mr. Humphrey to purchase an
         additional 300,000 shares of common stock* or ownership of 66,666
         shares of Series A convertible preferred non-voting stock of the
         Company. See "Certain Relationships and Related Transactions - Pledge
         of Shares."
(3)      Does not reflect options for Mr. Montgomery to purchase an additional
         100,000 shares of common stock* or ownership of 3,333 shares of Series
         A convertible preferred non-voting stock of the Company
(4)      Does not reflect options for Mr. McKernan to purchase an additional
         35,000 shares of common stock*.
(5)      Mr. Holm and Mr. Thawley are WMA Sales Associates.
(6)      Mr. Holm owns 9,226 shares individually of record, 40,000 shares
         jointly with his wife, and 1,500 shares jointly with Mr. Steve Marx.
         110,000 shares are held of record by seven trusts created by Mr. Holm
         and his wife. Does not include 55,000 shares of Series A convertible
         preferred non-voting stock of the Company
(7)      Mr. Thawley owns 88,200 shares individually of record. 20,000 shares
         are owned by Mr. Thawley's children. 91,800 shares are owned by two IRA
         rollover trusts for the benefit of Mr. Thawley and his wife.

---------------
*        Options will not become exercisable unless at least $15 million of new
         capital is raised, or there is a change in control of the Company, by
         January 1, 2002.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Mr. Humphrey is the Company's Chairman, Chief Executive Officer, a Director and
the largest stockholder. Mr. Humphrey also owns substantially all of World
Financial Group, Inc., a holding company that owns all of WMA Agency, and WMA
Securities. WMA Agency and WMA Securities recruit, train and supervise the sales
force responsible for selling life insurance and annuity contracts reinsured by
the Company. Certain directors and executive officers of the Company, including
Mr. Humphrey, are also employees of WMA Agency.

The Company has and may continue to enter into transactions from time to time
with WMA Agency, Mr. Humphrey, other officers or directors of the Company or
their affiliates. Such transactions necessarily involve conflicts of interest,
and the terms of such transactions may not necessarily be equivalent to the
terms of transactions entered into between unrelated parties pursuant to arms
length negotiations.


                                       28
<PAGE>   29

The Company's officers do not, and are not required to, devote their time
exclusively to the business of the Company, nor are they subject to
non-competition agreements. As a consequence, they could legally engage in
activities that could be adverse to the best interests of the Company, subject
to their fiduciary obligations to the Company under appropriate corporate law.

In view of the substantial relationships among the Company, WMA Agency and Mr.
Humphrey, conflicts of interest will exist or arise with respect to existing and
future business dealings, including without limitation: the terms of WMA
Agency's selling agreements (including commission arrangements) and the
Company's reinsurance relationships with life insurance companies; the relative
commitment of time and energy of Mr. Humphrey and the other common executive
officers of WMA Agency and the Company; agreements between the Company and WMA
Agency; agreements among WMA Agency and other parties that may impact the
Company; potential acquisitions of properties or businesses; potential
divestures of properties or businesses; the issuance of additional securities by
the Company; the election of the Company's directors; and the payment of
dividends by the Company.

The Company's by-laws require transactions in which a director or executive
officer has a direct or indirect material interest to be approved by a majority
of the Board of Directors, including two independent and disinterested
directors, after full disclosure, or by the vote of the holders of a majority of
the shares of common stock outstanding. At the present time, the Company has
only one independent and disinterested director. The Company is seeking
potential candidates to serve as "independent" director. There is no assurance
that any conflicts of interest will be resolved in favor of the Company.

Commissions for sales of life insurance and annuity contracts reinsured by the
Company are paid to WMA Agency and WMA Sales Associates by the Ceding Life
Companies. Mr. Humphrey and Mr. Montgomery receive direct compensation from WMA
Agency and receive virtually no direct compensation from the Company. In
addition, Messrs. Humphrey, Montgomery and McKernan are also executive officers
and employees of companies constituting WMA Agency. As a result of such
relationships, the interests of WMA Agency, with respect to commissions received
on life insurance sales by WMA Agency through the Ceding Life Companies (and
indirectly under coinsurance and ModCo agreements from the Company), may
conflict with the interests of the Company in negotiating reinsurance agreements
beneficial to the Company.

PLEDGE OF SHARES

The Company's major shareholder, S. Hubert Humphrey, Jr., in 1995 pledged all of
his shares of the Company's common stock in connection with a loan made to WMA
Agency ("the Agency Loan"). Part of the Agency Loan proceeds were allocated for
use by WMA Agency to make loans to certain WMA Sales Associates (the "Agent
Loans") to finance 20% of the cost to acquire shares of common stock in the 1995
offering. As of December 31, 2000, the outstanding principal amount of the Agent
Loans was $551,633. The WMA Sales Associates' shares of common stock are pledged
to WMA Agency as security for these Agent Loans. The Agent Loans are payable in
60 equal monthly payments of principal and interest and may not be prepaid. The
shares acquired by the WMA Sales Associates are non-transferable during the loan
term. Many of the loans are scheduled to be paid in full by the end of 2001.
Proxies have been executed in favor of WMA Agency for voting such shares of
common stock for so long as the Agent Loans are outstanding. By virtue of his
ownership of WMA Agency, Mr. Humphrey is considered to be the beneficial owner
of the 355,927 shares pledged to secure the Agent Loans and is able to control
the proxies relating to them.

The Agency Loan, in the initial principal amount of $2.25 million in 1995, was
subsequently consolidated into a WMA Agency line of credit facility. During
2000, the line was increased to a maximum available amount of $27.25 million.
Mr. Humphrey's pledge of his shares of common stock is one of the various forms
of collateral for this line of credit, which as of December 31, 2000 had an
outstanding balance of $26.95 million. Upon default on this credit line, the
lender, Money Services, Inc., a subsidiary of AEGON USA Inc., would have the
right to take title to the pledged shares and to exercise voting control. This
line of credit is being amortized over a fifteen year period ending November 1,
2012 with principal and interest payable monthly. Interest is calculated in
arrears based on AEGON's cost of its five-year senior debt instruments, which
is, in turn, based upon five year U.S. Treasury Notes, plus an underwriter's
override. Interest on the line of credit is adjusted every five years.


                                       29
<PAGE>   30

MANAGEMENT AND RELATED SERVICES

Effective April 1, 1998, the Company entered into an ongoing Corporate Services
Agreement with WMA Agency whereby WMA Agency provides corporate services and
supplies to the Company for a fixed monthly fee of $2,250, adjustable annually.
These services include facilities maintenance, security, human resources, mail
services, utilities, postage, telephone and copier service. The Company incurred
$48,922 and $48,851 of costs for these services from WMA Agency for the years
ended December 31, 2000 and 1999, respectively. At December 31, 2000, the
Company had an outstanding payable to WMA Agency in the amount of $7,430.

WARRANTS

In June 1998, the Company entered into a Directed Reinsurance Agreement which
provides that WMA Agency will use its best efforts to cause any life insurance
company with which WMA Agency has selling agreements to enter into reinsurance
agreements with the Company covering the life insurance products sold through
WMA Agency. On June 15, 1999, the Board of Directors of the Company approved an
amendment to the Directed Reinsurance Agreement with WMA Agency, which amendment
was also approved by WMA Agency. The amendment provided for the issuance of
Warrants by the Company to purchase 300,000 shares of the Company's common
stock. At the 1999 Annual Meeting, the Company's stockholders approved the
creation and issuance of such Warrants. The shares to be issued under the
Warrants were exercisable in equal increments over the five years after the
first anniversary of the date of issuance. Since the Company raised no new
capital by December 31, 1999, the outstanding Warrants could not, by their
terms, be exercised.

On May 12, 2000, the Board of Directors approved an amendment to the Warrants
extending the December 31, 1999 deadline to January 1, 2002. Additionally, the
amendment limits the number of shares that can be issued upon exercise of the
Warrant to an amount to be determined by the amount of capital raised by the
Company from the sale of common and preferred stock during the period from
January 1, 2000 through January 1, 2002. If less than $15 million is raised
through the sale of stock, the outstanding Warrants would lapse and not be
exercisable. If more than $75 million is raised through the sale of stock, the
number of shares exercisable would be one times the number of shares subject to
the Warrant. If an amount between $15 million and $75 million is raised through
the sale of stock during the same period, the number of shares exercisable would
be a formula amount as shown below:

<TABLE>
<S>                     <C>   <C>                        <C>    <C>
Number of shares to     =        Number of shares        X      Proceeds raised from sale of stock
     be issued                exercisable on Warrant            ----------------------------------
                                                                           $75,000,000
</TABLE>

The Warrants were issued to key management employees of WMA Agency and its
affiliated corporations as consideration for the Directed Reinsurance Agreement.
There will be no monetary consideration given to the Company for the issuance of
the Warrants. No Warrants will be issued to directors of the Company.

Neither the Warrants nor the common stock to be issued upon exercise of the
Warrants will be registered. The common stock shall be considered restricted
shares, which may only be resold pursuant to an effective registration
statement, an exemption from registration, or Rule 144. There are no
registration rights contained in the terms of the Warrant.

The stockholders ratified and approved the issuance of Warrants at their August
14, 2000 Annual Meeting.

PRINCIPAL REPRESENTATIVE AGREEMENT

The Company has an agreement with CFM Insurance Managers Ltd. ("CFM"), a member
of the Mutual Risk Management Ltd. group, which provides professional management
services to companies operating in Bermuda. C. Simon Scupham, a director of the
Company and of WMA Life, is the President of CFM. Pursuant to this agreement,
CFM acts as the Principal Representative for WMA Life in Bermuda. This agreement
is for an unlimited duration, but may be terminated by either party upon ninety
(90) days prior written notice or upon thirty (30) days prior written notice
under specified circumstances. The Company paid annual fees of $60,000 during
2000 and 1999 to CFM pursuant to the management agreement.


                                       30
<PAGE>   31

LEASE AGREEMENT WITH WMA AGENCY

The Company currently subleases on a triple net basis approximately 1,500 square
feet of office space in Duluth, Georgia from WMA Agency. The triple-net basis
requires the Company to pay its proportionate share of the taxes, insurance and
common area maintenance as well as a stipulated base rent. The sublease extends
through January 2008. The annual base rent until January 2003 is $18,675, which
is equivalent to the rate being paid by WMA Agency to its lessor. For the second
five-year period of the sublease, the annual base rent is subject to an increase
of approximately 13.65%.

