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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K
                             ---------------------

<Table>
<C>        <S>
(Mark One)
   [X]     ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
           ACT OF 1934

           FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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

           FOR THE TRANSITION PERIOD FROM             TO
</Table>

                         COMMISSION FILE NUMBER 0-23637

                        GLOBAL PREFERRED HOLDINGS, INC.
             (Exact Name of Registrant as Specified in its Charter)

<Table>
<S>                                            <C>
                   DELAWARE                                      58-2179041
       (State or other Jurisdiction of                        (I.R.S. Employer
        Incorporation or Organization)                     Identification Number)
</Table>

                           11315 JOHNS CREEK PARKWAY
                             DULUTH, GEORGIA 30097
                                 (770) 248-3311
   (Address, Including Zip Code and Telephone Number, Including Area Code, of
                   Registrant's Principal Executive Offices)
                             ---------------------

         SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:

<Table>
<S>                                            <C>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
---------------------------------------------- ----------------------------------------------
                     None                                           None
</Table>

         SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:

                         COMMON STOCK, PAR VALUE $.001
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  [X] Yes  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.  [X]

     As of March 15, 2002, 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 $23,941,438. There is no established market for the shares of common
stock.

     At March 15, 2002, there were 4,141,684 shares of common stock outstanding.

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                               TABLE OF CONTENTS

<Table>
<S>       <C>                                                           <C>
                                   PART I
Item 1.   Business....................................................    2
Item 2.   Properties..................................................   17
Item 3.   Legal Proceedings...........................................   17
Item 4.   Submission of Matters to a Vote of Security Holders.........   17

                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   17
Item 6.   Selected Financial Data.....................................   19
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   20
Item 7A.  Quantitative and Qualitative Disclosures About Market
          Risk........................................................   44
Item 8.   Financial Statements and Supplementary Data.................   44
Item 9.   Changes in and Disagreements With Accountants on Accounting
          and Financial Disclosure....................................   44

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   **
Item 11.  Executive Compensation......................................   **
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   **
Item 13.  Certain Relationships and Related Transactions..............   **

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   45
</Table>

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

** Portions of the definitive proxy statement for the annual meeting of
   stockholders, which the registrant intends to file no later than 120 days
   after December 31, 2001, are incorporated by reference in Part III.

                                        1
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

OVERVIEW

     Global Preferred Holdings, Inc. was incorporated in Delaware in 1995 as a
holding company, owning all of the outstanding capital stock of Global Preferred
Re Limited, a Bermuda company registered as a long-term insurer under the
Bermuda Insurance Act 1978 ("Global Preferred Re"). Global Preferred Re, formed
during 1995 under the name of WMA Life Insurance Company Limited, commenced its
reinsurance operations during 1996. We were formed principally to provide an
opportunity for the independent agents associated with an independent marketing
organization, World Marketing Alliance, Inc. ("WMA Agency"), to participate
indirectly in the reinsurance of the policies they sold. An independent
marketing organization ("IMO") is an organization of independent agents that
contracts with one or more insurance companies to distribute and market
securities and insurance products. Many of those individual agents purchased
equity in Global Preferred. In June 2001, World Financial Group, Inc., an
indirect subsidiary of AEGON USA, Inc., acquired certain of the assets of WMA
Agency and substantially all of the agents formerly associated with WMA Agency
became associated with World Financial Group. These independent agents own a
majority of the outstanding common stock of Global Preferred.

     In the third quarter of 2001, we changed our name from The WMA Corporation
to Global Preferred Holdings, Inc. and our subsidiary changed its name from WMA
Life Insurance Company Limited to Global Preferred Re Limited. References in
this report to "Global Preferred," "we," "us," "our" and "our company" refer to
Global Preferred Holdings, Inc. and, unless the context otherwise requires or
otherwise as expressly stated, our Bermuda subsidiary, Global Preferred Re. Our
executive offices are located at 11315 Johns Creek Parkway, Duluth, Georgia
30097 and our telephone number is 770-248-3311.

     Global Preferred, through our subsidiary, Global Preferred Re, provides
reinsurance for life insurance and annuity products. The strength of our
reinsurance business is based on our historical relationship with the
independent agents of World Financial Group, Inc., which is an independent
marketing organization that markets the products we reinsure. As of December 31,
2001, World Financial Group had over 7,500 associated independent registered
agents licensed to sell securities and insurance products. The foundation for
our strong relationship with the agents associated with World Financial Group is
the equity participation that many of them have in our company. We believe that
our relationship with these agents has motivated life insurance companies to
enter into favorable reinsurance arrangements with us as they seek to gain
preferential access to life insurance distribution channels. We believe this
distinguishes us from other companies in our industry. We intend to continue to
grow our reinsurance business with World Financial Group and diversify and
develop new IMO relationships by offering various financial incentives, which
may include stock, warrants and other forms of equity participation in our
company, designed to create an ongoing economic interest in the reinsurance
business that IMOs direct to us.

     Although the reinsurance business is directed to us through our IMO
relationship, the variable universal life insurance and variable annuity
policies that we currently reinsure are underwritten and issued by various
ceding life companies. In the insurance industry, the term "ceding" refers to
the use of reinsurance to transfer from one insurance company to another some or
all of the risks associated with one or more insurance policies. We often refer
to the life insurance companies that reinsure life insurance and annuity
policies through us as the "ceding life companies." The ceding life companies
who currently issue the policies we reinsure are:

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

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

                                        2
<PAGE>

     - Pacific Life Insurance Company, an affiliate of Pacific Mutual Holding
       Company ("Pacific Life"); and

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

     As reported by A.M. Best, each of these companies had over $25 billion of
admitted assets in the United States as of December 31, 2000. Currently, our
largest reinsurance relationship is with Western Reserve, which accounted for
89% of our reinsurance premiums and reinsured policy revenues as of December 31,
2001. This high concentration of our business with Western Reserve has its
origins in the strong relationships between Western Reserve and the agents
associated with World Financial Group; we believe that expanding the base of
life insurance companies for which we reinsure will allow us to better diversify
our risks and reduce our dependency on any single reinsurance agreement.

     When we reinsure a policy for a life insurance company, we continue to
reinsure that policy for as long as it remains in effect. Although the life
insurance company may have the right to cancel the reinsurance on one or more
policies, this right can occur only upon certain defaults or after a period of
10 years or longer, depending on the particular reinsurance agreement. By
maintaining a continued financial interest in these policies, we share the
ongoing revenue streams associated with the policies. Additionally, as we
reinsure new policies, we expand the base of policies in which we maintain an
economic interest.

     For the year ended December 31, 2001, we earned $5.5 million on revenues of
$31.3 million. Our total assets and stockholders' equity at December 31, 2001
was $67.9 million and $42.0 million, respectively. As of December 31, 2001, we
had reinsured over 287,000 life insurance policies with an aggregate face value
of approximately $9.1 billion and approximately 48,000 annuities with aggregate
contract benefits of approximately $266.3 million.

RECENT DEVELOPMENT

     On February 22, 2002, we filed a registration statement with the Securities
and Exchange Commission for an initial public offering of our common stock at a
proposed maximum aggregate offering price of $120,750,000.

LIFE INSURANCE OVERVIEW

     According to A.M. Best, life insurance in force in the United States at
December 31, 2000 totaled $23.1 trillion. Life insurance products typically fall
within a spectrum ranging from insurance protection products that pay a sum of
money upon the death of the insured to asset accumulation products that offer
the insured a tax-advantaged investment vehicle for long-term savings. At the
insurance protection end of the spectrum is term life insurance. Term life
insurance is often renewable on a yearly basis and pays a sum of money upon the
death of the insured. In general, as you move along the spectrum, the investment
component becomes increasingly more meaningful, with the end point being a
variable annuity product, which is a pure asset accumulation product. Variable
annuities provide the policyholder the opportunity to vary benefit payments
depending on the investment results of the assets held in the account. According
to The VARDS Report, a variable annuity data publication, variable annuity sales
totaled $138 billion in 2000.

     We currently reinsure two types of insurance products: variable universal
life and variable annuities. We have the capability, and it is our intent, to
expand the scope of our reinsurance to include other life insurance products,
such as term life, whole life, universal life and fixed annuities.

     Variable Universal Life.  Variable universal life is an investment-oriented
insurance product that combines an investment product with a death benefit. This
product enables the policyholder to vary the timing and amount of premium
payments, the level of death benefit protection, and the investment allocation
of policy funds. Premiums paid by the policyholder, which comprise a separate
pool of assets, are placed in the insurance company's fixed account or separate
accounts. For the funds in the separate

                                        3
<PAGE>

accounts, the policyholder may choose among alternative investment vehicles,
usually including stock funds, corporate or government bonds, and money-market
accounts. The death benefits and cash values in variable universal life policies
vary to reflect the investment experience of the policy's fixed or separate
accounts. The policy may have a guaranteed minimum death benefit while cash
values vary with the investment performance of the fixed or separate account.

     Variable Annuities.  Variable annuity contracts provide for flexible
premium payments and guarantee that the contract holder will receive periodic
benefit payments beginning on a specified date. Prior to the specified date,
premium payments made and resulting income earned accumulate on a tax-deferred
basis. Similar to variable universal life, variable annuity contract holders may
allocate their account balances among a variety of investment vehicles.
Accordingly, the resulting benefit payments to the annuity contract holder will
vary depending on the performance of the invested assets. Variable annuity
contracts may provide a guaranteed minimum death benefit prior to the
commencement of annuity benefit payments.

REINSURANCE OVERVIEW

     Life insurance companies spread the risks they assume by purchasing
insurance, known as reinsurance, from other insurers, known as reinsurers. A
reinsurer agrees to indemnify another insurance company, commonly referred to as
the ceding life company, for all or a portion of the insurance risks
underwritten by the ceding life company under one or more of its own insurance
policies.

     Ceding life companies receive a number of direct benefits from reinsurance,
including:

     - Reduced net liability on individual risks;

     - Catastrophe protection from large events or an aggregation of multiple
       small claims;

     - Reduced fluctuations in profit and loss margins that are inherent to the
       insurance industry;

     - Assistance in maintaining acceptable leverage ratios; and

     - Additional underwriting capacity by permitting them to assume larger
       risks and underwrite a greater number of policies without being required
       to increase their capital and surplus.

     In addition to the direct benefits of reinsurance, a ceding life company
that reinsures through an organization that has a relationship with the
distribution channel that sells the product that is reinsured may receive a
number of indirect benefits that more closely align their economic interests
with those of the distribution channel. These indirect benefits may include
higher quality, more profitable business, longer-term relationships, and higher
sales volumes.

     In exchange for assuming a portion of the risk associated with a reinsured
policy, the reinsurer receives a portion of the revenue stream associated with
the policy so long as the reinsurance remains in effect.

     Reinsurance can be written on either a proportional, also known as quota
share or pro rata, basis or a non-proportional, referred to as excess share or
excess of loss, basis. Under quota share reinsurance, the reinsurer indemnifies
the ceding life company against a predetermined percentage or share of the
benefits paid by the ceding life company under policies it has issued. In
reinsurance written on an excess share basis, the reinsurer indemnifies the
ceding life company against that portion of benefits paid on the original policy
in excess of a specified dollar amount.

     According to A.M. Best, the percentage of new life insurance business
written in the United States that is reinsured has risen from 34% in 1990 to 52%
in 2000. Additionally, the percentage of United States life insurance in force
that was reinsured has grown from 20% in 1990 to 32% in 2000. We believe that
the recent conversions of a number of large mutual insurance companies to
publicly traded stock companies may provide additional reinsurance opportunities
as these companies become interested in restructuring their balance sheets and
stabilizing their operating margins through long-term reinsurance agreements.

                                        4
<PAGE>

TYPES OF REINSURANCE ARRANGEMENTS WE USE

     We currently write three types of reinsurance on a quota share basis:
renewable term (consisting of monthly renewable term and yearly renewable term),
coinsurance and modified coinsurance.

     Renewable Term.  Renewable term, also referred to as risk premium
reinsurance, which includes monthly renewable term and yearly renewable term, is
a plan of reinsurance in which the premium rates are not directly related to the
premium rates on the original plan of insurance. Under renewable term
reinsurance, the ceding life company reinsures the mortality risk with us. The
amount reinsured in any one period is not based on the face amount of the
policy, but rather on the net amount of risk we reinsure. The net amount of risk
is typically defined as the difference between the death benefit and the cash
value of a policy. The ceding life company establishes the policy reserves,
which are reduced for the mortality risk reinsured with us, and pays all policy
benefits, commissions and expenses involved in issuing and maintaining the
business and, correspondingly, we establish reserves specific to the mortality
risk reinsured.

     Under renewable term reinsurance, we may also be subject to persistency
risk, although it is not part of the risk transferred from the ceding life
company. Persistency risk is the risk that a policyholder stops paying premiums,
which would cause the policy to lapse, or chooses to surrender the policy for
the cash surrender value. The effect of persistency risk on us is that possible
future revenue will be reduced, potentially reducing profits such that we may
not be able to fully recover our deferred acquisition expenses.

     Coinsurance.  Under a coinsurance arrangement, the insured risks are ceded
to us on essentially the same basis as underwritten by the ceding life company.
The ceded risks include mortality, persistency, investment and expense. We share
the risks pro rata with the ceding life company. We receive a proportionate
share of gross premiums from the ceding life company and provide contractual
expense allowances to the ceding life company in recognition of expenses
associated with the reinsured policies. Expenses include commissions and costs
associated with underwriting, marketing, policy issue and maintenance. We also
pay the ceding life company our proportionate share of death benefits and other
policy benefits. We hold the reserves on the ceded portion of the policy and are
responsible for the associated obligations of the policy.

     Modified Coinsurance.  Modified coinsurance is similar to coinsurance
except the ceding life company retains the reserves, and the assets related to
the reserves. Modified coinsurance is used primarily for products that develop
cash values and allows the ceding life company to retain the associated assets
for investment purposes.

     Under coinsurance and modified coinsurance agreements, our reinsurance
premiums are materially higher than premiums paid on the renewable term
reinsurance since we are reinsuring more risks. During the first year in which a
policy is reinsured on a coinsurance basis, we are required to reimburse the
ceding life company for our share of acquisition costs, including first year
commissions and issuance expenses. Consequently, our net cash outlays could be
as much as, or more than, the first year life insurance premiums and as much as
10% of annuity premiums. In year two and beyond, however, our cash outlays for
reinsurance allowances are significantly lower than the first year of a policy.

INDUSTRY TRENDS

     We believe that over the last few decades the production and distribution
of life insurance has experienced several fundamental trends.

  TRENDS IN THE PRODUCTION OF LIFE INSURANCE PRODUCTS

     - Product Proliferation.  The life insurance market has evolved from one
       offering a handful of industry-standardized products to one with products
       that are highly differentiated across the industry and even within a
       particular company. This has been driven primarily by the market's demand
       for more complex, investment-oriented products, as well as technological
       improvements that have enabled the support and administration of such
       products.

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<PAGE>

     - Demutualization.  A number of large mutual life insurance companies have
       converted into publicly traded stock companies. We believe that this
       conversion has caused those companies to focus more on maximizing product
       profitability and stockholder value.

     - Consolidation Among Life Insurance Companies.  Industry pressures on
       profitability and the desire to achieve economies of scale have driven
       consolidation of life insurance companies. Although we believe that
       larger, stronger insurance companies have a more focused approach to
       distribution channels, it has also created a greater degree of
       competition among fewer insurers for access to those distribution
       channels. This increased competition has pressured insurance companies to
       increase agent commissions, thereby lowering their profit margins, and
       increasing the insurers' focus on securing stable, reliable access to
       distribution channels.

  TRENDS IN THE DISTRIBUTION OF LIFE INSURANCE PRODUCTS

     - Diversification of Distribution Channels.  Historically, most life
       insurers distributed their products through their own captive agency
       sales force. Although this traditional distribution channel is still
       utilized, insurers are now increasingly selling their products through
       IMOs (including independent agents, brokerage firms, banks and other
       alternative distribution channels), enabling the insurers to focus their
       resources on their principal expertise: product development, underwriting
       and policy administration. As a result, insurers increasingly rely on
       IMOs for agent recruitment, training and sales support.

     - Increasingly Complex Regulatory Environment.  Regulation of insurance
       sales has become more extensive as products have become more complicated
       and the distribution systems have become more diverse. As a result, the
       cost of compliance with such regulations has risen dramatically and has
       made it more difficult for IMOs to manage a diverse portfolio of
       products.

     - Consolidation Among Distribution Channels and the Emergence of National
       Distribution Franchises.  In order to achieve economies of scale and
       increased bargaining power, a number of IMOs have grown and acquired
       other, smaller IMOs.

     We believe that these trends have led to a misalignment of interests
between the distributors of life insurance products and the life insurance
companies that create those products. The separation of life insurance companies
from distribution channels, followed by the growing strength of those
distribution channels, creates an environment where the distributors control
access to the life insurance consumers. The independent distributors' ability to
select the products to sell to the public has given them significantly greater
influence over product development. Often, product selection decisions are
driven by a desire for immediate commissions rather than on the value provided
by long-term relationships focused on writing persistent, high quality business.
Additionally, this short-term focus has inhibited the product development
process, as life insurance companies are reluctant to invest in the development
of products for distribution relationships that may not be long lasting. We
believe that these trends have created an environment in which life insurance
companies seek more stable and reliable distribution networks in which
distributors have long-term incentives to write persistent, high quality
business and the insurance companies have less pressure to pay higher
commissions to the distributors solely to gain and maintain access to the
consumers.

THE GLOBAL PREFERRED VALUE PROPOSITION

     We strive to align the interests between life insurance distributors and
life insurance companies by developing long-term, collaborative reinsurance
relationships. The foundation for these relationships is providing the
distribution channels a meaningful financial incentive, tied to the
profitability of the reinsurance business directed to us. Among these possible
financial incentives is equity participation in the reinsured business, with
such levels of equity participation driven by the volume and quality of
reinsurance business directed to us. Through these collaborative relationships,
both the distributors and the insurers benefit.

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<PAGE>

  BENEFITS TO DISTRIBUTORS

     - Participates in Benefits from Reinsurance.  Through the financial
       incentives we provide, distributors receive financial benefits in
       addition to traditional commissions.

     - Increases in Net Operating Margins.  Similarly, to the extent that the
       receipt of financial incentives results in a recognizable item for income
       statement purposes, distributors will be able to substantially increase
       their net operating margins without incurring additional costs.

     - Enhances Ability to Assess Quality of Business.  As the overall economic
       package to the distributor is increasingly influenced by the long-term
       performance of the business they sell, distributors will be driven to
       gain more information regarding the drivers of profitability and they
       will seek to enhance the quality of business they produce.

     - Increases Involvement in Product Development.  As distributors become
       increasingly focused on long-term product success, they will want to
       become more involved in product development decisions to improve sales
       volume and profitability within the products they sell.

  BENEFITS TO INSURER

     - Stabilizes Product Distribution.  Reinsurance-driven partnerships with
       distribution channels interested in performance-based incentives should
       result in more stable relationships with the channels, as the financial
       benefits are realized over a number of years as opposed to immediate
       commission payouts, which create no need for a long-term tie between the
       distribution channels and the insurers.

     - Motivates Distributor to Focus on Quality of Business.  As distributors'
       economic interests become more aligned with those of the insurers whose
       policies they sell, they will become more focused on the quality of that
       business.

     - Helps Alleviate Downward Margin Pressure.  By complementing commission
       dollars with the other financial incentives we provide, distributors
       should be less inclined to seek continual commission increases from
       insurers, resulting in measurable improvements in the insurers' margins.
       As insurers recognize the long-term benefits we are creating for them
       with the distribution channels and improved margins, those insurers will
       be more likely to choose us for reinsurance to help assure continued
       long-term distribution relationships.

     - Focuses Distribution System on Specific Products.  Since the financial
       incentives paid by us will be linked to the sale of specific products,
       distributors will place an emphasis on selling those products in order to
       receive the additional financial benefits.

     By providing these benefits to both the distribution channel and the
insurer, we are able to develop long-term relationships with both parties,
thereby contributing to our continued overall success.

GROWTH STRATEGY

     Our objectives are to build strong financial performance, loyal IMOs and
stockholder value. We aim to achieve these objectives through the following
growth strategies:

     - Expanding Reinsurance Coverage of Currently Reinsured Policies.  Some of
       our existing reinsurance agreements provide us the right to expand the
       scope of our reinsurance of policies we are already reinsuring through
       the exercise of contractual rights. Expansion of this coverage requires
       additional capital and we intend to use a substantial portion of the
       proceeds from our proposed public offering of common stock to increase
       our level of economic participation in the policies we are currently
       reinsuring by exercising these contractual rights. Specifically, our
       agreement with Western Reserve provides us with the right to convert our
       reinsurance of certain variable universal life policies from a monthly
       renewable term basis to a coinsurance and modified coinsurance basis.
       Further, we are contractually able to increase the quota share on certain
       Western Reserve variable

                                        7
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       annuity products on a coinsurance and modified coinsurance basis from 10%
       to at least 40% for policies written since January 1, 1999. By expanding
       this coverage, we will be able to further diversify our exposure and
       participate more fully in the ongoing revenue streams generated by the
       life insurance and annuity products reinsured under these agreements.

     - Expanding Reinsurance Coverage of New Policies Under Existing
       Agreements.  These same reinsurance agreements also permit us to reinsure
       certain new policies as they are written and increase our participation
       in those new policies reinsured by reinsuring them on a coinsurance and
       modified coinsurance basis and at higher quota share percentages.
       Additionally, in June 2001, we entered into the First Right Agreement
       with Western Reserve that provides us a first right to reinsure new
       products offered by Western Reserve, or its U.S. affiliates, that are
       sold by agents associated with World Financial Group. This agreement
       covers new variable universal life policies issued through March 31, 2006
       and new variable annuity policies issued through December 31, 2002. The
       reinsurance of new policies and products will continue to increase our
       base of policies reinsured and generate additional revenues under our
       existing reinsurance agreements.

     - Broadening Existing Relationships.  We will also seek to grow our
       business by (1) broadening the pool of products that we reinsure for the
       ceding life companies with which we have existing reinsurance
       arrangements and (2) establishing new reinsurance arrangements with other
       life insurance companies that sell products through World Financial
       Group. We believe that our new agreements with World Financial Group and
       Western Reserve provide the foundation for future cooperation in the
       development, distribution and underwriting of new life insurance and
       annuity products. We also believe that the reinsurance agreement that we
       recently entered into with Pacific Life is an example of the new
       relationships that we are striving to establish with additional life
       insurance companies that desire to establish distribution relationships
       with the agents associated with World Financial Group.

     - Forming Relationships with Other IMOs.  Through the use of financial
       incentives, which may include stock, warrants and other forms of equity
       in our company, we intend to form new relationships with other IMOs
       distributing both variable and fixed life insurance and annuity products.
       These new relationships may be with other independent insurance agencies,
       broker/dealers, regional investment firms, banks or other financial
       institutions.

DISTRIBUTION RELATIONSHIPS AND SALES STRATEGIES

     Our strategy is to generate reinsurance business through strong,
incentive-based relationships with IMOs that have the desire and ability to
establish long-term reinsurance relationships with the life insurance companies
whose products they sell. We believe that IMOs that develop long-term
relationships have a greater incentive to place profitable and persistent
business with those life insurers that reinsure through their reinsurance
partner. This three-party relationship creates positive economic opportunities
for each party, as the IMO may benefit above and beyond commissions, and we and
the life insurance company benefit through increased sales and incremental
profitability of the business.

     All of the policies we currently reinsure have been generated through the
marketing efforts of the independent agents who have been associated with World
Financial Group and its predecessor, WMA Agency. Our relationship with World
Financial Group was formed in June 2001, when certain assets of WMA Agency were
sold to World Financial Group. As a result of the asset acquisition,
substantially all of the agents of WMA Agency became associated with World
Financial Group. Our relationship with WMA Agency dates back to our founding in
1995, when we were principally formed to provide an opportunity for its agents
to participate indirectly in the reinsurance of the policies they sold. Many of
those individual agents purchased an equity ownership in our company through a
private sale of common stock in 1995 and a subsequent sale of preferred stock in
2000. We believe that this equity participation provides an effective incentive
for those individuals to establish strong relationships with the ceding life
companies that reinsure through us.

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     We expect to generate additional reinsurance business through the
continuing efforts of World Financial Group, as contemplated by the following
agreements:

     - An agreement between World Financial Group and us, which requires that
       World Financial Group will, for a period extending through June 8, 2008,
       use its commercially reasonable efforts to assist us in attaining the
       opportunity to reinsure all insurance products sold by its agents for
       insurance companies with which World Financial Group has selling
       agreements, other than Western Reserve and Western Reserve's affiliates.
       Additionally, the agreement provides that World Financial Group will use
       commercially reasonable efforts to cooperate with us in our negotiations
       to establish reinsurance relationships with life insurance companies and
       provide benefits to the companies that reinsure their business through us
       not otherwise available to them, such as access to events and conferences
       sponsored by World Financial Group for its independent agents and the
       opportunity to participate in World Financial group sponsored
       communications, which may included mailings, conference calls or
       televised broadcasts; and

     - An agreement ("First Right Agreement") with Western Reserve that provides
       us a first right to reinsure certain business sold by agents associated
       with World Financial Group and underwritten by Western Reserve or its
       U.S. affiliates, as further described below in "Reinsurance
       Relationships."

