##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-23637
 Global Preferred Holdings, Inc.
 (Exact Name of Registrant as Specified in its Charter)
 DELAWARE
    
    58-2179041(State or other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)
 c/o MORRIS MANNING & MARTIN LLP
3343 PEACHTREE ROAD, SUITE 1600
ATLANTA, GEORGIA 30326
(770) 248-3311  (Address, Including Zip Code and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
 
 Securities registered under Section 12(b) of the Exchange Act:
 Title of each class
    
    Name of each exchange on which registeredNone
    
    None
 Securities registered under Section 12(g) of the Exchange Act:
 Common Stock, Par Value $.001
 (Title of class)
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




---



##### 



TABLE OF CONTENTS
 PART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    4Item 1B.
    
    Unresolved Staff Comments
    
    
    6Item 2.
    
    Properties
    
    
    6Item 3.
    
    Legal Proceedings
    
    
    6Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    6PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    7Item 6.
    
    Selected Financial Data
    
    
    7Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
    
    
    9Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 8.
    
    Financial Statements and Supplementary Data
    
    
    23Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    23Item 9A.
    
    Controls and Procedures
    
    
    24Item 9B.
    
    Other Information
    
    
    24PART IIIItem 10.
    
    Directors and Executive Officers of the Registrant
    
    
    **Item 11.
    
    Executive Compensation
    
    
    **Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
    
    
    **Item 13.
    
    Certain Relationships and Related Transactions
    
    
    **Item 14.
    
    Principal Accounting Fees and Services
    
    
    **PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    25EX-2.1.1 PLAN OF COMPLETE LIQUIDATION AND DISSOLUTIONEX-3.1.5 CERTIFICATE OF DISSOLUTION OF REGISTRANTEX-10.22 THIRD RENEWAL OF EMPLOYMENT AGREEMENTEX-10.23 THIRD RENEWAL OF EMPLOYMENT AGREEMENTEX-10.24 THIRD AMENDMENT TO EMPLOYMENT AGREEMENTEX-10.25 FOURTH RENEWAL OF EMPLOYMENT AGREEMENTEX-31.1 CERTIFICATION BY CARYL P. SHEPHERD, CAOEX-32.1 CERTIFICATION BY CARYL P. SHEPHERD, CAO
   1




---



##### Table of Contents



PART I
 
 Item 1. Business
 Overview
        2




---



##### Table of Contents



Business Operations Prior to Asset Sale
 While we no longer have active business operations, the following description of our business
operations prior to the asset sale is provided to aid our readers understanding of our historical
financial statements.
   
    
    Western Reserve Life Assurance Co. of Ohio, a subsidiary of AEGON USA, Inc. (Western Reserve);
    
    American Skandia Life Assurance Corporation, a subsidiary of Prudential Financial, Inc. (American Skandia);
    
    Pacific Life Insurance Company (Pacific Life); and
    
    Federal Kemper Life Assurance Company, a subsidiary of J.P. Morgan Chase & Co. (Kemper).
  Reinsurance Relationships under Global Preferred Re
  3




---



##### Table of Contents



Type of ReinsuranceModifiedCeding Life Company
    
    Renewable Term
    
    
    Coinsurance
    
    
    CoinsuranceWestern ReserveVariable universal life
    
    
    ü
    
    
    
    ü
    
    
    
    üVariable annuity
    
    
    
    
    
    
    ü
    
    
    
    üAmerican SkandiaVariable annuity
    
    
    
    
    
    
    
    
    
    
    üPacific LifeVariable universal life
    
    
    üKemperVariable universal life
    
    
    ü
 Investments
     Employees
  
 Item 1A. Risk Factors
  4




---



##### Table of Contents



We cannot determine at this time the amount of any distributions that will be made to our
stockholders or the timing of any such distributions, because there are many factors, some of which
are outside of our control, that could affect our ability to make distributions to our
stockholders.
  §
    
    increases in the amount of our liabilities and obligations or estimated costs and
expenses of the operation of Global Preferred until the dissolution is completed;§
    
    liabilities of Global Preferred that are unknown or contingent which later arise or
become fixed in amount and must be satisfied or reserved for as part of the dissolution;
and§
    
    delays in the dissolution that could result in additional expenses and result in
reductions of distributions to our stockholders.
  The timing of any future possible distributions of cash, if any, is uncertain.
  We continue to incur costs and expenses, which reduce the amount available for distribution to
stockholders.
  Our stockholders may be liable to creditors of Global Preferred for an amount up to the amount of
distributions received from Global Preferred pursuant to the Dissolution Plan if our reserves for
payments to creditors are inadequate.
  5




---



##### Table of Contents



You are unable to transfer your Global Preferred shares.
  We are substantially dependent upon the continued services of our remaining executive officer.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  6




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities.
     
 Item 6. Selected Financial Data
   7




---



##### Table of Contents



145 DayYear
    
    
    Year
    
    
    Year
    
    
    Year
    
    
    PeriodEnded
    
    
    Ended
    
    
    Ended
    
    
    Ended
    
    
    EndedDec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    May 25,(Dollars in thousands, except per share data)
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005Consolidated Statements of Income Data:Premiums
    
    $
    19,240
    
    
    $
    17,985
    
    
    $
    17,401
    
    
    $
    17,109
    
    
    $
    6,745Reinsured policy revenues
    
    
    11,238
    
    
    
    13,859
    
    
    
    12,797
    
    
    
    12,532
    
    
    
    4,655Net investment income
    
    
    811
    
    
    
    742
    
    
    
    407
    
    
    
    842
    
    
    
    426Net realized gain (loss) on investments
    
    
    45
    
    
    
    428
    
    
    
    21
    
    
    
    (20
    )
    
    
    37Net unrealized gain on trading
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    17Other Income
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    16
    
    
    
    9Total revenues
    
    
    31,334
    
    
    
    33,014
    
    
    
    30,689
    
    
    
    30,528
    
    
    
    11,889Total benefits and expenses
    
    
    23,480
    
    
    
    30,708
    
    
    
    27,757
    
    
    
    24,988
    
    
    
    10,315Income before income tax
    
    
    7,854
    
    
    
    2,306
    
    
    
    2,932
    
    
    
    5,540
    
    
    
    1,574Income tax expense
    
    
    (2,392
    )
    
    
    (788
    )
    
    
    (998
    )
    
    
    (1,570
    )
    
    
    (361
    )Net income
    
    
    5,462
    
    
    
    1,518
    
    
    
    1,934
    
    
    
    3,970
    
    
    
    1,213Preferred dividends
    
    
    267
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income available to common
Stockholders
    
    $
    5,195
    
    
    $
    1,518
    
    
    $
    1,934
    
    
    $
    3,970
    
    
    $
    1,213Basic earnings per share
    
    $
    1.39
    
    
    $
    0.37
    
    
    $
    0.47
    
    
    $
    0.96
    
    
    $
    0.29Diluted earnings per share
    
    $
    1.32
    
    
    $
    0.37
    
    
    $
    0.47
    
    
    $
    0.95
    
    
    $
    0.29Weighted-average common shares
outstanding
    
    
    3,742,610
    
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,141,684Total weighted-average common
and common equivalent shares
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,157,539
    
    
    
    4,197,857
 Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    May 25,(Dollars in Thousands)
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005Consolidated Balance Sheet Data:Fixed maturity and equity securities
    
    $
    12,214
    
    
    $
    2,798
    
    
    $
    17,768
    
    
    $
    20,620
    
    
    $
    18,431Cash and cash equivalents
    
    
    8,062
    
    
    
    15,858
    
    
    
    11,580
    
    
    
    12,464
    
    
    
    16,864Deferred acquisition costs
    
    
    42,800
    
    
    
    49,850
    
    
    
    45,608
    
    
    
    40,168
    
    
    
    38,441Total assets
    
    
    67,853
    
    
    
    74,274
    
    
    
    79,284
    
    
    
    77,807
    
    
    
    78,236Debt
    
    
    5,000
    
    
    
    5,000
    
    
    
    5,000
    
    
    
    
    
    
    
    Total liabilities
    
    
    25,884
    
    
    
    30,952
    
    
    
    33,978
    
    
    
    28,541
    
    
    
    27,823Stockholders equity
    
    
    41,969
    
    
    
    43,322
    
    
    
    45,305
    
    
    
    49,266
    
    
    
    50,413
 Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    Dec. 31,
    
    
    May 25,(Dollars in Thousands)
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005Summary of Policies Reinsured:Number of life insurance policies and
riders reinsured
    
    
    287,303
    
    
    
    265,384
    
    
    
    239,201
    
    
    
    221,626
    
    
    
    213,781Number of annuity policies reinsured
    
    
    48,007
    
    
    
    48,889
    
    
    
    48,285
    
    
    
    44,886
    
    
    
    43,131Face value of life insurance reinsured
    
    $
    9,082,204
    
    
    $
    8,451,310
    
    
    $
    7,606,281
    
    
    $
    7,035,027
    
    
    $
    6,787,771Annuity policy benefits reinsured
    
    $
    266,305
    
    
    $
    224,710
    
    
    $
    252,180
    
    
    $
    244,907
    
    
    $
    226,245
 8




---



##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   Plan of Liquidation
    Liquidation Basis of Accounting, including Critical Accounting Policies and Estimates
   9




---



##### Table of Contents



As of(Dollars in Thousands)
    
