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EXHIBIT 99.3

SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS

FACTORS THAT MAY AFFECT FUTURE RESULTS OF
OPERATIONS

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



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| | Our business is currently dependent upon
    our relationships with independent agents associated with World
    Financial Group and the loss of business provided by the
    independent agents could have a material adverse effect on our
    growth strategies and business.

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

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



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| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The ability of World Financial Group to retain
    agents who have the incentive to support us;                                                           
|
| |  | The degree of market acceptance of the products
    offered by those agents;                                                                              
|
| |  | The relationship between the agents and the life
    insurance companies that use us for reinsurance; and                                                 
|
| |  | The occurrence of regulatory actions or
    litigation that could restrict or prohibit sales activities by
    the agents or the life insurance companies.

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

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

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

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| | We face certain specialized risks common to
    all life reinsurance companies; however, because of the
    concentration of our business with a small number of life
    insurance companies, we may have a greater exposure to these
    risks.

We face certain specialized risks common to all
life reinsurance companies. However, because Western Reserve,
American Skandia, Pacific Life and 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. 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:



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| |  | Mortality.Mortality
    is the relative incidence of death experienced by insured lives
    taken as a group. We are subject to the risk that the mortality
    on the lives reinsured by us may be above the mortality assumed
    in pricing our reinsurance.                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Persistency.Persistency is the extent to which insurance policies are
    maintained by the policyholder. Policyholders may not pay
    premiums, causing their policies to lapse, or they may choose to
    surrender their policies for the cash surrender value. Policy
    lapses and surrenders will result in lost future revenues and
    may result in diminished profitability associated with the
    business reinsured.                                                                                                                                                                                                                
|
| |  | Investment.Investment income is based on the rate of return on invested
    assets. We are subject to (1) asset value risk, which is
    the risk that invested assets will decrease in value,
    (2) reinvestment risk, which is the risk that interest
    rates will decline and funds reinvested will earn lower rates,
    and (3) disintermediation risk, which is the risk that we
    may have to sell assets at a loss to fund cash outflows
    resulting from policyholder withdrawals. Additionally, our
    revenues on modified coinsurance may decline if
    policyholders separate account values decline.                      
|
| |  | Expenses.Expenses
    principally consist of our reinsurance expense allowances and
    internal operating expenses. Reinsurance expense allowances
    typically consist of reimbursements to the life insurance
    companies that sell the policies for commissions, issuance
    expenses and administrative expenses associated with the
    reinsured policies. In general, we are not at risk for variances
    in the life insurance companies actual expenses from
    reinsurance expense allowances. However, we face the risk that
    our internal operating expenses may exceed the expenses assumed
    in pricing our reinsurance.

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



| |                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is dependent upon a small
    number of reinsurance agreements with a limited number of
    unaffiliated insurance companies and the loss of new business
    provided by them could adversely affect us.

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

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We have an agreement with Western Reserve that
provides us with the first rights to reinsure new products
offered by Western Reserve or its U.S. affiliates that are sold
by agents associated with World Financial Group. These rights,
through automatic renewal, have current terms expiring on
December 31, 2003 for variable annuity products reinsured
on a coinsurance and modified coinsurance basis, March 31,
2004 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 we are unable to exercise our
    contractual rights to expand the scope of our existing
    reinsurance arrangements, our growth strategy and business could
    be affected.

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



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| | -----------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to develop new
    relationships with IMOs, the long-term growth of our business
    could be materially affected.

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



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| | --------------------------------------------------------------------------------------------------------------------------------------
| | 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.



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| | -------------------------------------------------------------------------------------------
| | We anticipate experiencing a period of
    growth that may place a strain on our resources.

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

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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.




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| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

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 IAS Park Group, 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.



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| | If the life and annuity products we
    reinsure do not continue to be accepted in the marketplace or if
    tax regulations change with regard to those products, our
    business strategy could be significantly and adversely
    affected.