LACK OF SEPARATE LEGAL REPRESENTATION

During 2000, counsel for the Company, Merritt & Tenney LLP, of Atlanta, Georgia,
also represented WMA Agency, WMA Securities and Mr. Humphrey. Should a conflict
of interest result from this lack of separate legal representation, the
independent and disinterested directors shall select independent counsel to
represent the Company and to advise the Company with respect to the conflict of
interest.


ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

The Company filed an 8-K report on February 28, 2001 regarding ongoing
negotiations for the purchase of certain assets of the Company's affiliates,
World Marketing Alliance, Inc. and WMA Securities, by a subsidiary of AEGON N.V.

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

<S>               <C>
  10.1            Amendment Number 4 to the Automatic Flexible Premium Variable
                  Life Reinsurance Agreement Number 2 between Western Reserve
                  and WMA Life effective January 1, 2000 dated December 29, 2000
                  (Attached). Portions of this Exhibit have been omitted, a
                  complete copy of which has been filed separately with the
                  Secretary of the SEC pursuant to an application for
                  confidential treatment.

  10.2            Amendment Number 5 to the Automatic Variable Annuity
                  Reinsurance Agreement between Western Reserve and WMA Life
                  effective January 1, 2000 dated December 29, 2000 (Attached).
                  Portions of this Exhibit have been omitted, a complete copy of
                  which has been filed separately with the Secretary of the SEC
                  pursuant to an application for confidential treatment.
</TABLE>


                                       31
<PAGE>   32

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
The WMA Corporation:

We have audited the accompanying consolidated balance sheets of The WMA
Corporation and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, stockholders' equity and comprehensive income
and cash flows for each of the years in the three-year period ended December 31,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The WMA Corporation
and subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows, for each of the years in the three-year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America.


                                             /s/ KPMG LLP

Atlanta, Georgia
March 8, 2001


                                      F-1
<PAGE>   33

                               THE WMA CORPORATION

                           Consolidated Balance Sheets

                           December 31, 2000 and 1999

<TABLE>
<CAPTION>
                                                                                2000              1999
                                                                            ------------      ------------

<S>                                                                         <C>               <C>
                             Assets
Fixed maturity securities - available for sale (amortized cost of
   $5,817,900 and $2,118,705 for 2000 and 1999, respectively)               $  5,912,379      $  2,054,231
Cash and cash equivalents                                                      4,259,153         3,475,950
Investment income due and accrued                                                113,558            19,443
Reinsurance balances receivable                                                2,632,949         2,985,937
Reinsured policy loans                                                           867,023           286,963
Deferred acquisition costs                                                    42,752,339        39,750,100
Prepaid expenses                                                                  31,210           346,894
Fixed assets (net of accumulated depreciation of $102,992 and
   $55,017 for 2000 and 1999, respectively)                                       48,806            88,332
Other assets                                                                       5,099                --
                                                                            ------------      ------------
         Total assets                                                       $ 56,622,516      $ 49,007,850
                                                                            ============      ============
              Liabilities and Stockholders' Equity
Liabilities:
   Future policy benefits                                                   $  8,025,748      $  4,494,786
   Reinsurance balances payable                                                  388,016           716,330
   Accrued expenses                                                               92,927           110,885
   Accrued interest payable                                                      161,356           665,789
   Accounts payable                                                               52,006            46,696
   Due to World Marketing Alliance, Inc.                                           7,430             2,559
   Current income tax payable                                                    410,530                --
   Short term debt                                                               277,285         1,125,000
   Long term debt                                                              5,000,000         9,178,562
   Deferred tax liability                                                      5,618,285         4,259,599
                                                                            ------------      ------------
         Total liabilities                                                    20,033,583        20,600,206
                                                                            ------------      ------------

Stockholders' equity:
   Preferred stock, par value $2.00, 10,000,000 shares authorized;
     7% Series A convertible preferred stock; 266,047 shares
     issued in 2000                                                              532,094                --
     Common stock, par value $.001, 50,000,000 shares authorized;
     2,500,000 shares issued in 2000 and 1999                                      2,500             2,500
   Additional paid-in capital                                                 22,795,581        20,228,973
   Accumulated other comprehensive income (loss)                                  62,357           (42,552)
   Retained earnings                                                          13,246,301         8,268,623
   Treasury stock, at cost (4,990 shares for 2000 and 1999)                      (49,900)          (49,900)
                                                                            ------------      ------------
         Total stockholders' equity                                           36,588,933        28,407,644
                                                                            ------------      ------------

Total liabilities and stockholders' equity                                  $ 56,622,516      $ 49,007,850
                                                                            ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-2
<PAGE>   34

                               THE WMA CORPORATION

                        Consolidated Statements of Income

                  Years ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                                                      2000              1999              1998
                                                                  ------------      ------------      ------------

<S>                                                               <C>               <C>               <C>
Revenues:
   Premiums                                                       $ 16,618,927      $  9,692,649      $  7,280,489
   Reinsured policy revenues                                        12,893,664        13,505,823         4,098,371
   Net investment income                                               527,613           349,683           951,101
   Net realized gain (loss) on investments                               2,606           (66,000)          267,063
   Loss on recapture of business                                            --          (822,814)               --
                                                                  ------------      ------------      ------------
         Total revenue                                              30,042,810        22,659,341        12,597,024
                                                                  ------------      ------------      ------------
Benefits and expenses:
   Benefits, claims and settlement expenses                          7,559,164         4,511,469         3,488,157
   Change in future policy benefits                                  2,052,733           313,679           (45,526)
   Reinsurance premium allowances, net                               7,539,492         5,362,263         2,917,483
   Amortization of deferred acquisition costs                        4,016,629         3,789,318         1,541,439
   Professional fees and other expenses                              1,207,158           934,297           957,446
   Interest expense                                                    665,119         1,153,958           101,099
   Fees to World Marketing Alliance, Inc.                               48,922            48,851           240,708
                                                                  ------------      ------------      ------------
         Total benefits and expenses                                23,089,217        16,113,835         9,200,806
                                                                  ------------      ------------      ------------
         Income before income tax                                    6,953,593         6,545,506         3,396,218
Income tax expense                                                  (1,820,717)       (2,225,472)       (1,156,861)
                                                                  ------------      ------------      ------------
         Net income                                               $  5,132,876      $  4,320,034      $  2,239,357
                                                                  ------------      ------------      ------------

Preferred dividends                                                    155,198                --                --
                                                                  ------------      ------------      ------------
         Net income available to common stockholders              $  4,977,678      $  4,320,034      $  2,239,357
                                                                  ============      ============      ============

Basic earnings per share                                          $       2.00      $       1.73      $       0.90
                                                                  ============      ============      ============

Diluted earnings per share                                        $       1.95      $       1.73      $       0.90
                                                                  ============      ============      ============

Weighted average common shares outstanding                           2,495,010         2,495,010         2,495,766
                                                                  ============      ============      ============

Total weighted average common and common
   equivalent shares outstanding                                     2,629,201         2,495,010         2,495,766
                                                                  ============      ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>   35

                               THE WMA CORPORATION

    Consolidated Statements of Stockholders' Equity and Comprehensive Income

                  Years ended December 31, 2000, 1999, and 1998

<TABLE>
<CAPTION>
                                               Number                      Number                                    Accumulated
                                                 of                          of                     Additional          other
                                              preferred     Preferred      common       Common       paid-in        comprehensive
                                               shares         stock        shares       stock        capital        income (loss)
                                              ---------     ---------    ----------   ----------   ------------     -------------
<S>                                           <C>           <C>          <C>          <C>          <C>              <C>
Balance, January 1, 1998                                                  2,500,000   $    2,500   $ 20,228,973      $    157,670
  Comprehensive income
  Net income
     Other comprehensive income, net of tax                                                                                85,307

  Total comprehensive income

Purchase of treasury stock (2,790 shares)                                        --           --             --                --
                                                                         ----------   ----------   ------------      ------------
Balance, December 31, 1998                                                2,500,000        2,500     20,228,973           242,977
  Comprehensive income
  Net income
     Other comprehensive loss, net of tax                                        --           --             --          (285,529)
                                                                         ----------   ----------   ------------      ------------
  Total comprehensive income

Balance, December 31, 1999                                                2,500,000        2,500     20,228,973           (42,552)
  Comprehensive income
  Net income
     Other comprehensive income, net of tax                                                                               104,909

  Total comprehensive income

Preferred stock issued                          266,047      $532,094                                 2,566,608
Preferred dividends                                  --            --            --           --             --                --
                                               --------      --------    ----------   ----------   ------------      ------------
Balance, December 31, 2000                      266,047      $532,094     2,500,000   $    2,500   $ 22,795,581      $     62,357
                                               ========      ========    ==========   ==========   ============      ============

<CAPTION>

                                                                                          Total
                                                    Retained          Treasury        stockholders'     Comprehensive
                                                    earnings           stock              equity            income
                                                  ------------      ------------      -------------     -------------
<S>                                               <C>               <C>               <C>               <C>
Balance, January 1, 1998                          $  1,709,232      $    (22,000)      $ 22,076,375
  Comprehensive income
  Net income                                         2,239,357                            2,239,357      $  2,239,357
     Other comprehensive income, net of tax                                                  85,307            85,307
                                                                                                         ------------
  Total comprehensive income                                                                             $  2,324,664
                                                                                                         ============
Purchase of treasury stock (2,790 shares)                   --           (27,900)           (27,900)
                                                  ------------      ------------       ------------
Balance, December 31, 1998                           3,948,589           (49,900)        24,373,139
  Comprehensive income
  Net income                                         4,320,034                            4,320,034      $  4,320,034
     Other comprehensive loss, net of tax                   --                --           (285,529)         (285,529)
                                                  ------------      ------------       ------------      ------------
  Total comprehensive income                                                                             $  4,034,505
                                                                                                         ============
Balance, December 31, 1999                           8,268,623           (49,900)        28,407,644
  Comprehensive income
  Net income                                         5,132,876                            5,132,876      $  5,132,876
     Other comprehensive income, net of tax                                                 104,909           104,909
                                                                                                         ------------
  Total comprehensive income                                                                             $  5,237,785
                                                                                                         ============
Preferred stock issued                                                                    3,098,702
Preferred dividends                                   (155,198)               --           (155,198)
                                                  ------------      ------------       ------------
Balance, December 31, 2000                        $ 13,246,301      $    (49,900)      $ 36,588,933
                                                  ============      ============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-4
<PAGE>   36