    December 31, 2005Employee compensation and benefits, including severance
    
    $
    1,390.7Legal, audit and other professional services
    
    
    592.6Settlement reserves and other estimated costs of liquidation
    
    
    2,415.0Total
    
    $
    4,398.3
  Status of Liquidation
    10




---



##### Table of Contents



Business Operations Prior to Asset Sale
     Critical Accounting Policies and Estimates
  Income Statement
 Reinsurance Revenues.
 Reinsurance Expenses.
 11




---



##### Table of Contents



Net Income.
 Balance Sheet
 Deferred Acquisition Costs.
   Future Policy Benefits.
     12




---



##### Table of Contents



Fair Value Disclosure
 Investments.
  Other Financial Assets and Liabilities.
 Reinsurance Agreements under Global Preferred Re
  Year Ended
    
    Year Ended
    
    145 DayDecember 31,
    
    December 31,
    
    Period Ended2003
    
    2004
    
    May 25, 2005Western Reserve
    
    
    92
    %
    
    
    92
    %
    
    
    92
    %American Skandia
    
    
    7
    %
    
    
    6
    %
    
    
    6
    %Kemper
    
    
    1
    %
    
    
    1
    %
    
    
    1
    %Pacific Life
    
    
    
    (1)
    
    
    1
    %
    
    
    1
    %Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Less than 1%. 13




---



##### Table of Contents



ReinsurancePolicy Issue
    
    CommencementCeding Life Company
    
    Reinsured Product Name
    
    Product Type(1)
    
    Reinsurance Type(2)
    
    Dates
    
    DateWestern Reserve
    
    Freedom Equity Protector
    
    VUL
    
    MRT
    
    1/92 to 12/99
    
    7/96Western Reserve
    
    Financial Freedom Builder
    
    VUL
    
    MRT
    
    7/97  to 3/98
    
    7/97Western Reserve
    
    Financial Freedom Builder
    
    VUL
    
    Co/Modco
    
    4/98 to 12/98
    
    4/98Western Reserve
    
    Financial Freedom Builder
    
    VUL
    
    MRT
    
    1/99 to 3/01
    
    10/99Western Reserve
    
    Financial Freedom Builder
    
    VUL
    
    Co/Modco
    
    4/01 to 12/01
    
    1/02Western Reserve
    
    Financial Freedom Builder
    
    VUL
    
    MRT
    
    1/02 to 12/02
    
    10/99Western Reserve
    
    Freedom Elite Builder
    
    VUL
    
    Co/Modco
    
    7/01 to 12/01
    
    1/02Kemper
    
    Power VUL
    
    VUL
    
    MRT
    
    9/96 to 3/01
    
    9/96Pacific Life
    
    Select Exec II
    
    VUL
    
    YRT
    
    1/01 to 5/05
    
    1/01American Skandia
    
    Imperium
    
    VA
    
    Modco
    
    1/97 to 12/02
    
    1/97Western Reserve
    
    Freedom Wealth Creator
    
    VA
    
    Co/Modco
    
    1/98 to 12/01
    
    1/98Western Reserve
    
    Freedom Premier
    
    VA
    
    Co/Modco
    
    10/00 to 12/04
    
    10/00
 
 (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.  Results of Operations
   14




---



##### Table of Contents



Year Ended
    
    Year Ended
    
    145 DayDecember
    
    December
    
    Period Ended31, 2003
    
    31, 2004
    
    May 25, 2005(As a percentage of total revenue)Consolidated Statements of Income Data:Revenues:Premiums
    
    
    57
    %
    
    
    56
    %
    
    
    57
    %Reinsured policy revenues
    
    
    42
    
    
    
    41
    
    
    
    39Net investment income
    
    
    1
    
    
    
    3
    
    
    
    4Total revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Benefits and expenses:Benefits, claims and settlement expenses
    
    
    30
    
    
    
    23
    
    
    
    30Change in future policy benefits
    
    
    4
    
    
    
    2
    
    
    
    2Reinsurance expense allowances, net
    
    
    27
    
    
    
    25
    
    
    
    26Amortization of deferred acquisition costs
    
    
    18
    
    
    
    20
    
    
    
    16Operating expenses
    
    
    11
    
    
    
    11
    
    
    
    13Interest expense
    
    
    1
    
    
    
    1
    
    
    
    Total benefits and expenses
    
    
    91
    
    
    
    82
    
    
    
    87Income before income tax
    
    
    9
    
    
    
    18
    
    
    
    13Income tax expense
    
    
    (3
    )
    
    
    (5
    )
    
    
    3Net income available to common stockholders
    
    
    6
    %
    
    
    13
    %
    
    
    10
    %
  Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
 Revenues
 Premiums.
 Reinsured Policy Revenues.
  Net Investment Income.
 15




---



##### Table of Contents



Net Realized Gains & Loss on Investments.
 Net Unrealized Gain on Investments.
 Benefits and Expenses
 Benefits, Claims and Settlement Expenses.
 Change in Future Policy Benefits.
 Reinsurance Expense Allowances, Net.
 Amortization of Deferred Acquisition Costs.
 Operating Expenses.
 Interest Expense.
 Income Taxes.
 16




---



##### Table of Contents



Accounting
for Income Taxes
 Quarterly Results of Operations
  55 DayPeriodQuarter Ended
    
    
    
    
    
    
    
    
    
    
    EndedMar. 31,
    
    
    June 30,
    
    
    Sept. 30,
    
    
    Dec. 31,
    
    
    Mar. 31,
    
    
    May 25,(Dollars in thousands, except per share amounts)
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2005
    
    
    2005Revenues:Premiums
    
    $
    4,302
    
    
    $
    4,271
    
    
    $
    4,286
    
    
    $
    4,250
    
    
    $
    4,195
    
    
    $
    2,550Reinsurance policy revenues
    
    
    3,199
    
    
    
    3,112
    
    
    
    3,191
    
    
    
    3,031
    
    
    
    2,949
    
    
    
    1,706Net investment income
    
    
    178
    
    
    
    210
    
    
    
    222
    
    
    
    232
    
    
    
    260
    
    
    
    166Net realized gain (loss) investments
    
    
    
    
    
    
    (29
    )
    
    
    (2
    )
    
    
    11
    
    
    
    35
    
    
    
    2Net unrealized gain on trading investments
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    7
    
    
    
    13
    
    
    
    3Other income
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    3
    
    
    
    6Total revenues
    
    
    7,686
    
    
    
    7,564
    
    
    
    7,738
    
    
    
    7,540
    
    
    
    7,455
    
    
    
    4,433Benefits and expenses:Benefits, claims and settlement
expenses
    
    
    1,976
    
    
    
    1,451
    
    
    
    1,767
    
    
    
    1,710
    
    
    
    1,941
    
    
    
    1,601Change in future policy benefits
    
    
    215
    
    
    
    158
    
    
    
    140
    
    
    
    133
    
    
    
    127
    
    
    
    62Reinsurance expense allowances, net
    
    
    1,975
    
    
    
    1,991
    
    
    
    1,795
    
    
    
    1,925
    
    
    
    1,881
    
    
    
    1,146Amortization of deferred acquisition costs
    
    
    1,434
    
    
    
    1,470
    
    
    
    1,649
    
    
    
    1,655
    
    
    
    1,252
    
    
    
    704Operating expenses
    
    
    839
    
    
    
    732
    
    
    
    792
    
    
    
    964
    
    
    
    939
    
    
    
    662Interest expense
    
    
    93
    
    
    
    93
    
    
    
    30
    
    
    
    
    
    
    
    
    
    
    
    Total benefits and expenses
    
    
    6,532
    
    
    
    5,895
    
    
    
    6,173
    
    
    
    6,387
    
    
    
    6,140
    
    
    
    4,175Income before income tax
    
    
    1,154
    
    
    
    1,669
    
    
    
    1,565
    
    
    
    1,153
    
    
    
    1,315
    
    
    
    258Income tax expense
    
    
    (322
    )
    
    
    (542
    )
    
    
    (363
    )
    
    
    (343
    )
    
    
    (347
    )
    
    
    (14
    )Net income available to common stockholders
    
    $
    832
    
    
    $
    1,127
    
    
    $
    1,202
    
    
    $
    810
    
    
    $
    968
    
    
    $
    244Basic earnings per share
    
    $
    0.20
    
    
    $
    0.27
    
    
    $
    0.29
    
    
    $
    0.20
    
    
    $
    0.23
    
    
    $
    0.06Diluted earnings per share
    
    $
    0.20
    
    
    $
    0.27
    
    
    $
    0.29
    
    
    $
    0.19
    
    
    $
    0.23
    
    
    $
    0.06
 17




---



##### Table of Contents



55 DayPeriodQuarter Ended
    
    
    Ended(As a percentage of total
    
    Mar. 31,
    
    
    June 30,
    
    
    Sept. 30,
    
    
    Dec. 31,
    
    
    Mar. 31,
    
    
    May 25,revenue)
    
    2004
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2005
    
    
    2005Revenues:Premiums
    
    
    56
    %
    
    
    56
    %
    
    
    55
    %
    
    
    57
    %
    
    
    56
    %
    
    
    58
    %Reinsurance policy revenues
    
    
    42
    
    
    
    41
    
    
    
    41
    
    
    
    40
    
    
    
    40
    
    
    