     Additionally, we intend to form new relationships with other IMOs and
ceding life companies by:

     - Marketing directly to IMOs with which we do not currently have
       relationships;

     - Leveraging our existing IMO relationship to establish reinsurance
       relationships with additional ceding life companies;

     - Employing our existing IMO relationship to establish relationships with
       other IMOs; and

     - Utilizing relationships with ceding life companies to establish
       relationships with additional IMOs.

REINSURANCE RELATIONSHIPS

  CURRENT REINSURANCE BUSINESS

     We currently provide reinsurance for variable universal life and variable
annuity policies issued by four large life insurance companies. Our reinsurance
agreements with these ceding life companies provide for our assumption of a
portion of defined risks associated with specified products sold by agents
associated with World Financial Group. Reinsurance under these agreements is
automatic, meaning we are required to accept the business ceded to us so long as
the ceding life companies satisfy the terms of the reinsurance agreements. The
following table indicates, by ceding life company, the types of policies we are
currently reinsuring and the type of reinsurance applicable to each.

<Table>
<Caption>
                                                           TYPE OF REINSURANCE
                                           ---------------------------------------------------
CEDING LIFE INSURANCE COMPANY              RENEWABLE TERM   COINSURANCE   MODIFIED COINSURANCE
-----------------------------              --------------   -----------   --------------------
<S>                                        <C>              <C>           <C>
Western Reserve
  Variable universal life................         x              x                  x
  Variable annuity.......................                        x                  x
American Skandia
  Variable annuity.......................                                           x
Pacific Life
  Variable universal life................         x
Zurich Kemper
  Variable universal life................         x
</Table>

     We have four separate reinsurance agreements with Western Reserve that
cover policies on Western Reserve variable universal life and variable annuity
products issued on or after January 1, 1992 that are sold by the agents of World
Financial Group. These agreements were entered into on July 1, 1996,

                                        9
<PAGE>

January 1, 1998, April 1, 1998, and October 1, 1999, respectively. Our
reinsurance agreement with American Skandia began on January 1, 1997 and covers
policies on an American Skandia variable annuity product sold by these agents
after that date. Our Zurich Kemper agreement was effective September 1, 1996 and
covers all policies on a Zurich Kemper variable universal life product issued
between September 1, 1996 and March 31, 2001 sold by the agents associated with
World Financial Group.

     Our agreement with Pacific Life was signed on June 25, 2001 and covers
policies on a variable universal life product issued on or after January 1,
2001, which are sold by the agents associated with World Financial Group. We
believe our relationship with Pacific Life is a significant event in the growth
of our business because this reinsurance agreement was entered into after World
Financial Group purchased certain of the assets of WMA Agency.

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

  INCREASED BUSINESS UNDER EXISTING CONTRACTS

     Expand Reinsurance Business by Exercising Contractual Rights.  If we
successfully complete our proposed public offering of our common stock, we
intend to increase our level of economic participation in our reinsurance of
policies we currently reinsure by exercising the following contractual expansion
rights that we have under our existing reinsurance agreements:

     - We currently reinsure certain Western Reserve variable universal life
       products on a monthly renewable term basis. We have a contractual right
       to convert our reinsurance of these policies to a coinsurance and
       modified coinsurance basis.

     - We currently reinsure certain Western Reserve variable annuity products
       on a coinsurance and modified coinsurance basis at a quota share of 10%.
       We have a contractual right to increase the quota share to between 40%
       and 50% for policies written since January 1, 1999.

     Reinsurance of New Business with Western Reserve.  Following World
Financial Group's purchase of a substantial portion of the assets of WMA Agency
in June 2001, we entered into a First Right Agreement with Western Reserve that
provides us a first right to reinsure certain new products issued by Western
Reserve or its U.S. affiliates that are sold by agents associated with World
Financial Group, as follows:

     - We have the right, subject to minimum sales volume thresholds, to
       reinsure up to 20% of all single life variable universal life products
       introduced for sale after July 1, 2001, on a coinsurance and modified
       coinsurance basis for all policies issued through March 31, 2003 and on a
       monthly renewable term basis for all policies issued through March 31,
       2006.

     - We have the right to reinsure between 40% and 50% of all variable annuity
       products introduced after December 31, 2000 and issued through December
       31, 2002, depending upon the volume of direct written variable annuity
       premiums issued by Western Reserve or its U.S. affiliates in the previous
       calendar year.

     These rights automatically extend for one-year renewal periods unless
either party gives notice of termination 180 days prior to the expiration of the
applicable initial or renewal term. Our decisions to reinsure these products
will be made from time to time during the term of the First Right Agreement and

                                        10
<PAGE>

such decisions will be based on a number of relevant factors, including the
attractiveness of the reinsurance rates prescribed by the agreement, the volume
of business and our available capital capacity.

INVESTMENTS

     Our investments are selected with the objective of achieving favorable
investment returns consistent with appropriate credit, diversification, tax and
regulatory consideration, while providing sufficient liquidity to enable us to
meet our obligations as a reinsurance company on a timely basis. We have
developed specific investment guidelines that stress diversification of risk,
conservation of principal and liquidity. Our investments, however, will be
subject to market risks and fluctuations, as well as to the risks inherent in
particular securities. Our 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 board
of directors reviews the guidelines annually.

     We utilize an independent investment manager to invest our assets in
accordance with our investment guidelines. Conning Asset Management Inc., a
subsidiary of Swiss Reinsurance Company, has been our investment manager since
June 1998. Conning has discretionary authority to manage our non-cash investment
portfolio. We consistently and systematically monitor the strategies and funds
in which we are invested, and we believe our overall risk is limited as a result
of our selected strategy. The Investment Committee of the board of directors
periodically reviews the performance of, and the fees paid to, Conning. We are
not aware of any affiliation by us with Conning or by Conning with the ceding
life companies. The fees paid to Conning for services rendered during 2001
totaled $62,500.

     As of December 31, 2001, we had invested assets totaling $20.3 million with
a net unrealized gain of $246,531. The table below shows the aggregate amounts
of fixed maturity securities and cash and cash equivalents comprising our
portfolio of invested assets:

<Table>
<Caption>
                                                            AT DECEMBER 31,
                                                 --------------------------------------
                                                    1999         2000          2001
                                                 ----------   -----------   -----------
<S>                                              <C>          <C>           <C>
Fixed maturity securities......................  $2,054,231   $ 5,912,379   $12,214,279
Cash and cash equivalents......................   3,475,950     4,259,153     8,062,110
                                                 ----------   -----------   -----------
Total invested assets..........................  $5,530,181   $10,171,532   $20,276,389
                                                 ==========   ===========   ===========
</Table>

     As of December 31, 2001, the fixed maturity portion of our invested asset
portfolio had a dollar weighted average Moody's rating of Aa2, an average
duration of 2.7 years and an average yield to maturity of 6.5% before investment
expenses.

     Market Sensitive Instruments.  Our investment portfolio includes
investments that are subject to changes in market values with changes in
interest rates. The aggregate hypothetical loss generated from an immediate 100
basis point increase in market interest rates would have resulted in an
estimated decrease in fair value of approximately 1.8%, or approximately
$357,000, on a portfolio valued at approximately $20.3 million at December 31,
2001. The impact on our investment portfolio from an immediate 100 basis point
decrease in market interest rates would have resulted in an estimated increase
in fair value of 1.6%, or approximately $332,000. The foregoing reflects the use
of an immediate time horizon. Credit spreads are assumed to remain constant in
these hypothetical examples.

                                        11
<PAGE>

     The following table summarizes the fair value of our investments at the
dates indicated.

<Table>
<Caption>
                                                            AT DECEMBER 31,
                                                 --------------------------------------
                                                    1999         2000          2001
                                                 ----------   -----------   -----------
<S>                                              <C>          <C>           <C>
U.S. government agency.........................          --            --   $   216,308
Corporate......................................  $  785,524   $ 4,004,700     7,434,498
Asset-backed securities........................     933,686       880,457     1,661,456
Mortgage-backed securities.....................     335,021     1,027,222     2,902,017
                                                 ----------   -----------   -----------
Total fixed maturity securities................  $2,054,231   $ 5,912,379   $12,214,279
Cash and cash equivalents......................   3,475,950     4,259,153     8,062,110
                                                 ----------   -----------   -----------
          Total................................  $5,530,181   $10,171,532   $20,276,389
                                                 ==========   ===========   ===========
</Table>

     The following table summarizes the fair value by contractual maturities of
our fixed maturity securities portfolio at the dates indicated.

<Table>
<Caption>
                                                             AT DECEMBER 31,
                                                  -------------------------------------
                                                     1999         2000         2001
                                                  ----------   ----------   -----------
<S>                                               <C>          <C>          <C>
Due in less than one year.......................          --           --   $   615,406
Due after one through five years................  $  211,930   $3,613,946     6,825,383
Due after five through ten years................     573,594      390,754       210,017
Asset-backed securities.........................     933,686      880,457     1,661,456
Mortgage-backed securities......................     335,021    1,027,222     2,902,017
                                                  ----------   ----------   -----------
          Total.................................  $2,054,231   $5,912,379   $12,214,279
                                                  ==========   ==========   ===========
</Table>

     Quality of Fixed Maturity Securities in Portfolio.  The following table
summarizes the composition of the fair value of our fixed maturity securities
portfolio at the dates indicated by rating as assigned by S&P or Moody's, using
the higher of these ratings for any security where there is a split rating.

<Table>
<Caption>
                                                               AT DECEMBER 31,
                                                              ------------------
RATING                                                        1999   2000   2001
------                                                        ----   ----   ----
<S>                                                           <C>    <C>    <C>
AAA/Aaa.....................................................   61%    33%    43%
AA/Aa2......................................................   10     13     17
A/A2........................................................   20     51     39
BBB/Baa2....................................................    9      3      1
BB/Ba2......................................................   --     --     --
B/B2........................................................   --     --     --
CCC/Caa or lower, or not rated..............................   --     --     --
                                                              ---    ---    ---
          Total.............................................  100%   100%   100%
                                                              ===    ===    ===
</Table>

UNDERWRITING AND POLICY ADMINISTRATION

     As an automatic reinsurer, we rely upon the underwriting of the ceding life
companies on policies we reinsure. We review and monitor the underwriting
standards and procedures of the ceding life companies, including rules for
policy continuations, changes, re-entries, reinstatements and conversions.

     The ceding life companies administer policies we reinsure and provide us
with all information necessary for processing the reinsurance. We have conducted
only a limited review of the administrative practices of our ceding life
companies. Therefore, we may not have sufficient information to properly
evaluate the administration of the business we reinsure or the accuracy of the
information provided by the ceding life companies.

                                        12
<PAGE>

     Our reinsurance agreements give us 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. 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.

RETROCESSION

     Our profitability depends, in part, 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 our operating results for such period.

     As a partial hedge against the unpredictability of claims experience, we
have entered into a pool retrocession agreement. Under the pool retrocession
agreement, multiple reinsurers participate in the risks ceded by us. Standard
mortality risks in excess of our 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.

REGULATION OF GLOBAL PREFERRED RE

  BERMUDA

     Global Preferred Re is registered as a long-term insurer in Bermuda under
The Insurance Act 1978 and related regulations of Bermuda (the "Insurance Act").
The Insurance Act 1978 and related regulations of Bermuda (the "Insurance Act"),
which regulates the insurance business of Global Preferred Re, provides that no
person shall carry on any insurance business in or from within Bermuda unless
registered as an insurer under the Insurance Act by the Bermuda Monetary
Authority (the "Authority"). Under the Insurance Act, insurance business
includes reinsurance business. The Authority, in deciding whether to grant
registration, has broad discretion to act as the Authority thinks fit in the
public interest. The Authority is required by the Insurance Act to determine
whether the applicant is a fit and proper body to be engaged in the insurance
business and, in particular, whether it has, or has available to it, adequate
knowledge and expertise. The registration of an applicant as an insurer is
subject to its complying with the terms of its registration and such other
conditions as the Authority may impose from time to time.

     An Insurance Advisory Committee appointed by the Minister of Finance
advises the Authority on matters related to the discharge of the Authority's
functions and sub-committees thereof supervise and review the law and practice
of insurance in Bermuda, including reviews of accounting and administrative
procedures.

     The Insurance Act also imposes solvency and liquidity standards and
auditing and reporting requirements and grants to the Authority powers to
supervise, investigate and intervene in the affairs of Bermuda insurance
companies.

     Cancellation of Insurer's Registration.  An insurer's registration may be
canceled by the Authority on certain grounds specified in the Insurance Act,
including failure of the insurer to comply with its obligations under the
Insurance Act or if, in the opinion of the Authority after consultation with the
Insurance Advisory Committee, the insurer has not been carrying on business in
accordance with sound insurance principles.

     Independent Approved Auditor.  Every registered insurer must appoint an
independent auditor who will annually audit and report on the statutory
financial statements and the statutory financial return of the insurer, both of
which, in the case of Global Preferred Re, are required to be filed annually
with the Authority. The independent auditor of the insurer must be approved by
the Authority and may be the

                                        13
<PAGE>

same person or firm that audits the insurer's financial statements and reports
for presentation to its shareholders. Global Preferred Re's independent auditor
is KPMG, Bermuda.

     Statutory Financial Statements.  An insurer must prepare annual statutory
financial statements. The Insurance Act prescribes rules for the preparation and
substance of such statutory financial statements, which include, in statutory
form, a balance sheet, an income statement, a statement of capital and surplus
and notes thereto. The insurer is required to give detailed information and
analyses regarding premiums, claims, reinsurance and investments. The statutory
financial statements are not prepared in accordance with accounting principles
generally accepted in the United States of America and are distinct from the
financial statements prepared for presentation to the insurer's stockholders
under the Companies Act 1981 of Bermuda, which financial statements may be
prepared in accordance with accounting principles generally accepted in the
United States of America. Global Preferred Re, as a long-term insurer, is
required to submit to the Authority the annual statutory financial statements as
part of its annual statutory financial return. The statutory financial
statements and the statutory financial return do not form part of the public
records maintained by the Authority.

     Minimum Solvency Margin; Restrictions on Dividends.  Under the Insurance
Act, Global Preferred Re:

     - Must maintain the required minimum solvency margin (the value of its
       long-term business assets exceed the amount of its long-term business
       liabilities by at least $250,000) and is prohibited from declaring or
       paying any dividends during any financial year if it is in breach of its
       minimum solvency margin or if the declaration or payment of such
       dividends would cause it to fail to meet such margin (if it fails to meet
       its minimum solvency margin on the last day of any financial year, Global
       Preferred Re will be prohibited, without the approval of the Authority,
       from declaring or paying any dividends during the next financial year);

     - Is prohibited, without the approval of the Authority, from reducing its
       total statutory capital as set out in its previous year's financial
       statements by 15% or more, during a single calendar year;

     - Is required to establish and maintain a long-term business fund; and

     - Is prohibited from declaring or paying a dividend to any person other
       than a policyholder unless the value of the assets of its long-term
       business fund as certified by Global Preferred Re's approved actuary,
       exceeds the extent (as so certified) of the liabilities of Global
       Preferred Re's long-term business. The amount of any such dividend shall
       not exceed the aggregate of the excess referenced in the preceding
       sentence and other funds properly available for the payment of dividends,
       being funds arising out of its business, other than its long-term
       business.

     Long-term Business Fund.  An insurer carrying on long-term business is
required to keep its accounts in respect of its long-term business separate from
any accounts kept in respect of any other business and all receipts of its
long-term business form part of its long-term business fund. No payment may be
made directly or indirectly from an insurer's long-term business fund for any
purpose other than a purpose related to the insurer's long-term business, unless
such payment can be made out of any surplus certified by the insurer's approved
actuary to be available for distribution otherwise than to policyholders. Upon
the winding-up of a long-term business insurer, the assets in the insurer's
long-term business fund shall be available only for meeting the liabilities of
the insurer attributable to its long-term business and all its other assets
shall be available only for meeting the liabilities of the insurer attributable
to its other business -- these restrictions shall not apply if the value of the
assets exceeds the amount of liabilities to the extent of the assets in excess.

     Restrictions on Transfer of Business and Winding-Up.  Global Preferred Re,
as a long-term insurer, is subject to the following provisions of the Insurance
Act:

     - All or any part of the long-term business, other than long-term business
       that is reinsurance business, may be transferred only with and in
       accordance with the sanction of the applicable Bermuda court; and

                                        14
<PAGE>

     - An insurer or reinsurer carrying on long-term business may only be
       wound-up or liquidated by order of the applicable Bermuda court, and this
       may increase the length of time and costs incurred in the winding-up of
       Global Preferred Re when compared with a voluntary winding-up or
       liquidation.

     Supervision, Investigation and Intervention.  The Authority may appoint an
inspector with extensive powers to investigate the affairs of an insurer if the
Authority believes that an investigation is required in the interest of the
insurer's policyholders or persons who may become policyholders. In order to
verify or supplement information otherwise provided to the Authority, the
Authority may direct an insurer to produce documents or information relating to
matters connected with the insurer's business.

     If it appears to the Authority that there is a risk of the insurer becoming
insolvent, or that it is in breach of the Insurance Act or any conditions
imposed upon its registration, the Authority may, among other things, direct the
insurer to:

     - Not take on any new insurance business;

     - Not vary any insurance contract if the effect would be to increase the
       insurer's liabilities;

     - Not make certain investments;

     - Realize certain investments;

     - Maintain, or transfer to the custody of a specified bank, certain assets;

     - Not declare or pay any dividends or other distributions or restrict the
       making of such payments; and

     - Limit its premium income.

     Principal Representative.  An insurer is required to maintain a principal
office in Bermuda and to appoint and maintain a principal representative in
Bermuda. For the purpose of the Insurance Act, Global Preferred Re's principal
representative is CFM Insurance Managers, Ltd. and its principal office is
located at 44 Church Street, 3rd Floor, Hamilton HM 12, Bermuda. Without a
reason acceptable to the Authority, Global Preferred Re may not terminate the
appointment of its principal representative, and the principal representative
may not cease to act as such, unless 30 days' notice in writing to the Authority
is given of the intention to do so. It is the duty of CFM Insurance Managers,
Ltd., as Global Preferred Re's principal representative, within 30 days of
reaching the view that there is a likelihood of it becoming insolvent or that a
reportable event has, to the principal representative's knowledge, occurred or
is believed to have occurred, to make a report in writing to the Authority
setting out all the particulars of the case that are available to the principal
representative. Examples of such a reportable event include failure by the
insurer to comply substantially with a condition imposed upon the insurer by the
Authority relating to a solvency margin or liquidity or other ratio.

     Certain Bermuda Law Considerations.  Global Preferred Re has been
designated as non-resident for exchange control purposes by the Authority and is
required to obtain the permission of the Authority for the issue and free
transferability of all of its shares. Global Preferred Re's common shares cannot
be transferred without the consent of the Bermuda Monetary Authority. Because
Global Preferred Re is designated as non-resident for Bermuda exchange control
purposes, Global Preferred Re is allowed to engage in transactions, and to pay
dividends to Bermuda non-residents who are holders of Global Preferred Re's
common shares, in currencies other than the Bermuda Dollar. Global Preferred Re
is exempt from Bermuda laws restricting the percentage of share capital that may
be held by non-Bermudians, but as an exempted company it may not participate in
certain business transactions, including:

     - Acquiring or holding land in Bermuda, except as required for business
       purposes and held by way of lease or tenancy for terms of not more than
       50 years or with the consent of the Minster of Finance, and by way of
       lease or tenancy agreement for a term not exceeding 21 years in order to
       provide accommodation or recreational facilities for its officers and
       employees, without the express authorization of the Bermuda legislature;

                                        15
<PAGE>

     - Taking of mortgages on land in Bermuda to secure an amount in excess of
       $50,000 without the consent of the Minister of Finance;

     - Acquiring any bonds or debentures secured by any land in Bermuda, other
       than certain types of Bermuda government securities; or

     - The carrying on of business of any kind in Bermuda, except in furtherance
       of business carried on outside Bermuda or under license granted by the
       Minister of Finance or the Authority. While Global Preferred Re is
       permitted to reinsure risks undertaken by any company incorporated in
       Bermuda and permitted to engage in the insurance and reinsurance
       business, generally it is not permitted without a special license granted
       by the Authority to insure Bermuda domestic risks or risks of lives of
       persons of, in or based in Bermuda.

     Global Preferred Re must comply with the provisions of the Bermuda
Companies Act 1981 regulating the declaration and payment of dividends and
making distributions from contributed surplus and reductions of capital. Global
Preferred Re may declare or pay a dividend, or make a distribution out of
contributed surplus, if there are reasonable grounds for believing that: the
company is, or would after the payment be, unable to pay its liabilities as they
become due; or the realizable value of the company's assets would thereby be
less than the aggregate of its liabilities and its issued share capital and
share premium accounts.

     Further under the Companies Act 1981:

     - Global Preferred Re may redeem or re-purchase its shares only as
       permitted by and in accordance with Companies Act 1981. Restrictions
       include the requirement to have the necessary power and maintenance of
       the minimum share capital required under the Companies Act 1981 and as
       stated in its memorandum of association (in the case of Global Preferred
       Re, the minimum share capital as currently stated in its memorandum of
       association is $250,000). Further redemption or re-purchase by Global
       Preferred Re of its shares may be effected if, there are reasonable
       grounds for believing that Global Preferred Re is, or after the
       redemption or re-purchase would be, unable to pay its liabilities as they
       become due. Any redemption or re-purchase may only be effected out of the
       paid-up capital thereon or out of the funds of Global Preferred Re which
       would otherwise be available for dividend or distributions or out of the
       proceeds of an issue of shares made for the purposes of the redemption or
       re-purchase of shares. Any premium (amounts over par value) payable on
       the redemption or re-purchase, must be provided out of the funds of
       Global Preferred Re which would otherwise be available for dividend or
       distribution or out of Global Preferred Re's share premium account, prior
       to such redemption or re-purchase.

     - Global Preferred Re may not reduce the amount of its share capital below
       the required minimum share capital unless there are reasonable grounds
       for believing that Global Preferred Re is, or after the reduction would
       be, unable to pay its liabilities as they become due.

  UNITED STATES

     In general, reinsurers domiciled outside the United States (referred to as
"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 Global Preferred Re, 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.

     The state insurance laws in the United States restricting the investments
of insurance companies are not applicable to Global Preferred Re. Unlike
insurance regulations in the United States, Bermuda law does not limit or
regulate investments of Global Preferred Re as a long-term insurer provided that
such investments are made for its potential benefit and the minimum solvency
ratios prescribed under the Insurance Act are not breached.

                                        16
<PAGE>

COMPETITION

     Reinsurance and insurance companies compete based on many factors,
including premium charges, ability to structure innovative terms and conditions
in product offerings, the general reputation and perceived financial strength of
the reinsurer or insurer, relationships with reinsurance and insurance
intermediaries, ratings assigned by independent rating agencies, speed of claims
payment and administrative activities and experience in the particular risk to
be underwritten.

     While we compete with numerous national and international reinsurance
companies, primary insurance companies, underwriting syndicates and other
financial services providers, many of which are well established, have
significant operating histories and substantially greater underwriting,
marketing and administrative resources than we do, we believe that our focus on
building relationships with IMOs can be a distinguishing feature. Our growth
strategy includes the expansion of our relationships with IMOs through the use
of financial incentives, which may include stock, warrants and other forms of
equity in our company. We believe that these incentives will motivate IMOs to
influence ceding life companies to enter into favorable reinsurance arrangements
with us, thereby distinguishing us from other companies in our industry. Our
ability to compete with other potential reinsurers in this market will depend
upon our ability to successfully develop and maintain strong relationships with
IMOs. Aside from our experience in establishing our current IMO relationship, we
have not yet attempted to develop new IMO relationships and cannot assure you
that we will be able to compete successfully, and the inability to do so could
have a material adverse effect upon our ability to implement our strategies.

     Direct insurance companies who are licensed to underwrite insurance are
also licensed to underwrite reinsurance, making commercial access into the
reinsurance business relatively uncomplicated. In addition, over the last
several years, capital markets participants, including exchanges and financial
intermediaries, have developed financial products intended to compete with
traditional reinsurance. We are unable to predict the extent to which new,
proposed or potential initiatives may affect the demand for our products.
Barriers to entry to the reinsurance industry for non-insurers are chiefly the
time, capital, and talent necessary to attract, underwrite and manage the
business.

EMPLOYEES

     As of December 31, 2001, we had nine full-time employees. None of our
employees is covered by a collective bargaining agreement. We consider our
relations with our employees to be good.

     We believe our future success will depend in large part on our ability to
recruit and retain qualified employees experienced in insurance and
underwriting. The competition for such personnel is intense, and there can be no
assurance that we will be successful in retaining or recruiting key personnel.

ITEM 2.  PROPERTIES

     We are currently tenants-at-will in approximately 2,100 square feet of
office space in Duluth, Georgia. Western Reserve is the landlord on the space
that we occupy. As tenants-at-will our landlord is required by law to provide us
60-days notice to vacate. Our monthly rent is $3,482, plus our proportionate
share of the taxes. We are currently in the process of obtaining a new lease for
office space. We do not own or lease any other properties.

                                        17
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS

     We are currently not a party to any material legal proceedings.

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

     During the fourth quarter of 2001, no matters were submitted to our
security holders for a vote.

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     No public trading market existed for our common stock during 2001.

     At March 15, 2002, we had 4,141,684 shares of common stock outstanding and
approximately 800 stockholders.