                               THE WMA CORPORATION
                      Consolidated Statements of Cash Flows
                  Years ended December 31, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                2000              1999              1998
                                                                            ------------      ------------      ------------
<S>                                                                         <C>               <C>               <C>
Cash flows from operating activities:
   Net income                                                               $  5,132,876      $  4,320,034      $  2,239,357
   Adjustments to reconcile net income to net cash provided by
     (used in) operating activities:
     Amortization and depreciation                                             4,064,604         3,924,990         1,585,525
     Deferred tax expense                                                      1,304,642         2,225,472         1,156,861
     Net realized (gain) loss on investments                                      (2,606)           66,000          (267,063)
     Preferred dividends                                                        (155,198)               --                --
     Loss on recapture of business                                                    --           822,814                --
     Change in:
         Investment income due and accrued                                       (94,115)          116,753           121,433
         Reinsurance balances receivable                                         352,989        (1,944,005)           82,490
         Reinsured policy loans                                                 (580,060)         (283,265)          (45,502)
         Deferred acquisition cost                                            (7,018,868)      (36,612,052)      (24,575,967)
         Prepaid expenses                                                        315,684          (130,148)         (103,503)
         Other assets                                                             (5,099)          179,810          (179,027)
         Due from World Marketing Alliance, Inc.                                      --             3,507            (3,507)
         Future policy benefits                                                3,530,962         2,651,956         1,330,103
         Reinsurance balances payable                                           (328,314)       13,398,265         4,991,024
         Accrued expenses                                                        (17,958)            5,031            52,119
         Accrued interest payable                                               (504,433)          564,690           101,099
         Accounts payable                                                          5,310           (23,680)          (34,732)
         Due to World Marketing Alliance, Inc.                                     4,871             2,559            (1,916)
         Due to WMA Management Services, Inc.                                         --                --          (120,000)
         Current income tax payable                                              410,530                --                --
                                                                            ------------      ------------      ------------
           Net cash provided by (used in) operating activities                 6,415,817       (10,711,269)      (13,671,206)
                                                                            ------------      ------------      ------------
Cash flows from investing activities:
   Proceeds from sale and maturity of available for sale securities              322,586         7,316,827         8,939,622
   Purchase of available-for-sale securities                                  (4,019,176)               --                --
   Purchase of fixed assets                                                       (8,449)          (50,880)          (92,469)
                                                                            ------------      ------------      ------------
           Net cash (used in) provided by investing activities                (3,705,039)        7,265,947         8,847,153
                                                                            ------------      ------------      ------------
Cash flows from financing activities:
   Issuance of preferred stock                                                 3,098,702                --                --
   Purchase of treasury stock and warrants                                            --                --           (27,900)
   Proceeds from short term debt                                                      --                --        10,000,000
   (Repayment of) proceeds from long term debt                                (5,026,277)        5,000,000                --
   Decrease in principal due on short term debt                                       --        (4,696,438)               --
                                                                            ------------      ------------      ------------
           Net cash (used in) provided by financing activities                (1,927,575)          303,562         9,972,100
                                                                            ------------      ------------      ------------
           Net increase (decrease) in cash and cash equivalents                  783,203        (3,141,760)        5,148,047
Cash and cash equivalents at beginning of period                               3,475,950         6,617,710         1,469,663
                                                                            ------------      ------------      ------------
Cash and cash equivalents at end of period                                  $  4,259,153      $  3,475,950      $  6,617,710
                                                                            ============      ============      ============
Supplemental disclosure of cash flow information:
   Interest paid                                                            $  1,169,552      $         --      $         --
                                                                            ============      ============      ============
   Income taxes paid                                                        $    105,545      $         --      $         --
                                                                            ============      ============      ============
Supplemental disclosure of non-cash financing activities:
   Recapture of reinsurance business:
     Reduction of deferred acquisition costs                                          --      $ 20,610,500                --
     Reduction of reinsured policy loans                                              --            41,804                --
     Increase in reinsurance balances receivable                                      --          (940,898)               --
     Reduction of future policy benefits                                              --          (781,190)               --
     Reduction of reinsurance balances payable                                        --       (18,107,402)               --
                                                                            ------------      ------------      ------------
         Loss on recapture of business                                                --      $    822,814                --
                                                                            ============      ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>   37

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998

1.       Organization

         The WMA Corporation is an insurance holding company originally formed
         March 9, 1995.

         The consolidated financial statements for the year ended December 31,
         2000 include the assets, liabilities, and results of operations of The
         WMA Corporation ("WMA Corporation") and its wholly owned subsidiary WMA
         Life Insurance Company Limited ("WMA Life"), a Bermuda domiciled life
         reinsurance company (collectively the "Company"). The consolidated
         financial statements for the year ended December 31, 1998 also included
         a former subsidiary WMA Life Holding, Ltd., which was dissolved in
         January 1999. Net assets of $7,957 were paid to WMA Corporation.

         The Company, through WMA Life, provides reinsurance for certain
         national life insurance companies on variable universal life insurance
         ("VUL") and variable annuity policies sold by "WMA Sales Associates", a
         growing network of independent agents associated with "WMA Agency".
         Such policies are sold throughout the United States and its
         territories. Unless the context indicates otherwise, "WMA Agency"
         refers to World Marketing Alliance, Inc., an insurance agency, and
         certain affiliated entities and persons that are involved in the
         marketing and sale of life insurance, annuities and other financial
         services. "WMA Sales Associates" are independent agents who market
         financial services products through WMA Agency and often hold licenses
         as registered representatives for the sale of certain securities
         products, through another affiliate, WMA Securities, Inc. ("WMA
         Securities"), a registered securities broker-dealer.

         Reinsurance is an arrangement under which an insurance company, the
         "reinsurer", agrees to indemnify another insurance company, the ceding
         company, for all or a portion of the insurance risks underwritten by
         the ceding company. The reinsurer, in turn, assumes a portion of the
         underwritten risk in exchange for a portion of the premium collected.
         The Company currently assumes portions of mortality and other risks
         relating to life insurance and annuity policies in order to share in
         the net profits generated through the sale of such policies by WMA
         Sales Associates.

         All of the Company's reinsurance business is generated by the marketing
         efforts of WMA Agency, and the Company has made a considered decision
         to focus the Company's energies on existing WMA Agency relationships
         for the generation of new reinsurance business. In recent years, the
         SEC, the NASD and various state regulatory authorities have commenced a
         variety of regulatory investigations of WMA Securities and WMA Agency
         raising concerns about their respective compliance with applicable
         regulatory standards and appropriate supervision of WMA Sales
         Associates. WMA Agency and WMA Securities have implemented corrective
         action plans with respect to such alleged compliance issues; however no
         assurance can be given that such corrective actions will be viewed as
         sufficient by the applicable regulatory authorities. If such corrective
         actions are not deemed acceptable, it could impact the Company's
         ability to reinsure additional plans of insurance. As a consequence,
         business and regulatory issues facing WMA Securities and WMA Agency may
         have limited the Company's access to capital markets, which have and
         are expected to continue to influence the Company's growth thereby
         affecting its financial position and results of operations.

         S. Hubert Humphrey, Jr., a major shareholder of the Company, owns
         substantially all of World Financial Group, Inc., a holding company
         that owns all of WMA Agency and WMA Securities. During the first
         quarter of 1998, employees of WMA Agency performed the Company's
         administrative functions. The Company paid WMA Agency a monthly payroll
         allocation based upon the amount of time during which WMA Agency
         employees provided services to the Company. The Company also received
         certain other services from WMA Agency, including the funding of
         certain operating and travel related expenses. Effective April 1, 1998,
         the Company entered into a Corporate Services Agreement with WMA Agency
         pursuant to which WMA Agency provides corporate services and supplies
         for a fixed monthly fee of $2,250, adjusted as necessary on an annual
         basis.


                                      F-6
<PAGE>   38

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

2.       Summary of Significant Accounting Policies

         Consolidation and Basis of Presentation. The consolidated financial
         statements of the Company have been prepared in accordance with
         generally accepted accounting principles prescribed for stock life
         insurance companies. The preparation of financial statements in
         conformity with generally accepted accounting principles 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 the Company
         deems to be sensitive to changes in estimates include deferred policy
         acquisition costs and future policy benefits. In all instances, actual
         results could differ from estimates.

         The accompanying financial statements consolidate the accounts of WMA
         Corporation and its subsidiary. All significant inter-company balances
         and transactions have been eliminated.

         Investments. The Company classifies all fixed maturity securities and
         equity securities as "available for sale." Such securities are reported
         at fair value. Fixed maturities available for sale are so classified
         based upon the possibility that such securities could be sold prior to
         maturity if that action enables the Company to execute its investment
         philosophy and appropriately match investment results to operating and
         liquidity needs. Unrealized gains and losses on marketable equity
         securities and fixed maturity securities available for sale, less
         applicable deferred income taxes, are reported as a separate component
         of accumulated other comprehensive income within stockholders' equity.

         Although no impairments in value have occurred which would require
         adjustment to the carrying value of securities, any such impairment
         identified in the future would result in a reduction of the carrying
         value of the individual security to its fair value as the new cost
         basis and reflection of a corresponding write down amount as a realized
         capital loss in the consolidated statements of operations. The
         Company's policy is to recognize such impairment when the projected
         cash flows of these securities have been reduced on other than a
         temporary basis so that the realizable value is reduced to an amount
         less than the carrying value.

         Investment income is recognized as it accrues or is legally due. Income
         on mortgage-backed securities includes amortization and accretion of
         purchase premiums and discounts using a method that approximates a
         level yield, taking into consideration assumed prepayment patterns. The
         retrospective adjustment method is used to adjust for prepayment
         activity. Realized gains and losses on sales of investment are included
         in net income, as are write-downs of securities where declines in value
         are deemed to be other than temporary in nature. The cost of investment
         securities sold is determined based upon the specific identification
         method.

         Fair Value Disclosures. The carrying values of cash and cash
         equivalents, reinsurance receivables and payables, short-term debt,
         accrued expenses and accounts payable approximate their fair values due
         to the short-term nature of these accounts. The carrying value of
         future policy benefits approximates its fair value as credited interest
         approximates current market rates. See Note 3 for fair value
         information covering the Company's investment portfolio.