    38Net investment income
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    4Net realized gain (loss) on
investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Net unrealized gain trading
investments
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %Benefits and expenses:Benefits, claims and settlement
expenses
    
    
    26
    
    
    
    19
    
    
    
    23
    
    
    
    23
    
    
    
    26
    
    
    
    36Change in future policy benefits
    
    
    3
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    2
    
    
    
    1Reinsurance expense
allowances, net
    
    
    26
    
    
    
    26
    
    
    
    23
    
    
    
    25
    
    
    
    25
    
    
    
    26Amortization of deferred
acquisition costs
    
    
    18
    
    
    
    20
    
    
    
    21
    
    
    
    22
    
    
    
    17
    
    
    
    16Operating expenses
    
    
    11
    
    
    
    10
    
    
    
    10
    
    
    
    13
    
    
    
    12
    
    
    
    15Interest expense
    
    
    1
    
    
    
    1
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    Total benefits and expenses
    
    
    85
    %
    
    
    78
    %
    
    
    80
    %
    
    
    85
    %
    
    
    82
    %
    
    
    94
    %Income (loss) before income tax
    
    
    15
    
    
    
    22
    
    
    
    20
    
    
    
    15
    
    
    
    18
    
    
    
    6Income tax expense
    
    
    (4
    )
    
    
    (7
    )
    
    
    (4
    )
    
    
    (4
    )
    
    
    (5
    )
    
    
    Net income available to common
stockholders
    
    
    11
    %
    
    
    15
    %
    
    
    16
    %
    
    
    11
    %
    
    
    13
    %
    
    
    6
    %
  Investments
   At December 31,2003
    
    
    2004
    
    
    2005Fixed maturity securities
    
    $
    15,267,477
    
    
    $
    20,071,625
    
    
    $
    2,423,584Equity securities
    
    
    2,500,191
    
    
    
    548,819
    
    
    
    14,868Cash and cash equivalents
    
    
    11,580,045
    
    
    
    12,463,601
    
    
    
    1,830,747Reinsured policy loans
    
    
    1,270,711
    
    
    
    1,475,516
    
    
    
    Total invested assets
    
    $
    30,618,424
    
    
    $
    34,559,561
    
    
    $
    4,269,199
 18




---



##### Table of Contents



At December 31,2003
    
    
    2004
    
    
    2005U.S. government agency
    
    $
    4,032,188
    
    
    $
    6,230,801
    
    
    $
    2,423,584Corporate
    
    
    10,849,743
    
    
    
    11,756,765
    
    
    
    Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    385,546
    
    
    
    2,084,059
    
    
    
    Total fixed maturity securities
    
    $
    15,267,477
    
    
    $
    20,071,625
    
    
    $
    2,423,584Equity securities
    
    
    2,500,191
    
    
    
    548,819
    
    
    
    14,868Cash and cash equivalents
    
    
    11,580,045
    
    
    
    12,463,601
    
    
    
    1,830,747Reinsured policy loans
    
    
    1,270,711
    
    
    
    1,475,516
    
    
    
    Total invested assets
    
    $
    30,618,424
    
    
    $
    34,559,561
    
    
    $
    4,269,199
  At December 31,2003
    
    
    2004
    
    
    2005Due in less than one year
    
    $
    912,255
    
    
    $
    6,832,379
    
    
    $
    898,570Due after one through five years
    
    
    8,891,136
    
    
    
    6,060,040
    
    
    
    1,525,014Due after five through ten years
    
    
    5,078,540
    
    
    
    5,095,147
    
    
    
    Asset-backed securities
    
    
    
    
    
    
    
    
    
    
    Mortgage-backed securities
    
    
    385,546
    
    
    
    2,084,059
    
    
    
    Total
    
    $
    15,267,477
    
    
    $
    20,071,625
    
    
    $
    2,423,584
  At December 31,Rating
    
    2003
    
    
    2004
    
    
    2005AAA/Aaa
    
    
    32
    %
    
    
    44
    %
    
    
    100
    %AA/Aa2
    
    
    18
    
    
    
    3
    
    
    
    A/A2
    
    
    50
    
    
    
    46
    
    
    
    BBB/Baa2
    
    
    
    
    
    
    7
    
    
    
    BB/Ba2
    
    
    
    
    
    
    
    
    
    
    B/B2
    
    
    
    
    
    
    
    
    
    
    CCC/Caa or lower, or not rated
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 Segment Reporting
  19




---



##### Table of Contents



Liquidity and Capital Resources
      Cash Flows for the Years Ended December 31, 2003 and 2004 Compared to the 145 Day Period Ended May 25, 2005
 Operating Cash Flows.
   20




---



##### Table of Contents



(in millions)
    
    Operating Cash Flows fromCalendar
    
    Co/ModCo
    
    Co/ModCoYear of
    
    Reinsurance
    
    Reinsurance
    
    Renewable
    
    Other
    
    TotalReporting
    
    Assumed in
    
    Assumed
    
    Term
    
    Operating
    
    Operating(CYR)
    
    CYR
    
    Prior to CYR
    
    Reinsurance
    
    Cash Flows
    
    Cash Flows2005
    
    $
    
    
    
    $
    2.7
    
    
    $
    1.3
    
    
    $
    (0.9
    )
    
    $
    3.12004
    
    
    (0.1
    )
    
    
    8.2
    
    
    
    6.0
    
    
    
    (5.0
    )
    
    
    9.12003
    
    
    (0.2
    )
    
    
    7.8
    
    
    
    4.2
    
    
    
    (1.0
    )
    
    
    10.8
 Investment Cash Flows.
 Financing Cash Flows.
 Restrictions.
  Contractual Obligations and Commitments
  21




---



##### Table of Contents



(In Thousands)
    
    Total
    
    
    2006Severance payments and benefits
    
    $
    1,152.5
    
    
    $
    1,152.5
 Currency
  Inflation
  Off Balance Sheet Arrangements
  Recent Accounting Pronouncements
  Forward-Looking Statements
  
    
    The timing of any distributions of remaining assets and the impact
of distributions on the adequacy of reserves available to pay
costs and expenses arising during liquidation;
    
    Estimates of our cash requirements and costs of liquidation;
    
    Estimates of our asset values, including future investment income;
    
    Estimates of our settlement reserve during liquidation;
    
    The assertion of unforeseen claims against us;
    
    The passage of federal or state legislation subjecting our
business to additional supervision or regulation, including
additional tax regulation, in the United States or other
jurisdictions in which we operate; and
    
    Changes in economic conditions, including interest rate and equity
market conditions, which could affect our investment portfolio.
 22




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  
    
    Reports of Independent Registered Public Accounting Firms
    
    Statement of Net Assets in Liquidation as of December 31, 2005
    
    Consolidated Balance Sheet (Going Concern Basis) at December 31, 2004
    
    Consolidated Statement of Changes in Net Assets in Liquidation for the Period May 26, 2005 to December 31, 2005
    
    Consolidated Statements of Income (Going Concern Basis) for the Years Ended
December 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005
    
    Consolidated Statements of Stockholders Equity and Comprehensive Income (Going
Concern Basis) for the Years Ended December 31, 2003 and 2004 and for the Period January 1,
2005 to May 25, 2005
    
    Consolidated Statements of Cash Flows (Going Concern Basis) for the Years Ended
December 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005
    
    Notes to Financial Statements for the Years Ended December 31, 2003, 2004 and 2005
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  23




---



##### Table of Contents



Limitations on the Effectiveness of Controls
  
 Item 9A. Controls and Procedures
   
 Item 9B. Other Information
  24




---



##### Table of Contents



PART III
  
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    The following documents are filed or incorporated by reference as part of this Form 10-K.
   25




---



##### Table of Contents



SIGNATURES
  GLOBAL PREFERRED HOLDINGS, INC.By:
    
    /s/ CARYL P. SHEPHERDCaryl P. ShepherdChief Accounting Officer
   Signature
    
    Title
    
    Date/s/ CARYL P. SHEPHERD
    
    Chief Accounting Officer and
    
    March 31, 2006Caryl P. Shepherd
    
    Vice
President (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)/s/ JOSEPH F. BARONE
    
    Chairman of the Board of Directors
    
    March 31, 2006Joseph F. Barone
    
    and
Director/s/ MILAN M. RADONICH
    
    Director
    
    March 31, 2006Milan M. Radonich/s/ C. SIMON SCUPHAM
    
    Director
    
    March 31, 2006C. Simon Scupham/s/ THOMAS W. MONTGOMERY
    
    Director
    
    March 31, 2006Thomas W. Montgomery/s/ EDWARD F. MCKERNAN
    
    Director
    
    March 31, 2006Edward F. McKernan
 26




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    Agreement and Plan of Reorganization, dated as of December 30, 2004, by and among AEGON
N.V., GPRE Acquisition Corp. and Global Preferred Holdings, Inc. (incorporated by reference
to Exhibit 2.1 to Registrants Current Report on Form 8-K filed on January 4, 2005).2.1.1
    
    Plan of Complete Liquidation and Dissolution of the Registrant, dated as of April 5, 2005.3.1
    
    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
    
    Certificate of 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
    
    Certificate of 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).3.1.4
    
    Certificate of Amendment to Certificate of Incorporation of the Registrant, decreasing the
number of authorized shares of common stock and preferred stock and reducing the par value of
the preferred stock (incorporated by reference to Exhibit 3.1 to Registrants Quarterly
Report on Form 10-QSB for the quarter ended June 30, 2003, filed on August 14, 2003).3.1.5
    