     We have not declared or paid any cash dividends on our common stock during
2000 or 2001 and our board of directors does not anticipate declaring or paying
any cash dividends in the foreseeable future. We anticipate that all of our
earnings and other cash resources, if any, will be retained for the purpose of
financing Global Preferred Re's reinsurance business and will be available for
other strategic opportunities that may develop. Future dividend policy will be
subject to the discretion of our board of directors, and will be contingent upon
our results of operations, financial position and capital requirements, general
business conditions, restrictions imposed by financing arrangements, if any,
legal and regulatory restrictions on the payment of dividends and other factors
that our board of directors deems relevant.

     As a holding company with no direct operations, the payment of dividends by
us in the future will be largely dependent on our receipt of dividends from
Global Preferred Re. The payment of dividends by Global Preferred Re is
restricted under Bermuda law and regulations. Under the Insurance Act, Global
Preferred Re must maintain long-term assets with a value of at least $250,000
more than its long-term liabilities. Global Preferred Re is prohibited from
declaring or paying dividends unless the value of its long-term assets exceeds
the amount of its long-term liabilities, as certified by its approved actuary,
by the amount of the dividend and at least $250,000. Global Preferred Re is also
prohibited, without approval of the Bermuda Monetary Authority, from reducing
its total statutory capital by 15% or more in a single calendar year. In
addition, under the Bermuda Companies Act 1981, Global Preferred Re may only
declare or pay a dividend if, among other things, there are reasonable grounds
for believing that Global Preferred Re is, or would after the payment, be able
to pay its liabilities as they become due.

                                        18
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The following table sets forth selected financial data and other operating
information. The selected financial data have been derived from our consolidated
financial statements and should be read in conjunction with our consolidated
financial statements and accompanying notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
herein.

<Table>
<Caption>
                                              YEAR ENDED DECEMBER 31,
                           --------------------------------------------------------------
                              1997         1998         1999         2000         2001
                           ----------   ----------   ----------   ----------   ----------
                                   (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                        <C>          <C>          <C>          <C>          <C>
CONSOLIDATED STATEMENTS
  OF INCOME DATA:
  Premiums...............  $    5,217   $    7,281   $    9,692   $   16,618   $   19,240
  Reinsured policy
     revenues............         195        4,098       13,506       12,894       11,238
  Net investment
     income..............       1,088          951          350          528          811
  Net realized gain
     (loss)
     on investments......          --          267          (66)           3           45
  Loss on recapture of
     business............          --           --         (823)          --           --
  Other income...........         300           --           --           --           --
                           ----------   ----------   ----------   ----------   ----------
     Total revenue.......       6,800       12,597       22,659       30,043       31,334
                           ----------   ----------   ----------   ----------   ----------
  Total benefits and
     expenses............       4,465        9,201       16,114       23,089       23,480
                           ----------   ----------   ----------   ----------   ----------
     Income before income
       taxes.............       2,335        3,396        6,545        6,954        7,854
     Income tax
       expense...........        (816)      (1,157)      (2,225)      (1,821)      (2,392)
                           ----------   ----------   ----------   ----------   ----------
     Net income..........       1,519        2,239        4,320        5,133        5,462
     Preferred
       dividends.........          --           --           --          155          267
                           ----------   ----------   ----------   ----------   ----------
  Net income available to
     common
     stockholders........  $    1,519   $    2,239   $    4,320   $    4,978   $    5,195
                           ==========   ==========   ==========   ==========   ==========
  Basic earnings per
     share...............  $     0.42   $     0.60   $     1.15   $     1.33   $     1.39
  Diluted earnings per
     share...............  $     0.42   $     0.60   $     1.15   $     1.30   $     1.32
  Weighted-average common
     shares..............   3,592,154    3,743,649    3,742,610    3,742,610    3,742,610
  Total weighted-average
     common and common
     equivalent shares...   3,592,154    3,743,649    3,742,610    3,943,897    4,141,684
</Table>

                                        19
<PAGE>

<Table>
<Caption>
                                                   YEAR ENDED DECEMBER 31,
                                       -----------------------------------------------
                                        1997      1998      1999      2000      2001
                                       -------   -------   -------   -------   -------
                                                   (DOLLARS IN THOUSANDS)
<S>                                    <C>       <C>       <C>       <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
  Cash and cash equivalents..........  $ 1,470   $ 6,618   $ 3,476   $ 4,259   $ 8,062
  Fixed maturity securities..........   18,413     9,870     2,054     5,912    12,214
  Deferred acquisition costs.........    4,503    27,538    39,750    42,752    42,800
  Total assets.......................   25,066    44,881    49,008    56,617    67,853
  Long-term debt.....................       --        --     9,179     5,000     5,000
  Total liabilities..................    2,990    20,508    20,600    20,028    25,884
  Stockholders' equity...............   22,076    24,373    28,408    36,589    41,969
</Table>

<Table>
<Caption>
                                              YEAR ENDED DECEMBER 31,
                           --------------------------------------------------------------
                              1997         1998         1999         2000         2001
                           ----------   ----------   ----------   ----------   ----------
                                               (DOLLARS IN THOUSANDS)
<S>                        <C>          <C>          <C>          <C>          <C>
SUMMARY OF POLICIES
  REINSURED:
  Number of life
     insurance policies
     and riders
     reinsured...........     154,682      208,321      260,356      296,674      287,303
  Number of annuity
     policies
     reinsured...........       1,897       10,028       24,483       43,819       48,007
  Face value of life
     insurance
     reinsured...........  $4,315,000   $6,117,000   $8,030,219   $9,378,075   $9,082,204
  Annuity contract
     benefits
     reinsured...........  $   30,894   $  157,695   $  324,827   $  310,063   $  266,305
</Table>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD-LOOKING STATEMENTS

     The following analysis of our consolidated financial condition and results
of operations should be read in conjunction with "Selected Financial Data" and
the consolidated financial statements and accompanying notes included elsewhere
in this report. The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the use of estimates and assumptions developed by our management. Any
adjustments to reported bases of assets or liabilities resulting from changes in
estimates are reflected in earnings in the period the estimates are revised.
This report contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of various factors.

     Certain statements made in this report are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
are subject to the safe harbor provisions of that Act. Additionally, any written
or oral statements made by us or on our behalf may include forward-looking
statements that reflect our current views with respect to future events and
financial performance. These statements may include, but are not limited to
statements relating to reinsurance revenues, gross profits, cash flows and net
income in future periods. Such statements often include the words "believes,"
"expects," "assumes," "predicts," "continue," "potential," "should," "could,"
"can," "may," "will," "proposes," "anticipates," "intends," "plans,"
"estimates," "projects," variations or negations of such expressions or similar
expressions. When we make forward-looking statements, we are basing them on our
management's beliefs and assumptions, using information currently available to
us. Because such forward-looking statements involve risks, both known and
unknown, and uncertainties, there are important factors that could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements, including but not limited to: a decrease in the
level of demand for our reinsurance business, or increased competition in the
industry; extent to which we are able to develop new reinsurance programs;

                                        20
<PAGE>

adverse reinsurance experience; estimates of reserves; assumptions used in
accounting for deferred acquisition costs; negotiation of reinsurance
agreements; our cash requirements; availability of capital on acceptable terms;
the passage of federal or state legislation subjecting our business to
additional supervision or regulation, including additional tax regulation, in
the United States or other jurisdictions in which we operate; and changes in
economic conditions, including interest rate conditions, which could affect our
investment portfolio.

     These forward-looking statements are subject to change and uncertainty that
are beyond our control and have been made based upon our expectations and
beliefs concerning future developments and their potential effect on our
business. We cannot assure you that future developments will be in accordance
with our expectations or that the effect of future developments will be those we
anticipate. Actual results could differ materially from those we expect,
depending upon the outcome of certain factors, including those described in the
forward-looking statements. We caution readers not to place undue reliance on
these forward-looking statements, which speak only as of their dates. We have
described some important factors that could cause our actual results to differ
materially from our expectations in this report, including in the section below
titled "Factors That May Affect Future Results." Except as otherwise required by
federal securities laws, we undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.

OVERVIEW

     Global Preferred, through Global Preferred Re, provides reinsurance for
life insurance and annuity products. The strength of our reinsurance business is
based on our strong relationship with the independent agents of World Financial
Group, which is an independent marketing organization that markets the products
we currently reinsure. World Financial Group is an indirect subsidiary of AEGON
USA, Inc. and, as of December 31, 2001, had over 7,500 associated independent
registered agents licensed to sell securities and insurance products.

     Although our reinsurance business is directed to us through our IMO
relationship, the variable universal life insurance and variable annuity
policies that we currently reinsure are underwritten and issued by various
ceding life companies.

     Under a reinsurance agreement, the economic consequences of certain
insurance risks are transferred from the ceding life company to the reinsurer.
Depending upon the type of reinsurance agreement, these risks may include
mortality, persistency, investment and expense. Key considerations in evaluating
the risks include industry experience, the ceding life company's pricing and
assumptions, the type of product, the ceding life company's underwriting
practices and procedures, the type of distribution system, the ceding life
company's recent experience and the market for the product.

     The ceding life companies retain responsibility for the payment of all
claims, surrender values, commissions and expenses involved in issuing and
maintaining the policies we reinsure. In addition, the ceding life companies
administer the reinsurance contracts and, on a monthly basis, provide us with
information regarding premiums, reserves and benefits and the amounts we owe to
the ceding life company for claims and settlement expenses on the policies we
reinsure.

SIGNIFICANT FINANCIAL STATEMENT IMPACT OF REINSURANCE

     Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Additional information is shown in Note 2 to the
consolidated financial statements which includes a summary of the methods used
in the preparation of our consolidated financial statements.

                                        21
<PAGE>

  INCOME STATEMENT IMPACT

     Reinsurance Revenues.  For renewable term reinsurance, we record as
"premiums" the amount of reinsurance premiums we receive over the paying periods
of the reinsured policies. For policies reinsured on a coinsurance or modified
coinsurance basis, we record as "reinsured policy revenues" a proportionate
share of gross revenues received by the ceding life company over the paying
periods of the reinsured policies. These revenues represent the policy mortality
and expense charges, asset-based allowances and deferred sales charges that have
been assessed against the reinsured policy account balances. As we elect to
convert coverage on policies that we currently reinsure on a renewable term
basis to a coinsurance or modified coinsurance basis, the associated premium
revenues for those policies will discontinue, and our proportionate share of the
associated mortality and expense charges, asset based allowances and deferred
sales charges will be recorded as reinsured policy revenues.

     Reinsurance Expenses.  Regardless of the type of reinsurance, our related
expenses may include: (1) benefits, claims and settlement expenses, which
represent our share of the payments made to insured individuals during the
period, (2) expense allowances paid to the ceding life company for expenses
associated with the reinsured policies, including commissions and costs
associated with underwriting, marketing, policy issue and maintenance, and (3)
amortization of deferred acquisition costs, which are discussed in more detail
below.

  BALANCE SHEET IMPACT

     Deferred Acquisition Costs.  We capitalize and defer 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 and are recorded as deferred acquisition costs on
the balance sheet. Such costs include reinsurance commission and expense
allowances paid to ceding life companies, and may include other underwriting
costs such as actuarial, legal and accounting fees.

     Deferred acquisition costs are amortized over the lives of the underlying
policies, in conformity with the terms of the reinsurance agreement. Under the
renewable term agreements, the rate of amortization depends on the approach
utilized, static or dynamic, and is based upon assumptions applicable at the
time the policies are reinsured, such as estimates of expected investment
yields, mortality, persistency and expenses. Under the static approach, the
amortization is in proportion to the ratio of premiums collected during the then
current period to total anticipated premiums. Often the static approach is used
in the first policy year or until the business is sufficiently large to warrant
the complexity of the dynamic approach. Under the dynamic approach, the
amortization under the static approach is adjusted to reflect actual persistency
of the insurance in effect. To the extent fewer policies persist than otherwise
anticipated, the amortization will be greater under the dynamic approach than
under the static approach. Conversely, to the extent more policies persist than
otherwise anticipated, the amortization will be smaller. Currently, we use the
dynamic amortization approach for all our policies reinsured under our renewable
term agreements.

     Under the coinsurance and modified coinsurance agreements, the amortization
of the deferred acquisition costs is in proportion to the ratio of gross profits
recognized during the then current period to total anticipated future gross
profits. During each accounting period, assumptions used in calculating the
amortization of the deferred acquisition expense reflect actual experience for
the then current accounting period. We also review, on a periodic basis, our
evolving experience with regard to our assumptions concerning future experience
as to mortality, persistency, investment yields and expenses in determining our
estimate of anticipated future gross profits. This periodic review is commonly
referred to as "unlocking." Our period of observation is from October 1 of the
previous calendar year through September 30 of the current calendar year. If we
believe variances from expected assumptions are permanent, we will change the
assumptions we use with regard to future experience. Upon adoption of any change
in assumptions used with regard to future experience, the amortization of the
deferred acquisition cost will be recalculated and reflected during the then
current accounting period.

                                        22
<PAGE>

     Future Policy Benefits.  Liabilities for future benefits on life insurance
policies are established in an amount adequate to meet the estimated future
obligations on the policies in effect. Policy and contract reserves are included
in "future policy benefits" on the consolidated balance sheet.

     Liabilities for future policy benefits under the renewable term agreements
include provisions for claims in the course of settlement, claims incurred but
not reported and expected future claims. The liability is estimated using
assumptions such as estimates of expected investment yields, mortality,
persistency and expenses applicable at the time the reinsurance contracts are
executed.

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

     Liabilities for future policy benefits reflected in the consolidated
financial statements are based on information provided to us by the ceding life
companies. Reserves established by us with respect to individual risks or
classes of business may not be the same as those established by ceding life
companies due to differing risks and assumptions regarding mortality,
persistency, investment and expenses.

FAIR VALUE DISCLOSURE

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

     Investment income is recognized as it accrues or becomes legally due.
Realized gains or losses on sales of investments are included in income, as are
write-downs of securities where declines in value are deemed to be other than
temporary. The cost of investment securities sold is determined based upon the
specific identification method.

     Other Financial Assets and Liabilities.  The carrying value of cash and
cash equivalents, reinsurance receivables and payables, short-term debt, accrued
expenses and accounts payable approximate their fair values due to the
short-term nature of these accounts. The carrying value of future policy
benefits approximates its fair value as credited interest approximates current
market rates.

                                        23
<PAGE>

OUR CURRENT REINSURANCE AGREEMENTS

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

<Table>
<Caption>
                                                                  YEAR ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                              1999   2000   2001
                                                              ----   ----   ----
<S>                                                           <C>    <C>    <C>
Western Reserve.............................................   88%    88%    89%
American Skandia............................................    9%    10%     9%
Zurich Kemper...............................................    3%     2%     2%
Pacific Life(1).............................................   --     --      0%
                                                              ---    ---    ---
Total.......................................................  100%   100%   100%
                                                              ===    ===    ===
</Table>

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

(1) This agreement was effective as of January 1, 2001.

     The following table indicates, by ceding life company: (1) the names and
types of insurance products we currently reinsure; (2) the type of reinsurance
agreement applicable to each; (3) policy issue date reinsured under each
agreement; and (4) the commencement date of the reinsurance.

<Table>
<Caption>
                                                                                                                 REINSURANCE
CEDING LIFE COMPANY     REINSURED PRODUCT NAME    PRODUCT TYPE(1)   REINSURANCE TYPE(2)   POLICY ISSUE DATES  COMMENCEMENT 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                7/97 to 3/98         7/97
Western Reserve        Financial Freedom Builder     VUL              Co/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                9/96 to 3/01         9/96
Pacific Life           Select Exec II                VUL                 YRT               1/01 to present       1/01
American Skandia       Imperium                      VA                 Modco              1/97 to present       1/97
Western Reserve        Freedom Wealth Creator        VA               Co/Modco             1/98 to present       1/98
Western Reserve        Freedom Premier               VA               Co/Modco            10/00 to present       10/00
</Table>

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

(1) "VUL" means variable universal life product. "VA" means variable annuity
    product.

(2) "MRT" means monthly renewable term. "YRT" means yearly renewable term.
    "Co/Modco" means coinsurance and modified coinsurance.

     Under our reinsurance agreements with the ceding life companies, we
currently reinsure variable life insurance and variable annuity policies on
either a renewable term basis or a coinsurance and modified coinsurance basis.
For the year ended December 31, 2001, the policies we reinsured on a renewable
term basis represented 63% of our reinsurance revenues and the policies we
reinsured on a coinsurance and modified coinsurance basis represented 37% of our
reinsurance revenues.

                                        24
<PAGE>

RESULTS OF OPERATIONS

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

<Table>
<Caption>
                                                                   YEAR ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                              1999    2000    2001
                                                              -----   -----   -----
                                                               (AS A PERCENTAGE OF
                                                                 TOTAL REVENUES)
<S>                                                           <C>     <C>     <C>
CONSOLIDATED STATEMENTS OF INCOME DATA:
Revenues:
  Premiums..................................................    43%     55%     61%
  Reinsured policy revenues.................................    60      43      36
  Net investment income.....................................     1       2       3
  Net realized gain (loss) on investments...................    --      --      --
  Loss on recapture of business.............................    (4)     --      --
                                                               ---     ---     ---
Total revenues..............................................   100%    100%    100%
                                                               ---     ---     ---
Benefits and expenses:
  Benefits, claims and settlement expenses..................    20      25      20
  Change in future policy benefits..........................     1       7       8
  Reinsurance expense allowances, net.......................    24      25      27
  Amortization of deferred acquisition costs................    17      14      13
  Operating expenses........................................     4       4       6
  Interest expense..........................................     5       2       1
                                                               ---     ---     ---
Total benefits and expenses.................................    71      77      75
                                                               ---     ---     ---
Income before income taxes..................................    29      23      25
  Income taxes..............................................   (10)     (6)     (8)
                                                               ---     ---     ---
Net income..................................................    19%     17%     17%
                                                               ===     ===     ===
</Table>

  YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

  Revenues

     Premiums.  Premiums increased $2.6 million, or 16%, from $16.6 million for
the year ended December 31, 2000 to $19.2 million for the comparable period in
2001. The majority of this increase was due to a rise in reinsured policies
under the Western Reserve Financial Freedom Builder Monthly Renewable Term
Agreement. The aggregate face value of reinsurance under the Financial Freedom
Builder Monthly Renewable Term Agreement increased $246 million, or 6%, from
$4.2 billion at December 31, 2000 to $4.4 billion at December 31, 2001. The
remaining increase in premiums was attributable to the increasing duration of
the policies, since reinsurance premiums increase with the advancing age of the
insureds.

     Reinsured Policy Revenues.  Reinsured policy revenues decreased $1.7
million, or 13%, from $12.9 million for the year ended December 31, 2000 to
$11.2 million for the same period in 2001. This decrease was primarily
attributable to revenues associated with our variable annuity coinsurance and
modified coinsurance agreements, which declined from $6.7 million for the year
ended December 31, 2000 to $5.5 million for the same period in 2001, a decrease
of $1.2 million, or 18%. Decreasing revenues for both variable universal life
and variable annuity business have resulted primarily from a decline in
collected mortality and expense charges associated with lower account values,
due to the decline in the equity markets. Further, the variable universal life
coinsurance and modified coinsurance business is a "closed block," meaning that
there are no new policies being issued in this block of business, resulting in a

                                        25
<PAGE>

declining number of policies reinsured in that block, due to normal policy
lapses and surrenders. New variable universal life policies that we reinsured in
2000 and 2001 were reinsured on a monthly renewable term basis. The capital
requirements for reinsuring on a coinsurance or modified coinsurance basis
limited our ability to reinsure any new variable universal life policies on that
basis.

     Net Investment Income and Net Realized Gain on Investments.  Net investment
income increased $283,000, or 54%, from $528,000 for the year ended December 31,
2000 to $811,000 for the same period in 2001, primarily due to the increased
size of our portfolio from new purchases of fixed maturity securities.

     The sale of fixed maturity securities for the year ended December 31, 2000
resulted in a net realized gain on investments of $3,000 compared to a net
realized gain on investments of $45,000 for the same period in 2001. This shift
was caused by a decline in market yields, which resulted in an increase in the
fair value of invested securities.

  Benefits and Expenses

     Benefits, Claims and Settlement Expenses.  Benefits, claims and settlement
expenses decreased $1.3 million, or 17%, from $7.6 million for the year ended
December 31, 2000 to $6.3 million for the same period in 2001. The decrease was
primarily associated with better mortality experience in the current period,
which resulted in lower claims activity. We do not expect, nor have we been
advised by the ceding life companies of, any material claims exposure related to
the September 11, 2001 terrorist attacks. The aggregate face value of insurance
underlying the policies we reinsured at December 31, 2000 was $9.4 billion
compared to $9.1 billion at December 31, 2001.

     Change in Future Policy Benefits.  Change in future policy benefits
increased $359,000, or 17%, from $2.1 million for the year ended December 31,
2000 to $2.4 million in the same period of 2001. $230,000 of the increase was
tied to the $2.4 million growth in premiums collected under the Financial
Freedom Builder Monthly Renewable Term Agreement. Additionally, during the third
quarter of 2001, we refined our methodology for recognizing earned premiums
under the Zurich Kemper monthly renewable term agreement, which resulted in an
increase in future policy benefits of $152,000.

     Reinsurance Expense Allowances, Net.  Net reinsurance expense allowances
increased $962,000, or 13%, from $7.5 million for the year ended December 31,
2000 to $8.5 million for the same period in 2001. Consistent with the increase
in premium revenues, the increase in net reinsurance expense allowances was due
primarily to an increase in the business placed under the Financial Freedom
Builder Monthly Renewable Term Agreement.

     Amortization of Deferred Acquisition Costs.  Amortization of deferred
acquisition costs decreased $72,000, or 2%, from $4.0 million for the year ended
December 31, 2000 to $3.9 million for the same period in 2001. A majority of the
decrease in the amortization of deferred acquisition costs resulted from the
refinement of our methodology of recognizing earned premiums under the Zurich
Kemper monthly renewable term agreement, which caused a $122,000 decrease.
Offsetting this decrease was a net increase of $50,000, which reflects amounts
related to historical realized experience and unlocking of future experience
assumptions.

     Operating Expenses.  Operating expenses increased $696,000, or 55%, from
$1.3 million for the year ended December 31, 2000 to $2.0 million for the same
period in 2001. These expenses include salaries and benefits, professional fees
for legal, actuarial and accounting expenses and other operating expenses. The
increase was associated with a $447,000 increase in salaries, benefits and
recruiting expenses, due to the employment of additional staff, payment of a
discretionary bonus for the year 2000 and accrual of discretionary bonuses for
2001. The remainder of the increase was primarily due to increases in directors'
and officers' insurance expenses, outside director fees, legal fees and our
franchise taxes for the State of Delaware.

     Interest Expense.  Interest expense decreased $287,000, or 43%, from
$665,000 for the year ended December 31, 2000 to $378,000 for the comparable
period in 2001. The decrease was due to the

                                        26
<PAGE>

repayment of a $5.3 million debt on a line of credit. The final payment of
principal and interest in the amount of $283,566 was paid in February 2001.

     Income Taxes.  Due to higher levels of income before income taxes, income
taxes increased $571,000, or 31%, from $1.8 million for the year ended December
31, 2000 to $2.4 million for the same period in 2001. Income before income taxes
is comprised of income subject to taxes which are both recognized and due in the
current period and income subject to taxes which are recognized during the
current period but are due in future periods. The amount of income taxes which
was recognized and due in the respective periods was only $516,000 and $437,000
in 2000 and 2001, respectively, due to the "small life insurance company
deduction" which permanently reduces the current income taxes due. The amount of
income taxes that was due in future periods in 2001 was $2.0 million, an
increase of $650,000 as compared to the amount in 2000, due to an increase in
timing differences with respect to reserves.

     As a result of the "small life insurance company deduction," the combined
effective tax rate will fluctuate between 20% and 34%. During 2000 our effective
tax rate was 26%, as compared to 30% in 2001.

  YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

  Revenues

     Premiums.  Premiums increased $6.9 million, or 71%, from $9.7 million the
year ended December 31, 1999 to $16.6 million for the comparable period in 2000.
A majority of this increase was caused by a $6.6 million increase in premiums
relating to the full-year impact of the Financial Freedom Builder Monthly
Renewable Term Agreement that we entered into with Western Reserve in October
1999. The remaining increase in premiums was attributable to the increasing
duration of the policies reinsured, since reinsurance premiums increase with the
advancing age of the insureds.

     Reinsured Policy Revenues.  Reinsured policy revenues decreased $612,000,
or 5%, from $13.5 million for the year ended December 31, 1999 to $12.9 million
for the same period in 2000. The overall revenue decline was due to a $2.8
million decline in revenues associated with our variable universal life
coinsurance and modified coinsurance agreement with Western Reserve, partially
offset by a $2.2 million increase in revenues attributable to our variable
annuity reinsurance agreements, which was reflective of an increase in the
contract benefits from existing policies reinsured and new business reinsured
under these agreements. The decline in revenues associated with the variable
universal life business was caused by Western Reserve's October 1, 1999
recapture of certain policies previously ceded to us under our reinsurance
agreements. This recapture was in conjunction with the execution of the monthly
renewable term agreement discussed above in "Premiums."

     Net Investment Income and Net Realized Gain (Loss) on Investments.  Net
investment income increased $178,000, or 51%, from $350,000 for the year ended
December 31, 1999 to $528,000 for the same period in 2000, primarily due to the
increased size of our portfolio from new purchases of fixed maturity securities.

     The sale of fixed maturity securities for the year ended December 31, 1999
resulted in a net realized loss on investments of $66,000 compared to a net
realized gain on investments of $3,000 for the same period in 2000. This shift
was caused by a decline in market yields, which resulted in an increase in the
fair value of invested securities.