         Additional Information Regarding Statements of Cash Flows. Cash and
         cash equivalents include cash on hand and on deposit purchased with an
         original maturity of three months or less.

         Deferred Policy Acquisition Costs. Costs of acquiring new business,
         which vary with and are primarily related to the production of new
         business, have been deferred to the extent that such costs are deemed
         recoverable from future revenues. Such costs include reinsurance
         commission and expense allowances paid to ceding companies, and certain
         other underwriting costs such as actuarial, legal and accounting fees.

         Deferred acquisition costs are amortized over the lives of the
         underlying policies (with regard to the terms of the reinsurance
         agreement), in proportion to the ratio of revenues collected during the
         then current period to total anticipated revenues. On those policies
         reinsured under a monthly renewable term agreement, revenues represent
         premiums recognized for the mortality risk reinsured.


                                      F-7
<PAGE>   39

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

         Such premiums are estimated using the same assumptions used for
         computing liabilities for future policy benefits. Such assumptions
         include estimates of expected investment yields, mortality, persistency
         and expenses applicable at the time the policies are reinsured.
         Original assumptions on monthly renewable term business continue to be
         used in subsequent accounting periods to determine changes in the
         deferred acquisition costs unless a premium deficiency exists.

         For policies reinsured under a coinsurance or modified coinsurance
         agreement, revenues represent gross profits associated with mortality
         charges, investment margins, surrender charges and expense loads.
         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 estimates of future gross profits. 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 will be reflected during the then current accounting
         period.

         Reinsurance Premium Allowances. Allowances generally represent a
         percentage of each reinsurance premium that is paid or allowed by WMA
         Life to the ceding company for each policy reinsured in recognition of
         commissions and other expenses associated with the reinsured policies.
         These other expenses relate to costs associated with underwriting,
         marketing, policy issue and maintenance. The reinsurance expense
         allowances represent the Company's share of acquisition and maintenance
         expenses incurred by the ceding company that are attributable to the
         risks reinsured. Allowances are shown net of amounts deferred as policy
         acquisition costs.

         Fixed Assets. Fixed assets are stated at cost less accumulated
         depreciation. Depreciation is provided on the straight-line basis over
         the estimated useful lives of the related assets, which range from
         three to seven years.

         Future Policy Benefits. Liabilities for future benefits on life
         policies are established in an amount adequate to meet the estimated
         future obligations on policies in force. Liabilities for future policy
         benefits under long-term life insurance policies have been computed
         based on estimates of investment yields, mortality and withdrawal rates
         expected at the time the policies are reinsured, and other assumptions
         including estimates for incurred but not reported losses. These
         assumptions include a margin for adverse deviation and vary with the
         characteristics of the plan of insurance, year of issue, age of insured
         and other appropriate factors. The assumptions for estimated investment
         yields are based upon various factors including then current yields on
         the Company's investment portfolio and market rates for new investment
         money. Interest rates used in estimating future policy benefits range
         from 5.5% to 7.0%. The mortality and withdrawal assumptions are based
         on the Company's experience, industry experience and industry
         standards. Policy and contract reserves are included in future policy
         benefits on the consolidated balance sheet.

         Liabilities for future policy benefits under the coinsurance and
         modified coinsurance agreements equal reinsured policy account balances
         on the underlying VUL policies and variable annuity contracts. With
         regard to the separate account benefits reinsured on a modified
         coinsurance basis, the Company records such liabilities as an offset to
         related assets as its intentions and rights under the agreements with
         the ceding companies meet the appropriate conditions governing rights
         of setoff. Liabilities for the fixed account portion of the variable
         annuity contracts and VUL policies reinsured on a coinsurance basis are
         recorded as future policy benefits.

         Income Taxes. The Company uses the asset and liability method to record
         deferred income taxes. Accordingly, deferred tax assets and liabilities
         are recognized for the future tax consequences attributable to
         differences between the financial statement carrying amounts of
         existing assets and liabilities and their respective tax bases, using
         an effective federal tax rate of 34%. Statement of Financial Accounting
         Standards (SFAS) No. 109, Accounting for Income Taxes 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 December 31, 2000.


                                      F-8
<PAGE>   40

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

         Recognition of Revenues and Related Expenses. Reinsurance premiums
         received under the monthly renewable term agreements are recognized as
         revenue over the premium paying periods of the reinsured policies.
         Benefits and expenses are associated with earned premiums so that
         profits are recognized over the life of the related contract. This
         association is accomplished through the provision for future policy
         benefits and the amortization of deferred policy acquisition costs.
         Other revenue consists of non-recurring items other than reinsurance
         premiums or investment earnings and is recognized upon completion of
         the related earnings process.

         Reinsured Policy Revenues. Reinsured policy revenues represent the
         policy mortality and expense charges, cost of insurance charges net of
         retrocession reinsurance premiums, 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.

         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 of stock 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.

         Deferred Organization Costs. In April 1998, the Accounting Standards
         Executive Committee ("AcSEC") issued Statement of Position (SOP) 98-5,
         Reporting on the Costs of Start-Up Activities which provides guidance
         regarding the capitalization and expense treatment of start-up
         activities including organization costs. The SOP was effective for
         1999, with any impact upon adoption recorded at the beginning of the
         fiscal year in which the SOP is initially adopted. The Company adopted
         SOP-98-5 effective January 1, 1999 and as a result, wrote off $88,304
         of remaining deferred organization costs during the first quarter of
         1999.

         Recent 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. SFAS No.
         133 is effective for all quarters of fiscal years beginning after June
         15, 2000. Such provisions will not have a significant impact on the
         financial statements upon adoption.

         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 March 31, 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. Such provisions will not have a
         significant impact on the financial statements upon adoption.

         In December 1999, the Securities and Exchange Commission issued Staff
         Accounting Bulletin (SAB) No. 101 - Revenue Recognition in Financial
         Statements. SAB 101, as amended, is effective for fiscal years ended
         after December 15, 2000. The bulletin further defines when revenues are
         recognizable and provides a series of questions and answers related to
         specific revenue recognition topics. The provisions of SAB 101 do not
         have a significant impact on the financial statements of the Company.


                                      F-9
<PAGE>   41

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

         Reclassification. The Company has reclassified the presentation of
         certain 1999 and 1998 information to conform to the 2000 presentation.

3.       Investments

         Major categories of net investment income consist of the following:

<TABLE>
<CAPTION>
                                                                  Years ended December 31,
                                                          2000            1999             1998
                                                       ----------      ----------      ------------

         <S>                                           <C>             <C>             <C>
         Fixed maturity and equity securities          $  365,536      $  361,830      $    939,180
         Short-term investments                           230,200          59,431            63,957
                                                       ----------      ----------      ------------
                                                          595,736         421,261         1,003,137
         Investment expense                               (68,123)        (71,578)          (52,036)
                                                       ----------      ----------      ------------
                     Net investment income             $  527,613      $  349,683      $    951,101
                                                       ==========      ==========      ============
</TABLE>

         Gross losses of $0, $93,267 and $35,718 were realized on sales of fixed
         maturity securities for the years ended December 31, 2000, 1999 and
         1998, respectively. Gross gains of $2,606, $27,267 and $116,230 were
         realized on sales of fixed maturity securities for the years ended
         December 31, 2000, 1999 and 1998, respectively. Gross gains of
         $186,551 were realized on sales of equity securities for the year ended
         December 31, 1998.

         The amortized cost, unrealized gains and losses, and estimated fair
         values of investment securities at December 31, 2000 and 1999 are as
         follows:

<TABLE>
<CAPTION>
                                                                 Amortized      Unrealized    Unrealized
                                                                    cost          gains         losses       Fair value
                                                                 ----------     ----------    ----------     ----------

         <S>                                                     <C>            <C>           <C>            <C>
                              2000
         Fixed maturity securities, available for sale:
             Commercial and industrial                           $4,411,870        87,509         6,636      $4,492,743
             Public utilities                                       391,708         3,530         2,824         392,414
         Mortgage-backed securities                               1,014,322        17,284         4,384       1,027,222
                                                                 ----------      --------      --------      ----------
                    Total                                        $5,817,900       108,323        13,844      $5,912,379
                                                                 ==========      ========      ========      ==========

                              1999
         Fixed maturity securities, available for sale:
             Commercial and industrial                           $1,571,797            --        38,235      $1,533,562
             Public utilities                                       198,969            --        13,321         185,648
         Mortgage-backed securities                                 347,939            --        12,918         335,021
                                                                 ----------      --------      --------      ----------
                    Total                                        $2,118,705            --        64,474      $2,054,231
                                                                 ==========      ========      ========      ==========
</TABLE>

         There were no investments in any entity in excess of 10% of
         stockholders' equity at December 31, 2000. Fixed maturity securities
         are valued based upon quoted market prices.

         At December 31, 2000, the contractual maturities of investments in
         fixed maturity securities were as follows:

<TABLE>
<CAPTION>
                                                               Amortized cost    Fair value
                                                               --------------    ----------

         <S>                                                   <C>               <C>
         Available for sale:
             Due in one year or less                             $  479,398      $  477,997
             Due after one year through five years                3,925,466       4,016,406
             Due after five years through ten years                 398,714         390,754
         Mortgage-backed securities                               1,014,322       1,027,222
                                                                 ----------      ----------
                    Total                                        $5,817,900      $5,912,379
                                                                 ==========      ==========
</TABLE>

         Expected maturities will differ from contractual maturities because
         some issuers have the right to call or prepay obligations with or
         without call or prepayment penalties.


                                      F-10
<PAGE>   42

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

         Changes in net unrealized gains and losses were as follows:

<TABLE>
<CAPTION>
                                                                          Years ended December 31,
                                                                    2000            1999            1998
                                                                 ----------      ----------      ----------

         <S>                                                     <C>             <C>             <C>
         Fixed maturity securities, available for sale           $  158,953      $ (432,622)     $  272,450
         Equity securities                                               --              --        (143,196)
                                                                 ----------      ----------      ----------
                                                                 $  158,953      $ (432,622)     $  129,254
                                                                 ==========      ==========      ==========
</TABLE>

4.       Recapture of Business

         During the fourth quarter of 1999, as a result of the Company's
         inability to pay its deferred reinsurance settlement balances under the
         coinsurance and modified coinsurance agreements with Western Reserve
         Life Assurance Co. of Ohio ("Western Reserve"), effective October 1,
         1999, Western Reserve recaptured all Financial Freedom Builder VUL
         policies and riders and 75% of the Freedom Wealth Creator variable
         annuity policies, that were issued from January 1, 1999 through
         September 30, 1999. Concurrent with the recapture, WMA Life commenced
         reinsuring, on a monthly renewable term ("MRT") basis, 20% of the
         Financial Freedom Builder VUL policies and riders issued on or after
         January 1, 1999.