    Certificate of Dissolution of Registrant filed June 1, 2005 with the State of Delaware.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).10.1
    
    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).10.2
    
    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).10.3
    
    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).10.4
    
    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).10.5
    
    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).10.6
    
    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).10.7
    
    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).10.8
    
    First Amendment to Employment Agreement by and between the Registrant and Bradley E. Barks,
effective July 30, 2002 (incorporated by reference to Exhibit 10.1 to Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 2002, filed on November 14, 2002).
 27




---



##### Table of Contents



ExhibitNumber
    
    Description10.9
    
    Renewal of the Employment Agreement by and between the Registrant and Bradley E. Barks,
effective March 1, 2003 (incorporated by reference to Exhibit 10.1 to Registrants Quarterly
Report on Form 10-Q for the quarter ended March 31, 2003, filed on May 15, 2003).10.10
    
    Renewal of the Employment Agreement by and between the Registrant and Caryl P. Shepherd,
effective February 1, 2003 (incorporated by reference to Exhibit 10.2 to Registrants
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003, filed on May 15, 2003).10.11
    
    First Amendment to the Employment Agreement by and between the Registrant and Edward F.
McKernan, effective April 1, 2003 (incorporated by reference to Exhibit 10.1 to Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, filed on August 14, 2003).10.12
    
    Second Renewal of Employment Agreement by and between the Registrant and Bradley E. Barks,
effective January 1, 2004 (incorporated by reference to Exhibit 10.1 to Registrants Quarterly
Report on Form 10-Q for the quarter ended March 31, 2004).10.13
    
    Second Renewal of Employment Agreement by and between the Registrant and Caryl P. Shepherd,
effective January 1, 2004 (incorporated by reference to Exhibit 10.2 to Registrants Quarterly
Report on Form 10-Q for the quarter ended March 31, 2004).10.14
    
    Second Amendment to Employment Agreement by and between the Registrant and Edward F.
McKernan, effective May 26, 2004 (incorporated by reference to Exhibit 10.1 to Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30, 2004).10.15
    
    Letter Agreement by and between Registrant and Bradley E. Barks, dated March 4, 2004
(incorporated by reference to Exhibit 10.46 to Registrants Annual Report on Form 10-K for the
fiscal year ended December 31, 2004).10.16
    
    Letter Agreement by and between Registrant and Caryl P. Shepherd, dated March 4, 2004
(incorporated by reference to Exhibit 10.47 to Registrants Annual Report on Form 10-K for the
fiscal year ended December 31, 2004).10.17
    
    Letter Agreement by and between Registrant and Edward F. McKernan, dated March 4, 2004
(incorporated by reference to Exhibit 10.48 to Registrants Annual Report on Form 10-K for the
fiscal year ended December 31, 2004).10.18
    
    Transition Letter by and between Registrant and Edward F. McKernan dated July 6, 2005
(incorporated by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed
July 12, 2005).10.19
    
    Transition Letter by and between Registrant and Bradley E. Barks dated July 6, 2005
(incorporated by reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
July 12, 2005).10.20
    
    Separation and Release Agreement by and between Registrant and Edward F. McKernan dated
August 19, 2005 (incorporated by reference to Exhibit 10.1 to Registrants Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2005).10.21
    
    Separation and Release Agreement by and between Registrant and Bradley E. Barks dated August
19, 2005 (incorporated by reference to Exhibit 10.2 to Registrants Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2005).10.22
    
    Third Renewal of Employment Agreement by and between the Registrant and Bradley E. Barks,
effective January 1, 2005.10.23
    
    Third Renewal of Employment Agreement by and between the Registrant and Caryl P. Shepherd,
effective January 1, 2005.10.24
    
    Third Amendment to Employment Agreement by and between the Registrant and Edward F.
McKernan, effective January 1, 2005.10.25
    
    Fourth Renewal of Employment Agreement by and between the Registrant and Caryl P. Shepherd,
effective January 1, 2006.16.1
    
    Letter of KPMG LLP to the Securities and Exchange Commission dated June 26, 2003 regarding
change in certifying accountant (incorporated by reference to Exhibit 16.1 to Registrants
Current Report on Form 8-K filed on June 26, 2003).16.2
    
    Letter of Deloitte & Touche LLP to the Securities and Exchange Commission dated November 12,
2004 regarding change in certifying accountant (incorporated by reference to Exhibit 16.1 to
the Registrants Current Report on Form 8-K filed on November 15, 2004).
 28




---



##### Table of Contents



ExhibitNumber
    
    Description31.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification by Caryl P. Shepherd, Chief Accounting Officer, Pursuant to 18 U.S.C. Section
1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 29




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENTS
 Page
 Financial Statements:Reports of Independent Registered Public Accounting Firms
    
    F-2Statement of Net Assets in Liquidation as of December 31, 2005
    
    F-4Consolidated Balance Sheet (Going Concern Basis) as of December 31, 2004
    
    F-5Consolidated
Statement of Changes in Net Assets in Liquidation for the Period May 26, 2005 to
December 31, 2005
    
    F-6Consolidated Statements of Income (Going Concern Basis) for the Years EndedDecember 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005
    
    F-7Consolidated Statements of Stockholders Equity and Comprehensive Income (Going Concern Basis)
    
    F-8for the Years Ended December 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005Consolidated Statements of Cash Flows (Going Concern Basis) for the Years EndedDecember 31, 2003 and 2004 and for the Period January 1, 2005 to May 25, 2005
    
    F-9Notes to Financial Statements
    
    F-10
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
        
 F-2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
         F-3




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 Statement of Net Assets in Liquidation
 December 31,2005Estimated Net Realizable Values of Assets:Cash and cash equivalents
    
    $
    1,830,747Fixed maturity securities
    
    
    2,423,584Equity securities
    
    
    14,868Miscellaneous receivables
    
    
    2,495Current income tax recoverable
    
    
    4,510Fixed assets
    
    
    2,780Estimated future investment income
    
    
    211,485Total estimated assets
    
    
    4,490,469Estimated Settlement Amount of Liabilities:Accrued expenses and accounts payable
    
    
    77,134Dividends payable
    
    
    15,079Estimated future operating costs and settlement
reserves during liquidation period
    
    
    4,398,256Total estimated liabilities
    
    
    4,490,469Commitments and contingencies (Note 11)Net assets in liquidation
    
    $
    
  F-4




---



##### Table of Contents



GLOBAL
PREFERRED HOLDINGS, INC.AND SUBSIDIARIES
 Consolidated Balance Sheet
(Going Concern Basis)
 December 31,2004AssetsFixed maturity securities  available for sale (amortized
cost of $19,885,253)
    
    $
    20,071,625Other equity investments (cost of $500,000)
    
    
    548,819Cash and cash equivalents
    
    
    12,463,601Reinsured policy loans
    
    
    1,475,516Total invested assets
    
    
    34,559,561Investment income due and accrued
    
    
    234,220Accounts receivable
    
    
    11,357Reinsurance balances receivable
    
    
    2,567,121Deferred acquisition costs
    
    
    40,167,670Prepaid expenses
    
    
    223,973Fixed assets (net of accumulated depreciation of $433,046)
    
    
    43,095Total assets
    
    $
    77,806,997Liabilities and Stockholders EquityLiabilities:Future policy benefits
    
    $
    19,401,495Accrued expenses and accounts payable
    
    
    526,316Current income tax payable
    
    
    377,075Deferred tax liability
    
    
    8,236,127Total liabilities
    
    
    28,541,013Commitments and contingencies (Note 11)Stockholders equity:Preferred
stock, par value $.001, 2,000,000 shares
authorized; no shares issued
    
    
    Common
stock, par value $.001, 15,000,000 shares
authorized; 4,149,074 shares issued
    
    
    4,149Additional paid-in capital
    
    
    23,326,026Accumulated other comprehensive income
    
    
    123,007Retained earnings
    
    
    25,862,069Treasury stock, at cost (7,390 shares)
    
    
    (49,267
    )Total stockholders equity
    
    
    49,265,984Total liabilities and stockholders equity
    
    $
    77,806,997
  F-5




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.AND SUBSIDIARIES
 Consolidated Statement of Changes in Net Assets in Liquidation
 For the PeriodMay 26, 2005 toDecember 31, 2005Accumulated stockholders equity as of May 25, 2005
    
    $
    50,413,081Adjustment of assets and liabilities to estimated fair value to change to
liquidation basis
    
    
    8,444,710Estimated net assets in liquidation as of May 26, 2005
    
    
    58,857,791AEGON N.V. shares distribution to stockholders
    
    
    (57,957,136
    )Change in estimate of:Future operating costs and settlement reserves during
liquidation period
    
    
    (34,515
    )Fair value of invested assets
    
    
    (908,026
    )Future investment income
    
    
    42,961Fixed assets
    
    
    (1,075
    )Net change in net assets in liquidation
    
    
    (58,857,791
    )Net assets in liquidation at December 31, 2005
    
    $
    
  F-6




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.AND SUBSIDIARIES
 Consolidated
Statements of Income

(Going Concern Basis)
 For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Revenues:Premiums
    
    $
    17,401,266
    
    
    $
    17,109,121
    
    
    $
    6,744,999Reinsured policy revenues
    
    
    12,796,537
    
    
    
