SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


                                    FORM 10-Q

(Mark  One)
/  /   QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR 15 (d) OF THE SECURITIES
      EXCHANGE  ACT  OF  1934

                                       OR

/X/   TRANSITION  REPORT  PURSUANT  TO  SECTION  13  OR 15 (d) OF THE SECURITIES
      EXCHANGE  ACT  OF  1934

      For  the  transition  period  from  October  1,  1998 to December 31, 1998


                           Commission File No. 33-5014


                     FIRST SUNAMERICA LIFE INSURANCE COMPANY


      Incorporated  in  New  York                             06-0992729
                                                          IRS  Employer
                                                        Identification  No.

              733 Third Avenue, 4th Floor, New York, New York 10017
       Registrant's telephone number, including area code:  (800) 272-3007


     INDICATE  BY  CHECK  MARK  WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED  TO  BE FILED BY SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934  DURING  THE  PRECEDING  12  MONTHS  (OR  FOR  SUCH SHORTER PERIOD THAT THE
REGISTRANT  WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING  REQUIREMENTS  FOR  THE  PAST  90  DAYS  Yes  x  No  _
                                                     -

     THE  NUMBER  OF  SHARES  OUTSTANDING  OF  THE  REGISTRANTS  COMMON STOCK ON
FEBRUARY  12,  1999  WAS  AS  FOLLOWS:

Common  Stock  (par  value  $10,000.00 per share)         300 shares outstanding





















































<PAGE>
<TABLE>
<CAPTION>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY

                                      INDEX




                                                                     Page
                                                                   Number(s)
                                                                   ---------
<S>                                                                <C>
Part I - Financial Information

      Balance Sheet (Unaudited) -
      December 31, 1998 and September 30, 1998                             3

      Statement of Income and Comprehensive Income (Unaudited) -
      Three Months Ended December 31, 1998 and 1997                        4

      Statement of Cash Flows (Unaudited) -
      Three Months Ended December 31, 1998 and 1997                      5-6

      Notes to Financial Statements (Unaudited)                          7-9

      Management's Discussion and Analysis of Financial
      Condition and Results of Operations                              10-21

      Quantitative and Qualitative Disclosures About Market
      Risk                                                                22

Part II - Other Information                                               23




























































</TABLE>


<PAGE>
<TABLE>
<CAPTION>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                                  BALANCE SHEET
                                   (Unaudited)



                                               December 31,   September 30,
                                                       1998            1998
                                             --------------  --------------
<S>                                           <C>             <C>
ASSETS

Investments:
  Cash and short-term investments             $   18,466,000  $   55,679,000
  Bonds and notes available for sale,
    at fair value (amortized cost:
    December 1998, $1,293,637,000;
    September 1998, $1,262,703,000)            1,313,390,000   1,303,872,000
  Mortgage loans                                 176,737,000     187,906,000
  Other invested assets                            6,539,000       6,859,000
                                              --------------  --------------

  Total investments                            1,515,132,000   1,554,316,000

Variable annuity assets held in separate
  accounts                                       344,619,000     271,865,000
Accrued investment income                         18,169,000      19,853,000
Deferred acquisition costs                        96,918,000      87,074,000
Receivable from brokers for sales of
  securities                                      30,597,000       6,661,000
Other assets                                       2,247,000       2,451,000
                                              --------------  --------------

TOTAL ASSETS                                  $2,007,682,000  $1,942,220,000
                                              ==============  ==============

LIABILITIES AND SHAREHOLDER'S EQUITY

Reserves, payables and accrued liabilities:
  Reserves for fixed annuity contracts        $1,432,558,000  $1,460,856,000
  Income taxes currently payable                  10,144,000      10,177,000
  Payable to brokers for purchases
    of securities                                 19,806,000          60,000
  Other liabilities                               12,088,000       7,836,000
                                              --------------  --------------

  Total reserves, payables
    and accrued liabilities                    1,474,596,000   1,478,929,000
                                              --------------  --------------

Variable annuity liabilities related
  to separate accounts                           344,619,000     271,865,000
                                              --------------  --------------

Deferred income taxes                              3,792,000       5,371,000
                                              --------------  --------------

Shareholder's equity:
  Common Stock                                     3,000,000       3,000,000
  Additional paid-in capital                     144,428,000     144,428,000
  Retained earnings                               34,737,000      31,361,000
  Accumulated other comprehensive income           2,510,000       7,266,000
                                              --------------  --------------