         The recapture of business during the fourth quarter of 1999 resulted in
         a loss of $822,814 for the year ended December 31, 1999. Of the
         $822,814 Loss on recapture of business, $556,304 related to the VUL
         coinsurance and modified coinsurance business, and is composed of
         $14.35 million in gross revenues due to the Company for recapture
         allowances, net of $14.91 million in expenses from the amortization of
         the related deferred acquisition costs, and the release of the related
         policy reserve and reinsurance expense allowance accruals. The
         remaining loss of $266,510, related to the variable annuity coinsurance
         and modified coinsurance business, is composed of $5.68 million in
         gross revenues from recapture allowances, net of $5.94 million in
         expenses from the amortization of the related deferred acquisition
         costs.

         The Loss on recapture of business included a reinsurance fee relating
         to the deferral of financial settlements owed to Western Reserve during
         the period in which the Company reinsured the underlying business. Such
         reinsurance fees were effectively offset by the interest due to the
         Company for amounts previously remitted to Western Reserve on business
         subsequently recaptured. The recapture of business was done in
         accordance with the terms of the amended reinsurance agreements
         regarding the deferral of settlements and recourse provided to Western
         Reserve. As a result of the recapture, the Company received a net
         settlement of $1.51 million in February 2000, which was included in
         Reinsurance balances receivable on the Company's Consolidated Balance
         Sheet as of December 31, 1999, prior to any offset from fourth quarter
         1999 settlements on the remaining business.

5.       Reinsurance

         As of December 31, 2000, the Company has six reinsurance contracts and
         one retrocession agreement in place. Effective January 1, 2000, WMA
         Life and Western Reserve jointly determined to discontinue the
         reinsurance of Freedom Equity Protector VUL policies issued January 1,
         2000 and thereafter due to low sales volume. Additionally, WMA Life and
         American Skandia agreed to reduce the reinsurance percentage, from 40%
         to 10%, on all reinsured Imperium variable annuity policies issued from
         January 1, 2000 through December 31, 2000. Beginning January 1, 2001,
         the reinsurance percentage will be 40% on all reinsured Imperium
         variable annuity policies issued from January 1, 2001.

         Effective October 1, 2000, the Company amended its variable annuity
         agreement with Western Reserve to reinsure 10% of the Freedom Premier
         variable annuity policies sold by WMA Sales Associates. The reinsurance
         of the Freedom Premier product is conducted on substantially the same
         terms and conditions as the other Western Reserve product reinsured by
         WMA Life. During 1999, the Company amended its coinsurance and modified
         coinsurance agreements with Western Reserve, in which Western Reserve
         recaptured a portion of 1999 VUL and variable annuity policies issued
         from January 1 through September 30 as discussed in Note 4 above.
         Coincidental with the recapture, WMA Life entered into another MRT
         agreement with Western Reserve as also discussed in Note 4 above.


                                      F-11
<PAGE>   43

                               The WMA Corporation

                   Notes to Consolidated Financial Statements

         WMA Life has the option to prospectively increase the reinsurance
         percentages, up to a maximum ranging from 40% to 50%, with regard to
         the reinsured Freedom Wealth Creator and Freedom Premier variable
         annuity policies issued from January 1, 1999 through December 31, 2002,
         provided WMA Life demonstrates sufficient capacity. Sufficient capacity
         is defined as having unassigned invested securities and anticipated
         cash flows in a sufficient amount to meet expected reinsurance
         settlements for the ensuing two calendar years with regard to the
         increased reinsurance. The option to increase the reinsurance
         percentage for the variable annuity coinsurance and modified
         coinsurance expires on December 31, 2002.

         WMA Life also has the option to convert the MRT reinsurance, regarding
         the Financial Freedom Builder VUL policies and riders issued from
         January 1, 1999 through March 31, 2003, to coinsurance and modified
         coinsurance, provided WMA Life demonstrates sufficient capacity. The
         option to convert the MRT reinsurance to coinsurance and modified
         coinsurance expires on March 31, 2003.

         Prior to 1998, the Company had entered into MRT agreements with Western
         Reserve and Kemper Investors Life Insurance Company, a modified
         coinsurance agreement with American Skandia Life Assurance Corporation,
         and two coinsurance and modified coinsurance agreements with Western
         Reserve. All policies reinsured under these agreements are
         self-administered by the ceding companies. The ceding companies provide
         the Company with all information necessary for processing the
         reinsurance, including claims.

         Retrocession reinsurance agreements do not relieve the Company from its
         obligations to ceding companies. Failure of retrocessionaires to honor
         their obligations could result in losses to the Company; consequently,
         allowances are established for amounts deemed uncollectible. Currently,
         no amounts are deemed uncollectible. In 1998, the Company entered into
         a pool retrocession agreement with four national companies whereby the
         Company retrocedes ("reinsures") standard mortality risks in excess of
         $100,000 per life to the pool. The retrocession agreement serves to
         reduce the impact of fluctuations in death claims from period to period
         and limits the Company's exposure on any one policy reinsured.

         The net effect of all reinsurance agreements on premiums and policy
         revenues is as follows:

<TABLE>
<CAPTION>
                                                            Years ended December 31,
                                                      2000            1999            1998
                                                  ------------    ------------    ------------

         <S>                                      <C>             <C>             <C>
         Reinsurance assumed                      $ 29,977,786    $ 23,435,657    $ 11,406,682
         Reinsurance ceded                            (465,195)       (237,185)        (27,822)
                                                  ------------    ------------    ------------
         Net premiums and policy revenues         $ 29,512,591    $ 23,198,472    $ 11,378,860
                                                  ============    ============    ============
</TABLE>

         The net effect of all reinsurance agreements on benefits, claims and
         settlement expenses is as follows:

<TABLE>
<CAPTION>
                                                                          Years ended December 31,
                                                                     2000           1999           1998
                                                                 ------------   ------------   ------------

         <S>                                                     <C>            <C>            <C>
         Reinsurance assumed                                     $  7,705,566   $  4,511,469   $  3,488,157
         Reinsurance ceded                                           (146,402)            --             --
                                                                 ------------   ------------   ------------
         Net benefits, claims and settlement expenses            $  7,559,164   $  4,511,469   $  3,488,157
                                                                 ============   ============   ============
</TABLE>

         The impact of reinsurance on life insurance in force is as follows (in
         millions):

<TABLE>
<CAPTION>
         Life insurance in force      Direct      Assumed      Ceded         Net
         -----------------------      ------      -------      -----        ------
         <S>                          <C>         <C>          <C>          <C>
         December 31, 2000              --         $9,378       $169        $9,209
         December 31, 1999              --         $8,030       $122        $7,908
         December 31, 1998              --         $6,117       $ 49        $6,068
</TABLE>


                                      F-12
<PAGE>   44
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


6.       Deferred Policy Acquisition Costs

         The amount of policy acquisition costs deferred and amortized is as
         follows:

<TABLE>
<CAPTION>
                                                   Years ended December 31,
                                                  2000                  1999
                                              ------------         ------------
            <S>                               <C>                  <C>
            Deferred acquisition cost:
                Assumed                       $ 42,752,339         $ 39,750,100
                Retroceded                              --                   --
                                              ------------         ------------
                   Net                        $ 42,752,339         $ 39,750,100
                                              ============         ============

            Beginning of year                 $ 39,750,100         $ 27,537,866
                Capitalized:
                   Assumed                       7,018,868           36,612,052
                   Retroceded                           --                   --
                Amortized:
                   Assumed                      (4,016,629)          (3,789,318)
                   Retroceded                           --                   --
                Gross Recapture:
                   Assumed                              --          (20,610,500)
                   Retroceded                           --                   --
                                              ------------         ------------
            End of year                       $ 42,752,339         $ 39,750,100
                                              ============         ============
</TABLE>


         The retrocession agreement is a yearly renewable term agreement,
         however the retrocession premiums are offset against reinsured policy
         revenues and premiums for the respective issue years. Consequently,
         retrocession premiums, benefit claims and allowances lose their
         identity in calculating estimated gross profits as used in amortizing
         capitalized acquisition costs. As such, there is no separate reportable
         deferred acquisition costs or associated amortization.

7.       Income Tax

         Under current Bermuda law, WMA Life is not required to pay any taxes in
         Bermuda on either income or capital gains. WMA Life has received an
         undertaking from the Minister of Finance in Bermuda that in the event
         of any such taxes being imposed, WMA Life will be exempted from
         taxation until the year 2016.

         Effective January 1, 1996, WMA Life made an irrevocable election to be
         treated as a domestic insurance company for United States Federal
         income tax purposes under section 953(d) of the Internal Revenue Code
         of 1986, as amended (the "Code"). As a result of this "domestic"
         election, WMA Life is subject to U.S. taxation on its worldwide income
         as if it were a U.S. corporation. The Company determines its income tax
         expense and liability in accordance with SFAS No. 109, Accounting for
         Income Taxes.