     Loss on Recapture of Business.  The recapture of business by Western
Reserve, discussed above, during the fourth quarter of 1999 resulted in a loss
of $823,000 for the year ended December 31, 1999. This loss related to the
recapture of the Financial Freedom Builder variable universal life 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 modified coinsurance basis for Western Reserve. Of the $823,000
loss on recapture of business, $556,000 related to the variable universal life
coinsurance and modified coinsurance business. The balance of $267,000 related
to the variable annuity coinsurance and modified coinsurance business. No
recapture occurred during 2000.

                                        27
<PAGE>

  Benefits and Expenses

     Benefits, Claims and Settlement Expenses.  Benefits, claims and settlement
expenses increased $3.1 million, or 68%, from $4.5 million for the year ended
December 31, 1999 to $7.6 million for the same period in 2000. The increase was
the result of greater claims activity than otherwise expected, an increase in
volume of policies reinsured and the increasing age of the policies reinsured.
The aggregate face value of insurance underlying the policies we reinsure was
$8.0 billion at December 31, 1999 compared to $9.4 billion at December 31, 2000,
which represented a $1.4 billion, or 17% increase.

     Change in Future Policy Benefits.  Change in future policy benefits
increased $1.7 million, or 554%, from $314,000 for the year ended December 31,
1999 to $2.0 million in the same period of 2000. This change was tied to an
increase in the liability for future policy benefits under our monthly renewable
term reinsurance agreements, which rose by $2.0 million, or 188%, from $1.1
million at December 31, 1999 to $3.1 million at December 31, 2000. The Financial
Freedom Builder Monthly Renewable Term Agreement we entered into with Western
Reserve in October 1999 was the primary cause of this increase.

     Reinsurance Expense Allowances, Net.  Net reinsurance expense allowances
increased $2.2 million, or 41%, from $5.3 million for the year ended December
31, 1999 to $7.5 million for the same period in 2000. Consistent with the
increase in premium revenues, the increase in net reinsurance expense allowances
was due to increased business placed under the Financial Freedom Builder Monthly
Renewable Term Agreement, placement of the variable annuity business reinsured
on a coinsurance and modified coinsurance basis and premiums on existing
policies reinsured on renewable term basis.

     Amortization of Deferred Acquisition Costs.  Amortization of deferred
acquisition costs increased $227,000, or 6%, from $3.8 million for the year
ended December 31, 1999 to $4.0 million for the same period in 2000. The
increase was attributable to a $1.3 million increase in amortization for
business reinsured on a coinsurance and modified coinsurance basis, which was
driven by increased gross profits during 2000 from existing policies reinsured
and new policies reinsured. Offsetting this increase was (1) amortization of
$976,000 in 1999 associated with the Western Reserve coinsurance and modified
coinsurance business that was recaptured on October 1, 1999 and (2) a decrease
in amortization of deferred acquisition costs for business reinsured on a
monthly renewable term basis of $55,000, which was driven by a shift in the mix
of business toward more Financial Freedom Builder variable universal life
policies, which do not have associated deferred acquisition costs.

     Operating Expenses.  Operating expenses increased $273,000, or 28%, from
$983,000 for the year ended December 31, 1999 to $1.3 million for the same
period in 2000. These expenses include professional fees for legal, actuarial
and accounting expenses, 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.

     Interest Expense.  Interest expense decreased $489,000, or 42%, from $1.2
million for the year ended December 31, 1999 to $665,000 for the comparable
period in 2000. During 1999, interest expense included $285,000 of reinsurance
fees associated with deferred settlements on the variable annuity and variable
universal life policies that are no longer applicable. The decrease was also due
to lower interest costs associated with principal payments on our $5.0 million
line of credit and, to a lesser extent, the restructuring in 1999 of our debt
owed to Money Services, Inc., which involved a decrease in the annual interest
rate from 9.0% to 7.5%.

     Income Taxes.  Income taxes decreased $405,000, or 18%, from $2.2 million
for the year ended December 31, 1999 to $1.8 million for the same period in
2000. We earned statutory taxable income during 2000, which was attributable to
lower payments of policy acquisition costs due to a decline in new business
reinsured under our coinsurance and modified coinsurance agreements. Our
effective tax rate was

                                        28
<PAGE>

34% and 26% for 1999 and 2000, respectively. Current tax expense of $411,000 was
payable as of December 31, 2000. The remaining income tax expense for the year
ended December 31, 2000, as well as the entire income tax expense for 1999, was
deferred.

QUARTERLY RESULTS OF OPERATIONS

     The following table presents certain unaudited quarterly consolidated
statements of income data for the eight-quarter period ending December 31, 2001,
as well as the percentage of total revenue represented by each item. The
information has been derived from the unaudited consolidated financial
statements. The unaudited consolidated financial statements have been prepared
on substantially the same basis as the audited consolidated financial statements
contained herein and all adjustments, consisting only of normal recurring
adjustments, which we consider to be necessary to present fairly this
information when read in conjunction with the consolidated financial statements
and notes thereto appearing elsewhere herein. The results of operations for any
quarter are not necessarily indicative of the results to be expected for any
future period.

<Table>
<Caption>
                                                                      QUARTER ENDED
                                     -------------------------------------------------------------------------------
                                     MAR. 31   JUNE 30   SEPT. 30   DEC. 31   MAR. 31   JUNE 30   SEPT. 30   DEC. 31
                                      2000      2000       2000      2000      2001      2001       2001      2001
                                     -------   -------   --------   -------   -------   -------   --------   -------
                                                                       (UNAUDITED)
                                                                 (DOLLARS IN THOUSANDS)
<S>                                  <C>       <C>       <C>        <C>       <C>       <C>       <C>        <C>
Revenues:
  Premiums.........................  $3,676    $4,087     $4,334    $4,522    $4,656    $4,796     $4,908    $4,880
  Reinsurance policy revenues......   3,020     3,192      3,215     3,466     2,940     2,806      2,728     2,762
  Net investment income............      71       149        149       159       161       206        221       223
  Net realized gain (loss) on
    investments....................      --        --          3        --         6        --         (2)       41
  Loss on recapture of business....      --        --         --        --        --        --         --        --
                                     ------    ------     ------    ------    ------    ------     ------    ------
Total revenue......................   6,767     7,428      7,701     8,147     7,763     7,808      7,855     7,906
                                     ------    ------     ------    ------    ------    ------     ------    ------
Benefits and expenses:
  Benefits, claims and settlement
    expenses.......................   1,836     1,845      1,860     2,019     1,503     1,583      1,407     1,800
  Change in future policy
    benefits.......................     436       413        602       602       644       548        742       477
  Reinsurance expense allowances,
    net............................   1,566     1,799      2,145     2,030     2,096     2,154      2,094     2,156
  Amortization of deferred
    acquisition costs..............   1,086     1,105        930       895     1,002       877        741     1,325
  Operating expenses...............     325       286        362       283       477       362        515       597
  Interest expense.................     204       206        147       108        96        93         95        95
                                     ------    ------     ------    ------    ------    ------     ------    ------
Total benefits and expenses........   5,453     5,654      6,046     5,937     5,818     5,617      5,594     6,450
                                     ------    ------     ------    ------    ------    ------     ------    ------
  Income before income tax.........   1,314     1,774      1,655     2,210     1,945     2,191      2,261     1,456
Income tax (expense) benefit.......    (447)     (552)         1      (823)     (654)     (743)      (653)     (341)
                                     ------    ------     ------    ------    ------    ------     ------    ------
Net income.........................  $  867    $1,222     $1,656    $1,387    $1,291    $1,448     $1,608    $1,115
                                     ======    ======     ======    ======    ======    ======     ======    ======
</Table>

     Historically, our operations and related revenues and operating results
have varied substantially from quarter to quarter, and we expect variations to
continue. Our quarterly operating results will continue to vary significantly
depending on a number of factors, including fluctuations in demand for
reinsurance products and variable life insurance and annuity products, as well
as the sales price and resulting gross margin for specific reinsurance
contracts. A high percentage of our operating expenses, particularly personnel,
marketing and rent are relatively fixed in advance of any particular quarter.

                                        29
<PAGE>

SEGMENT REPORTING

     We have defined our reportable segments based on the nature of our
reinsurance agreements and the accounting treatment used for the various
reinsurance agreements. Based on this definition, we have identified two
reportable segments: non-universal life-type agreements and universal life-type
agreements (as each is referenced in SFAS No. 97, Accounting and Reporting by
Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains
and Losses from the Sale of Investments, paragraphs 44 and 45).

     Our first segment, reported as non-universal life-type, relates to those
variable universal life policies that are reinsured on a renewable term basis.
These policies are accounted for under SFAS No. 60 accounting principles and, as
such, revenues therefrom are classified as premiums revenue.

     Our second segment, reported as universal life-type, relates to all
variable annuity contracts and those variable universal life policies that are
reinsured on a coinsurance and modified coinsurance basis. The products
reinsured on a coinsurance and modified coinsurance basis are accounted for
under SFAS No. 97 accounting principles and, as such, revenues therefrom are
classified as reinsured policy revenues.

     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 our
internal measurement process. Segment assets reported include those assets
directly attributable to the reinsurance agreements such as reinsurance balances
receivable, deferred acquisition costs, policy loans, prepaid expenses, invested
assets and cash. Invested assets are allocated to the agreements consistent with
our internal measurement process.

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                             -------------------------------------------------------------------------------------
                                               2000                                        2001
                             -----------------------------------------   -----------------------------------------
                               NON-                                        NON-
                             UNIVERSAL   UNIVERSAL                       UNIVERSAL   UNIVERSAL
                             LIFE-TYPE   LIFE-TYPE    OTHER     TOTAL    LIFE-TYPE   LIFE-TYPE    OTHER     TOTAL
                             ---------   ---------   -------   -------   ---------   ---------   -------   -------
                                                            (DOLLARS IN THOUSANDS)
<S>                          <C>         <C>         <C>       <C>       <C>         <C>         <C>       <C>
Premiums...................   $16,619     $    --    $    --   $16,619    $19,240     $    --    $    --   $19,240
Reinsured policy
  revenues.................        --      12,894         --    12,894         --      11,238         --    11,238
Benefits, claims and
  settlement expenses(1)...     8,658         954         --     9,612      7,833         871         --     8,704
Reinsurance expense
  allowances, net..........     5,711       1,829         --     7,540      6,859       1,642         --     8,501
Amortization of deferred
  acquisition costs........       116       3,901         --     4,017        197       3,748         --     3,945
                              -------     -------    -------   -------    -------     -------    -------   -------
Underwriting profit........     2,134       6,210         --     8,344      4,351       4,977         --     9,328
Net investment income......       213         171        144       528        215         230        366       811
Net realized gain on
  investment...............        --          --          3         3         --          --         45        45
Other expenses.............       150         184      1,588     1,922        123         216      1,991     2,330
                              -------     -------    -------   -------    -------     -------    -------   -------
Segment operating income
  (loss) before tax........     2,197       6,197     (1,441)    6,953      4,443       4,991     (1,580)    7,854
Income tax expense
  (benefit)................       589       1,659       (428)    1,820      1,353       1,520       (481)    2,392
                              -------     -------    -------   -------    -------     -------    -------   -------
Segment net income
  (loss)...................   $ 1,608     $ 4,538    $(1,013)  $ 5,133    $ 3,090     $ 3,471    $(1,099)  $ 5,462
                              =======     =======    =======   =======    =======     =======    =======   =======
Preferred dividends........        --          --        155       155         --          --        267       267
                              -------     -------    -------   -------    -------     -------    -------   -------
Segment net income (loss)
  available to common
  stockholders.............   $ 1,608     $ 4,538    $(1,168)  $ 4,978    $ 3,090     $ 3,471    $(1,366)  $ 5,195
                              =======     =======    =======   =======    =======     =======    =======   =======
Segment assets.............   $ 9,279     $44,688    $ 2,656   $56,623    $ 8,615     $46,748    $12,490   $67,853
                              =======     =======    =======   =======    =======     =======    =======   =======
</Table>

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

(1) Benefits, claims and settlement expenses include change in future policy
    benefits.

                                        30
<PAGE>

     Of the total premiums and reinsured policy revenues above, 88% and 89%
relates to business issued by Western Reserve for the year ended December 31,
2000 and 2001, respectively. Of the total underwriting profit above, 83% and 86%
relates to business issued by Western Reserve for the year ended December 31,
2000 and 2001, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     Our principal sources of cash flow have been premiums received from the
ceding life companies, investment income, proceeds from the sale of invested
assets, issuance of common and preferred stock, and short- and long-term
financing. In addition to cash flow to meet operating expenses, our liquidity
requirements relate primarily to the payment of gross reinsurance allowances,
investment purchases, debt service and reinsurance claims.

     We generally receive premiums in advance of our making related benefits and
claims payments. Under the renewable term reinsurance agreements, premiums
typically vary in proportion to the expected mortality claims reinsured. Our
cash inflows under the renewable term agreements are premiums for the mortality
risk reinsured. Our cash outflows are reinsurance expense allowances, policy
benefits and death benefit claims. The reinsurance expense allowances represent
our share of acquisition and maintenance expenses incurred by the ceding life
company that are attributable to the risks reinsured by us.

     Under the coinsurance and modified coinsurance agreements, since we are
reinsuring risks on essentially the same basis as that of the original policy,
reinsurance premiums are materially greater than premiums received on the
renewable term reinsurance. During the first year in which a policy is reinsured
on a coinsurance basis, we are required to reimburse the ceding life company for
our share of acquisition costs, including first year commissions and issuance
expenses. Thereafter, we reimburse the ceding life company for our share of
renewal commissions and maintenance expenses. Further, under modified
coinsurance, we allow the ceding life company to retain assets related to
reserves in support of reinsured policy benefits (e.g., cash values).
Accordingly, because of the type of reinsurance and the basis reinsured, the net
first year cash outlays could be as much as, or more than, that year's premiums
paid for variable universal life insurance, and as much as 10% of variable
annuity premiums. In year two and beyond, however, our cash outlays for
reinsurance allowances are significantly lower than in the first year of a
policy.

     In the first quarter of 1999, we negotiated amendments to our coinsurance
and modified coinsurance agreements with Western Reserve in contemplation of
completing a private offering of our stock begun in 1998. The amendments
provided that: (1) we could defer payment to Western Reserve of reinsurance
expense allowances on new policies reinsured in 1999, until the earlier of the
completion of our offering, or December 31, 1999; (2) a reinsurance fee at an
effective rate of 9% per year accrued on the deferred payments; and (3) Western
Reserve could recapture the reinsurance on the policies issued during 1999 if
the expense allowances were not paid by December 31, 1999. As contemplated by
the new amendments, payment by us to Western Reserve of a portion of the
reinsurance expense allowances on policies issued in 1999 was deferred pending
the completion of our capital raising efforts in 1999. When the funding had not
been completed by September 30, 1999, the reinsurance of all variable universal
life policies and riders and 75% of the variable annuity policies issued from
January 1, 1999 through September 30, 1999 that had been entered into on a
coinsurance and modified coinsurance basis was recaptured. These recapture
rights exercised by Western Reserve in 1999 were created specifically to address
the possibility that we would not complete our contemplated capital raising in
1999. Concurrent with the recapture, we began reinsuring, on a monthly renewable
term basis, 20% of certain variable universal life policies and riders issued by
Western Reserve on or after January 1, 1999. Additionally, we further amended
our reinsurance agreements to reduce our quota share percentage on the
reinsurance of the Western Reserve variable annuity business for 1999 and
thereafter. However, we retained the right to convert our monthly renewable term
reinsurance of the variable universal life business to a coinsurance and
modified coinsurance basis for all policies issued from January 1999 through
March 2003 and the right to increase our quota share percentage of the
reinsurance of Western Reserve variable annuity business.

                                        31
<PAGE>

     The general terms of our reinsurance agreements, including our agreements
with Western Reserve, include only limited rights to recapture such as: after
the passage of stated periods (ten years of more) from the policy issue date,
upon determination, relative to some products, that the total volume of policies
reinsured for the product is below a minimum threshold, upon default by Global
Preferred and upon the insolvency of Global Preferred. Oftentimes, if a
reinsurance agreement provides for early recapture based on criteria such as low
product sales volume, then there may be a recapture allowance paid to the
reinsurer to compensate for lost future revenues and profits associated with the
recaptured policies. Receipt of the recapture allowance would result in an
increase in revenues for the period. Similarly, any associated unamortized
deferred acquisition cost would be written off in the same reporting period. The
net effect of these amounts would then result in either a gain or a loss
associated with the recaptured policies.

     Our 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. We incurred no capital expenditures during
2001.

     Net cash flows provided by (used in) operating activities were $(10.7)
million, $6.6 million and $10.4 million for the years ended December 31, 1999,
2000 and 2001, respectively. Changes in cash provided by operating activities
primarily relate to: amounts of reinsurance premiums and policy revenues
received; claims, reinsurance expense allowances and operating expenses paid;
and changes in working capital. The amount of cash provided by operations
increased in 2000 and 2001 because we utilized less cash to acquire new
reinsurance business in those years and due to the increasing age of the
policies reimbursed. In addition, cash paid for acquisition costs decreased in
2000 and 2001 because the amount of policies reinsured on a coinsurance and
modified coinsurance basis decreased. The $10.7 million used in operations in
1999 was to reimburse Western Reserve for the first year reinsurance expense
allowances on policies issued and reinsured during 1998 on a coinsurance and
modified coinsurance basis. Regarding acquisition costs, substantially more cash
was used in 1999 than in 2000 because more policies were reinsured during 1999
and 1998.

     On July 30, 1999, we issued a $5 million, five-year convertible term note
to Money Services, Inc. due on July 29, 2004. Money Services is a subsidiary of
AEGON USA, Inc. Proceeds of this note were used to reduce a portion of the
outstanding principal balance on a line of credit with Money Services from $10
million to $5 million. Interest is payable on the note at 7.5% per annum (except
in the event of redemption), on the 29th of each succeeding January and July
through and including July 29, 2004. Money Services has the right to convert the
outstanding principal balance of this note into common stock at any time. Upon
conversion, Money Services will receive 6.25 shares of common stock for each
$100 of the outstanding principal amount of the note, which reflects our
three-for-two stock split in 2001. We have the option to redeem the note before
maturity, in whole or in part, between July 29, 2002 and July 29, 2004. To
redeem the note, we must pay all principal, plus interest accrued from the date
of the note through the redemption date at a higher effective interest rate of
9% per annum. As of December 31, 2001, we had an outstanding principal balance
on the term note of $5 million and accrued interest of $158,000.

     In addition, we had a $5 million line of credit with Money Services that we
paid in full, together with the related accrued interest, on February 15, 2001.
Principal payments totaled $277,285 during 2001.

     Our primary source of liquidity was $8.1 million in cash and cash
equivalents at December 31, 2001. The effective duration of our fixed maturity
portfolio is 2.7 years with 100% of the fixed maturity securities having an
effective maturity of less than 10 years. Our fixed maturity portfolio
represents all of our total invested assets, and has an average Moody's quality
rating of Aa2.

     Net cash flows provided by (used in) investing activities were $7.3
million, $(3.7) million and $(6.1) million for the years ended December 31,
1999, 2000 and 2001, respectively. Changes in cash used in investing activities
are generally a result of our investment of excess capital generated by
operating activities to purchase of fixed maturity securities. The $7.3 million
cash provided by investing activities in

                                        32
<PAGE>

1999 primarily relates to the sale of our fixed maturity securities to reimburse
Western Reserve and American Skandia for allowances associated with our
reinsurance agreements.

     Net cash flows provided by (used in) financing activities were $304,000,
$(2.1) million and $(557,000) for the years ended December 31, 1999, 2000 and
2001, respectively. Changes in cash used in financing activities primarily
related to the principal payments on the Money Services line of credit and the
dividends paid on our preferred stock, offset by the issuance of 266,047 shares
of preferred stock to accredited investors, during 2000, which resulted in net
proceeds of approximately $3.1 million. The $304,000 source of cash in 1999 was
due to the issuance of a $5 million term note, the proceeds of which were
applied to reduce the then outstanding principal balance of our short-term debt.

     We are a holding company with no direct operations, and our principal
assets are the capital stock of Global Preferred Re and $3.7 million of cash and
invested assets, as of December 31, 2001. We rely primarily on funds retained at
the holding company level, debt service on amounts loaned to Global Preferred Re
and potential dividends from Global Preferred Re to meet ongoing cash
requirements. The ability of Global Preferred Re to pay us dividends is subject
to, among other things, regulatory restrictions under the insurance laws of
Bermuda. During the year ended December 31, 2001, Global Preferred Re paid us no
dividends.

     Under our reinsurance agreements, we are required to provide security
through a letter of credit for the benefit of the ceding life companies. We have
three letters of credit issued by Comerica Bank, our custodian, for the benefit
of Western Reserve, Pacific Life and Zurich Kemper, in the amounts of $8.5
million, $50,000 and $300,000, respectively. We assess our letter of credit
needs in support of each new reinsurance agreement. If determined to be
necessary, we will undertake to develop facilities for future letters of credit
and trust arrangements in support of additional reinsurance agreements.

     On February 22, 2002, Global Preferred filed a registration statement with
the Securities and Exchange Commission for an initial public offering of common
stock at a proposed maximum aggregate offering price of $120,750,000.

CURRENCY

     At December 31, 2001, we had written all of our reinsurance business in
U.S. dollars. If, in the future, we write business in currencies other than the
U.S. dollar, we intend to invest a portion of the premiums collected on the
reinsurance contract in securities denominated in the same foreign currency as
the premium received. We also intend to consider and evaluate our foreign
currency exchange risk and hedge our exposure.

INFLATION

     The effects of inflation have not had a material impact on our operations
or the conduct of our business. Inflationary trends are typically countered by a
tightening monetary policy by the U.S. Federal Reserve, resulting in increases
in interest rates. Rapid and severe interest rate increases could have a
significant and negative impact on the value of our fixed income portfolio.

OFF BALANCE SHEET ARRANGEMENTS

     We have no obligations, assets or liabilities other than those disclosed in
our financial statements, no trading activities involving non-exchange traded
contracts accounted for at fair value, and no relationships and transactions
with persons or entities that derive benefits from their non-independent
relationship with us or our related parties.

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

                                        33
<PAGE>

recognize all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value. The accounting for changes in the
fair value of a derivative will be included in either earnings or other
comprehensive income depending on the intended use of the derivative instrument.
The provisions of SFAS No. 133 did not have an impact on Global Preferred's
financial statements.

     In September 2000, the Financial Accounting Standards Board ("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. The provisions of SFAS No. 140 did
not have a significant impact on Global Preferred's financial statements.

     FASB issued four new accounting standards in 2001. SFAS No. 141, SFAS No.
142, SFAS No. 143 and SFAS No. 144 primarily address the accounting for
goodwill, business combinations, and the impairment and disposition of
long-lived assets. The adoption of these standards in 2002 is not expected to
have a material impact on the Company's financial statements.

              FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATIONS

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

     To date, all life insurance and annuity policies reinsured by us have been
written through the agents associated with World Financial Group who, until June
2001, were associated with WMA Agency. In June 2001, World Financial Group
acquired certain assets of WMA Agency. As a result of the acquisition,
substantially all of the agents became associated with World Financial Group.
World Financial Group is the independent marketing organization that markets the
products we currently reinsure. An independent marketing organization is an
organization of independent agents that contracts with one or more insurance
companies to distribute and market securities and insurance products. We have
been informed that World Group Securities, Inc., the broker-dealer affiliated
with World Financial Group, is in the process of obtaining approval for the
transfer of the securities licenses of agents from WMA Securities, Inc., the
broker-dealer affiliated with WMA Agency. We understand that the formation of
World Group Securities and its business plan have been approved by the National
Association of Securities Dealers and World Group Securities is awaiting state
regulatory approvals which they have indicated that they anticipate receiving in
the near future.

     Our growth in new business through World Financial Group is significantly
dependent on the continued willingness and ability of the agents associated with
that IMO to market and sell life insurance and annuity products for life
insurance companies that reinsure through us.

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

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

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

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

     - Regulatory actions that restrict or prohibit the sales activities by the
       agents; and

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

     We do not direct or oversee the activities of these agents. We cannot
assure you that World Financial Group will be able to attract new agents or
retain key agents responsible for significant portions of

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production. The loss of a substantial number of key agents could have a material
adverse effect upon the future sales of World Financial Group and the production
of new business to be reinsured by us.

     In recent years, the Securities and Exchange Commission, the National
Association of Securities Dealers and various state regulatory authorities have
commenced various regulatory inquiries of WMA Agency and its affiliated
registered broker-dealer, WMA Securities relating to their respective compliance
with applicable regulatory standards and appropriate supervision of their
associated agents. WMA Agency and WMA Securities informed us that, in response
to such inquiries, they implemented corrective action plans with respect to such
alleged compliance issues. Additionally, upon completion of the pending transfer
of securities licenses to World Group Securities, World Financial Group and
World Group Securities will have responsibility for ongoing compliance
activities relating to the agents. If the regulatory authorities do not consider
such corrective actions and the ongoing compliance measures implemented by World
Financial Group and World Group Securities to be sufficient, then there could be
an adverse impact on the ability of those agents to generate additional life
insurance and annuity business for us to reinsure.