  Total shareholder's equity                     184,675,000     186,055,000
                                              --------------  --------------

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY    $2,007,682,000  $1,942,220,000
                                              ==============  ==============


See accompanying notes
</TABLE>




















                                        3
<PAGE>
<TABLE>
<CAPTION>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                  STATEMENT OF INCOME AND COMPREHENSIVE INCOME
              For the three months ended December 31, 1998 and 1997
                                   (Unaudited)



                                                          1998           1997
                                                 -------------  -------------
<S>                                              <C>            <C>
Investment income                                $ 28,010,000   $ 29,882,000 
                                                 -------------  -------------

Interest expense on:
  Fixed annuity contracts                         (18,406,000)   (21,307,000)
  Senior indebtedness                                  (1,000)       (28,000)
                                                 -------------  -------------

  Total interest expense                          (18,407,000)   (21,335,000)
                                                 -------------  -------------

NET INVESTMENT INCOME                               9,603,000      8,547,000 
                                                 -------------  -------------

NET REALIZED INVESTMENT GAINS                         797,000      2,075,000 
                                                 -------------  -------------

Fee income:

  Variable annuity fees                             1,189,000        699,000 
  Surrender charges                                   662,000        954,000 
                                                 -------------  -------------

TOTAL FEE INCOME                                    1,851,000      1,653,000 
                                                 -------------  -------------

GENERAL AND ADMINISTRATIVE
  EXPENSES                                         (1,548,000)      (988,000)
                                                 -------------  -------------

AMORTIZATION OF DEFERRED
  ACQUISITION COSTS                                (5,046,000)    (4,026,000)
                                                 -------------  -------------

ANNUAL COMMISSIONS                                    (90,000)       (68,000)
                                                 -------------  -------------

PRETAX INCOME                                       5,567,000      7,193,000 

Income tax expense                                 (2,191,000)    (2,919,000)
                                                 -------------  -------------


NET INCOME                                          3,376,000      4,274,000 


Other comprehensive income (loss), net of tax:

Net unrealized gains on bonds and notes
  available for sale:
    Net unrealized gains (losses) on bonds
      and notes available for sale identified
      in the current period                        (1,446,000)     3,898,000 
    Less reclassification adjustment for
      net realized gains included in net
      income                                       (3,310,000)    (3,652,000)
                                                 -------------  -------------

OTHER COMPREHENSIVE INCOME (LOSS)                  (4,756,000)       246,000 
                                                 -------------  -------------

COMPREHENSIVE INCOME (LOSS)                      $ (1,380,000)  $  4,520,000 
                                                 =============  =============

















See accompanying notes
</TABLE>


                                        4
<PAGE>
<TABLE>
<CAPTION>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                             STATEMENT OF CASH FLOWS
              For the three months ended December 31, 1998 and 1997
                                   (Unaudited)



                                                       1998            1997
                                             --------------  --------------
<S>                                          <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                   $   3,376,000   $   4,274,000 
Adjustments to reconcile net income to net
  cash provided by operating activities:
    Interest credited to fixed annuity
      contracts                                 18,407,000      21,307,000 
    Net realized investment gains                 (797,000)     (2,075,000)
    Accretion of net discounts on
      investments                                 (377,000)       (543,000)
    Amortization of goodwill                        14,000          14,000 
    Provision for deferred income taxes            981,000         761,000 
Change in:
  Deferred acquisition costs                     4,256,000        (471,000)
  Income taxes currently payable                   (33,000)      2,159,000 
Other, net                                      (1,946,000)      4,926,000 
                                             --------------  --------------

NET CASH PROVIDED BY OPERATING ACTIVITIES       23,881,000      30,352,000 
                                             --------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of:
    Bonds and notes                           (323,897,000)   (173,754,000)
    Other investments, excluding short-term
      investments                                      ---        (236,000)
  Sales of:
    Bonds and notes                            271,632,000     230,398,000 
  Redemptions and maturities of:
    Bonds and notes                             18,231,000      23,953,000 
    Mortgage loans                              11,253,000       1,258,000 
    Other investments, excluding short-term
      investments                                  320,000             --- 
                                             --------------  --------------

NET CASH PROVIDED (USED) BY INVESTING
  ACTIVITIES                                   (22,461,000)     81,619,000 
                                             --------------  --------------








































See accompanying notes
</TABLE>


                                        5

<PAGE>
<TABLE>
<CAPTION>

                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                       STATEMENT OF CASH FLOWS (Continued)
              For the three months ended December 31, 1998 and 1997
                                   (Unaudited)