         Total income taxes (benefit) for the years ended December 31, 2000,
         1999 and 1998 were allocated as follows:

<TABLE>
<CAPTION>
                                                                               Years ended December 31,
                                                                    2000               1999               1998
                                                                -----------        -----------         -----------
            <S>                                                 <C>                <C>                 <C>
            Tax attributable to:
                 Income from continuing operations              $ 1,820,717        $ 2,225,472         $ 1,156,861
                                                                ===========        ===========         ===========
                 Unrealized gains (losses) on securities
                   available for sale                           $    54,044        $  (147,093)        $    43,947
                                                                ===========        ===========         ===========
</TABLE>



                                      F-13
<PAGE>   45
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


         The Federal income tax expense from continuing operations for the years
         ended December 31, 2000, 1999, and 1998 is as follows:

<TABLE>
<CAPTION>
                                                                             Years ended December 31,
                                                                   2000               1999                1998
                                                                -----------        -----------         -----------
            <S>                                                 <C>                <C>                 <C>
            Current                                             $   516,075                 --                  --
            Deferred                                              1,304,642        $ 2,225,472         $ 1,156,861
                                                                -----------        -----------         -----------
                 Total                                          $ 1,820,717        $ 2,225,472         $ 1,156,861
                                                                ===========        ===========         ===========
</TABLE>

         The income tax expense from continuing operations for the years ended
         December 31, 2000, 1999 and 1998 differed from the amounts computed by
         applying the U.S. Federal income tax rate of 34% to income before
         income taxes as a result of the following:

<TABLE>
<CAPTION>
                                                                             Years ended December 31,
                                                                   2000                1999                1998
                                                                -----------        -----------         -----------
            <S>                                                 <C>                <C>                 <C>
            Computed expected tax expense                       $ 2,364,222        $ 2,225,472         $ 1,154,714
            Small life insurance company deduction                 (605,880)                --                  --
            Other, net                                               62,375                 --               2,147
                                                                -----------        -----------         -----------
                 Total                                          $ 1,820,717        $ 2,225,472         $ 1,156,861
                                                                ===========        ===========         ===========
</TABLE>

         During 2000, the Company was able to benefit from the "small life
         insurance company deduction" available under Section 806 of the Code
         and the "alternative minimum tax" treatment available under Section 55
         of the Code at rates less than 34%.

         Deferred income taxes reflect the net tax effects of temporary
         differences between the carrying values of assets and liabilities for
         financial reporting purposes and Federal income tax purposes. The net
         deferred tax liability at December 31, 2000 and 1999 is composed of the
         following amounts:

<TABLE>
<CAPTION>
                                                                          2000                 1999
                                                                      ------------        ------------
            <S>                                                       <C>                 <C>
            Deferred tax assets:
              Alternative minimum tax credit                          $     35,646        $         --
              Capital losses realized in excess of gains                    20,535                  --
              Deferred organizational costs                                     --               6,120
              Policy benefit reserves                                           --             142,199
              Unrealized loss on securities held for sale                       --              21,922
              Reserve differences                                        8,262,095           7,962,034
              Net operating loss carry-forward                             779,960           1,123,160
              Other                                                         81,506                  --
                                                                      ------------        ------------
                 Gross deferred tax assets                               9,179,742           9,255,435

            Deferred tax liabilities:
              Policy benefit reserves                                      230,110                  --
              Deferred acquisition costs                                14,535,795          13,515,034
              Unrealized gain on securities held for sale                   32,122                  --
                                                                      ------------        ------------
                 Gross deferred tax liabilities                         14,798,027          13,515,034

                 Net deferred tax liabilities                         $  5,618,285        $  4,259,599
                                                                      ============        ============
</TABLE>

         There were no valuation allowances for deferred tax assets as of
         December 31, 2000 and 1999 since it is management's belief that it is
         more likely than not that the deferred tax assets will be realized.
         This assessment is made based on the scheduled reversal of deferred tax
         liabilities, projected future taxable income, and tax planning
         strategies. At December 31, 2000, the Company has net operating loss
         carry-forwards for income tax purposes of $2,294,000, which begin to
         expire in 2018.

         The Company does not have a policyholder surplus account. Therefore,
         the Company is not subject to the potential addition to federal income
         tax imposed by Section 815 of the Code.


                                      F-14
<PAGE>   46
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


8.       Related Party Transactions

         The Company, from time to time, has entered into transactions with WMA
         Agency or its affiliates, which are controlled by S. Hubert Humphrey,
         Jr., beneficial owner of approximately 34.3% of the Company's
         outstanding common stock. Mr. Humphrey and certain directors and
         officers of the Company are also employees of WMA Agency.

         During the first quarter of 1998, employees of WMA Agency performed the
         Company's administrative functions. The Company paid WMA Agency a
         monthly payroll allocation based upon the amount of time during which
         WMA Agency employees provided services to the Company. The Company also
         received certain other services from WMA Agency, including the funding
         of certain operating and travel related expenses. Effective April 1,
         1998, the Company entered into an ongoing Corporate Services Agreement
         with WMA Agency whereby WMA Agency provides corporate services and
         supplies to the Company for a fixed monthly fee of $2,250, adjustable
         annually. These services include facilities maintenance, security,
         human resources, mail services, utilities, postage, telephone, and
         copier service. The Company incurred costs of $48,922, $48,851 and
         $240,708 for these services from WMA Agency for the years ended
         December 31, 2000, 1999, and 1998, respectively. The Company has
         reimbursed WMA Agency for all such expenditures.

         The Company's officers do not, and are not required to, devote their
         time exclusively to the business of the Company, nor are they subject
         to non-competition agreements. As a consequence, they could legally
         engage in activities that could be adverse to the best interests of the
         Company, subject to their fiduciary duties under applicable corporate
         law.

         Commissions for sales of life insurance and annuity contracts reinsured
         by the Company are paid to WMA Agency and WMA Sales Associates by the
         ceding companies. Mr. Humphrey receives direct compensation from WMA
         Agency and receives virtually no direct compensation from the Company.
         In addition, since Mr. Humphrey and certain of the directors are also
         executive officers and directors of companies constituting WMA Agency,
         the interests of WMA Agency with respect to the commissions received on
         life insurance sales by WMA Agency from the ceding companies (and
         indirectly under reinsurance agreements from the Company) may conflict
         with the interests of the Company in negotiating reinsurance agreements
         beneficial to the Company.

         In 1995, WMA Life entered into an agreement with CFM Insurance
         Managers, Ltd. ("CFM"), a member of the Mutual Risk Management Ltd.
         group, which provides professional management services to international
         companies operating in Bermuda. C. Simon Scupham, a director of the
         Company and of WMA Life, is the President of CFM. Pursuant to this
         agreement, CFM acts as the Principal Representative for WMA Life in
         Bermuda. This agreement is for an unlimited duration, but may be
         terminated by either party upon 90 days prior written notice or upon 30
         days prior written notice under specified circumstances. The Company
         paid $60,000 in fees during each of the years ended December 31, 2000,
         1999 and 1998 pursuant to the agreement with CFM.

         In 1995, Mr. Humphrey pledged all of his shares of the Company's common
         stock in connection with a loan made by Money Services, Inc. to WMA
         Agency ("Agency Loan"). Money Services, Inc. (MSI) is a subsidiary of
         AEGON USA, Inc., as is Western Reserve. Part of the Agency Loan
         proceeds were allocated for use by WMA Agency to make loans to certain
         WMA Sales Associates ("Agent Loans") for the purpose of acquiring
         shares of common stock of the Company in its 1995 offering. As of
         December 31, 2000, the outstanding principal amount of the Agent Loans
         was $551,533. The WMA Sales Associates' shares of common stock are
         pledged to WMA Agency as security for these Agent Loans. The Agent
         Loans are payable in 60 equal monthly payments of principal and
         interest and may not be prepaid. The shares acquired by the WMA Sales
         Associates are non-transferable during the loan term. Many of the loans
         are scheduled to be paid in full by the end of 2001. Proxies have been
         executed in favor of WMA Agency for voting such shares of common stock
         for so long as the Agent Loans are outstanding. By virtue of his
         ownership of WMA Agency, Mr. Humphrey is considered to be the
         beneficial owner of the 355,927 shares and is able to control the
         proxies relating to them.


                                      F-15
<PAGE>   47
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


         The Agency Loan, which was in the initial amount of $2.25 million in
         1995, was subsequently consolidated into a WMA Agency line of credit
         facility. The maximum available amount under this line of credit was
         increased in 2000 to $27.25 million. Mr. Humphrey's pledge of his
         shares of common stock is one of the various forms of collateral for
         this line of credit, which as of December 31, 2000 had an outstanding
         balance of $26.95 million. Upon default on this credit line, the
         lender, MSI, would have the right to take title to the pledged shares
         and to exercise voting control. Amounts outstanding under this line of
         credit are being amortized over the period ending November 1, 2012 with
         principal and interest payable monthly by WMA Agency. Interest is
         calculated in arrears based on AEGON USA's cost of its five-year senior
         debt instruments, which is in turn, based upon five-year U.S. Treasury
         Notes, plus an underwriters' override. Interest on the line of credit
         is recalculated every five years.

9.       Statutory Restrictions

         WMA Corporation's subsidiary, WMA Life, is a Bermuda-domiciled
         insurance company and as such is subject to the restrictions of the
         Bermuda Insurance Act of 1978 (the "Insurance Act"). The most
         significant of these restrictions is that WMA Life must maintain a
         minimum of $250,000 capital and surplus. In addition, WMA Life must
         maintain a solvency margin, defined as the excess of statutory assets
         over statutory liabilities, of at least $250,000. Statutory assets and
         liabilities refer to those assets and liabilities recorded on the
         statutory balance sheet required by the Insurance Act.

         WMA Corporation relies, and will rely, primarily on funds retained at
         the holding company level, loan repayments and potential dividends from
         WMA Life to meet ongoing cash requirements of the holding company. The
         payment of dividends by WMA Life to WMA Corporation is subject to
         regulatory restrictions under Bermuda insurance law. WMA Life may not
         declare or pay a dividend or make a distribution out of contributed
         surplus if, among other things, there are reasonable grounds for
         believing that (a) WMA Life is, or after the payment, would be unable
         to pay its liabilities as they become due; or (b) the realizable value
         of WMA Life's assets would thereby be less than the aggregate of its
         liabilities and its issued share capital and share premium accounts.
         During 2000, WMA Life paid dividends of $3.4 million to WMA Corporation
         to meet cash requirements, including payment of principal and interest
         on the loans from MSI for the benefit of WMA Life.

10.      Commitments and Contingent Liabilities

         From time to time the Company may be subject to reinsurance-related
         litigation and arbitration in the normal course of business. Management
         does not believe that the Company is a party to any such pending
         litigation or arbitration that would have a material adverse effect on
         its future operations.

         The Company has obtained letters of credit in favor of unaffiliated
         insurance companies with whom the Company has reinsurance agreements.
         The posting of a letter of credit allows the ceding company to take
         statutory reserve credit for reinsurance ceded, which would otherwise
         not be available as WMA Life is not "authorized" (essentially licensed)
         by the ceding company's state of domicile. At December 31, 2000, the
         outstanding letters of credit totaled $6.14 million. The letters of
         credit were issued by the Company's custodian and secured by the
         Company's investments held by the custodian.