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

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

     We face certain specialized risks common to all life reinsurance companies.
However, because Western Reserve, American Skandia, Pacific Life and Zurich
Kemper issued all of the policies we currently reinsure, we may have a more
concentrated exposure to these risks than other life reinsurance companies. For
the year ended December 31, 2001, Western Reserve accounted for 89% of our
reinsurance premiums and reinsured policy revenues, American Skandia 9%, Pacific
Life 0% and Zurich Kemper 2%. These risks include the risk of mispricing by life
insurance companies of the coverage provided by the underlying policies, adverse
insurance experience risk, and risks relating to miscellaneous and external
events. Adverse insurance experience risks relate to the risks insured, which
may include excessive claims, poor persistency, inadequate investment results,
and excessive expenses. However, as long as the life insurance companies that
issue the policies we reinsure retain a proportionate share of the risk insured,
they will have an incentive to underwrite and price appropriately.

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

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

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

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

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<PAGE>

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

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

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

     To date, we have derived all of our life reinsurance revenues from variable
universal life policies issued by Western Reserve, Pacific Life and Zurich
Kemper and all of our annuity reinsurance revenues from variable annuities
issued by Western Reserve and American Skandia. For the year ended December 31,
2001, Western Reserve accounted for 89% of our reinsurance premiums and
reinsured policy revenues, American Skandia 9%, Pacific Life 0% and Zurich
Kemper 2%.

     We have an agreement with Western Reserve that provides us with the first
rights to reinsure new products offered by Western Reserve or its U.S.
affiliates that are sold by agents associated with World Financial Group. These
rights have an initial term expiring on December 31, 2002 for variable annuity
products reinsured on a coinsurance and modified coinsurance basis, March 31,
2003 for variable universal life products reinsured on a coinsurance and
modified coinsurance basis and March 31, 2006 for variable universal life
products reinsured on a monthly renewable term basis. This agreement provides
for automatic renewal for successive one year periods following its initial
term, unless notice of non-renewal is given at least 180 days prior to the end
of the current term.

     Our reinsurance agreements provide for the reinsurance of new policies as
they are issued. These agreements provide for automatic renewals following their
initial terms, subject to termination or non-renewal upon notice of at least 180
days.

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

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

     Due to our historical capital constraints, we have been unable to reinsure
the maximum available percentage under the Western Reserve variable universal
life reinsurance agreements and the Western Reserve variable annuity reinsurance
agreement. We intend to use a significant portion of the proceeds from our
proposed public offering to exercise the rights we have under these agreements
to accept additional reinsurance percentages on business that has already been
written by Western Reserve as well as to increase our commitment to reinsure new
business written by Western Reserve. Based on our current estimates, the
offering will provide us sufficient capital to exercise the rights in full. If,
for any reason, whether for contractual reasons, an inability to complete the
initial public offering or otherwise, we are unable to fully exercise the rights
under these agreements to expand our reinsurance business, our growth could be
adversely affected. We cannot assure you that we will exercise our rights under
these agreements.

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<PAGE>

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

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

IF AGENTS ASSOCIATED WITH WORLD FINANCIAL GROUP WHO ARE OUR STOCKHOLDERS SELL
ALL OR A SIGNIFICANT PORTION OF THEIR SHARES, THEIR MOTIVATION TO ACT IN WAYS
THAT BENEFIT OUR BUSINESS COULD BE REDUCED.

     The agents associated with World Financial Group own a majority of our
outstanding capital stock. If agents associated with World Financial Group who
are our stockholders sell all or a significant portion of their shares and
receive little or no further financial incentives from us, their motivation to
act in ways that benefit our business could be reduced.

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

     We are substantially dependent on a small number of key employees, in
particular Edward F. McKernan, President and Chief Executive Officer, Bradley E.
Barks, Chief Financial Officer and Senior Vice President -- Finance, Caryl P.
Shepherd, Chief Accounting Officer, Controller, Treasurer and Secretary, and
Thomas Bobowski, Vice President of Marketing, with whom we have employment
agreements. Due to increasing complexities associated with growing our business,
deploying our business strategies, the increasing duration of the reinsurance
agreements and diversification of the business reinsured, we plan to hire
additional employees. The loss of the services of any key employee, or the
inability to hire additional employees, could adversely affect the quality and
profitability of our business operations. We do not currently maintain key
employee insurance with respect to any of our employees.

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

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

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

     The policies we reinsure are administered by the life insurance companies
issuing the policies. The life insurance companies provide us with the
information necessary for managing our reinsurance business. We do not
participate in the underwriting or any of the direct administration of the
reinsured policies and have conducted only a limited review of the
administrative practices of the life insurance companies for which we provide
reinsurance. Therefore, management may not have sufficient or timely information
to evaluate the quality or the administration of the business reinsured by us or
the accuracy of the information provided by these life insurance companies,
though our agreements may provide us some limited oversight in the form of audit
rights.

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<PAGE>

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

     Global Preferred Re has an insurance management agreement with CFM
Insurance Managers Ltd., a member company of the Mutual Risk Management Ltd.
group of companies, which provides professional insurance management services to
companies operating in Bermuda. C. Simon Scupham, a director of our company and
of Global Preferred Re, is the chairman of CFM. Pursuant to this agreement, CFM
acts as the managing agent and Principal Representative under the Insurance Act
1978 for Global Preferred Re in Bermuda. This agreement is for an unlimited
duration, but may be terminated by either party upon three months prior written
notice or upon 30 days prior written notice under specified circumstances.

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

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

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

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

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

     We compete, and will continue to compete, with numerous national and
international reinsurance companies, primary insurance companies, underwriting
syndicates and other financial services providers, many of which are well
established, have significant operating histories and substantially greater
underwriting, marketing and administrative resources than we do. Our growth
strategy includes the expansion of our relationships with IMOs and other
distribution channels through the strategic use of financial incentives. Our
ability to compete with other reinsurers in this market will depend upon our
ability to successfully develop and maintain strong relationships with IMOs.
Aside from our experience in

                                        38
<PAGE>

establishing our current IMO relationship, we have not yet attempted to develop
new IMO relationships because of our historical capital constraints. As a
result, we cannot assure you that we will be able to successfully develop such
relationships. Furthermore, our inability to do so could have a material adverse
effect upon our ability to implement our strategies.

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

CONSOLIDATION IN THE INSURANCE INDUSTRY COULD LEAD TO LOWER MARGINS FOR US AND
LESS DEMAND FOR LIFE AND ANNUITY REINSURANCE PRODUCTS.

     Many insurance industry participants are consolidating to enhance their
market power. These entities, particularly life insurance companies, may try to
use their market power to negotiate price reductions for our products and
services. If competitive pressures compel us to reduce our prices, our operating
margins will decrease. As the insurance industry consolidates, competition for
customers will become more intense and the importance of acquiring and properly
servicing each customer will become greater. We could incur greater expenses
relating to customer acquisition and retention, further reducing our operating
margins. In addition, insurance companies that merge may be able to spread their
risks across a consolidated, larger capital base so that they require less
reinsurance.

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

     We believe that our existing sources of cash, together with the net
proceeds from our initial public offering, will be sufficient to meet our
business needs through the first quarter of 2003, including exercising our
contractual rights under our reinsurance agreements to increase our reinsurance
percentages and convert certain monthly renewable term reinsurance arrangements
to coinsurance and modified coinsurance. Thereafter, or if the public offering
is not completed for any reason, to continue to fully implement our growth
strategies, we may need to raise additional funds through loans from financial
institutions and the sale of equity securities in subsequent private or
underwritten public offerings. We cannot assure you that such alternatives would
be available to us at an acceptable cost, if at all.

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

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

                                        39
<PAGE>

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

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

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

     - Potential acquisitions of properties or businesses;

     - Potential divestitures of properties or businesses; and

     - The issuance of additional securities by us.

A CHANGE IN DEMAND FOR REINSURANCE COULD LEAD TO REDUCED PREMIUM RATES, WHICH
COULD REDUCE OUR NET INCOME.

     The successful underwriting of primary insurers and prevailing general
economic conditions significantly influence demand for reinsurance. In addition,
as primary insurers consolidate and grow, they may require less reinsurance. The
supply of reinsurance is related to prevailing prices and levels of surplus
capacity that, in turn, may fluctuate in response to changes in rates of return
being realized in the reinsurance industry. It is possible that premium rates or
other terms and conditions could vary in the future, that the present level of
demand will not continue or that the present level of supply of reinsurance
could increase as a result of recent or future market entrants or the growth of
existing reinsurers.

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

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

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

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

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

     Due to the nature of the variable universal life and variable annuity
products we reinsure, we are generally insulated from the direct impact of
changes in the investment yields of these products. However, on an overall
basis, a decline in investment yields is expected to cause a decrease in our
revenues under

                                        40
<PAGE>

our coinsurance and modified coinsurance agreements because the funds upon which
some of our revenues are calculated would presumably be lower, resulting in a
corresponding decrease in our income. Conversely, an increase in investment
yields is expected to have the opposite effect. Policies reinsured under the
coinsurance and modified coinsurance agreements during 1998, 1999 and early 2000
experienced favorable investment yields, which resulted in increased earnings
during these periods. Moreover, the greater than otherwise expected asset base
resulted in increased anticipated future gross profits as used in amortizing the
associated deferred acquisition costs. Conversely, a reduction in investment
yields, as experienced in the latter half of 2000 and 2001, 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.

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

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

     Although we currently have three letters of credit issued by Comerica Bank
for the benefit of Western Reserve, Pacific Life and Zurich Kemper, in the
amounts of $8.5 million, $50,000 and $300,000, respectively, as we grow we will
need additional letter of credit capacity, or other acceptable forms of
security. If we are unable to increase our letter of credit capacity, or are
unable to do so on commercially acceptable terms or are unable to arrange for
other collateral through funds withheld or trust arrangements, our ability to
implement our business strategy would be significantly and negatively affected.

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

     We are not currently rated by any insurance company rating service and have
not sought any rating because the absence of a financial rating has not, to
date, interfered with the implementation of our business strategy. However,
development of our future business may be affected by the absence of such a
rating. Accordingly, we will seek a rating if we believe it will enhance our
business opportunities. We cannot assure you that we would receive a favorable
rating.

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

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

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

     The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the reported amounts of revenues and expenses during
the reporting period. Accounts that we deem to be sensitive to changes in
estimates include

                                        41
<PAGE>

deferred policy acquisition costs and future policy benefits. In addition,
management is required to make estimates and assumptions that affect our pricing
and risk assessments. In all instances, actual results could differ from
management's estimates and have an adverse impact on our financial condition and
business operations.

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

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

     As of December 31, 2000, Global Preferred Re had total statutory capital
and surplus, under the Insurance Act 1978 of Bermuda, of $9.0 million. The
amount available for distribution of dividends was $8.7 million. As approved by
the directors of Global Preferred Re, during fiscal year 2000 Global Preferred
Re paid dividends of $3.4 million to Global Preferred. Global Preferred Re paid
no dividends to Global Preferred during fiscal year 2001.

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

     Historically, a substantial portion of the policies we have reinsured were
sold in a few states. Much of our reinsurance premiums and reinsured policy
revenues were derived from Western Reserve (89% for the year ended December 31,
2001). According to information provided to us by Western Reserve for the year
ended December 31, 2001, over 63% of the variable universal life premiums from
policies sold by agents associated with World Financial Group and its
predecessor, on behalf of Western Reserve came from the states of California,
Texas, Utah, Illinois and Maryland, with 43% coming from California alone.
Similarly, in 2001, over 63% of all variable annuity premiums from policies sold
by the agents associated with World Financial Group and its predecessor, on
behalf of Western Reserve came from California, Texas, Utah, Illinois and
Maryland, with nearly 22% coming from California. We believe that the geographic
distribution of the policies we reinsure bears a similar geographic
concentration. As a result of such concentration, our operations may be
significantly affected by regulatory, economic, demographic and other conditions
specific to California and a small number of other states.

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

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

                                        42
<PAGE>

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

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

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

     - Satisfy solvency standards;

     - Restrict dividends and distributions;

     - Obtain prior approval of ownership and transfers of shares;

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

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

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

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

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

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

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

                                        43
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We seek to earn a favorable risk-adjusted total return on our assets by
engaging in an investment strategy that employs strategies to manage investment
risk. We attempt to maintain adequate liquidity in our fixed income portfolio to
fund operations and protect against unexpected events. We have diversified our
portfolio to reduce volatility. We seek to manage our credit risk through
industry and issuer diversification, and interest rate risk by monitoring the
duration and structure of our investment portfolio relative to the duration and
structure of our liability portfolio. We are exposed to potential loss from
various market risks, primarily changes in interest rates and equity prices.
Accordingly, earnings would be affected by these changes. We manage our market
risk based on investment policies approved by our board of directors.

     We do not directly control the allocation of our assets to strategies or
underlying funds, nor do we control the manner in which they are invested by
underlying fund managers. We utilize an independent investment manager to invest
our assets in accordance with our investment guidelines. Conning Asset
Management Inc., a subsidiary of Swiss Reinsurance Company, has been our
investment manager since June 1998. Conning has discretionary authority to
manage our non-cash investment portfolio. As a result, the performance of our
aggregate investment portfolio depends largely on the ability of Conning to
select and manage appropriate investments. However, we consistently and
systematically monitor the strategies and funds in which we are invested, and we
believe our overall risk is limited as a result of our selected strategy. We do
not have, nor have we ever had, an affiliation with Conning, nor has Conning
disclosed any affiliation with the ceding life companies.

     At December 31, 2001, the impact on our investment portfolio from an
immediate 100 basis point increase in market interest rates would have resulted
in an estimated decrease in fair value of 1.8%, or approximately $357,000, and
the impact on our investment portfolio from an immediate 100 basis point
decrease in market interest rates would have resulted in an estimated increase
in fair value of 1.6%, or approximately $332,000.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

     - Independent Auditors' Report

     - Consolidated Balance Sheets at December 31, 2000 and 2001

     - Consolidated Statements of Income for the years ended December 31, 1999,
       2000, and 2001

     - Consolidated Statements of Stockholders' Equity and Comprehensive Income
       for the years ended December 31, 1999, 2000, and 2001

     - Consolidated Statements of Cash Flows for the years ended December 31,
       1999, 2000, and 2001

     - Notes to Consolidated Financial Statements for the years ended December
       31, 1999, 2000, and 2001

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

     No change in or disagreement with accountants occurred during 2001.

                                    PART III

     The information required by Items 10, 11, 12 and 13 of Part III is
incorporated by reference to the registrant's definitive proxy statement for the
annual meeting of stockholders to be filed not more than 120 days after the year
ended December 31, 2001 or such information shall be included by amendment to
this report to be filed within 30 days from the date hereof.

                                        44
<PAGE>

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed or incorporated by reference as part
of this Form 10-K.

          1. The audited consolidated financial statements of Global Preferred
     Holdings, Inc. and the related auditor's report listed in the Index to
     Financial Statements and Financial Statement Schedule appearing on page
     F-1.

          2. The schedule listed in the Index to Financial Statements and
     Financial Statement Schedule appearing on pages F-2.

          3. The exhibits filed as part of this report as required by Item 601
     of Regulation S-K are included in the Index to Exhibits appearing on page
     E-1.

     (b) Reports on Form 8-K.

          A Current Report on Form 8-K was filed with the Securities and
     Exchange Commission on October 1, 2001, to disclose Global Preferred's name
     change from The WMA Corporation to Global Preferred Holdings, Inc.

          A Current Report on Form 8-K was filed with the Securities and
     Exchange Commission on October 4, 2001, to disclose Global Preferred's
     correspondence with its stockholders regarding its second quarter results.

                                        45
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          GLOBAL PREFERRED HOLDINGS, INC.

                                          By:    /s/ EDWARD F. MCKERNAN
                                            ------------------------------------
                                                 Edward F. McKernan
                                                 Chief Executive Officer and
                                              President

Date: March 29, 2002

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<Table>
<Caption>
                    SIGNATURE                                      TITLE                       DATE
                    ---------                                      -----                       ----
<C>     <S>                                          <C>                                  <C>

              /s/ EDWARD F. MCKERNAN                 Chief Executive Officer,             March 29, 2002
 ------------------------------------------------    President and Director
                Edward F. McKernan                   (Principal Executive Officer)


               /s/ BRADLEY E. BARKS                  Chief Financial Officer and          March 29, 2002
 ------------------------------------------------    Senior Vice President -- Finance
                 Bradley E. Barks


              /s/ CARYL P. SHEPHERD                  Chief Accounting Officer,            March 29, 2002
 ------------------------------------------------    Treasurer and Controller
                 Carl P. Shepherd                    (Principal Accounting Officer)


               /s/ JOSEPH F. BARONE                  Chairman of the Board of Directors   March 29, 2002
 ------------------------------------------------    and Director
                 Joseph F. Barone


                /s/ MILAN RADONICH                   Director                             March 29, 2002
 ------------------------------------------------
                  Milan Radonich


             /s/ THOMAS W. MONTGOMERY                Director                             March 29, 2002
 ------------------------------------------------
               Thomas W. Montgomery
</Table>

                                        46
<PAGE>

                               INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
  3.1     Certificate of Incorporation of the Registrant, as amended
          (incorporated by reference to Exhibit 3.1 to Registrant's
          Registration Statement on Form SB-2 filed on June 28, 1995).
  3.1.1   Amendment to Certificate of Incorporation of the Registrant,
          changing the name of the Company to "The WMA Corporation"
          (incorporated by reference to Exhibit 3.1.1 to Registrant's
          Quarterly Report on Form 10-QSB for the quarter ended March
          31, 1998, filed on May 15, 1998).
  3.1.2   Amendment to Certificate of Incorporation of the Registrant,
          increasing the number of authorized shares of common stock
          and creating a new class of authorized shares of preferred
          stock (incorporated by reference to Exhibit 3.1.1 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended June 30, 1999, filed on August 16, 1999).
  3.1.3   Certificate of Amendment to Certificate of Incorporation of
          the Registrant, changing the name of the Company to "Global
          Preferred Holdings, Inc." (incorporated by reference to
          Exhibit 3.1 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended September 30, 2001, filed on November
          14, 2001).
  3.2     Amended and Restated Bylaws of the Registrant (incorporated
          by reference to Exhibit 3.2 to Registrant's Registration
          Statement on Form S-1 filed on February 22, 2002).
  4.1     Revised Specimen Stock Certificate (incorporated by
          reference to Exhibit 4.1 to Registrant's Registration
          Statement on Form S-1 filed on February 22, 2002).
  4.2     Subscription Agreement (incorporated by reference to Exhibit
          4.3 to Registrant's Registration Statement on Form SB-2
          filed on November 17, 1995).
  4.3     Revised Specimen Warrant (incorporated by reference to
          Exhibit 4.4 to Registrant's Registration Statement on Form
          SB-2 filed on December 29, 1995).
  4.4     Loan Agreement between WMA Agency and Offering Subscribers
          (incorporated by reference to Exhibit 4.5 to Registrant's
          Registration Statement on Form SB-2 filed on November 17,
          1995).
 10.1     Form of Escrow Agreement between Registrant and Fidelity
          National Bank as Escrow Agent (incorporated by reference to
          Exhibit 10.1 to Registrant's Registration Statement on Form
          SB-2 filed on September 22, 1995).
 10.2     Form of Promotional Share Escrow Agreement (incorporated by
          reference to Exhibit 10.2 to Registrant's Registration
          Statement on Form SB-2 filed on November 17, 1995).
 10.3     Loan Agreement with Money Services, Inc. (incorporated by
          reference to Exhibit 10.3 to Registrant's Registration
          Statement on Form SB-2 filed on November 17, 1995).
 10.4     Loan Agreement between Money Services, Inc. and WMA Agency
          (incorporated by reference to Exhibit 10.4 to Registrant's
          Registration Statement on Form SB-2 filed on November 17,
          1995).
 10.5     Management Agreement with WMA Management (incorporated by
          reference to Exhibit 10.5 to Registrant's Registration
          Statement on Form SB-2 filed on November 17, 1995).
 10.6     Modification of Loan & Security Agreement between Money
          Services, Inc. and WMA Agency (incorporated by reference to
          Exhibit 10.2 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended March 31, 1998, filed on May 15,
          1998).
 10.7     Reinsurance Agreement No. 1 between WMA Life Insurance
          Company Limited and Western Reserve Life Assurance Company
          of Ohio, dated July 9, 1996 (incorporated by reference to
          Exhibit 10.4 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended March 31, 1998, filed on May 15,
          1998).
 10.8     Corporate Services Agreement with World Marketing Alliance,
          Inc. (incorporated by reference to Exhibit 10.3 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended June 30, 1998, filed on August 14, 1998).
 10.9*    Automatic Variable Annuity Reinsurance Agreement between
          Western Reserve Life Assurance Company of Ohio and WMA Life
          Insurance Company Limited, effective January 1, 1998
          (incorporated by reference to Exhibit 10.5 to Registrant's
          Quarterly Report on Form 10-QSB for the quarter ended June
          30, 1998, filed on August 14, 1998).
</Table>

                                        47
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
 10.10*   Automatic Flexible Premium Variable Life Reinsurance
          Agreement Number 2 between Western Reserve Life Assurance
          Company of Ohio and WMA Life Insurance Company Limited,
          effective April 1, 1998 (incorporated by reference to
          Exhibit 10.6 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended June 30, 1998, filed on August 14,
          1998).
 10.11    Sublease Agreement by and between World Marketing Alliance,
          Inc. and The WMA Corporation, dated as of January 21, 1998
          (incorporated by reference to Exhibit 10.5 to Registrant's
          Annual Report on Form 10-KSB/A for the year ended December
          31, 1997, filed on October 1, 1998).
 10.12    Management Agreement dated August 2, 1995 between CFM
          Insurance Managers, Ltd. and WMA Life (incorporated by
          reference to Exhibit 10.7 to Registrant's Annual Report on
          Form 10-KSB/A for the year ended December 31, 1997, filed on
          October 1, 1998).
 10.13    Form of Pledge and Security Agreement and Irrevocable Proxy
          between Debtor and World Marketing Alliance, Inc.
          (incorporated by reference to Exhibit 10.8 to Registrant's
          Annual Report on Form 10-KSB/A for the year ended December
          31, 1997, filed on October 1, 1998).
 10.14    Revolving Line of Credit Loan Agreement between The WMA
          Corporation and Money Services, Inc., dated September 30,
          1998 (incorporated by reference to Exhibit 10.1 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended September 30, 1998, filed on November 16, 1998).
 10.15    Revolving Line of Credit Promissory Note issued by The WMA
          Corporation on September 30,1998 to Money Services, Inc. in
          the principal sum of $10,000,000 (incorporated by reference
          to Exhibit 10.2 to Registrant's Quarterly Report on Form
          10-QSB for the quarter ended September 30, 1998, filed on
          November 16, 1998).
 10.16    Directed Reinsurance Agreement between WMA Life and WMA
          Agency, dated June 8, 1998 (incorporated by reference to
          Exhibit 10.3 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended September 30, 1998, filed on November
          16, 1998).
 10.17    First Amendment of Revolving Line of Credit Promissory Note
          between The WMA Corporation and Money Services, Inc., dated
          January 29, 1999 (incorporated by reference to Exhibit 10.5
          to Registrant's Quarterly Report on Form 10-QSB for the
          quarter ended March 31, 1999, filed on May 17, 1999).
 10.18    1999 Stock Option Plan and Stock Option Agreement Form of
          the Registrant (incorporated by reference to Exhibit A to
          Registrant's Definitive Proxy Statement, filed on August 3,
          1999).
 10.19    Amendment Number 1 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 2 between Western
          Reserve Life Assurance Co. of Ohio and WMA Life Insurance
          Company Limited, effective January 1, 1999 (incorporated by
          reference to Exhibit 10.1 to Registrant's Quarterly Report
          on Form 10-QSB for the quarter ended September 30, 1999,
          filed on November 15, 1999).
 10.20    Amendment Number 1 to the Automatic Variable Annuity
          Reinsurance Agreement between Western Reserve Life Assurance
          Co. of Ohio and WMA Life Insurance Company Limited,
          effective January 1, 1999 (incorporated by reference to
          Exhibit 10.1 to Registrant's Quarterly Report on Form 10-QSB
          for the quarter ended September 30, 1999, filed on November
          15, 1999).
 10.21    Third Amendment of Revolving Line of Credit Promissory Note
          between The WMA Corporation and Money Services, Inc., dated
          July 30, 1999 (incorporated by reference to Exhibit 10.2 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended September 30, 1999, filed on November 15, 1999).
 10.22    Five Year Term Note issued by The WMA Corporation to Money
          Services, Inc. on July 30, 1999 (incorporated by reference
          to Exhibit 10.3 to Registrant's Quarterly Report on Form
          10-QSB for the quarter ended September 30, 1999, filed on
          November 15, 1999).
 10.23    Fourth Amendment of Revolving Line of Credit Promissory Note
          between The WMA Corporation and Money Services, Inc.,
          effective December 31, 1999 (incorporated by reference to
          Exhibit 10.1 to Registrant's Annual Report on Form 10-KSB
          for the year ended December 31, 1999, filed on March 20,
          2000).
</Table>