    12,532,579
    
    
    
    4,655,164Net investment income
    
    
    406,993
    
    
    
    849,233
    
    
    
    425,770Net realized gain (loss) on investments
    
    
    21,476
    
    
    
    (27,364
    )
    
    
    36,785Net unrealized gain on trading investments
    
    
    
    
    
    
    48,819
    
    
    
    16,923Other income
    
    
    62,786
    
    
    
    15,681
    
    
    
    9,050Total revenues
    
    
    30,689,058
    
    
    
    30,528,069
    
    
    
    11,888,691Benefits and expenses:Benefits, claims and settlement expenses
    
    
    9,268,559
    
    
    
    6,903,934
    
    
    
    3,541,827Change in future policy benefits
    
    
    1,054,256
    
    
    
    645,436
    
    
    
    189,068Reinsurance expense allowances, net
    
    
    8,135,785
    
    
    
    7,685,870
    
    
    
    3,027,560Amortization of deferred acquisition costs
    
    
    5,536,839
    
    
    
    6,208,647
    
    
    
    1,955,803Operating expenses
    
    
    3,386,942
    
    
    
    3,327,312
    
    
    
    1,601,076Interest expense
    
    
    375,000
    
    
    
    216,781
    
    
    
    Total benefits and expenses
    
    
    27,757,381
    
    
    
    24,987,980
    
    
    
    10,315,334Income before income tax
    
    
    2,931,677
    
    
    
    5,540,089
    
    
    
    1,573,357Income tax expense
    
    
    (998,262
    )
    
    
    (1,570,257
    )
    
    
    (360,941
    )Net income available to common
stockholders
    
    $
    1,933,415
    
    
    $
    3,969,832
    
    
    $
    1,212,416Basic earnings per share
    
    $
    0.47
    
    
    $
    0.96
    
    
    $
    0.29Diluted earnings per share
    
    $
    0.47
    
    
    $
    0.95
    
    
    $
    0.29Weighted average common shares outstanding
    
    
    4,141,684
    
    
    
    4,141,684
    
    
    
    4,141,684Total weighted average common and common
equivalent shares outstanding
    
    
    4,141,684
    
    
    
    4,157,539
    
    
    
    4,197,857
  F-7




---



##### Table of Contents



GLOBAL
PREFERRED HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders Equity and Comprehensive Income
(Going Concern Basis)
Years ended December 31, 2003 and 2004 and Period from January 1, 2005 to May 25, 2005
 Number
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accumulatedof
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Additional
    
    
    other
    
    
    
    
    
    
    
    
    
    
    Totalpreferred
    
    
    Preferred
    
    
    common
    
    
    Common
    
    
    paid-in
    
    
    comprehensive
    
    
    Retained
    
    
    Treasury
    
    
    stockholders
    
    
    
    Comprehensiveshares
    
    
    Stock
    
    
    shares
    
    
    Stock
    
    
    capital
    
    
    income (loss)
    
    
    earnings
    
    
    stock
    
    
    equity
    
    
    
    incomeBalance, December 31, 2002
    
    
    
    
    
    
    
    
    
    
    4,149,074
    
    
    
    4,149
    
    
    
    23,326,026
    
    
    
    82,125
    
    
    
    19,958,822
    
    
    
    (49,267
    )
    
    
    43,321,855Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,933,415
    
    
    
    
    
    
    
    1,933,415
    
    
    
    $
    1,933,415Other comprehensive
loss, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,206
    
    
    
    
    
    
    
    
    
    
    
    50,206
    
    
    
    
    50,206Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,983,621Balance, December 31, 2003
    
    
    
    
    
    
    
    
    
    
    4,149,074
    
    
    
    4,149
    
    
    
    23,326,026
    
    
    
    132,331
    
    
    
    21,892,237
    
    
    
    (49,267
    )
    
    
    45,305,476Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,969,832
    
    
    
    
    
    
    
    3,969,832
    
    
    
    $
    3,969,832Other comprehensive
income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,324
    )
    
    
    
    
    
    
    
    
    
    
    (9,324
    )
    
    
    
    (9,324
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    3,960,508Balance, December 31, 2004
    
    
    
    
    
    $
    
    
    
    
    4,149,074
    
    
    $
    4,149
    
    
    $
    23,326,026
    
    
    $
    123,007
    
    
    $
    25,862,069
    
    
    $
    (49,267
    )
    
    $
    49,265,984Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,212,416
    
    
    
    
    
    
    
    1,212,416
    
    
    
    $
    1,212,416Other comprehensive
income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (71,863
    )
    
    
    
    
    
    
    
    
    
    
    (71,863
    )
    
    
    
    (71,863
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    1,140,553Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,530
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,530Issuance of stock
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Balance, May 25, 2005
    
    
    
    
    
    $
    
    
    
    
    4,149,075
    
    
    $
    4,149
    
    
    $
    23,332,570
    
    
    $
    51,144
    
    
    $
    27,074,485
    
    
    $
    (49,267
    )
    
    $
    50,413,081
  F-8




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Going Concern Basis)
 For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Cash flows from operating activities:Net income
    
    $
    1,933,415
    
    
    $
    3,969,832
    
    
    $
    1,212,416Adjustments to reconcile net income to net cash provided by
operating activities:Amortization and depreciation
    
    
    5,633,217
    
    
    
    6,450,210
    
    
    
    2,018,782Deferred tax expense (benefit)
    
    
    871,664
    
    
    
    (1,011,320
    )
    
    
    (279,238
    )Net realized (gain) loss on investments
    
    
    (21,476
    )
    
    
    27,364
    
    
    
    (36,785
    )Net unrealized gain on trading investments
    
    
    
    
    
    
    (48,819
    )
    
    
    (16,923
    )Capitalization of deferred acquisition costs
    
    
    (1,294,395
    )
    
    
    (768,452
    )
    
    
    (229,242
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    1,821Expense of stock option compensation
    
    
    
    
    
    
    
    
    
    
    6,534Change in:Investment income due and accrued
    
    
    (116,138
    )
    
    
    (37,200
    )
    
    
    4,561Accounts receivable
    
    
    170,912
    
    
    
    33,231
    
    
    
    4,723Reinsurance balances receivable
    
    
    966,487
    
    
    
    (454,658
    )
    
    
    1,589,678Prepaid expenses
    
    
    368,774
    
    
    
    295,915
    
    
    
    (763,182
    )Current income tax recoverable
    
    
    124,348
    
    
    
    48,152
    
    
    
    (16,378
    )Future policy benefits
    
    
    1,957,615
    
    
    
    520,105
    
    
    
    (268,597
    )Reinsurance balances payable
    
    
    127,351
    
    
    
    (169,481
    )
    
    
    377,573Accrued expenses and accounts payable
    
    
    43,442
    
    
    
    9,238
    
    
    
    (133,448
    )Accrued interest payable
    
    
    
    
    
    
    (158,219
    )
    
    
    Current income tax payable
    
    
    
    
    
    
    377,075
    
    
    
    (377,075
    )Net cash provided by operating activities
    
    
    10,765,216
    
    
    
    9,082,973
    
    
    
    3,095,220Cash flows from investing activities:Proceeds from sale of fixed maturity securities available-for-sale
    
    
    421,282
    
    
    
    1,029,185
    
    
    
    532,540Proceeds from sale of equity securities
    
    
    
    
    
    
    2,009,731
    
    
    
    Proceeds from principal payments on mortgage-backed
securities of available-for-sale securities
    
    
    738,085
    
    
    
    324,330
    
    
    
    231,420Proceeds from maturity of available-for-sale securities
    
    
    800,000
    
    
    
    400,000
    
    
    
    750,000Purchase of fixed maturity and equity securities
    
    
    (16,831,299
    )
    
    
    (6,754,030
    )
    
    
    Change in reinsured policy loans
    
    
    (154,717
    )
    
    
    (204,805
    )
    
    
    (205,478
    )Purchase of fixed assets
    
    
    (16,778
    )
    
    
    (3,828
    )
    
    
    (3,629
    )Net cash (used in) provided by investing activities
    
    
    (15,043,427
    )
    
    
    (3,199,417
    )
    
    
    1,304,673Cash flows from financing activities:Repayment of short term debt
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Issuance of stock
    
    
    
    
    
    
    
    
    
    
    11Net cash (used in) provided by financing activities
    
    
    
    
    
    
    (5,000,000
    )
    
    
    11Net (decrease) increase in cash and cash
equivalents
    
    
    (4,278,211
    )
    
    
    883,556
    
    
    
    4,399,904Cash and cash equivalents at beginning of period
    
    
    15,858,256
    
    
    
    11,580,045
    
    
    
    12,463,601Cash and cash equivalents at end of period
    
    $
    11,580,045
    
    
    $
    12,463,601
    
    
    $
    16,863,505Supplemental disclosure of cash flow information:Interest paid
    
    $
    375,000
    
    
    $
    216,781
    
    
    $
    Income taxes paid
    
    $
    2,250
    
    
    $
    2,156,350
    
    
    $
    1,033,632
  F-9




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 1.
    
    Organization and Wind Up of Business
      F-10




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
    2.
    
    Summary of Significant Accounting Policies
 Basis of Presentation
    F-11




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 Estimated Net Realizable Value of Assets in Liquidation.
 