         The Company currently leases office space from WMA Agency under a
         sublease, which expires in 2008. Payments under this lease are $18,675
         annually through January 2003. For the second five-year period, the
         rate paid is subject to an increase of approximately 13.65%. Total
         lease expense for the year ended December 31, 2000 was $18,675. The
         following is a schedule of future minimum lease payments as of December
         31, 2000:

                               Year ending December 31,         Lease Payments
                               ------------------------         --------------
                                         2001                        18,675
                                         2002                        18,675
                                         2003                        21,011
                                         2004                        21,224
                                      Thereafter                     65,441
                                                                  ---------
                                                                  $ 145,026
                                                                  =========



                                      F-16
<PAGE>   48
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


11.      Short Term and Long Term Debt

         Short-term and long-term debt at December 31, 2000 and 1999 are as
         follows:

<TABLE>
<CAPTION>
                                                                               2000                1999
                                                                           ------------        ------------
            <S>                                                            <C>                 <C>
            Line of credit - short term                                    $    277,285                  --
            Line of credit - long term                                               --        $  5,303,562
               Convertible Term Note - 7.5% interest, principal
               and interest due at July 29, 2004                              5,000,000           5,000,000
                                                                           ------------        ------------
                 Total short-term and long-term debt                          5,277,285          10,303,562
            Less: Anticipated current maturity of line of credit                277,285           1,125,000
                                                                           ------------        ------------
                 Total long-term debt                                      $  5,000,000        $  9,178,562
                                                                           ============        ============
</TABLE>

         In 1998, the Company received short-term debt financing from MSI via a
         $10 million line of credit agreement. By the end of 1998, the Company
         had drawn down the entire line of $10 million. As of December 31, 1998,
         all outstanding balances of principal and interest under this line of
         credit were due and payable on August 1, 1999, thus the amount was
         classified as short-term debt. Through March 31, 1999, borrowings under
         this line of credit accrued interest at the rate of 8% per annum.
         Effective April 1, 1999, the outstanding interest balance of $303,562
         at March 31, 1999 was added to the outstanding principal balance and
         the interest rate increased from 8% to 9%.

         On July 30, 1999, the Company issued a $5 million, five-year term note
         to MSI due on July 29, 2004. 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,
         after December 31, 1999 and prior to July 29, 2004, the outstanding
         principal balance of this note into common stock of the Company. Upon
         conversion, the number of shares of common stock which may be obtained
         per each $100.00 of the outstanding principal amount of the note shall
         be 4.17 shares. The note may be redeemed after July 29, 2002, in whole
         or in part, at the Company's option, at the redemption price, which
         shall include all accrued but unpaid interest to the date of
         redemption. If the note is redeemed prior to July 29, 2004, interest
         shall accrue on the outstanding principal amount at the rate of 9% per
         annum from the date of the note through the date of redemption.

         Also, on July 30, 1999, the $5 million proceeds made available from the
         issuance of the term note discussed above were applied to reduce the
         outstanding principal balance of the line of credit, and the line of
         credit was amended such that all remaining balances of principal and
         interest became due and payable upon the earlier of: (i) December 31,
         1999; or (ii) the closing of the Company's offerings related to the
         private sale of preferred and common stock to institutional and other
         accredited investors.

         Effective December 31, 1999, the line of credit was amended to extend
         the maturity date and establish scheduled principal and interest
         payments beginning in February 2000. Under the amended terms, the
         outstanding balance of $5,303,362 and related accrued interest was
         payable commencing February 15, 2000 and continuing on the 45th day
         after the close of each calendar quarter thereafter until the entire
         outstanding balance and accrued interest is paid in full. Quarterly
         payments totaled $5.03 million of principal during 2000. At December
         31, 2000, the anticipated payment for 2001 is the outstanding principal
         balance of $277,285. This amount represents the current maturities of
         the long-term debt, which is reflected as short-term debt on the
         Consolidated Balance Sheet.


                                      F-17
<PAGE>   49
                                The WMA Corporation

                   Notes to Consolidated Financial Statements


12.      Comprehensive Income

         The following table sets forth the amounts of other comprehensive
         income (loss) along with the related tax effects allocated to other
         comprehensive income (loss) for the years ended December 31, 2000,
         1999, and 1998:

<TABLE>
<CAPTION>
                                                                               Before-Tax     Tax (Expense)       Net-of-Tax
                                                                                 Amount          Benefit            Amount
                                                                               ----------     -------------       ----------
            <S>                                                                <C>            <C>                 <C>
                                   2000
            Net unrealized holding gains arising during period                 $ 161,559          (54,930)        $ 106,629
            Less: reclassification adjustment for gains realized
              in net income                                                        2,606             (886)            1,720
                                                                               ---------        ---------         ---------
            Other comprehensive income                                         $ 158,953          (54,044)        $ 104,909
                                                                               =========        =========         =========

                                   1999
            Net unrealized holding losses arising during period                $(366,622)         124,653         $(241,969)
            Plus: reclassification adjustment for losses
              realized in net income                                             (66,000)          22,440           (43,560)
                                                                               ---------        ---------         ---------
            Other comprehensive loss                                           $(432,622)         147,093         $(285,529)
                                                                               =========        =========         =========

                                   1998
            Net unrealized holding gains arising during period                 $ 396,317         (134,748)        $ 261,569
            Less: reclassification adjustment for gains realized
               in net income                                                     267,063          (90,801)          176,262
                                                                               ---------        ---------         ---------
             Other comprehensive income                                        $ 129,254          (43,947)        $  85,307
                                                                               =========        =========         =========
</TABLE>

13.      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 VUL policies on a 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
         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 reinsures 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 and
         modified coinsurance agreements are accounted for under SFAS No. 97
         accounting principles. Items not directly related to the business
         segments and unallocated corporate items (i.e. other income, interest
         expense on corporate debt and unallocated operating expenses) are shown
         separately, consistent with 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. Cash and invested assets are allocated to the treaties
         based upon statutory reserves, the letters of credit posted in support
         of the statutory reserves held, and allocated surplus which is
         consistent with the Company's internal measurement process.


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


                                      F-18
<PAGE>   50
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


<TABLE>
<CAPTION>
         SEGMENT REPORTING
         YEARS ENDED DECEMBER 31                                              2000
-------------------------------------------      ----------------------------------------------------------
  (Amounts in thousands)                            NON-
                                                 UNIVERSAL       UNIVERSAL
                                                 LIFE-TYPE       LIFE-TYPE         OTHER            TOTAL
                                                 ---------       ---------        --------         --------
<S>                                              <C>             <C>              <C>              <C>
Premiums                                          $ 16,619              --              --         $ 16,619

Reinsured policy revenues                               --          12,894              --           12,894

Benefits, claims and settlement expenses             8,658             954              --            9,612

Reinsurance premium allowances, net                  5,711           1,829              --            7,540

Amortization of deferred acquisition cost              116           3,901              --            4,017

Loss on recapture of business                           --              --              --               --
                                                  --------        --------        --------         --------
Underwriting profit                                  2,134           6,210              --            8,344

Net investment income                                  213             171             144              528

Net realized gain (loss) on investments                 --              --               3                3

Other expenses                                         150             184           1,588            1,922
                                                  --------        --------        --------         --------
Segment operating income (loss) before
  income tax                                         2,197           6,197          (1,441)           6,953

Income tax expense (benefit)                           589           1,659            (428)           1,820
                                                  --------        --------        --------         --------
Segment net income (loss)                         $  1,608           4,538          (1,013)        $  5,133
                                                  --------        --------        --------         --------
Preferred dividends                                     --              --             155              155
                                                  --------        --------        --------         --------
Segment net income (loss) available to
  common stockholders                             $  1,608           4,538          (1,168)        $  4,978
                                                  ========        ========        ========         ========

Segment assets                                    $  9,279          44,688           2,656         $ 56,623
                                                  ========        ========        ========         ========

<CAPTION>
         SEGMENT REPORTING
         YEARS ENDED DECEMBER 31                                              1999
-------------------------------------------       -----------------------------------------------------------
  (Amounts in thousands)                             NON-
                                                  UNIVERSAL       UNIVERSAL
                                                  LIFE-TYPE       LIFE-TYPE          OTHER            TOTAL
                                                  ---------       ---------         --------         --------
<S>                                               <C>             <C>               <C>              <C>
Premiums                                           $  9,693              --               --         $  9,693

Reinsured policy revenues                                --          13,506               --           13,506

Benefits, claims and settlement expenses              3,215           1,610               --            4,825

Reinsurance premium allowances, net                   2,775           2,588               --            5,363

Amortization of deferred acquisition cost               171           3,618               --            3,789

Loss on recapture of business                            --             823               --              823
                                                   --------        --------         --------         --------
Underwriting profit                                   3,532           4,867               --            8,399

Net investment income                                   118             132              100              350

Net realized gain (loss) on investments                  --              --              (66)             (66)

Other expenses                                           22             422            1,693            2,137
                                                   --------        --------         --------         --------
Segment operating income (loss) before
  income tax                                          3,628           4,577           (1,659)           6,546

Income tax expense (benefit)                          1,234           1,556             (564)           2,226
                                                   --------        --------         --------         --------
Segment net income (loss)                          $  2,394           3,021           (1,095)        $  4,320
                                                   --------        --------         --------         --------
Preferred dividends                                      --              --               --               --
                                                   --------        --------         --------         --------
Segment net income (loss) available to
  common stockholders                              $  2,394           3,021           (1,095)        $  4,320
                                                   ========        ========         ========         ========

Segment assets                                     $  7,762          40,220            1,026         $ 49,008
                                                   ========        ========         ========         ========
<CAPTION>
         SEGMENT REPORTING
         YEARS ENDED DECEMBER 31                                              1998
-------------------------------------------       ----------------------------------------------------------
  (Amounts in thousands)                             NON-
                                                  UNIVERSAL       UNIVERSAL
                                                  LIFE-TYPE       LIFE-TYPE         OTHER            TOTAL
                                                  ---------       ---------        --------         --------
<S>                                               <C>             <C>              <C>              <C>
Premiums                                           $  7,280              --              --         $  7,280

Reinsured policy revenues                                --           4,098              --            4,098

Benefits, claims and settlement expenses              3,416              26              --            3,442

Reinsurance premium allowances, net                   1,945             974              --            2,917

Amortization of deferred acquisition cost               149           1,393              --            1,542

Loss on recapture of business                            --              --              --               --
                                                   --------        --------        --------         --------
Underwriting profit                                   1,772           1,705              --            3,477

Net investment income                                   142              75             733              950

Net realized gain (loss) on investments                  --              --             267              267

Other expenses                                           18             121           1,159            1,298
                                                   --------        --------        --------         --------
Segment operating income (loss) before
  income tax                                          1,896           1,659            (159)           3,396

Income tax expense (benefit)                            645             564             (52)           1,157
                                                   --------        --------        --------         --------
Segment net income (loss)                          $  1,251           1,095            (107)        $  2,239
                                                   --------        --------        --------         --------
Preferred dividends                                      --              --              --               --
                                                   --------        --------        --------         --------
Segment net income (loss) available to
  common stockholders                              $  1,251           1,095            (107)        $  2,239
                                                   ========        ========        ========         ========

Segment assets                                     $  5,527          31,774           7,580         $ 44,881
                                                   ========        ========        ========         ========
</TABLE>


         During 2000, 1999, and 1998, the percentage of total premiums and
         reinsured policy revenues that relate to Western Reserve is 88%, 87%
         and 89%, respectively. The percentage of the total underwriting profit
         that relates to Western Reserve for 2000, 1999 and 1998 is 83% for all
         three years.