                                        48
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
 10.24*   Amendment Number 2 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 2 between Western
          Reserve Life Assurance Co. of Ohio and WMA Life Insurance
          Company Limited, effective October 1, 1999 (incorporated by
          reference to Exhibit 10.2 to Registrant's Annual Report on
          Form 10-KSB/A for the year ended December 31, 1999, filed on
          March 30, 2000).
 10.25*   Automatic Flexible Premium Variable Life Reinsurance
          Agreement Number 3 between Western Reserve Life Assurance
          Co. of Ohio and WMA Life Insurance Company Limited,
          effective October 1, 1999 (incorporated by reference to
          Exhibit 10.3 to Registrant's Annual Report on Form 10-KSB/A
          for the year ended December 31, 1999, filed on March 30,
          2000).
 10.26*   Amendment Number 2 to the Automatic Variable Annuity
          Reinsurance Agreement between Western Reserve Life Assurance
          Co. of Ohio and WMA Life Insurance Company Limited,
          effective October 1, 1999 (incorporated by reference to
          Exhibit 10.4 to Registrant's Annual Report on Form 10-KSB/A
          for the year ended December 31, 1999, filed on March 30,
          2000).
 10.27    Amendment Number 3 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 2 between Western
          Reserve Life Assurance Co. of Ohio and WMA Life Insurance
          Company Limited, effective February 1, 2000 (incorporated by
          reference to Exhibit 10.5 to Registrant's Annual Report on
          Form 10-KSB/A for the year ended December 31, 1999, filed on
          March 30, 2000).
 10.28    Amendment Number 3 to the Automatic Variable Annuity
          Reinsurance Agreement between Western Reserve Life Assurance
          Co. of Ohio and WMA Life Insurance Company Limited,
          effective February 1, 2000 (incorporated by reference to
          Exhibit 10.6 to Registrant's Annual Report on Form 10-KSB/A
          for the year ended December 31, 1999, filed on March 30,
          2000).
 10.29*   Amendment Number 4 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 2 between Western
          Reserve and WMA Life, effective January 1, 2000
          (incorporated by reference to Exhibit 10.1 to Registrant's
          Annual Report on Form 10-KSB for the year ended December 31,
          2000, filed on March 20, 2001).
 10.30*   Amendment Number 5 to the Automatic Variable Annuity
          Reinsurance Agreement between Western Reserve and WMA Life,
          effective January 1, 2000 (incorporated by reference to
          Exhibit 10.2 to Registrant's Annual Report on Form 10-KSB
          for the year ended December 31, 2000, filed on March 20,
          2001).
 10.31    Third Amendment and Joinder to the Directed Reinsurance
          Agreement between The WMA Corporation, World Marketing
          Alliance, Inc. and World Financial Group, Inc. dated July
          12, 2001 (incorporated by reference to Exhibit 10.1 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended June 30, 2001, filed on August 13, 2001).
 10.32    First Right Agreement between The WMA Corporation and
          Western Reserve Life Assurance Co. of Ohio dated July 12,
          2001 (incorporated by reference to Exhibit 10.2 to
          Registrant's Quarterly Report on Form 10-QSB for the quarter
          ended June 30, 2001, filed on August 13, 2001).
 10.33    Amendment Number 3 to the Automatic Reinsurance Agreement
          between Western Reserve Life Assurance Company of Ohio and
          WMA Life Insurance Company Limited, effective as of
          September 18, 2001 (incorporated by reference to Exhibit
          10.33 to Registrant's Registration Statement on Form S-1,
          filed on February 22, 2002).
 10.34    Amendment Number 5 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 2 between Western
          Reserve and WMA Life, effective September 18, 2001
          (incorporated by reference to Exhibit 10.34 to Registrant's
          Registration Statement on Form S-1, filed on February 22,
          2002).
 10.35    Amendment Number 2 to the Automatic Flexible Premium
          Variable Life Reinsurance Agreement Number 3 between Western
          Reserve Life Assurance Co. of Ohio and WMA Life Insurance
          Company Limited, effective September 18, 2001 (incorporated
          by reference to Exhibit 10.36 to Registrant's Registration
          Statement on Form S-1, filed on February 22, 2002).
</Table>

                                        49
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
 10.36*   Amendment Number 6 to the Automatic Variable Annuity
          Reinsurance Agreement between Western Reserve Life Assurance
          Co. of Ohio and WMA Life Insurance Company Limited,
          effective September 18, 2001(incorporated by reference to
          Exhibit 10.37 to Registrant's Registration Statement on Form
          S-1, filed on February 22, 2002).
 10.37    Global Preferred Holdings, Inc. Stock Incentive Plan and
          Form of Stock Option Grant Certificate (incorporated by
          reference to Exhibit 10.38 to Registrant's Registration
          Statement on Form S-1, filed on February 22, 2002).
 10.38    Global Preferred Holdings, Inc. Directors Stock Option Plan
          and Form of Stock Option Grant Certificate (incorporated by
          reference to Exhibit 10.39 to Registrant's Registration
          Statement on Form S-1, filed on February 22, 2002).
 10.39    Form of Officer and Director Indemnification Agreement
          (incorporated by reference to Exhibit 10.40 to Registrant's
          Registration Statement on Form S-1, filed on February 22,
          2002).
 10.40    Employment Agreement by and between the Registrant and
          Edward F. McKernan, effective January 1, 2002 (incorporated
          by reference to Exhibit 10.41 to Registrant's Registration
          Statement on Form S-1, filed on February 22, 2002).
 10.41    Resignation of S. Hubert Humphrey, Jr., dated December 28,
          2001 (incorporated by reference to Exhibit 10.1 to
          Registrant's Form 8-K, filed on February 22, 2002).
 10.42    Form of Stock Option Grant Certificate for S. Hubert
          Humphrey, Jr. (incorporated by reference to Exhibit 10.2 to
          Registrant's Form 8-K, filed on February 22, 2002).
 10.43    Employment Agreement by and between the Registrant and Caryl
          P. Shepherd, effective February 1, 2002 (incorporated by
          reference to Exhibit 10.42 to Registrant's Registration
          Statement on Form S-1/A, filed on March 29, 2002).
 10.44    Employment Agreement by and between the Registrant and
          Bradley E. Barks, effective March 4, 2002 (incorporated by
          reference to Exhibit 10.45 to Registrant's Registration
          Statement on Form S-1/A, filed on March 29, 2002).
 10.45    Employment Agreement by and between the Registrant and
          Thomas Bobowski, effective March 4, 2002 (incorporated by
          reference to Exhibit 10.46 to Registrant's Registration
          Statement on Form S-1/A, filed on March 29, 2002).
 10.46*   Automatic Pool Reinsurance Agreement, effective April 1,
          1998, among WMA Life Insurance Company Limited, American
          Phoenix Life and Reinsurance Company, Swiss Re Life & Health
          America, Inc., The Lincoln National Life Insurance Company
          and Transamerica Occidental Life Insurance Company
          (incorporated by reference to Exhibit 10.47 to Registrant's
          Registration Statement on Form S-1/A, filed on March 29,
          2002).
</Table>

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

* Confidential Treatment has been requested with respect to portions of these
  documents. The omitted portions of these documents were filed separately with
  the Securities and Exchange Commission.

                                        50
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                               PAGE
                                                               ----
<S>                                                            <C>
FINANCIAL STATEMENTS:
Independent Auditor's Report................................    F-2
Consolidated Balance Sheets as of December 31, 1999, 2000
  and 2001..................................................    F-3
Consolidated Statements of Income for the Years Ended
  December 31, 1999, 2000 and 2001..........................    F-4
Consolidated Statements of Stockholders' Equity for the
  Years Ended December 31, 1999, 2000 and 2001..............    F-5
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1999, 2000 and 2001..........................    F-6
Notes to Consolidated Financial Statements..................    F-7
</Table>

                                       F-1
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
Global Preferred Holdings, Inc.:

We have audited the accompanying consolidated balance sheets of Global Preferred
Holdings, Inc. and subsidiaries (formerly known as The WMA Corporation) as of
December 31, 2000 and 2001, 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, 2001. These consolidated
financial statements are the responsibility of Global Preferred'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 Global Preferred
Holdings, Inc. and subsidiaries as of December 31, 2000 and 2001, and the
results of their operations and their cash flows, for each of the years in the
three-year period ended December 31, 2001 in conformity with accounting
principles generally accepted in the United States of America.

KPMG LLP
Atlanta, Georgia
March 8, 2002

                                       F-2
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.
                          Consolidated Balance Sheets

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                                 2000          2001
                                                              -----------   -----------
<S>                                                           <C>           <C>
                           Assets
Fixed maturity securities -- available for sale (amortized
  cost of $5,817,900 and $11,480,749 for 2000 and 2001,
  respectively).............................................  $ 5,912,379   $12,214,279
Cash and cash equivalents...................................    4,259,153     8,062,110
Investment income due and accrued...........................      113,558       172,055
Reinsurance balances receivable.............................    2,632,949     2,842,908
Reinsured policy loans......................................      867,023     1,013,629
Deferred acquisition costs..................................   42,752,339    42,800,269
Prepaid expenses............................................       31,210       659,538
Fixed assets (net of accumulated depreciation of $102,992
  and $147,750 for 2000 and 2001, respectively).............       48,806        88,114
                                                              -----------   -----------
          Total assets......................................  $56,617,417   $67,852,902
                                                              ===========   ===========
            Liabilities and Stockholders' Equity
Liabilities:
  Future policy benefits....................................  $ 8,025,748   $11,911,532
  Reinsurance balances payable..............................      388,016       188,818
  Accrued expenses and accounts payable.....................      140,118       544,683
  Accrued interest payable..................................      161,356       158,219
  Dividend payable..........................................       12,245            --
  Current income tax payable................................      405,431       413,299
  Short term debt...........................................      277,285            --
  Long term debt............................................    5,000,000     5,000,000
  Deferred tax liability....................................    5,618,285     7,667,767
                                                              -----------   -----------
          Total liabilities.................................   20,028,484    25,884,318
                                                              -----------   -----------
Stockholders' equity:
  Preferred stock, par value $2.00, 10,000,000 shares
     authorized; Series A Preferred Stock, 1,000,000 shares
     authorized; 266,047 shares issued for 2000 and 2001....      532,094       532,094
  Common stock, par value $.001, 50,000,000 shares
     authorized; 2,500,000 shares and 3,750,000 shares
     issued for 2000 and 2001, respectively.................        2,500         3,750
  Additional paid-in capital................................   22,795,581    22,794,331
  Accumulated other comprehensive income....................       62,357       246,531
  Retained earnings.........................................   13,246,301    18,441,145
  Treasury stock, at cost (7,485 shares and 7,390 shares for
     2000 and 2001, respectively)...........................      (49,900)      (49,267)
                                                              -----------   -----------
          Total stockholders' equity........................   36,588,933    41,968,584
                                                              -----------   -----------
Total liabilities and stockholders' equity..................  $56,617,417   $67,852,902
                                                              ===========   ===========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.
                       Consolidated Statements of Income

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                           1999          2000          2001
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
Revenues:
  Premiums............................................  $ 9,692,649   $16,618,927   $19,240,551
  Reinsured policy revenues...........................   13,505,823    12,893,664    11,237,610
  Net investment income...............................      349,683       527,613       810,544
  Net realized gain (loss) on investments.............      (66,000)        2,606        44,807
  Loss on recapture of business.......................     (822,814)           --            --
                                                        -----------   -----------   -----------
     Total revenue....................................   22,659,341    30,042,810    31,333,512
                                                        -----------   -----------   -----------
Benefits and expenses:
  Benefits, claims and settlement expenses............    4,511,469     7,559,164     6,292,392
  Change in future policy benefits....................      313,679     2,052,733     2,411,335
  Reinsurance expense allowances, net.................    5,362,263     7,539,492     8,501,197
  Amortization of deferred acquisition costs..........    3,789,318     4,016,629     3,944,660
  Operating expenses..................................      983,148     1,256,080     1,951,634
  Interest expense....................................    1,153,958       665,119       378,145
                                                        -----------   -----------   -----------
     Total benefits and expenses......................   16,113,835    23,089,217    23,479,363
                                                        -----------   -----------   -----------
     Income before income tax.........................    6,545,506     6,953,593     7,854,149
  Income tax expense..................................   (2,225,472)   (1,820,717)   (2,391,568)
                                                        -----------   -----------   -----------
     Net income.......................................  $ 4,320,034   $ 5,132,876   $ 5,462,581
                                                        -----------   -----------   -----------
  Preferred dividends.................................           --       155,198       267,104
                                                        -----------   -----------   -----------
     Net income available to common stockholders......  $ 4,320,034   $ 4,977,678   $ 5,195,477
                                                        ===========   ===========   ===========
Basic earnings per share..............................  $      1.15   $      1.33   $      1.39
                                                        ===========   ===========   ===========
Diluted earnings per share............................  $      1.15   $      1.30   $      1.32
                                                        ===========   ===========   ===========
Weighted average common shares outstanding............    3,742,610     3,742,610     3,742,610
                                                        ===========   ===========   ===========
Total weighted average common and common equivalent
  shares outstanding..................................    3,742,610     3,943,897     4,141,684
                                                        ===========   ===========   ===========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.
    Consolidated Statements of Stockholders' Equity and Comprehensive Income
                 Years ended December 31, 1999, 2000, and 2001
<Table>
<Caption>
                                                                                               ACCUMULATED
                                  NUMBER OF               NUMBER OF             ADDITIONAL        OTHER
                                  PREFERRED   PREFERRED    COMMON     COMMON      PAID-IN     COMPREHENSIVE    RETAINED
                                   SHARES       STOCK      SHARES      STOCK      CAPITAL     INCOME (LOSS)    EARNINGS
                                  ---------   ---------   ---------   -------   -----------   -------------   -----------
<S>                               <C>         <C>         <C>         <C>       <C>           <C>             <C>
Balance, January 1, 1999........        --    $     --    2,500,000   $2,500    $20,228,973     $ 242,977     $ 3,948,589
  Comprehensive income..........
  Net income....................                                                                                4,320,034
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)      8,268,623

  Comprehensive income
  Net income....................                                                                                5,132,876
Other comprehensive income, net
  of tax........................                                                                  104,909
  Total comprehensive income....
Preferred stock issued..........   266,047     532,094                            2,566,608
Preferred dividends.............        --          --           --       --             --            --        (155,198)
                                   -------    --------    ---------   ------    -----------     ---------     -----------
Balance, December 31, 2000......   266,047     532,094    2,500,000    2,500     22,795,581        62,357     $13,246,301

  Comprehensive income
  Net income....................                                                                                5,462,581
    Other comprehensive income,
      net of tax................                                                                  184,174
  Total comprehensive income....
Three-for-two stock split.......                          1,250,000    1,250         (1,250)
Preferred dividends.............                                                                                 (267,104)
Treasury stock reissued (95
  shares).......................        --          --           --       --             --            --            (633)
                                   -------    --------    ---------   ------    -----------     ---------     -----------
Balance, December 31, 2001......   266,047    $532,094    3,750,000   $3,750    $22,794,331     $ 246,531     $18,441,145
                                   =======    ========    =========   ======    ===========     =========     ===========

<Caption>

                                                TOTAL
                                  TREASURY   STOCKHOLDERS   COMPREHENSIVE
                                   STOCK        EQUITY         INCOME
                                  --------   ------------   -------------
<S>                               <C>        <C>            <C>
Balance, January 1, 1999........  $(49,900)  $24,373,139
  Comprehensive income..........
  Net income....................               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......   (49,900)   28,407,644
  Comprehensive income
  Net income....................               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)
                                  --------   -----------
Balance, December 31, 2000......   (49,900)  $36,588,933
  Comprehensive income
  Net income....................               5,462,581     $5,462,581
    Other comprehensive income,
      net of tax................                 184,174        184,174
                                                             ----------
  Total comprehensive income....                             $5,646,755
                                                             ==========
Three-for-two stock split.......
Preferred dividends.............                (267,104)
Treasury stock reissued (95
  shares).......................       633            --
                                  --------   -----------
Balance, December 31, 2001......  $(49,267)  $41,968,584
                                  ========   ===========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.
                     Consolidated Statements of Cash Flows

<Table>
<Caption>
                                                                      YEARS ENDED DECEMBER 31,
                                                              ----------------------------------------
                                                                  1999          2000          2001
                                                              ------------   -----------   -----------
<S>                                                           <C>            <C>           <C>
Cash flows from operating activities:
  Net income................................................  $  4,320,034   $ 5,132,876   $ 5,462,581
  Adjustments to reconcile net income to net cash provided
    by (used in) operating activities:
    Amortization and depreciation...........................     3,924,990     4,064,604     3,989,418
    Deferred tax expense....................................     2,225,472     1,304,642     1,954,605
    Net realized (gain) loss on investments.................        66,000        (2,606)      (44,807)
    Loss on recapture of business...........................       822,814            --            --
  Change in:
    Investment income due and accrued.......................       116,753       (94,115)      (58,497)
    Reinsurance balances receivable.........................    (1,944,005)      352,989      (209,959)
    Reinsured policy loans..................................      (283,265)     (580,060)     (146,606)
    Deferred acquisition costs..............................   (36,612,052)   (7,018,868)   (3,992,590)
    Prepaid expenses........................................      (130,148)      315,684      (628,328)
    Other assets............................................       183,317            --            --
    Future policy benefits..................................     2,651,956     3,530,962     3,885,784
    Reinsurance balances payable............................    13,398,265      (328,314)     (199,198)
    Accrued expenses and accounts payable...................       (16,090)      (20,022)      404,565
    Accrued interest payable................................       564,690      (504,433)       (3,137)
    Current income tax payable..............................            --       405,431         7,868
                                                              ------------   -----------   -----------
      Net cash provided by (used in) operating activities...   (10,711,269)    6,558,770    10,421,699
                                                              ------------   -----------   -----------
Cash flows from investing activities:
  Proceeds from sale of available for sale securities.......     6,924,903       194,856     1,674,272
  Proceeds from maturities and principal payments on
    mortgage-backed securities of available for sale
    securities..............................................       391,924       127,730       474,925
  Purchase of available-for-sale securities.................            --    (4,019,176)   (8,127,239)
  Purchase of fixed assets..................................       (50,880)       (8,449)      (84,066)
                                                              ------------   -----------   -----------
      Net cash provided by (used in) investing activities...     7,265,947    (3,705,039)   (6,062,108)
                                                              ------------   -----------   -----------
Cash flows from financing activities:
  Issuance of preferred stock...............................            --     3,098,702            --
  Preferred dividends.......................................            --      (142,953)     (279,349)
  Purchase of treasury stock and warrants...................            --            --            --
  Proceeds from short term debt.............................            --            --      (277,285)
  Proceeds from (repayment of) long term debt...............     5,000,000    (5,026,277)           --
  Decrease in principal due on short term debt..............    (4,696,438)           --            --
                                                              ------------   -----------   -----------
      Net cash provided by (used in) financing activities...       303,562    (2,070,528)     (556,634)
                                                              ------------   -----------   -----------
      Net increase (decrease) in cash and cash
        equivalents.........................................    (3,141,760)      783,203     3,802,957
Cash and cash equivalents at beginning of period............     6,617,710     3,475,950     4,259,153
                                                              ------------   -----------   -----------
Cash and cash equivalents at end of period..................  $  3,475,950   $ 4,259,153   $ 8,062,110
                                                              ============   ===========   ===========
Supplemental disclosure of cash flow information:
  Interest paid.............................................  $         --   $ 1,169,552   $   381,282
                                                              ============   ===========   ===========
  Income taxes paid.........................................  $         --   $   110,644   $   429,095
                                                              ============   ===========   ===========
  Change in preferred dividend accrual......................  $         --   $    12,245   $   (12,245)
                                                              ============   ===========   ===========
  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            --            --
                                                              ============   ===========   ===========
  Non-cash financing activities:
    Treasury shares issued for stock split fractional
      shares................................................            --            --            95
                                                              ============   ===========   ===========
</Table>

          See accompanying notes to consolidated financial statements.
                                       F-6
<PAGE>

                        GLOBAL PREFERRED HOLDINGS, INC.
                   Notes to Consolidated Financial Statements
                        December 31, 1999, 2000 and 2001

1.  ORGANIZATION

     Global Preferred Holdings, Inc. (formerly known as The WMA Corporation) was
formed March 9, 1995 as an insurance holding company.

     The consolidated financial statements include the assets, liabilities, and
results of operations of Global Preferred Holdings, Inc. ("Global Preferred")
and its wholly-owned subsidiary, Global Preferred Re Limited (formerly known as
WMA Life Insurance Company Limited), a Bermuda company registered as a long-term
insurer under the Bermuda Insurance Act 1978 ("Global Preferred Re" together
with Global Preferred shall be referred to collectively as "Global Preferred"
unless the context otherwise requires or otherwise as expressly stated).

     Global Preferred, through its subsidiary, Global Preferred Re, provides
reinsurance for variable universal life insurance and variable annuity products.
Historically, Global Preferred's reinsurance business has been based on its
relationship with the independent agents of World Financial Group, Inc., which
is an independent marketing organization ("IMO") that markets the products
Global Preferred Re currently reinsures. World Financial Group is an indirect
subsidiary of AEGON USA, Inc. An independent marketing organization is an
organization of independent agents that contracts with one or more insurance
companies to distribute and market securities and insurance products. The
foundation for Global Preferred's relationship with the agents associated with
World Financial Group is the equity participation that many of them have in
Global Preferred.

     Reinsurance is an arrangement under which an insurance company (the
"reinsurer") agrees to indemnify another insurance company (the "ceding life
company") for all or a portion of the insurance risks underwritten by the ceding
life company. The reinsurer, in turn, assumes a portion of the underwritten risk
in exchange for a portion of the premium collected. Global Preferred currently
assumes portions of mortality and other risks relating to variable universal
life insurance and variable annuity policies in order to share in the net
profits generated through the sale of such policies by the independent
registered agents associated with World Financial Group.

     To date, all life insurance and annuity policies reinsured by Global
Preferred have been sold by the agents associated with World Financial Group
who, until June 2001, were associated with World Marketing Alliance, Inc. ("WMA
Agency"). In June 2001, World Financial Group acquired certain assets of WMA
Agency. As a result of the acquisition, substantially all of the agents became
associated with World Financial Group. Global Preferred has been informed that
World Group Securities, Inc., the broker-dealer affiliated with World Financial
Group, is in the process of obtaining approval for the transfer of the
securities licenses of agents from WMA Securities, Inc., the broker-dealer
affiliated with WMA Agency. Global Preferred understands that the formation of
World Group Securities and its business plan have been approved by the National
Association of Securities Dealers and World Group Securities is awaiting state
regulatory approvals.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Consolidation and Basis of Presentation.  The consolidated financial
statements of Global Preferred have been prepared in accordance with accounting
principles generally accepted in the United States of America. 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 Global Preferred deems
to be sensitive to changes in estimates include deferred acquisition costs and
future policy benefits. In all instances, actual results could differ from
estimates.

                                       F-7
<PAGE>

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

     Investments.  Global Preferred classifies all fixed maturity securities and
equity securities as "available for sale" and accordingly, such securities are
reported at fair value. Fixed maturity securities available for sale are so
classified based upon the possibility that such securities could be sold prior
to maturity if that action enables Global Preferred 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.

     Global Preferred's policy is to reflect an other-than-temporary impairment
in securities when the fair value of these securities is lower than the cost
basis for an extended period of time. Any such impairment identified would
result in a write-down of the cost basis of the individual security to its fair
value to establish a new cost basis and to reflect a realized capital loss in
the consolidated statements of income. No impairments in value have occurred
which would require Global Preferred to make such an adjustment.

     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
investments using the specific identification method are included in income.

     Fair Value Disclosure.  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. Taking into consideration the basis of reinsurance under the
reinsurance agreements, the carrying value of future policy benefits
approximates its fair value. See Note 3 for fair value information covering
Global Preferred's investment portfolio.

     Cash and Cash Equivalents.  Cash and cash equivalents include cash on hand
and on deposit purchased with an original maturity of three months or less.

     Deferred 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 life companies, and certain other underwriting costs, including
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.

     On those policies reinsured under a monthly renewable term agreement,
deferred acquisition costs are amortized in proportion to the premium revenue
related to the mortality risk reinsured. Such premium revenue is 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. Under the renewable term agreements,
the rate of amortization depends on the approach utilized, static or dynamic.
Under the static approach, the amortization is in proportion to the ratio of
premiums collected during the then current period to total anticipated premiums.
Often the static approach is used in the first policy year or until the business
is sufficiently large to warrant the complexity of the dynamic approach. Under
the dynamic approach, the amortization under the static approach is adjusted to
reflect actual persistency of the insurance in effect. Currently, we use the
dynamic amortization approach for all our policies reinsured under our renewable
term agreements.

     For policies reinsured under a coinsurance or modified coinsurance
agreement, deferred acquisition costs are amortized in proportion to the
expected gross profits associated with mortality charges, investment margins,
surrender charges and expense loads reinsured. Management periodically reviews
                                       F-8
<PAGE>

Global Preferred'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 Global Preferred's
deferred acquisition costs will be recalculated and will be reflected during the
then current accounting period.

     Reinsurance Expense Allowances.  Allowances generally represent a
percentage of each reinsurance premium that is paid or allowed by Global
Preferred to the ceding life 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 Global
Preferred's share of acquisition and maintenance expenses incurred by the ceding
life 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 calculated 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 believed to be 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 claims. 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 Global Preferred's investment portfolio and market rates for
new investments. Interest rates used in estimating future policy benefits range
from 5.5% to 7.0%. The mortality and withdrawal assumptions are based on Global
Preferred's experience, industry experience and industry standards. Policy and
contract reserves are included in future policy benefits on the consolidated
balance sheets.

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

     Income Taxes.  Global Preferred uses the asset and liability method to
record deferred income taxes. Accordingly, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, using an effective federal 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 Global
Preferred's earnings may ultimately prove to be less than the deferred income
tax liabilities and related expenses determined under SFAS No. 109, at December
31, 2001.

     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 acquisition costs.
Other revenue consists of non-recurring items other

                                       F-9
<PAGE>

than reinsurance premiums or investment earnings and is recognized upon
completion of the related earnings process.

     Reinsured Policy Revenues.  Reinsured policy revenues are recognized as
earned and 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 variable universal life and variable
annuity 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.