    
    Cash and cash equivalents are stated at fair value. At times, cash balances held in
financial institutions may be in excess of federally insured amounts. Cash balances held
in money market funds are not insured. Cash equivalents consist of United States treasury
bills.
    
    Fixed maturity securities consist of United States treasury notes and represent
estimated net sales proceeds less the costs of disposal.
    
    Equity securities consist of 911 AEGON common shares, which are held on behalf of
stockholders who have not claimed their ownership. The AEGON common shares were valued at
$13.07 per share as of the close of business on May 25, 2005 when received by us pursuant
to the Reorganization Agreement and are valued at $16.32 per share as of December 31, 2005.
    
    Miscellaneous receivables represent receivables due to Global Preferred by employees,
stockholders and third-party service providers.
    
    Current income tax recoverable represents an overpayment of 2005 estimated taxes paid in
2005.
    
    Fixed assets are assets being utilized by Global Preferred such as furniture and office
equipment stated at net realizable value.
    
    Estimated future investment income was projected by management based upon prevailing
interest rates, anticipated investment portfolio composition and future expected cash flows
based upon the estimated timeframe to complete the liquidation.
 Estimated Settlement Amount of Liabilities in Liquidation.
 
    
    Accrued expenses and accounts payable include all current amounts due that remain unpaid
for recurring administrative costs and for refunds of payments made to us in error by
third-party service providers.
    
    Dividends payable include the AEGON common shares yet to be distributed (as discussed
above) as of December 31, 2005 at $16.32 per share and cash dividends received from AEGON
for those remaining shares which are also to be distributed.
    
    Estimated future operating costs and settlement reserves during liquidation were
recorded on May 26, 2005 when Global Preferred adopted the liquidation basis of accounting
and include all estimated future amounts that remain unpaid for liquidation activities.
   Investments .
 F-12




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
   Fair Value Disclosure .
 Cash and Cash Equivalents .
 Deferred Acquisition Costs .
   Reinsurance Expense Allowances .
 F-13




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  Fixed Assets .
 Future Policy Benefits .
  Income Taxes Accounting for Income Taxes
 Recognition of Revenues and Related Expenses .
 Reinsured Policy Revenues .
 Earnings Per Share Earnings Per Share
 F-14




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
   Stock Compensation Plan Accounting for Stock Issued to Employees Accounting for Stock-Based Compensation
  For the PeriodYear ended
    
    
    Year ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 2005(In ThousandsExcept Per Share Amounts)
    
    2003
    
    
    2004
    
    
    (145 Days)Net income, as reported
    
    $
    1,933.4
    
    
    $
    3,969.8
    
    
    $
    1,212.4Less: Total stock-based employee
compensation expense determined under the
fair value method for all awards, net of
tax
    
    
    (16.1
    )
    
    
    (16.9
    )
    
    
    (0.1
    )Pro-forma net income
    
    $
    1,917.3
    
    
    $
    3,952.9
    
    
    $
    1,212.3Reported basic earnings per common share
    
    $
    0.47
    
    
    $
    0.96
    
    
    $
    0.29Reported diluted earnings per common share
    
    $
    0.47
    
    
    $
    0.95
    
    
    $
    0.29Pro-forma basic earnings per common share
    
    $
    0.46
    
    
    $
    0.95
    
    
    $
    0.29Pro-forma diluted earnings per common share
    
    $
    0.46
    
    
    $
    0.95
    
    
    $
    0.29
 Common Stock.
 Recent Accounting Pronouncements Accounting for Stock-Based Compensation, Share-Based Payment
 F-15




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 3.
    
    Liquidation Basis of Accounting
  As of(Dollars in Thousands)
    
    May 26, 2005Assets held for sale adjusted to estimated fair value
    
    $
    16,352.3Estimated future investment income
    
    
    236.8Elimination of prepaid expenses
    
    
    (934.5
    )Fixed assets adjusted to estimated fair value
    
    
    (17.1
    )Elimination of deferred tax asset, net
    
    
    (694.4
    )Reduction of accrued expenses
    
    
    196.6Estimated future operating costs and settlement reserves during liquidation
    
    
    (6,695.0
    )Total adjustment of assets and liabilities at estimated fair value to
change to liquidation basis
    
    $
    8,444.7
    F-16




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  Estimated
    
    
    
    
    
    
    
    
    
    
    Estimatedas of
    
    
    
    
    
    
    Costs
    
    
    as ofMay 26,
    
    
    Change in
    
    
    Incurred
    
    
    December 31,(Dollars in Thousands)
    
    2005
    
    
    Estimate
    
    
    and Paid
    
    
    2005Employee compensation and
benefits, including
severance payments
    
    $
    2,925.8
    
    
    $
    (19.0
    )
    
    $
    1,516.1
    
    
    $
    1,390.7Legal, audit and other
professional fees
    
    
    1,078.4
    
    
    
    189.5
    
    
    
    675.3
    
    
    
    592.6Other estimated costs and
settlement
reserves during liquidation
    
    
    2,690.8
    
    
    
    (136.0
    )
    
    
    139.8
    
    
    
    2,415.0Total estimated future
operating costs and
settlement
reserves
    
    $
    6,695.0
    
    
    $
    34.5
    
    
    $
    2,331.2
    
    
    $
    4,398.3
  4.
    
    Investments
   (Dollars in Thousands)
    
    Fair ValueFixed maturity securities:U.S. government agency obligations
    
    $
    2,423,584Equity securities
    
    
    14,868Total fixed maturity and equity securities
    
    $
    2,438,452
  F-17




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Fixed maturity securities
    
    $
    271,307
    
    
    $
    764,119
    
    
    $
    322,801Equity securities, available for sale
    
    
    15,178
    
    
    
    31,244
    
    
    
    Cash and cash equivalents
    
    
    188,303
    
    
    
    139,156
    
    
    
    138,326474,788
    
    
    
    934,519
    
    
    
    461,127Investment expenses
    
    
    (67,795
    )
    
    
    (85,286
    )
    
    
    (35,357
    )Net investment income
    
    $
    406,993
    
    
    $
    849,233
    
    
    $
    425,770
  Fair valueof securitieswithAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Total fair
    
    
    unrealizedAt December 31, 2004
    
    Cost
    
    
    gains
    
    
    losses
    
    
    value
    
    
    lossesFixed maturity securities:U.S. government
corporations and agencies
    
    $
    6,232,387
    
    
    $
    32,131
    
    
    $
    33,717
    
    
    $
    6,230,801
    
    
    $
    3,471,879Corporate
    
    
    11,621,577
    
    
    
    162,905
    
    
    
    27,717
    
    
    
    11,756,765
    
    
    
    4,550,047Mortgage-backed securities
    
    
    2,031,289
    
    
    
    52,770
    
    
    
    
    
    
    
    2,084,059
    
    
    
    Total fixed maturity
securities, available
for sale
    
    $
    19,885,253
    
    
    $
    247,806
    
    
    $
    61,434
    
    
    $
    20,071,625
    
    
    $
    8,021,926
   Amortized cost
    
    
    Fair valueAvailable for sale:Due in one year or less
    
    $
    6,816,246
    
    
    $
    6,832,379Due after one year through five years
    
    
    6,063,000
    
    
    
    6,060,040Due after five years through ten years
    
    
    4,974,719
    
    
    
    5,095,147Mortgage-backed securities
    
    
    2,031,288
    
    
    
    2,084,059Total
    
    $
    19,885,253
    
    
    $
    20,071,625
  F-18




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Fixed maturity securities, available for sale:Gross realized gains
    
    $
    21,476
    
    
    $
    3,831
    
    
    $
    36,785Gross realized losses
    
    
    
    
    
    
    (31,195
    )
    
    
    Net realized gain (loss) on investments
    
    $
    21,476
    
    
    $
    (27,364
    )
    
    $
    36,785
    Period fromYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 days)Unpaid life claims  January 1
    
    $
    1,645,065
    
    
    $
    1,550,188
    
    
    $
    1,983,679Add claims incurred during the
year related to:Current year
    
    
    9,027,513
    
    
    
    6,117,064
    
    
    
    3,340,716Prior years
    
    
    241,046
    
    
    
    786,870
    
    
    
    201,111Total incurred
    
    
    9,268,559
    
    
    
    6,903,934
    
    
    
    3,541,827Less claims paid during the year:Incurred during current year
    
    
    8,519,602
    
    
    
    5,625,696
    
    
    
    2,411,803Incurred during prior years
    
    
    843,834
    
    
    
    844,747
    
    
    
    1,426,355Total paid
    
    
    9,363,436
    
    
    
    6,470,443
    
    
    
    3,838,158Unpaid life claims  end of period
    
    $
    1,550,188
    
    
    $
    1,983,679
    
    
    $
    1,687,348
    F-19




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Reinsurance assumed
    
    $
    30,665,247
    
    
    $
    30,066,493
    
    
    $
    11,563,752Reinsurance ceded
    
    
    (467,444
    )
    
    
    (424,793
    )
    
    
    (163,589
    )Net premiums and policy revenues
    
    $
    30,197,803
    
    
    $
    29,641,700
    
    
    $
    11,400,163
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Reinsurance assumed
    
    $
    9,431,944
    
    
    $
    7,187,936
    
    
    $
    3,891,827Reinsurance ceded
    
    
    (163,385
    )
    
    
    (284,002
    )
    