                                                   1998           1997
                                          -------------  -------------
<S>                                       <C>            <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
  Premium receipts on fixed annuity
    contracts                             $ 19,411,000   $ 30,790,000 
  Net exchanges from the fixed accounts
    of variable annuity contracts           (9,340,000)   (11,632,000)
  Withdrawal payments on fixed annuity
    contracts                              (49,744,000)   (55,669,000)
  Claims and annuity payments on fixed
    annuity contracts                       (7,697,000)    (6,925,000)
  Net receipts from (repayments of)
    other short-term financings              8,737,000    (13,284,000)
  Cession of non-annuity product lines             ---    (34,776,000)
                                          -------------  -------------

NET CASH USED BY FINANCING ACTIVITIES      (38,633,000)   (91,496,000)
                                          -------------  -------------

NET INCREASE (DECREASE) IN CASH AND
  SHORT-TERM INVESTMENTS                   (37,213,000)    20,475,000 

CASH AND SHORT-TERM INVESTMENTS AT
  BEGINNING OF PERIOD                       55,679,000     50,585,000 
                                          -------------  -------------

CASH AND SHORT-TERM INVESTMENTS AT
  END OF PERIOD                           $ 18,466,000   $ 71,060,000 
                                          =============  =============


SUPPLEMENTAL CASH FLOW INFORMATION:

  Interest paid on indebtedness           $      1,000   $     28,000 
                                          =============  =============


  Net income taxes paid                   $        ---   $      1,000 
                                          =============  =============










































See accompanying notes
</TABLE>


                                        6
<PAGE>
                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

1.     Basis  of  Presentation
       -----------------------

     At  December  31,  1998,  First  SunAmerica  Life  Insurance  Company  (the
"Company") was an indirect wholly owned subsidiary of SunAmerica Inc. On January
1, 1999, SunAmerica Inc. merged with and into American International Group, Inc.
("AIG")  in  a  tax-free  reorganization  that  has been treated as a pooling of
interests for accounting purposes. Thus, SunAmerica Inc. ceased to exist on that
date.  However,  on  the  date of merger, substantially all of the net assets of
SunAmerica  Inc.  were  contributed  to  a  newly formed subsidiary of AIG named
SunAmerica  Inc.  ("SunAmerica").

In  the  opinion of the Company, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to  present  fairly the Company's financial position as of December 31, 1998 and
September 30, 1998, and the results of its operations and its cash flows for the
three  months  ended  December 31, 1998 and 1997.  The results of operations for
the  three  months ended December 31, 1998 are not necessarily indicative of the
results  to be expected for the full year.  The accompanying unaudited financial
statements  should  be read in conjunction with the audited financial statements
for  the fiscal year ended September 30, 1998, contained in the Company's Annual
Report  on  Form  10-K.  Certain  items have been reclassified to conform to the
current  period's  presentation.

2.     Reinsurance
       -----------

On  December  31,  1998,  Anchor  National  Life Insurance Company ("ANLIC"), an
affiliate  of  the  Company  acquired  the  individual  life  business  and  the
individual  and  group  annuity business of MBL Life Assurance Corporation ("MBL
Life"),  via  a  100%  coinsurance  transaction,  for  a  cash purchase price of
$128,420,000.  As  part  of  this  transaction,  the  affiliate  received
$2,276,894,000  in  long-term  bonds,  $3,081,994,000  in  cash  and  short-term
securities,  $309,386,000  in  policy loans and $45,521,000 of accrued interest.
The  transaction  includes  $2,317,365,000  of  universal  life  reserves,
$3,413,827,000  of  fixed  annuity  reserves  and  $70,687,000  of  guaranteed
investment contract reserves. Reserves for universal life contracts are based on
fund  value.

     This  business  was  assumed  from MBL life subject to existing reinsurance
ceded  agreements.  At  December  31,  1998, the maximum retention on any single
life was $2 million, and a total credit of $5,057,000 was taken against the life
insurance  reserves,  representing  predominantly  yearly  renewable  term
reinsurance.  In  order to limit even further the exposure to loss on any single
insured  and  to  recover  an  additional portion of the benefits paid over such
limits,  the  affiliate  entered  into a reinsurance treaty effective January 1,
1999  under which the affiliate retains no more than $100,000 of risk on any one
insured life.  With respect to these coinsurance agreements, the affiliate could
become  liable  for  all obligations of the reinsured policies if the reinsurers
were  to  become  unable  to  meet  the obligations assumed under the respective
reinsurance  agreements.