     Common Stock.  On July 12, 2001, the board of directors declared a
three-for-two stock split in the form of a stock dividend, consisting of 1.25
million shares, payable to stockholders of record at the close of business on
August 24, 2001. The stock split was distributed on September 7, 2001.
Fractional shares were adjusted up to the next share using shares of treasury
stock. 95 treasury shares were issued for the fractional shares. Share and
per-share amounts have been retroactively adjusted to reflect the stock split on
the consolidated statements of income.

     Stock Compensation Plans.  Global Preferred applies Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, in accounting for stock-based compensation plans. Global
Preferred has adopted the disclosure-only provisions of SFAS No. 123, Accounting
for Stock-Based Compensation.

     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 on the balance sheet and measure those instruments at fair value.
The accounting for changes in the fair value of a derivative will be included in
either earnings or other comprehensive income depending on the intended use of
the derivative instrument. The provisions of SFAS No. 133 did not have any
impact on Global Preferred's financial statements.

     In September 2000, the Financial Accounting Standards Board ("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. The provisions of SFAS No. 140 did
not have any impact on Global Preferred's financial statements.

     FASB issued four new accounting standards in 2001. SFAS No. 141, SFAS No.
142, SFAS No. 143 and SFAS No. 144 primarily address the accounting for
goodwill, business combinations, and the impairment and disposition of
long-lived assets. The adoption of these standards in 2002 is not expected to
have a material impact on Global Preferred's financial statements.

     Reclassification.  Global Preferred has reclassified the presentation of
certain 1999 and 2000 information to conform to the 2001 presentation.

                                       F-10
<PAGE>

3.  INVESTMENTS

     Major categories of net investment income consist of the following:

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                1999       2000       2001
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Fixed maturity securities...................................  $361,830   $365,536   $718,583
Cash and cash equivalents...................................    59,431    230,200    147,447
                                                              --------   --------   --------
                                                               421,261    595,736    866,030
Investment expenses.........................................   (71,578)   (68,123)   (55,486)
                                                              --------   --------   --------
Net investment income.......................................  $349,683   $527,613   $810,544
                                                              ========   ========   ========
</Table>

     The amortized cost, unrealized gains and losses, and estimated fair values
of fixed maturity securities at December 31, 2000 and 2001 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:
U.S. Government and government
  agencies........................  $        --    $     --     $    --     $        --
Corporate.........................    3,929,520      83,240       8,060       4,004,700
Asset-backed securities...........      874,058       7,799       1,400         880,457
Mortgage-backed securities........    1,014,322      17,284       4,384       1,027,222
                                    -----------    --------     -------     -----------
  Total...........................  $ 5,817,900    $108,323     $13,844     $ 5,912,379
                                    ===========    ========     =======     ===========
               2001
Fixed maturity securities,
  available for sale:
U.S. Government and government
  agencies........................  $   209,704    $  6,604     $    --     $   216,308
Corporate.........................    7,158,877     279,551       3,930       7,434,498
Asset-backed securities...........    1,611,012      50,444          --       1,661,456
Mortgage-backed securities........    2,861,156      41,194         333       2,902,017
                                    -----------    --------     -------     -----------
  Total...........................  $11,840,749    $377,793     $ 4,263     $12,214,279
                                    ===========    ========     =======     ===========
</Table>

     There were no investments in any entity in excess of 10% of stockholders'
equity at December 31, 2001. Fixed maturity securities are valued based upon
quoted market prices.

     At December 31, 2001, 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.........................   $   598,405     $   615,406
Due after one year through five years...........     6,570,310       6,825,383
Due after five years through ten years..........       199,866         210,017
Asset-backed securities.........................     1,611,012       1,661,456
Mortgage-backed securities......................     2,861,156       2,902,017
                                                   -----------     -----------
  Total.........................................   $11,840,749     $12,214,279
                                                   ===========     ===========
</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-11
<PAGE>

     Proceeds from sales of fixed maturity securities for the years ended
December 31, 1999, 2000 and 2001, were $6,924,903, $194,856 and $1,674,272,
respectively. Components of realized gains and losses are summarized in the
following table:

<Table>
<Caption>
                                                            1999      2000     2001
                                                          --------   ------   -------
<S>                                                       <C>        <C>      <C>
Fixed maturity securities:
Gross realized gains....................................  $ 27,267   $2,606   $47,180
Gross realized losses...................................   (93,267)      --    (2,373)
                                                          --------   ------   -------
  Net realized gain (loss) on investments...............  $(66,000)  $2,606   $44,807
                                                          ========   ======   =======
</Table>

     Changes in net unrealized gains (losses) were $(432,622), $158,953 and
$279,051 for the years ended December 31, 1999, 2000 and 2001, respectively.

4.  RECAPTURE OF BUSINESS

     In the first quarter of 1999, Global Preferred negotiated amendments to its
coinsurance and modified coinsurance agreements with Western Reserve Assurance
Co. of Ohio ("Western Reserve") in contemplation of completing a private
offering of Global Preferred's stock begun in 1998. The amendments provided
that: (1) Global Preferred could defer payment to Western Reserve of reinsurance
expense allowances on new policies reinsured in 1999, until the earlier of the
completion of its stock offering, or December 31, 1999; (2) a reinsurance fee at
an effective rate of 9% per year accrued on the deferred payments; and (3)
Western Reserve could recapture the reinsurance on the policies issued during
1999 if the expense allowances were not paid by December 31, 1999. As
contemplated by the new amendments, payment by Global Preferred to Western
Reserve of a portion of the reinsurance expense allowances on policies issued in
1999 was deferred pending the completion of Global Preferred's capital raising
efforts in 1999. When the funding had not been completed by September 30, 1999,
the reinsurance of all Financial Freedom Builder variable universal life
policies and riders and 75% of the Freedom Wealth Creator variable annuity
policies issued from January 1, 1999 through September 30, 1999 that had been
entered into on a coinsurance and modified coinsurance basis was recaptured.
These recapture rights exercised by Western Reserve in 1999 were created
specifically to address the possibility that Global Preferred would not complete
its contemplated capital raising in 1999. Concurrent with the recapture, Global
Preferred began reinsuring, on a monthly renewable term basis, 20% of the
Financial Freedom Builder variable universal life policies and riders issued by
Western Reserve on or after January 1, 1999. Additionally, Global Preferred
further amended its reinsurance agreements to reduce its quota share percentage
on the reinsurance of the Western Reserve variable annuity business for 1999 and
thereafter. However, Global Preferred retained the right to convert its monthly
renewable term reinsurance of the variable universal life business to a
coinsurance and modified coinsurance basis for all policies issued from January
1999 through March 2003 and the right to increase its quota share percentage of
the reinsurance of Western Reserve variable annuity business.

     The general terms of Global Preferred's reinsurance agreements, including
its agreements with Western Reserve, include only limited rights to recapture
such as: after the passage of stated periods (ten years or more) from the policy
issue date, upon determination, relative to some products, that the total volume
of policies reinsured for the product is below a minimum threshold, upon default
by Global Preferred and upon the insolvency of Global Preferred. Oftentimes, if
a reinsurance agreement provides for early recapture based on criteria such as
low product sales volume, then there may be a recapture allowance paid to the
reinsurer to compensate for lost future revenues and profits associated with the
recaptured policies. Receipt of the recapture allowance would result in an
increase in revenues for the period. Similarly, any associated unamortized
deferred acquisition cost would be written off in the same reporting period. The
net effect of these amounts would then result in either a gain or a loss
associated with the recaptured policies.

     The recapture of business during 1999 resulted in a loss of $822,814. Of
the $822,814 loss, $556,304 related to the variable universal life coinsurance
and modified coinsurance business, and is composed of

                                       F-12
<PAGE>

$14.3 million in gross revenues due to Global Preferred for recapture
allowances, net of $14.9 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 $5.7 million in gross revenues from recapture
allowances, net of $5.9 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 due to Western Reserve during the period
in which Global Preferred reinsured the underlying business. Such reinsurance
fee in the amount of $722,858 was effectively offset by interest in the amount
of $390,761 due to Global Preferred for amounts previously remitted to Western
Reserve on business subsequently recaptured.

5.  POLICY LIABILITIES

     Changes in the liability for unpaid policy claims are summarized as follows
for the years ended December 31:

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Unpaid life claims -- January 1 .................  $1,109,567   $1,590,232   $2,119,151
                                                   ----------   ----------   ----------
Add claims incurred during the year related to:
  Current year...................................   4,030,903    7,118,899    6,577,441
  Prior years....................................     174,000      290,248       32,000
                                                   ----------   ----------   ----------
          Total incurred(1)......................   4,204,903    7,409,147    6,609,441
                                                   ----------   ----------   ----------
Less claims paid during the year:
  On claims incurred during current year.........   3,236,049    6,150,172    6,068,109
  On claims incurred during prior years..........     488,189      730,056    1,122,098
                                                   ----------   ----------   ----------
          Total paid.............................   3,724,238    6,880,228    7,190,207
                                                   ----------   ----------   ----------
Unpaid life claims -- December 31................  $1,590,232   $2,119,151   $1,538,385
                                                   ==========   ==========   ==========
</Table>

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

(1) Total incurred plus the change in the experience refund for the year equals
the amount shown on the consolidated statements of income on line titled
"Benefits, claims and settlement expenses."

6.  REINSURANCE

     As of December 31, 2001, Global Preferred has seven reinsurance contracts
and one retrocession agreement in place. All policies reinsured under the
reinsurance agreements are self-administered by the ceding life companies. The
ceding life companies provide Global Preferred with all information necessary
for processing the reinsurance, including claims. On June 25, 2001, Global
Preferred entered into a new reinsurance agreement with Pacific Life Insurance
Company. The new agreement provides monthly renewable term reinsurance for
certain individual life plans, including Pacific Life's Select Exec II variable
universal life insurance policies, issued on or after January 1, 2001, which are
sold by the registered agents associated with World Financial Group.

     Pursuant to agreements with Western Reserve, Global Preferred has the
contractual right to prospectively increase the reinsurance percentages, up to a
maximum ranging from 40% to 50%, on Western Reserve's Freedom Wealth Creator and
Freedom Premier variable annuity policies which were issued from January 1, 1999
through December 31, 2002 and reinsured by Global Preferred. In order to
exercise this contractual right, Global Preferred must demonstrate "sufficient
capacity," which 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

                                       F-13
<PAGE>

right to increase the reinsurance percentage for the variable annuity
coinsurance and modified coinsurance expires on December 31, 2002.

     Pursuant to agreements with Western Reserve, Global Preferred also has the
contractual right to convert its monthly renewable term reinsurance of the
Financial Freedom Builder variable universal life policies and riders issued by
Western Reserve from January 1, 1999 through March 31, 2003, to coinsurance and
modified coinsurance, provided Global Preferred demonstrates sufficient
capacity. The right to convert the monthly renewable term reinsurance to
coinsurance and modified coinsurance expires on March 31, 2003.

     In 1998, Global Preferred entered into an agreement with WMA Agency under
which WMA Agency agreed to use its best efforts to encourage life insurance
companies to reinsure policies sold by its agents with Global Preferred. In
conjunction with the acquisition of WMA Agency's assets, World Financial Group
assumed this best efforts agreement between Global Preferred and WMA Agency,
with certain amendments. Under the amended agreement, World Financial Group
will, for a period extending through June 8, 2008, use commercially reasonable
efforts to assist Global Preferred in attaining the opportunity to reinsure all
insurance products sold by its agents for insurance companies with which World
Financial Group has selling agreements, other than Western Reserve and Western
Reserve's affiliates. Additionally, the agreement provides that World Financial
Group will use commercially reasonable efforts to cooperate with Global
Preferred in its negotiations to establish reinsurance relationships with life
insurance companies and provide certain benefits to the companies that reinsure
their business through Global Preferred.

     In June 2001, Global Preferred entered into the First Right Agreement with
Western Reserve that provides Global Preferred Re a first right to reinsure
certain new products issued by Western Reserve or its U.S. affiliates that are
sold by agents associated with World Financial Group. Global Preferred has the
right, subject to minimum sales volume thresholds, to reinsure up to 20% of all
single life variable universal life products introduced for sale after July 1,
2001 on a coinsurance and modified coinsurance basis for all policies issued
through March 31, 2003 and on a monthly renewable term basis for all policies
issued through March 31, 2006. Global Preferred also has the right to reinsure
between 40% and 50% of all variable annuity products introduced after December
31, 2000 and issued through December 31, 2002, depending upon the volume of
direct written variable annuity premiums issued by Western Reserve or its U.S.
affiliates in the previous calendar year. These rights automatically extend for
one-year renewal periods unless either party gives notice of termination 180
days prior to the expiration of the applicable initial or renewal term. Global
Preferred's decisions to reinsure these products will be made from time to time
during the term of the First Right Agreement and such decisions will be based on
a number of relevant factors, including the attractiveness of the reinsurance
rates prescribed by the agreement, the volume of business and Global Preferred's
available capital capacity.

     Global Preferred has a pool retrocession agreement with four reinsurance
companies, whereby Global Preferred retrocedes, or 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 Global Preferred's exposure on any one policy reinsured. This
retrocession reinsurance agreement does not relieve Global Preferred from its
obligations to ceding life companies. Failure of retrocessionaires to honor
their obligations could result in losses to Global Preferred; consequently,
allowances are established for amounts deemed uncollectible. Currently, no
amounts are deemed uncollectible.

                                       F-14
<PAGE>

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

<Table>
<Caption>
                                                       YEARS ENDED DECEMBER 31,
                                                ---------------------------------------
                                                   1999          2000          2001
                                                -----------   -----------   -----------
<S>                                             <C>           <C>           <C>
Reinsurance assumed...........................  $23,435,657   $29,977,786   $30,993,041
Reinsurance ceded.............................     (237,185)     (465,195)     (514,880)
                                                -----------   -----------   -----------
Net premiums and policy revenues..............  $23,198,472   $29,512,591   $30,478,161
                                                ===========   ===========   ===========
</Table>

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

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Reinsurance assumed..............................  $4,511,469   $7,705,566   $6,299,510
Reinsurance ceded................................          --     (146,402)      (7,118)
                                                   ----------   ----------   ----------
Net benefits, claims and settlement expenses.....  $4,511,469   $7,559,164   $6,292,392
                                                   ==========   ==========   ==========
</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, 1999................................     --    $8,030    $122    $7,908
December 31, 2000................................     --    $9,378    $169    $9,209
December 31, 2001................................     --    $9,082    $156    $8,926
</Table>

7.  DEFERRED ACQUISITION COSTS

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

<Table>
<Caption>
                                                     YEARS ENDED DECEMBER 31,
                                                     -------------------------
                                                        2000          2001
                                                     -----------   -----------
<S>                                                  <C>           <C>
Beginning of year..................................  $39,750,100   $42,752,339
  Capitalized......................................    7,018,868     3,992,590
  Amortized........................................   (4,016,629)   (3,944,660)
                                                     -----------   -----------
End of year........................................  $42,752,339   $42,800,269
                                                     ===========   ===========
</Table>

     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 are
no separate, reportable deferred acquisition costs or associated amortization.

8.  INCOME TAX

     Under current Bermuda law, Global Preferred Re is not required to pay taxes
in Bermuda on either income or capital gains. Global Preferred Re has received
an assurance from the Minister of Finance in Bermuda under the Exempted
Undertaking Tax Protection Act 1966 of Bermuda that if any legislation is
enacted in Bermuda that would impose tax on profits or income, or on any capital
asset, gain or appreciation, or any tax in the nature of estate duty or
inheritance tax, then the imposition of any such tax will not be applicable to
Global Preferred Re or to any of Global Preferred's operations or shares,
debentures or other obligations until March 28, 2016.

     Effective January 1, 1996, Global Preferred Re 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, Global Preferred
Re is subject to U.S. taxation on its worldwide income as if it were a U.S.
corporation. Global

                                       F-15
<PAGE>

Preferred 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, 1999, 2000
and 2001 were allocated as follows:

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Tax attributable to:
Income from continuing operations................  $2,225,472   $1,820,717   $2,391,568
                                                   ----------   ----------   ----------
Unrealized gains (losses) on securities available
  for sale.......................................  $ (147,093)  $   54,044   $   94,877
                                                   ==========   ==========   ==========
</Table>

     The federal income tax expense from continuing operations for the years
ended December 31, 1999, 2000, and 2001 is as follows:

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Current..........................................  $       --   $  516,075   $  436,963
Deferred.........................................   2,225,472    1,304,642    1,954,605
                                                   ----------   ----------   ----------
     Total.......................................  $2,225,472   $1,820,717   $2,391,568
                                                   ==========   ==========   ==========
</Table>

     The income tax expense from continuing operations for the years ended
December 31, 1999, 2000 and 2001 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,
                                                   ------------------------------------
                                                      1999         2000         2001
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>
Computed expected tax expense....................  $2,225,472   $2,364,222   $2,670,411
Small life insurance company deduction...........          --     (605,880)    (269,976)
Other, net.......................................          --       62,375       (8,867)
                                                   ----------   ----------   ----------
     Total.......................................  $2,225,472   $1,820,717   $2,391,568
                                                   ==========   ==========   ==========
</Table>

     During 2000 and 2001, Global Preferred Re 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%.

                                       F-16
<PAGE>

     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 2001 is composed of the following amounts:

<Table>
<Caption>
                                                        2000          2001
                                                     -----------   -----------
<S>                                                  <C>           <C>
Deferred tax assets:
Alternative minimum tax credit.....................  $    35,646   $     8,597
Capital losses realized in excess of gains.........       20,535         7,247
Reserve differences................................    8,262,095     6,139,342
Net operating loss carry-forward...................      779,960     1,030,018
DAC tax capitalized................................           --       258,252
Other..............................................       81,506        29,216
                                                     -----------   -----------
     Gross deferred tax assets.....................    9,179,742     7,472,672
                                                     -----------   -----------
Deferred tax liabilities:
Policy benefit reserves............................      230,110       461,348
Deferred acquisition costs.........................   14,535,795    14,552,091
Unrealized gain on securities held for sale........       32,122       127,000
                                                     -----------   -----------
     Gross deferred tax liabilities................   14,798,027    15,140,439
                                                     -----------   -----------
     Net deferred tax liabilities..................  $ 5,618,285   $ 7,667,767
                                                     ===========   ===========
</Table>

     There were no valuation allowances for deferred tax assets as of December
31, 2000 and 2001 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, 2001, Global Preferred had
net operating loss carry-forwards for income tax purposes of $3,029,000, which
begin to expire in 2018.

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

9.  RELATED PARTY TRANSACTIONS

     Global Preferred issued a $5.0 million convertible note, due July 29, 2004,
to Money Services, Inc., a subsidiary of AEGON USA, Inc. The note bears simple
interest at a rate of 7.5% per year and is currently convertible into 312,750
shares of Global Preferred common stock. If Money Services were to convert the
note, it would own approximately 8% of Global Preferred's outstanding common
stock as of December 31, 2001.

     Each of World Financial Group and Western Reserve are subsidiaries of AEGON
USA, Inc. and therefore are entities related to Money Services due to the common
ownership.

     Global Preferred entered into an agreement with World Financial Group,
which requires that World Financial Group will use its commercially reasonable
efforts to assist Global Preferred in attaining the opportunity to reinsure all
insurance products sold by its agents for insurance companies with which World
Financial Group has selling agreements, other than Western Reserve and Western
Reserve's affiliates.

     Global Preferred is a tenant-at-will in approximately 2,100 square feet of
office space in Duluth, Georgia. Western Reserve is the landlord on the space
that Global Preferred occupies. Global Preferred's monthly rent is $3,482, plus
its proportionate share of the taxes.

     After its acquisition of certain of the assets of WMA Agency, World
Financial Group continued to provide the services that WMA Agency provided to
Global Preferred under the Corporate Services Agreement described below. Global
Preferred incurred $22,882 of costs for these services from World Financial
Group for the year ended December 31, 2001.

                                       F-17
<PAGE>

     Global Preferred has four separate reinsurance agreements with Western
Reserve that cover policies on Western Reserve variable universal life and
variable annuity policies issued on or after various dates after January 1, 1992
which were sold by the agents of World Financial Group and its predecessor. Also
in June 2001, Global Preferred entered into the First Right Agreement with
Western Reserve. The First Right Agreement provides Global Preferred the right
to reinsure certain policies issued by Western Reserve or its U.S. affiliates
which are sold by agents associated with World Financial Group.

     In 1995, Global Preferred Re entered into an agreement with CFM Insurance
Managers, Ltd. ("CFM"), a member of the Mutual Risk Management Ltd. group of
companies, which provides professional insurance management services to
international companies operating in Bermuda. C. Simon Scupham, a director of
Global Preferred and of Global Preferred Re, is the Chairman of CFM. Pursuant to
this agreement, CFM acts as the managing agent and the Principal Representative
for Global Preferred Re in Bermuda. This agreement is for an unlimited duration,
but may be terminated by either party upon three months prior written notice or
upon 30 days prior written notice under specified circumstances. Global
Preferred paid $60,000 in fees during each of the years ended December 31, 1999,
2000 and 2001 pursuant to the agreement with CFM.

     Prior to December 28, 2001, S. Hubert Humphrey, Jr. served as a director,
Chairman of the Board and Chief Executive Officer of Global Preferred and of
Global Preferred Re. Effective December 28, 2001, Mr. Humphrey retired from
Global Preferred's and Global Preferred Re's boards of directors and all of the
positions he held with Global Preferred and with Global Preferred Re. As of
December 31, 2001, Mr. Humphrey was the beneficial owner of 22.7% of Global
Preferred's outstanding common stock. Mr. Humphrey controls WMA Agency and WMA
Securities. Global Preferred agreed to grant to Mr. Humphrey, upon successful
completion of a firm commitment, underwritten registered public offering,
options to purchase 100,000 shares of Global Preferred common stock. The options
are exercisable for a period of five years from the date of grant, at an
exercise price equal to the initial offering price of shares sold in the
underwritten offering.

     Effective April 1, 1998, Global Preferred entered into a Corporate Services
Agreement with WMA Agency to provide to Global Preferred corporate services and
supplies for a fixed monthly fee of $2,250, adjustable annually. These services
included computer network system, facilities maintenance, security, mail
services, utilities, postage, telephone and copier service. Global Preferred
incurred $48,851, $48,922 and $23,616 of costs for these services from WMA
Agency for the years ended December 31, 1999, 2000 and 2001, respectively.

     In June 1998, Global Preferred entered into a Directed Reinsurance
Agreement with WMA Agency, under which WMA Agency agreed to use its best efforts
to cause any life insurance company with which it had selling agreements to
enter reinsurance agreements with Global Preferred. In 1999, the parties amended
the agreement to provide, among other things, that Global Preferred would issue,
for no monetary consideration, warrants to individuals designated by WMA Agency
to purchase 300,000 shares of Global Preferred common stock. These warrants were
ultimately issued to key management personnel of WMA Agency. As subsequently
amended, the warrants were contingent upon Global Preferred raising additional
capital by January 1, 2002. Global Preferred raised no new capital by January 1,
2002 and the warrants expired. No shares of common stock were issued under these
warrants.

     In June 1998, Global Preferred entered into a Sublease Agreement with WMA
Agency for office space in Duluth, Georgia. The sublease was on a triple-net
basis for an initial term through January 2008. The annual base rent until
January 2003 was $18,675. The sublease was terminated in June 2001 in
conjunction with the purchase by World Financial Group of assets of WMA Agency.

10.  STATUTORY RESTRICTIONS

     Global Preferred Re is a Bermuda company registered as a long-term insurer
under the Bermuda Insurance Act 1978 (the "Insurance Act") and as such is
subject to the restrictions of the Insurance Act. The Insurance Act requires
that Global Preferred Re maintain a solvency margin, defined as the excess of

                                       F-18
<PAGE>

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.

     Global Preferred relies, and will continue to rely, primarily on funds
retained at the holding company level, dividends and other permitted payments,
such as debt service payments, from Global Preferred Re to meet ongoing cash
requirements. The payment of dividends by Global Preferred Re to Global
Preferred is subject to Bermuda law and regulations. Under the Insurance Act,
Global Preferred Re must maintain long-term assets with a value of at least
$250,000 more than its long-term liabilities and is prohibited from declaring or
paying dividends that would result in noncompliance if, among other things, it
has reasonable grounds for believing that after making such a payment, it would
not be able to pay its liabilities as they become due. During 2001, Global
Preferred Re paid no dividends to Global Preferred.

11.  COMMITMENTS AND CONTINGENT LIABILITIES

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

     Global Preferred has obtained letters of credit in favor of unaffiliated
insurance companies with whom Global Preferred has reinsurance agreements. The
posting of a letter of credit allows the ceding life company to take statutory
reserve credit for reinsurance ceded, which would otherwise not be available as
Global Preferred Re is not a licensed reinsurer by the ceding life company's
state of domicile. At December 31, 2001, the outstanding letters of credit
totaled $8.85 million. The letters of credit were issued by Global Preferred's
custodian and secured by Global Preferred's investments held by the custodian.

     Prior to June 2001, Global Preferred subleased office space in Duluth,
Georgia from WMA Agency. The sublease was terminated in June 2001 in conjunction
with World Financial Group's purchase of WMA Agency's assets. Since the
termination of the lease, Global Preferred has been a tenant-at-will in
approximately 2,100 square feet of the same office space in Duluth, Georgia.

     Global Preferred does not own or lease any other properties.