    
    (350,000
    )Net benefits,
claims and
settlement expenses
    
    $
    9,268,559
    
    
    $
    6,903,934
    
    
    $
    3,541,827
  December 31,
    
    
    December 31,Life insurance in force
    
    2003
    
    
    2004
    
    
    May 25, 2005Direct
    
    
    
    
    
    
    
    
    
    
    Assumed
    
    $
    7,606
    
    
    $
    7,035
    
    
    $
    6,788Ceded
    
    
    (131
    )
    
    
    (116
    )
    
    
    (109
    )Net
    
    $
    7,475
    
    
    $
    6,919
    
    
    $
    6,679
  F-20




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
   For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Beginning of year
    
    $
    49,850,309
    
    
    $
    45,607,865
    
    
    $
    40,167,670Capitalized
    
    
    1,294,395
    
    
    
    768,452
    
    
    
    229,242Amortized
    
    
    (5,536,839
    )
    
    
    (6,208,647
    )
    
    
    (1,955,803
    )End of year
    
    $
    45,607,865
    
    
    $
    40,167,670
    
    
    $
    38,441,109
  Accounting for Income Taxes
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Tax attributable to:Income from operations
    
    $
    998,262
    
    
    $
    1,570,257
    
    
    $
    360,941Unrealized gains
(losses) on
securities available
for sale
    
    $
    25,864
    
    
    $
    (4,803
    )
    
    $
    (37,021
    )
  Period fromJanuary 1, 2005Year Ended
    
    
    Year Ended
    
    
    to May 25,December 31,
    
    
    December 31,
    
    
    20052003
    
    
    2004
    
    
    (145 Days)Current
    
    $
    126,598
    
    
    $
    2,581,577
    
    
    $
    640,179Deferred
    
    
    871,664
    
    
    
    (1,011,320
    )
    
    
    (279,238
    )Total
    
    $
    998,262
    
    
    $
    1,570,257
    
    
    $
    360,941
 F-21




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Computed expected tax expense
    
    $
    996,770
    
    
    $
    1,883,630
    
    
    $
    534,941Small life insurance company deduction
    
    
    
    
    
    
    (314,951
    )
    
    
    (180,644
    )Other, net
    
    
    1,492
    
    
    
    1,578
    
    
    
    6,644Total
    
    $
    998,262
    
    
    $
    1,570,257
    
    
    $
    360,941
   December 31,2004Deferred tax assets:Alternative minimum tax credit
    
    $
    30,019Reserve differences
    
    
    4,228,455Net operating loss carry-forward
    
    
    441,539DAC tax capitalized
    
    
    693,514Other
    
    
    128,267Gross deferred tax assets
    
    
    5,521,794Deferred tax liabilities:Policy benefit reserves
    
    
    32,453Deferred acquisition costs
    
    
    13,657,008Unrealized gain on securities available for sale
    
    
    63,367Other
    
    
    5,093Gross deferred tax liabilities
    
    
    13,757,921Net deferred tax liabilities
    
    $
    8,236,127
     F-22




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
      
    
    Was required to 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 was prohibited from declaring or paying any dividends during
any financial year if it was in breach of its minimum solvency margin or if the
declaration or payment of such dividends would have caused it to fail to meet such
margin;
    
    Was prohibited, without the approval of the Bermuda Monetary Authority,
from reducing its total statutory capital as set out in its previous years financial
statements by 15% or more in a single financial year;
    
    Was required to establish and maintain a segregated long-term business
fund; and
    
    Was 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, exceeded the extent (as so
certified) of the liabilities of Global Preferred Res long-term business. The amount
of any such dividend could 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.
 F-23




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
         F-24




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  th
   TaxBefore-Tax
    
    
    (Expense)
    
    
    Net-of-TaxAmount
    
    
    Benefit
    
    
    AmountYear Ended December 31, 2003Net unrealized holding gains arising during period
    
    $
    97,546
    
    
    $
    (33,166
    )
    
    $
    64,380Less: reclassification adjustment for gains
realized in net income
    
    
    21,476
    
    
    
    (7,302
    )
    
    
    14,174Other comprehensive income
    
    $
    76,070
    
    
    $
    (25,864
    )
    
    $
    50,206Year Ended December 31, 2004Net unrealized holding losses arising during period
    
    $
    (41,491
    )
    
    $
    14,107
    
    
    $
    (27,384
    )Less: reclassification adjustment for losses
realized in net income
    
    
    (27,364
    )
    
    
    9,304
    
    
    
    (18,060
    )Other comprehensive loss
    
    $
    (14,127
    )
    
    $
    4,803
    
    
    $
    (9,324
    )For the Period January 1, 2005 to May 25, 2005Net unrealized holding losses arising during period
    
    $
    (72,099
    )
    
    $
    24,514
    
    
    $
    (47,585
    )Less: reclassification adjustment for gains
realized in net income
    
    
    36,785
    
    
    
    (12,507
    )
    
    
    24,278Other comprehensive loss
    
    $
    (108,884
    )
    
    $
    37,021
    
    
    $
    (71,863
    )
  Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments Accounting and Reporting by Insurance Enterprises
 F-25




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  2003Segment Reporting
    
    Non-Year
Ended December 31,

    
    Universal
    
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    TotalPremiums
    
    $
    17,401
    
    
    $
    
    
    
    $
    
    
    
    $
    17,401Reinsured policy revenues
    
    
    
    
    
    
    12,796
    
    
    
    
    
    
    
    12,796Benefits, claims and settlement
expenses*
    
    
    8,147
    
    
    
    2,176
    
    
    
    
    
    
    
    10,323Reinsurance expense allowances, net
    
    
    6,042
    
    
    
    2,093
    
    
    
    
    
    
    
    8,135Amortization of deferred acquisition
costs
    
    
    250
    
    
    
    5,287
    
    
    
    
    
    
    
    5,537Underwriting profit
    
    
    2,962
    
    
    
    3,240
    
    
    
    
    
    
    
    6,202Net investment income
    
    
    14
    
    
    
    207
    
    
    
    186
    
    
    
    407Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    21Other income
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    63Other expenses
    
    
    167
    
    
    
    344
    
    
    
    3,251
    
    
    
    3,762Segment operating income (loss)
before income tax
    
    
    2,809
    
    
    
    3,103
    
    
    
    (2,981
    )
    
    
    2,931Income tax expense (benefit)
    
    
    956
    
    
    
    1,057
    
    
    
    (1,015
    )
    
    
    998Segment net income (loss)
    
    $
    1,853
    
    
    $
    2,046
    
    
    $
    (1,966
    )
    
    $
    1,933Segment assets
    
    $
    5,601
    
    
    $
    48,164
    
    
    $
    25,519
    
    
    $
    79,284
 
 *
    
    Benefits, claims and settlement expenses include change in future policy benefits. F-26




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 2004Segment Reporting
    
    Non-Year
Ended December 31,
    
    Universal
    
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    TotalPremiums
    
    $
    17,109
    
    
    $
    
    
    
    $
    
    
    
    $
    17,109Reinsured policy revenues
    
    
    
    
    
    
    12,533
    
    
    
    
    
    
    
    12,533Benefits, claims and settlement
expenses*
    
    
    6,370
    
    
    
    1,180
    
    
    
    
    
    
    
    7,550Reinsurance expense allowances, net
    
    
    5,861
    
    
    
    1,825
    
    
    
    
    
    
    
    7,686Amortization of deferred acquisition
costs
    
    
    176
    
    
    
    6,033
    
    
    
    
    
    
    
    6,209Underwriting profit
    
    
    4,702
    
    
    
    3,495
    
    
    
    
    
    
    
    8,197Net investment income
    
    
    41
    
    
    
    120
    
    
    
    688
    
    
    
    849Net realized loss on investments
    
    
    
    
    
    
    
    
    
    
    (27
    )
    
    
    (27
    )Net unrealized gain on trading
investments
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    49Other income
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16Other expenses
    
    
    162
    
    
    
    370
    
    
    
    3,012
    
    
    
    3,544Segment operating income (loss)
before income tax
    
    
    4,581
    
    
    
    3,245
    
    
    
    (2,286
    )
    
    
    5,540Income tax expense (benefit)
    
    
    1,298
    
    
    
    920
    
    
    
    (648
    )
    
    
    1,570Segment net income (loss)
    
    $
    3,283
    
    
    $
    2,325
    
    
    $
    (1,638
    )
    
    $
    3,970Segment assets
    
    $
    5,885
    
    
    $
    43,258
    
    
    $
    28,664
    
    
    $
    77,807
 
 *
    
    Benefits, claims and settlement expenses include change in future policy benefits. 2005Segment Reporting
    
    Non-145 Day Period Ended May 25,
    
    Universal
    
    
    Universal(Dollars in thousands)
    
    Life-Type
    
    
    Life-Type
    
    
    Other
    
    
    TotalPremiums
    
    $
    6,745
    
    
    $
    
    
    
    $
    
    
    
    $
    6,745Reinsured policy revenues
    
    
    
    
    
    
    4,655
    
    
    
    
    
    
    
    4,655Benefits, claims and settlement
expenses*
    
    
    3,075
    
    
    
    656
    
    
    
    
    
    
    
    3,731Reinsurance expense allowances, net
    
    
    2,308
    
    
    
    720
    
    
    
    
    
    
    