         The Company estimates that approximately 44% of VUL premiums and 30% of
         variable annuity premiums, written through Western Reserve and sold by
         WMA Sales Associates, originated in California.


                                      F-19
<PAGE>   51
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


14.      Capital Infusion

         During 1999, the Company proceeded with a private placement offering up
         to 1,000,000 shares of Series A convertible preferred stock ("Preferred
         Stock") to a limited number of WMA Sales Associates, WMA Agency
         employees and certain other investors acceptable to the Company that
         qualified as "accredited investors" within the meaning of Rule 501 of
         Regulation D under The Securities Act of 1933. The Preferred Stock is
         designated non-voting and unregistered with a par value of $2.00. The
         Preferred Stock has a liquidation preference equal to $2.00 per share
         in the event of any liquidation, dissolution, or winding up of the
         affairs of the Company. The Preferred Stock will be converted
         automatically into common stock upon the earlier of (i) the closing of
         any Qualifying Sale of shares of common stock or (ii) January 1, 2002.
         A Qualifying Sale is defined as net proceeds to the Company of at least
         $10 million from the sale of shares of common stock.

         In August 2000, the Company closed its offering of the Preferred Stock,
         which resulted in approximately $4 million of gross proceeds to the
         Company. The Company issued 266,047 shares of its Preferred Stock to
         the investors in this offering. The net proceeds were loaned to WMA
         Life, which were applied toward repayment of the line of credit with
         MSI. In December 2000, the Company paid a 7% annual dividend to the
         preferred stockholders in the amount of $279,349. Sources of funds to
         pay the dividend included interest of $136,396 from the offering escrow
         account and $142,953 from operational income. For the year ended
         December 31, 2000, preferred dividend expense includes an accrual of
         $12,245 for the dividend due on December 15, 2001.

         Additionally, the Company proceeded with a private placement offering
         up to 4,333,333 shares of common stock to certain institutional
         investors. In September 2000, the Company closed this private offering
         with no sales of its common stock.

15.      Stock Options and Warrants

         Stock Options

         On June 15, 1999 the Company's Board of Directors authorized a 1999
         stock option plan for the directors, officers and employees of the
         Company (the "Plan") that contemplated the issuance of up to 700,000
         shares of the Company's authorized, but unissued, common stock upon the
         exercise of options granted under the 1999 Plan. On that same date, the
         Board of Directors granted options under the 1999 Plan to purchase
         450,000 shares of common stock. The Company's stockholders ratified the
         Plan at the Annual Meeting held on August 16, 1999. The Company raised
         no new capital on or before December 31, 1999; therefore, the
         outstanding options could not, by their terms, be exercised.

         On May 12, 2000, the Board of Directors approved an amendment to the
         Plan extending the December 31, 1999 deadline to January 1, 2002.
         Additionally, the amendment limits the number of shares that can be
         purchased upon exercise of the options to an amount to be determined by
         the amount of capital raised by the Company from the sale of common and
         preferred stock during the period from January 1, 2000 through January
         1, 2002. If less than $15 million is raised through the sale of stock,
         the outstanding options would lapse and no options would be
         exercisable. If more than $75 million is raised through the sale of
         stock, the number of shares exercisable would be one times the number
         of shares subject to the option. If an amount between $15 million and
         $75 million is raised through the sale of stock during the same period,
         the number of shares exercisable would be a formula amount as shown
         below:

<TABLE>
          <S>                            <C>                              <C>
          Number of shares to     =        Number of shares        X      Proceeds raised from sale of stock
                be issued                subject to the option            ----------------------------------
                                                                                     $75,000,000
</TABLE>

         The Company will receive no monetary consideration for granting these
         options. The shares owned by the optionees upon exercise of their
         options will not be registered and shall be considered restricted
         shares, which may only be resold pursuant to an effective registration
         statement, an exemption from registration, or Rule 144. The Company's
         stockholders ratified the amendment to the Plan at the Annual Meeting
         held on August 14, 2000.


                                      F-20
<PAGE>   52
                               The WMA Corporation

                   Notes to Consolidated Financial Statements


         Warrants

         In June 1998, the Company entered into a Directed Reinsurance Agreement
         that provides WMA Agency will use its best efforts to cause any life
         insurance company with which WMA Agency has selling agreements to enter
         into reinsurance agreements with the Company covering the life
         insurance products sold through WMA Agency. On June 15, 1999, the Board
         of Directors of the Company approved an amendment to the Directed
         Reinsurance Agreement with WMA Agency, which amendment was also
         approved by WMA Agency. The amendment provided for the issuance of
         Warrants by the Company to purchase 300,000 shares of the Company's
         common stock. At the 1999 Annual Meeting, the Company's stockholders
         approved the creation and issuance of such Warrants. The shares to be
         issued under the Warrants were exercisable in equal increments over the
         five years after the first anniversary of the date of issuance. Since
         the Company raised no new capital by December 31, 1999, the outstanding
         Warrants could not, by their terms, be exercised.

         On May 12, 2000, the Board of Directors approved an amendment to the
         Warrants extending the December 31, 1999 deadline to January 1, 2002.
         Additionally, the amendment limits the number of shares that can be
         issued upon exercise of the Warrant to an amount to be determined by
         the amount of capital raised by the Company from the sale of common and
         preferred stock during the period from January 1, 2000 through January
         1, 2002. If less than $15 million is raised through the sale of stock,
         the outstanding Warrants would lapse and not be exercisable. If more
         than $75 million is raised through the sale of stock, the number of
         shares exercisable would be one times the number of shares subject to
         the Warrant. If an amount between $15 million and $75 million is raised
         through the sale of stock during the same period, the number of shares
         exercisable would be a formula amount as shown below:


<TABLE>
          <S>                           <C>                               <C>
          Number of shares to     =        Number of shares        X      Proceeds raised from sale of stock
               be issued                exercisable on Warrant            ----------------------------------
                                                                                      $75,000,000
</TABLE>

         The Warrants were issued to key management employees of WMA Agency and
         its affiliated corporations as consideration for the Directed
         Reinsurance Agreement with WMA Agency to use its "best efforts" to
         encourage life insurance companies whose policies it sells to reinsure
         such policies with the Company. There will be no monetary consideration
         given to the Company for the issuance of the Warrants. No Warrants will
         be issued to directors of the Company.

         Neither the Warrants nor the common stock to be issued upon exercise of
         the Warrants will be registered. The common stock shall be considered
         restricted shares, which may only be resold pursuant to an effective
         registration statement, an exemption from registration, or Rule 144.
         There are no registration rights contained in the terms of the Warrant.
         The Company's stockholders ratified the amendment to the Warrants at
         the Annual Meeting held on August 14, 2000.

         Such options and warrants have been considered for purposes of stock
         compensation expense under SFAS No. 123, Accounting for Stock-Based
         Compensation, Accounting Principles Board Opinion No. 25, Accounting
         for Stock Issued to Employees and FASB Interpretation No. 44,
         Accounting for Certain Transactions involving Stock Compensation.
         However, since no shares can be issued upon exercising the options or
         warrants until the amount of capital raised by the Company from the
         sale of stock is equal to or greater than $15 million, there is no
         compensation expense reflected in the financial statements.
         Additionally, the amount of compensation expense is indeterminable as
         the amount of options and warrants will vary with the amount of capital
         raised.

16.      Subsequent Events

         In February 2001, the Company was informed that AEGON Asset Management
         Services, Inc., an indirect wholly owned subsidiary of AEGON N.V., is
         negotiating the purchase of certain assets of the Company's affiliates,
         World Marketing Alliance, Inc. and WMA Securities. No other details
         regarding the proposed transaction have been disclosed pending the
         completion and execution of a definitive agreement and approval of
         AEGON N.V.'s Board of Directors. The proposed asset purchase does not
         include any assets or securities of the Company. It is unclear what
         impact, if any, the proposed transaction will have upon the reinsurance
         business of the Company.


                                      F-21

<PAGE>   53

                                   SIGNATURES

         In accordance with section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


(Registrant)      The WMA Corporation
            --------------------------------

By (Signature and Title)   /s/  S. Hubert Humphrey, Jr.
                        ---------------------------------------
                         S. Hubert Humphrey, Jr.,
                         Chairman of the Board of Directors
                         and Chief Executive Officer


Date:    March 20, 2001
         --------------


         In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.


By (Signature and Title)   /s/  S. Hubert Humphrey, Jr.
                        ---------------------------------------
                         S. Hubert Humphrey, Jr.,
                         Chairman of the Board of Directors
                         and Chief Executive Officer


Date:    March 20, 2001
         --------------


By (Signature and Title)   /s/  Edward F. McKernan
                        ---------------------------------------
                         Edward F. McKernan,
                         President, Chief Financial Officer,
                         and Director


Date:    March 20, 2001
         --------------


By (Signature and Title)   /s/  Thomas W. Montgomery
                        ------------------------------
                         Thomas W. Montgomery,
                         Executive Vice President, Secretary
                         and Director


Date:    March 20, 2001
         --------------


By (Signature and Title)   /s/  Caryl P. Shepherd
                        --------------------------------------
                         Caryl P. Shepherd, Vice President,
                         Treasurer, Assistant Secretary
                         and Controller


Date:    March 20, 2001
         --------------