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

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

Under the Internal Revenue Code of 1986, income
tax payable by policyholders on investment earnings is deferred
during the accumulation period of some life insurance and
annuity products. To the extent that the Internal Revenue Code
is revised to reduce the tax-deferred status of life insurance
and annuity products or to increase the tax-deferred status of
competing products, all life insurance companies would be
adversely affected with respect to their ability to sell such
products, and, depending on grandfathering provisions, the
surrenders of existing annuity and life insurance policies. In
addition, life

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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.




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| | Comparable companies in our industry have
    recently suffered from poor financial performance, which has
    adversely affected the markets perception of our industry.
    The markets perception of these comparable companies and
    industry may adversely affect our ability to attract and retain
    business or to raise capital.

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



| |                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------
| | We operate in a highly competitive
    environment, which could make it more difficult for us to
    attract and retain business.

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

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



| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

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| | ----------------------------------------------------------------------------------------------------------------------
| | We may require additional working capital
    or financing to fully implement our strategies to grow our
    business.

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



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| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

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.



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| | -----------------------------------------------------------------------------------------------------------------
| | If we are unable to realize our investment
    objectives, our financial condition may be adversely
    affected.

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

General economic conditions can adversely affect
the markets for interest-rate-sensitive securities, including
the extent and timing of investor participation in such markets,
the level and volatility of interest rates and, consequently,
the value of fixed income securities. Interest rates are highly
sensitive to many factors, including governmental monetary
policies, domestic and international economic and political
conditions and other factors beyond our control. General
economic conditions, stock market conditions and

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many other factors can also adversely affect the
equities market and, consequently, the value of any equity
securities we may own. We may not be able to realize our
investment objectives, which could reduce our net income
significantly.


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



| |                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------
| | Changes in investment markets could cause a
    decline in the revenues we earn under our coinsurance and
    modified coinsurance agreements.

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



| |                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our inability to provide satisfactory
    financial security to life insurance companies that reinsure
    through us could significantly and negatively affect our ability
    to implement our business strategy.

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

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



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| | ----------------------------------------------------------------------------------------------------------------
| | 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 obtaining such a rating will enhance our business
opportunities. We cannot assure you that we would receive a
favorable rating.



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| | -----------------------------------------------------------------------------------------------------------------------------
| | 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

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seek to underwrite products and make investments
to achieve long-term results. Accordingly, our short-term
results of operations may not be indicative of our long-term
prospects.




| |                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The nature of our business requires our
    management to make estimates and assumptions that affect our
    pricing, risk assessment and financial statements.

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



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| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have no significant operations other
    than our ownership of Global Preferred Re, which is regulated
    with respect to declaring or paying dividends. Restrictions on
    our subsidiarys ability to declare and pay dividends may
    have a material adverse affect on our operations.

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



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business is geographically
    concentrated; therefore, our operations may be affected by
    regulatory, economic, demographic and other conditions specific
    to a small number of states.

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



| |                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------
| | 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

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to collect these balances as a general creditor,
which, in turn, could result in a material, adverse effect upon
our financial condition.


Terrorist
attacks may negatively affect our operations.

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



| |                                                                                                                                                                                                                                                      
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we become subject to insurance statutes
    and regulations in jurisdictions other than Bermuda or there is
    a change to a Bermuda law or application of Bermuda law, there
    could be a significant and negative impact on our
    business.

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



| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | Maintain a minimum level of capital, surplus and
    liquidity;                                                     
|
| |  | Satisfy solvency standards;                                                                                         
|
| |  | Restrict dividends and distributions;                                                                               
|
| |  | Obtain prior approval of ownership and transfers
    of shares;                                                     
|
| |  | Maintain a principal office and appoint and
    maintain a Principal Representative in Bermuda; and                 
|
| |  | Provide for the performance of certain periodic
    examinations of Global Preferred Re and its financial condition.

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

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

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.

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| |                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | Global Preferred Re may become subject to
    taxes in Bermuda after 2016, which may have a material adverse
    effect on our financial condition.

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

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