    3,028Amortization of deferred acquisition
costs
    
    
    73
    
    
    
    1,883
    
    
    
    
    
    
    
    1,956Underwriting profit
    
    
    1,289
    
    
    
    1,396
    
    
    
    
    
    
    
    2,685Net investment income
    
    
    30
    
    
    
    46
    
    
    
    350
    
    
    
    426Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    37
    
    
    
    37Net unrealized gain on trading
investments
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17Other income
    
    
    
    
    
    
    
    
    
    
    9
    
    
    
    9Other expenses
    
    
    86
    
    
    
    183
    
    
    
    1,332
    
    
    
    1,601Segment operating income (loss)
before income tax
    
    
    1,233
    
    
    
    1,259
    
    
    
    (919
    )
    
    
    1,573Income tax expense (benefit)
    
    
    283
    
    
    
    289
    
    
    
    (211
    )
    
    
    361Segment net income (loss)
    
    $
    950
    
    
    $
    970
    
    
    $
    (708
    )
    
    $
    1,212Segment assets
    
    $
    5,738
    
    
    $
    38,801
    
    
    $
    33,697
    
    
    $
    78,236
 
 *
    
    Benefits, claims and settlement expenses include change in future policy benefits. F-27




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
       F-28




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 Shares Available
    
    
    Number of
    
    
    Weighted Average(Shares in Thousands)
    
    for Options
    
    
    Shares
    
    
    Exercise PriceDecember 31, 2003
    
    
    1,530.7
    
    
    
    245.4
    
    
    $
    10.46Grants
    
    
    (44.4
    )
    
    
    44.4
    
    
    $
    10.94Cancellations
    
    
    
    
    
    
    (6.8
    )
    
    $
    10.46(1.1
    )
    
    $
    10.94December 31, 2004
    
    
    1,486.3
    
    
    
    238.6
    
    
    $
    10.4643.3
    
    
    $
    10.94Grants
    
    
    
    
    
    
    
    
    
    $
    10.46
    
    
    $
    10.94Cancellations
    
    
    
    
    
    
    (18.1
    )
    
    $
    10.46(5.5
    )
    
    $
    10.94Exercised
    
    
    
    
    
    
    (220.5
    )
    
    $
    10.46(37.8
    )
    
    $
    10.94Termination
    
    
    (1,486.3
    )
    
    
    
    
    
    
    N/ADecember 31, 2005
    
    
    
    
    
    
    
    
    
    
    N/AOptions exercisable at:December 31, 2003
    
    
    
    
    
    
    81.2
    
    
    $
    10.46December 31, 2004
    
    
    
    
    
    
    128.0
    
    
    $
    10.46December 31, 2005
    
    
    
    
    
    
    
    
    
    
    
      F-29




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
  
 December 31,2004AssetsInvestment in common stock of subsidiaries (1)
    
    $
    41,987,650Fixed maturity securities  available for sale (amortized
cost of $3,199,482)
    
    
    3,259,788Cash and cash equivalents
    
    
    2,595,461Investment income due and accrued
    
    
    27,344Accounts receivable
    
    
    32Intercompany receivables (1)
    
    
    1,099,064Current income tax recoverable
    
    
    1,144Prepaid expenses
    
    
    220,308Fixed assets (net of accumulated depreciation of $433,046)
    
    
    43,095Deferred tax benefit
    
    
    523,682Total assets
    
    $
    49,757,568Liabilities and Stockholders EquityLiabilities:Accrued expenses and accounts payable
    
    $
    491,584Total liabilities
    
    
    491,584Stockholders equity:Preferred stock, par value $.001, 2,000,000 authorized;
no shares issued
    
    
    Common stock, par value $.001, 15,000,000 shares
authorized; 4,149,074 shares issued
    
    
    4,149Additional paid-in capital
    
    
    23,326,026Accumulated other comprehensive income
    
    
    123,007Retained earnings
    
    
    25,862,069Treasury stock, at cost (7,390 shares)
    
    
    (49,267
    )Total stockholders equity
    
    
    49,265,984Total liabilities and stockholders equity
    
    $
    49,757,568
 
 (1)
    
    Eliminated on consolidation F-30




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 
 For the PeriodYear Ended
    
    
    Year Ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Revenues:Net investment income
    
    $
    24,626
    
    
    $
    121,643
    
    
    $
    80,536Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    35,675Intercompany interest income (1)
    
    
    450,000
    
    
    
    259,426
    
    
    
    Total revenue
    
    
    474,626
    
    
    
    381,069
    
    
    
    116,211Benefits and expenses:Operating expenses
    
    
    (137,929
    )
    
    
    (833,761
    )
    
    
    416,962Interest expense
    
    
    375,000
    
    
    
    216,781
    
    
    
    Total benefits and expenses
    
    
    237,071
    
    
    
    (616,980
    )
    
    
    416,962Income before income tax and equity
in undistributed net income of
subsidiaries
    
    
    237,555
    
    
    
    998,049
    
    
    
    (300,751
    )Income tax expense
    
    
    (80,403
    )
    
    
    (338,787
    )
    
    
    99,260Income before equity in
undistributed net income of
subsidiaries
    
    
    157,152
    
    
    
    659,262
    
    
    
    (201,491
    )Equity in earnings of subsidiaries
    
    
    1,776,263
    
    
    
    3,310,570
    
    
    
    1,413,907Net income available to common stockholders
    
    $
    1,933,415
    
    
    $
    3,969,832
    
    
    $
    1,212,416
 
 (1)
    
    Eliminated on consolidation F-31




---



##### Table of Contents



GLOBAL PREFERRED HOLDINGS, INC.
 
 For the PeriodYear ended
    
    
    Year ended
    
    
    January 1, 2005December 31,
    
    
    December 31,
    
    
    to May 25, 20052003
    
    
    2004
    
    
    (145 Days)Cash flows from operating activities:Net income
    
    $
    1,933,415
    
    
    $
    3,969,832
    
    
    $
    1,212,416Less equity in earnings of subsidiaries
    
    
    (1,776,263
    )
    
    
    (3,310,570
    )
    
    
    (1,413,907
    )Income (loss) before equity in undistributed net income
of subsidiaries
    
    $
    157,152
    
    
    $
    659,262
    
    
    $
    (201,491
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Amortization and depreciation
    
    
    96,378
    
    
    
    94,513
    
    
    
    6,640Deferred tax expense
    
    
    76,088
    
    
    
    320,296
    
    
    
    (99,406
    )Net realized gain on investments
    
    
    
    
    
    
    
    
    
    
    (35,675
    )Loss on disposal of assets
    
    
    
    
    
    
    
    
    
    
    1,821Expense of stock option compensation
    
    
    
    
    
    
    
    
    
    
    6,534Change in:Investment income due and accrued
    
    
    (2,190
    )
    
    
    (23,835
    )
    
    
    (3,210
    )Accounts receivable
    
    
    215,500
    
    
    
    (32
    )
    
    
    (52
    )Intercompany receivables (1)
    
    
    667,822
    
    
    
    5,385,644
    
    
    
    918,267Prepaid expenses
    
    
    356,466
    
    
    
    295,874
    
    
    
    (732,160
    )Accrued expenses and accounts payable
    
    
    44,062
    
    
    
    (6,767
    )
    
    
    (98,716
    )Accrued interest
    
    
    
    
    
    
    31,125
    
    
    
    Current income tax recoverable
    
    
    
    
    
    
    (1,144
    )
    
    
    (3,366
    )Current income tax payable
    
    
    2,065
    
    
    
    (2,065
    )
    
    
    Net cash provided by (used in) operating
activities
    
    
    1,613,343
    
    
    
    6,752,871
    
    
    
    (240,814
    )Cash flows from investing activities:Proceeds from sale of fixed maturity securities
available-for-sale
    
    
    
    
    
    
    
    
    
    
    532,540Proceeds from principal payments on mortgage-backed
securities of available-for-sale securities
    
    
    12,522
    
    
    
    30,040
    
    
    
    40,607Proceeds from maturity of available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    250,000Purchase of available-for-sale securities
    
    
    (498,810
    )
    
    
    (2,728,996
    )
    
    
    Purchase of fixed assets
    
    
    (16,779
    )
    
    
    (3,828
    )
    
    
    (3,629
    )Purchase of equity securities
    
    
    (40,000
    )
    
    
    
    
    
    
    Net cash provided by (used in) investing
activities
    
    
    (543,067
    )
    
    
    (2,702,784
    )
    
    
    819,518Cash flows from financing activities:Issuance of notes receivable  intercompany (1)
    
    
    
    
    
    
    (5,000,000
    )
    
    
    Issuance of stock
    
    
    
    
    
    
    
    
    
    
    11Dividends received from Global Preferred Re
    
    
    
    
    
    
    
    
    
    
    932,064Net cash provided by (used in) financing
activities
    
    
    
    
    
    
    (5,000,000
    )
    
    
    932,075Net increase in cash and cash equivalents
    
    
    1,070,276
    
    
    
    (949,913
    )
    
    
    1,510,779Cash and cash equivalents at beginning of period
    
    
    2,475,098
    
    
    
    3,545,374
    
    
    
    2,595,461Cash and cash equivalents at end of period
    
    $
    3,545,374
    
    
    $
    2,595,461
    
    
    $
    4,106,240
 
 (1)
    
    Eliminated on consolidation F-32