12.  SHORT-TERM AND LONG-TERM DEBT

     At December 31, 2000 and 2001, short-term and long-term debt were as
follows, in summary:

<Table>
<Caption>
                                                                 2000         2001
                                                              ----------   ----------
<S>                                                           <C>          <C>
Line of credit - short term.................................  $  277,285   $       --
Line of credit - long term..................................          --           --
  Convertible Term Note - 7.5% interest, principal and
    interest due at July 29, 2004...........................   5,000,000    5,000,000
                                                              ----------   ----------
         Total short and long-term debt.....................   5,277,285    5,000,000
Less anticipated current maturity of line of credit.........     277,285           --
                                                              ----------   ----------
         Total long-term debt...............................  $5,000,000   $5,000,000
                                                              ==========   ==========
</Table>

     In July 1999, Global Preferred issued a $5 million, five-year convertible
term note to Money Services, Inc. due on July 29, 2004. Money Services is a
subsidiary of AEGON USA, Inc. Proceeds of this note were used to reduce a
portion of the outstanding principal balance on a line of credit with Money
Services from $10 million to $5 million. Interest is payable at 7.5% per annum
(except in the event of redemption), on the 29th of each succeeding January and
July through and including July 29, 2004. Money Services has the right to
convert the outstanding principal balance of this note into shares of Global
Preferred's common stock at any time. Upon conversion, Money Services will
receive 6.25 shares of common stock for each $100 of the outstanding principal
amount of the note, which reflects our three-for-two stock split in 2001. Global
Preferred has the option to redeem the note, in whole or in part, between July
29, 2002 and July 29, 2004. To redeem the note before maturity, Global Preferred
must pay all principal, plus interest

                                       F-19
<PAGE>

accrued from the date of the note through the redemption date at a higher
effective interest rate of 9% per annum. As of December 31, 2001, Global
Preferred had an outstanding principal balance on the note of $5 million and
accrued interest of $158,000.

     Global Preferred also had a $5 million line of credit with Money Services
which was paid in full on February 15, 2001 together with the related accrued
interest. Principal payments totaled $277,285 during 2001.

13.  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, 1999, 2000, and 2001:

<Table>
<Caption>
                                                                             TAX
                                                             BEFORE-TAX   (EXPENSE)   NET-OF-TAX
                                                               AMOUNT      BENEFIT      AMOUNT
                                                             ----------   ---------   ----------
<S>                                                          <C>          <C>         <C>
                           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)
                                                             =========    =========   =========
                           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
                                                             =========    =========   =========
                           2001
Net unrealized holding gains arising during period.........  $ 323,858    $(110,111)  $ 213,747
Less: reclassification adjustment for gains realized in net
  income...................................................     44,807     (15,234)      29,573
                                                             ---------    ---------   ---------
Other comprehensive income.................................  $ 279,051    $(94,877)   $ 184,174
                                                             =========    =========   =========
</Table>

14.  SEGMENT REPORTING

     We have defined our reportable segments based on the nature of the
reinsurance agreements and the accounting treatment used for the various
reinsurance agreements. Based on this definition, we have identified two
reportable segments: non-universal life-type agreements and universal life-type
agreements (as each is referenced in SFAS No. 97, Accounting and Reporting by
Insurance Enterprises for Certain Long-duration Contracts and for Realized Gains
and Losses from the Sale of Investments, paragraphs 44 and 45). Global Preferred
reinsures certain variable universal life policies on a renewable term basis,
which are reported below as Non-Universal Life-Type Agreements and, as such,
revenues therefrom are classified as premiums revenue. Renewable term
reinsurance involves the reinsurance of mortality risk whereby premiums are not
directly related to the premium rates on the original plan of insurance and the
ceding life company is liable for the total net amount of risk of the policies
reinsured. Global Preferred renewable term agreements are accounted for under
SFAS No. 60 accounting principles. Global Preferred reinsures variable annuity
policies and certain other variable universal life policies on a coinsurance and
modified coinsurance basis, which are reported below as Universal Life-Type
Agreements and, as such, revenues therefrom are classified as reinsured policy
revenues. Coinsurance involves the reinsurance of mortality and investment risks
on the same basis as that of the underlying policies. The ceding life companies
and Global Preferred share in these risks on a pro rata basis. Global
Preferred's existing coinsurance and modified coinsurance agreements are
accounted for under SFAS No. 97 accounting principles.

     Items not directly related to the business segments and unallocated
corporate items (i.e., other income, interest expense on corporate debt and
unallocated operating expenses) are shown separately, consistent with Global
Preferred's internal measurement process. Segment assets reported include those
assets directly attributable to the reinsurance agreements such as reinsurance
balances receivable, deferred acquisition costs, policy loans, prepaid expenses,
invested assets and cash. Cash and invested assets are

                                       F-20
<PAGE>

allocated to the agreements based upon statutory reserves, the letters of credit
posted in support of the statutory reserves held, and allocated surplus which is
consistent with Global Preferred's internal measurement process.

<Table>
<Caption>
SEGMENT REPORTING
YEAR ENDED DECEMBER 31                                                          1999
----------------------                                        -----------------------------------------
                                                                NON-
                                                              UNIVERSAL   UNIVERSAL
                                                              LIFE-TYPE   LIFE-TYPE    OTHER     TOTAL
(Dollars in thousands)                                        ---------   ---------   -------   -------
<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 expense 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 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
                                                               ======      =======    =======   =======
</Table>

<Table>
<Caption>
SEGMENT REPORTING
YEAR ENDED DECEMBER 31                                                          2000
----------------------                                        -----------------------------------------
                                                                NON-
                                                              UNIVERSAL   UNIVERSAL
                                                              LIFE-TYPE   LIFE-TYPE    OTHER     TOTAL
(Dollars in thousands)                                        ---------   ---------   -------   -------
<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 expense allowances, net.........................     5,711       1,829         --     7,540
Amortization of deferred acquisition cost...................       116       3,901         --     4,017
                                                               -------     -------    -------   -------
Underwriting profit.........................................     2,134       6,210         --     8,344
Net investment income.......................................       213         171        144       528
Net realized gain 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    $ 2,650   $56,617
                                                               =======     =======    =======   =======
</Table>

                                       F-21
<PAGE>

<Table>
<Caption>
SEGMENT REPORTING
YEAR ENDED DECEMBER 31                                                          2001
----------------------                                        -----------------------------------------
                                                                NON-
                                                              UNIVERSAL   UNIVERSAL
                                                              LIFE-TYPE   LIFE-TYPE    OTHER     TOTAL
(Dollars in thousands)                                        ---------   ---------   -------   -------
<S>                                                           <C>         <C>         <C>       <C>
Premiums....................................................   $19,240     $    --    $    --   $19,240
Reinsured policy revenues...................................        --      11,238         --    11,238
Benefits, claims and settlement expenses....................     7,833         871         --     8,704
Reinsurance expense allowances, net.........................     6,859       1,642         --     8,501
Amortization of deferred acquisition cost...................       197       3,748         --     3,945
                                                               -------     -------    -------   -------
Underwriting profit.........................................     4,351       4,977         --     9,328
Net investment income.......................................       215         230        366       811
Net realized gain on investments............................        --          --         45        45
Other expenses..............................................       123         216      1,991     2,330
                                                               -------     -------    -------   -------
Segment operating income (loss) before income tax...........     4,443       4,991     (1,580)    7,854
Income tax expense (benefit)................................     1,353       1,520       (481)    2,392
                                                               -------     -------    -------   -------
Segment net income (loss)...................................   $ 3,090     $ 3,471    $(1,099)  $ 5,462
                                                               -------     -------    -------   -------
Preferred dividends.........................................        --          --        267       267
                                                               -------     -------    -------   -------
Segment net income (loss) available to common
  stockholders..............................................   $ 3,090     $ 3,471    $(1,366)  $ 5,195
                                                               =======     =======    =======   =======
Segment assets..............................................   $ 8,615     $46,748    $12,490   $67,853
                                                               =======     =======    =======   =======
</Table>

     During 1999, 2000, and 2001, the percentages of total premiums and
reinsured policy revenues that relate to Western Reserve were 87%, 88% and 89%,
respectively. The percentages of the total underwriting profit that relates to
Western Reserve for 1999, 2000 and 2001 were 83%, 83% and 86%, respectively.

     Global Preferred estimates that approximately 43% of variable universal
life premiums and 22% of variable annuity premiums, written through Western
Reserve and sold by agents associated with World Financial Group, originated in
California.

15.  CAPITAL INFUSION

     During 1999, Global Preferred conducted a private placement offering of up
to 1,000,000 shares of Series A Preferred Stock to a limited number of
individual investors that qualified as "accredited investors" within the meaning
of Rule 501 of Regulation D under the Securities Act of 1933. The Series A
Preferred Stock was designated non-voting and unregistered with a par value of
$2.00 per share. The Series A Preferred Stock had a liquidation preference equal
to $2.00 per share in the event of any liquidation, dissolution, or winding up
of the affairs of Global Preferred. The terms of the Series A Preferred Stock
provided for automatic conversion 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 was defined as net proceeds to Global Preferred of at
least $10 million from the sale of its shares of common stock.

     In August 2000, Global Preferred closed its offering of the Series A
Preferred Stock, which resulted in approximately $4 million of gross proceeds to
Global Preferred. Global Preferred issued 266,047 shares of Series A Preferred
Stock to the investors in this offering. The net proceeds were loaned to Global
Preferred Re, which were applied toward repayment of the line of credit with
Money Services. On December 15, 2001, Global Preferred paid a 7% annual dividend
to the preferred stockholders in the amount of $279,349.

16.  STOCK OPTIONS AND WARRANTS

Stock Options

     1999 Stock Option Plan.  The 1999 Stock Option Plan became effective on
June 15, 1999. The aggregate number of shares of common stock reserved for
issuance under the 1999 Stock Option Plan was 700,000 shares. The exercise price
of each option granted under the 1999 Stock Option Plan was $10 per share, as
adjusted for Global Preferred's three-for-two stock split in 2001. The 1999
Stock Option Plan

                                       F-22
<PAGE>

required that Global Preferred raise additional capital on or before December
31, 1999 in order for any options to be exercisable, however, Global Preferred
raised no new capital prior to that date and the outstanding options could not,
by their terms, be exercised. On May 12, 2000, the board of directors approved
an amendment to the 1999 Stock Option Plan extending the deadline for receipt of
a minimum of $15 million of additional capital from the sale of stock to January
1, 2002.

     Other Options.  In connection with S. Hubert Humphrey, Jr.'s retirement in
December 2001, Global Preferred agreed to grant to Mr. Humphrey options to
purchase 100,000 shares of common stock upon successful completion of a firm
commitment, underwritten registered public offering of common stock by December
31, 2003. The options are exercisable for a period of five years from the date
of grant, at an exercise price equal to the initial offering price of shares
sold in the underwritten offering.

Warrants

     In June 1998, Global Preferred entered into a Directed Reinsurance
Agreement with WMA Agency, under which WMA Agency agreed to use its best efforts
to cause any life insurance company with which it had selling agreements to
enter reinsurance agreements with Global Preferred. In 1999, the board of
directors approved an amendment to the agreement to provide, among other things,
that Global Preferred would issue, for no monetary consideration, warrants to
individuals designated by WMA Agency to purchase 300,000 shares of Global
Preferred's common stock. These warrants were ultimately issued to key
management personnel of WMA Agency. As subsequently amended, the warrants were
contingent upon Global Preferred raising a minimum of $15 million of additional
capital from the sale of stock prior to January 1, 2002. As amended, these
warrants had an exercise price of $10 per share, as adjusted for Global
Preferred's three-for-two stock split in 2001.

     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 Global Preferred from the sale of stock prior to January 1, 2002 is
equal to or greater than $15 million, there is no compensation expense reflected
in the accompanying financial statements. Additionally, the amount of
compensation expense is indeterminable as the amount of options and warrants
vary with the amount of capital raised.

17.  SUBSEQUENT EVENTS

     1999 Stock Option Plan and Warrants.  Global Preferred did not raise the
minimum of $15 million of additional capital from the sale of stock by January
1, 2002 and as of that date the outstanding options granted under the 1999 Stock
Option Plan could no longer be exercised, the board of directors terminated the
1999 Stock Option Plan in February 2002. Additionally, since Global Preferred
did not raise the minimum amount of additional capital by January 1, 2002, the
warrants issued to the management personnel of WMA Agency expired. No shares of
common stock were issued under the warrants.

     Preferred Stock Conversion.  On January 1, 2002, 266,047 shares of Series A
Preferred Stock issued were automatically converted into 399,074 shares of
common stock. The conversion reflected the three-for-two stock split effective
in September 2001.

     Stock Incentive Plan.  Global Preferred's Stock Incentive Plan became
effective on January 9, 2002. The aggregate number of shares of common stock
reserved for issuance under the Stock Incentive Plan is 1.5 million shares.
Awards granted under the Stock Incentive Plan may be stock appreciation rights,
restricted stock, options intended to qualify as "incentive stock options" or
nonqualified stock options. No shares of common stock have been issued upon
exercise of options granted under the Stock Incentive Plan. The Compensation
Committee of the board of directors has approved the grant of options to
purchase an aggregate of 215,000 shares of common stock to certain employees to
be granted upon completion of an initial public offering, at an exercise price
equal to the initial public offering price.

                                       F-23
<PAGE>

     Directors Stock Option Plan.  Global Preferred's Directors Stock Option
Plan became effective January 9, 2002. The aggregate number of shares of common
stock reserved for issuance under the Directors Stock Option Plan is 280,000
shares. After the effective date of an initial public offering, Global Preferred
intends to grant options to its five non-employee directors purchase shares of
common stock at a price equal Upon completion of an initial public offering
prior to December 31, 2003, options to purchase 105,000 shares will be granted
to Global Preferred's five non-employee directors under the Directors Stock
Option Plan and options to purchase 100,000 shares will be granted outside of
the Directors Stock Option Plan to a retired director. Each of these options
will have an exercise price equal to the initial public offering price. Global
Preferred has estimated that if the initial public offering is completed prior
to December 31, 2003, then the resulting compensation charge from the grants of
these options to current and retired directors will be between $335,000 and
$980,000, depending upon numerous variables, including the exercise price of the
options, the estimated effective life of the options and the volatility of the
stock (estimated in part by reference to the stock performance of comparable
companies).

     Employment Agreements.  Global Preferred's executive officers, Edward F.
McKernan, Bradley E. Barks, Caryl P. Shepherd and Thomas Bobowski are employed
pursuant to written employment agreements.

     Mr. McKernan, President and Chief Executive Officer, has an initial
employment agreement term of three years beginning January 1, 2002 and is
automatically renewed for additional one-year periods unless either party
provides written notice of termination at least 60 days in advance of the
expiration date of the current term. Mr. McKernan will receive a base salary of
$325,000 for the year ended December 31, 2002, plus options to purchase 75,000
shares of common stock, to be granted upon completion of an initial public
offering. If, within 90 days of a change of control of Global Preferred, Mr.
McKernan resigns for good reason, as defined in the agreement, or is terminated
without cause, Global Preferred will pay him an amount equal to 35 months of his
then-current base salary over a 12 month period or in one lump sum payment. Upon
Mr. McKernan's resignation for good reason or termination not for cause
unrelated to a change of control, Global Preferred will pay his base salary for
the greater of 12 months or the number of months remaining on his employment
agreement, not to exceed 24 months.

     Mr. Barks, Chief Financial Officer and Senior Vice President -- Finance,
has an initial employment agreement term from March 4, 2002 through February 28,
2003, which is renewable by agreement of the parties for additional one-year
periods. Mr. Barks will receive a base salary of $250,000 for the initial term,
plus options to purchase 20,000 shares of common stock, to be granted upon
completion of an initial public offering. Global Preferred paid Mr. Barks a
signing bonus of $9,200 and has agreed to pay $59,450 towards Mr. Barks'
relocation expenses and up to six months of actual rental costs for temporary
housing prior to his relocation. If Mr. Barks resigns for good reason, as
defined in the agreement, or is terminated without cause, Global Preferred will
pay him an amount equal to three months of his base salary if he is terminated
prior to completion of an initial public offering or twelve months of his
then-current base salary if he is terminated after completion of an initial
public offering.

     Ms. Shepherd, Chief Accounting Officer, Treasurer, Controller, Secretary
and Vice President, has an initial employment agreement term from February 1,
2002 through January 31, 2003, which is renewable by agreement of the parties
for additional one-year periods. Ms. Shepherd will receive a base salary of
$100,000 for the initial term, plus options to purchase 30,000 shares of common
stock, to be granted upon completion of an initial public offering. Upon Ms.
Shepherd's resignation for good reason, as defined in the agreement, or
termination not for cause, Global Preferred will pay her base salary for twelve
months.

     Mr. Bobowski, Vice President of Marketing, has an initial employment
agreement term from March 4, 2002 through February 28, 2003, which is renewable
by agreement of the parties for additional one-year periods. Mr. Bobowski will
receive a base salary of $122,000 for the initial term, plus options to purchase
12,500 shares of common stock to be granted upon completion of an initial public
offering. Upon Mr. Bobowski's resignation for good reason, as defined in the
agreement, or termination not for cause, Global Preferred will pay his base
salary for three months. For each month of Mr. Bobowski's employment

                                       F-24
<PAGE>

over three months, his separation payment upon resignation for good reason or
termination without cause will be increased by one month, with a maximum payment
equal to twelve months of his base salary.

     Mr. McKernan, Mr. Barks, Ms. Shepherd and Mr. Bobowski are eligible for an
annual bonus in an amount to be determined by the board of directors. Mr.
McKernan, Mr. Barks, Ms. Shepherd and Mr. Bobowski's employment agreements
include post-employment restrictive covenants not to solicit Global Preferred's
customers or recruit Global Preferred's employees.

     Registration Statement.  On February 22, 2002, Global Preferred filed a
registration statement with the Securities and Exchange Commission for an
initial public offering of common stock at a proposed maximum aggregate offering
price of $120,750,000.

                                       F-25
<PAGE>

18.  PARENT COMPANY FINANCIAL INFORMATION.

                                 BALANCE SHEETS
                                (PARENT COMPANY)
                           DECEMBER 31, 2000 AND 2001

<Table>
<Caption>
                                                                 2000          2001
                                                              -----------   -----------
<S>                                                           <C>           <C>
                           Assets
Investment in common stock of subsidiary(1).................  $14,260,526   $14,260,526
Fixed maturity securities -- available for sale (amortized
  cost of $0 and
  $2,241,534 for 2000 and 2001, respectively)...............           --     2,296,563
Cash and cash equivalents...................................      443,277     1,374,016
Investment income due and accrued...........................        2,876        42,192
Investment income due and accrued -- intercompany(1)........      305,330       201,219
Intercompany receivables(1).................................    2,573,807       155,118
Note receivable -- intercompany(1)..........................    8,100,029     6,087,550
Prepaid expenses............................................       28,472       654,699
Current income tax receivable...............................           --         1,875
Fixed assets (net of accumulated depreciation of $102,992
  and $147,750 for
  2000 and 2001, respectively)..............................       48,806        88,114
Deferred tax benefit........................................      792,271     1,047,737
                                                              -----------   -----------
         Total assets.......................................  $26,555,394   $26,209,609
                                                              ===========   ===========
            Liabilities and Stockholders' Equity
Liabilities:
  Accrued expenses and accounts payable.....................  $    79,102   $   530,880
  Accrued interest payable..................................      158,219       158,219
  Dividend payable..........................................       12,245            --
  Current income tax payable................................        7,306            --
  Long term debt............................................    5,000,000     5,000,000
                                                              -----------   -----------
         Total liabilities..................................    5,256,872     5,689,099
                                                              -----------   -----------
Stockholders' equity:
  Preferred stock, par value $2.00, 10,000,000 shares
    authorized; Series A Preferred Stock, 1,000,000 shares
    authorized; 266,047 shares issued for 2000 and 2001.....      532,094       532,094
  Common stock, par value $.001, 50,000,000 shares
    authorized; 2,500,000 shares and 3,750,000 shares issued
    for 2000 and 2001, respectively.........................        2,500         3,750
  Additional paid-in capital................................   22,795,581    22,794,331
  Accumulated other comprehensive income....................           --        36,319
  Retained earnings.........................................   (1,981,753)   (2,796,717)
  Treasury stock, at cost (7,485 shares and 7,390 shares for
    2000 and 2001, respectively)............................      (49,900)      (49,267)
                                                              -----------   -----------
         Total stockholders' equity.........................   21,298,522    20,520,510
                                                              -----------   -----------
Total liabilities and stockholders' equity..................  $26,555,394   $26,209,609
                                                              ===========   ===========
</Table>

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

(1) Eliminated on consolidation

                                       F-26
<PAGE>

                              STATEMENTS OF INCOME
                             (PARENT COMPANY ONLY)
                  YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

<Table>
<Caption>
                                                             1999          2000         2001
                                                          -----------   ----------   ----------
<S>                                                       <C>           <C>          <C>
Revenues:
  Net investment income.................................  $    27,450   $   85,053   $  133,575
  Net realized gain (loss) on investments...............       (2,997)          --        4,904
  Intercompany interest income(1).......................           --      613,298      674,298
  Gain (loss) on dissolution of subsidiary..............       (5,266)          --           --
                                                          -----------   ----------   ----------
          Total revenue.................................       19,187      698,351      812,777
                                                          -----------   ----------   ----------
Benefits and expenses:
  Operating expenses....................................      855,627       99,752    1,259,273
  Interest expense......................................      868,252      375,000      375,000
                                                          -----------   ----------   ----------
     Total benefits and expenses........................    1,723,879      474,752    1,634,273
                                                          -----------   ----------   ----------
     Income before income tax...........................   (1,704,692)     223,599     (821,496)
  Income tax benefit (expense) and equity in
     undistributed net income of subsidiaries...........      579,595     (120,224)     274,269
                                                          -----------   ----------   ----------
  Income before equity in undistributed net income of
     subsidiaries.......................................  $(1,125,097)  $  103,375   $ (547,227)
  Equity in earnings of subsidiaries....................    5,445,131    5,029,501    6,009,808
                                                          -----------   ----------   ----------
  Net income............................................    4,320,034    5,132,876    5,462,581
  Preferred dividends...................................           --      155,198      267,104
                                                          -----------   ----------   ----------
  Net income available to common stockholders...........  $ 4,320,034   $4,977,678   $5,195,477
                                                          ===========   ==========   ==========
</Table>

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

(1) Eliminated on consolidation

                                       F-27
<PAGE>

                            STATEMENTS OF CASH FLOWS
                             (PARENT COMPANY ONLY)
                  YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001

<Table>
<Caption>
                                                        1999            2000           2001
                                                     -----------    ------------    -----------
<S>                                                  <C>            <C>             <C>
Cash flows from operating activities:
Net income.........................................  $ 4,320,034    $  5,132,876    $ 5,462,581
Less equity in earnings of subsidiaries............   (5,445,131)     (5,029,501)    (6,009,808)
  Income before equity in undistributed net income
     of subsidiaries...............................   (1,125,097)        103,375       (547,227)
  Adjustments to reconcile net income to net cash
     provided by (used in) operating activities:
     Amortization and depreciation.................      108,597          47,975         44,758
     Deferred tax expense (benefit)................     (579,595)        112,918       (274,176)
     Net realized (gain) loss on investments.......        2,997              --         (4,905)
  Change in:
     Investment income due and accrued.............       13,880          (2,876)       (39,316)
     Investment income due and accrued --
       intercompany(1).............................           --        (305,330)       104,111
     Intercompany receivables(1)...................      (44,089)     (2,563,711)     2,418,689
     Prepaid expenses..............................     (139,698)        317,297       (626,227)
     Current income tax receivable.................           --              --         (1,875)
     Other receivables.............................      171,375              --             --
     Accrued expenses and accounts payable.........       42,196         (22,574)       451,778
     Accrued interest payable......................      564,690        (507,570)            --
     Current income tax payable....................           --           7,306         (7,306)
                                                     -----------    ------------    -----------
       Net cash provided by (used in) operating
          activities...............................   (1,069,136)     (2,813,190)     1,518,304
                                                     -----------    ------------    -----------
Cash flows from investing activities:
  Dividend received from subsidiary(1).............           --       3,400,000             --
  Return of capital from subsidiary(1).............           --      10,000,000             --
  Investment in subsidiary(1)......................       11,544              --             --
  Proceeds from sale of available for sale
     securities....................................      618,080              --        439,955
  Purchase of available-for-sale securities........           --              --     (2,676,584)
  Purchase of fixed assets.........................      (50,880)         (8,449)       (84,066)
                                                     -----------    ------------    -----------
       Net cash provided by (used in) investing
          activities...............................      578,744      13,391,551     (2,320,695)
                                                     -----------    ------------    -----------
Cash flows from financing activities:
  Issuance of preferred stock......................           --       3,098,702             --
  Preferred dividends..............................           --        (142,953)      (279,349)
  Proceeds from (repayment of) long term debt......      303,562      (5,303,562)            --
  Issuance (repayment) of notes receivable --
     intercompany(1)...............................           --      (8,100,029)     2,012,479
                                                     -----------    ------------    -----------
       Net cash provided by (used in) financing
          activities...............................      303,562     (10,447,842)     1,733,130
                                                     -----------    ------------    -----------
       Net increase (decrease) in cash and cash
          equivalents..............................     (186,830)        130,519        930,739
Cash and cash equivalents at beginning of period...      499,588         312,758        443,277
                                                     -----------    ------------    -----------
Cash and cash equivalents at end of period.........  $   312,758    $    443,277    $ 1,374,016
                                                     ===========    ============    ===========
</Table>

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

(1) Eliminated on consolidation

                                       F-28