     Included  in  the block of business acquired from MBL Life is approximately
$250,000,000  of  individual  life  business  and  $500,000,000 of group annuity
business  whose  contract  owners are residents of New York State ("the New York
Business").   Approximately




































                                        7
<PAGE>
                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

2.     Reinsurance  (continued)
       -----------

six  months  subsequent  to completion of the transaction, the New York Business
will  be  acquired  by the Company, via an assumption reinsurance agreement, and
the  remainder  of  the  business  will  be  acquired  by  the  affiliate via an
assumption  reinsurance  agreement  with  MBL  Life,  which  will  supersede the
coinsurance  agreement.  The  $128,420,000  purchase  price  will  be  allocated
between  the  Company  and  its  affiliate  based  on  their  respective assumed
reserves.

3.     Adoption  of  New  Accounting  Standard
       ---------------------------------------

     Effective  October  1,  1998,  the  Company  adopted Statement of Financial
Accounting  Standards  No.  130,  "Reporting  Comprehensive Income" ("SFAS 130")
which  requires  the reporting of comprehensive income in addition to net income
from  operations.  Comprehensive  income is a more inclusive financial reporting
methodology  that  includes  disclosure  of  certain  financial information that
historically  has  not  been  recognized  in the calculation of net income.  The
adoption  of  SFAS  130  did  not  have  an  impact  on the Company's results of
operations,  financial condition or liquidity.  Comprehensive income amounts for
the prior year are disclosed to conform to the current year's presentation.  Net
unrealized  gains  on bonds and notes available for sale decreased by $4,756,000
during  the months ended December 31, 1998, and increased by $246,000 during the
three  months  ended  December  31,  1997.


































































                                        8
<PAGE>
                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)

3.     Adoption  of  New  Accounting  Standard  (continued)
       ---------------------------------------

The  before tax, after tax, and tax (expense) benefit amounts for each component
of  the (decrease) increase in unrealized gains on bonds and notes available for
sale  for  both  the  current  and  prior  periods  are  summarized  below:
<TABLE>
<CAPTION>

                                                 Tax  Benefit
                                 Before  Tax       (Expense)      Net  of  Tax
                               -------------      ----------     -------------

  Three  months  ended  December  31,
  1998:
<S>                                 <C>            <C>           <C>
  Net unrealized losses on bonds
  and notes available for sale
  identified in the current
  period                            $(16,325,000)  $ 5,714,000   $(10,611,000)

  Increase in Deferred Acquisition
    Cost adjustment identified in
    the current period                14,100,000    (4,935,000)     9,165,000 
                                    -------------  ------------  -------------

                                      (2,225,000)      779,000     (1,446,000)
  Reclassification adjustment for
    net realized gains included
    in net income                     (5,092,000)    1,782,000     (3,310,000)
                                    -------------  ------------  -------------

    Total decrease in net
      unrealized gains
      on bonds and notes
      available for sale            $ (7,317,000)  $ 2,561,000   $ (4,756,000)
                                    =============  ============  =============

  Three months ended December 31,
  1997:

  Net unrealized gains on bonds
  and notes available for sale
  identified in the current
  period                            $  4,898,000   $(1,715,000)  $  3,183,000 

  Increase in Deferred Acquisition
    Cost adjustment identified in
    the current period                 1,100,000      (385,000)       715,000 
                                    -------------  ------------  -------------

                                       5,998,000    (2,100,000)     3,898,000 
  Reclassification adjustment for
    net realized gains included
    in net income                     (5,619,000)    1,967,000     (3,652,000)
                                    -------------  ------------  -------------

    Total increase in net
      unrealized gains on
      bonds and notes
      available for sale            $    379,000   $  (133,000)  $    246,000 
                                    =============  ============  =============

</TABLE>




























                                        9
<PAGE>
                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Management's  discussion and analysis of financial condition and results of
operations  of  First  SunAmerica Life Insurance Company (the "Company") for the
three  months  ended  December  31, 1998 ("1998") and December 31, 1997 ("1997")
follows.  The  Company  is  in  the  process  of changing its fiscal year end to
December  31.  Accordingly,  the quarter ended December 31, 1998 is a transition
period.

     In  connection  with the "safe harbor" provisions of the Private Securities
Litigation  Reform  Act  of 1995, the Company cautions readers regarding certain
forward-looking  statements contained in this report and in any other statements
made by, or on behalf of, the Company, whether or not in future filings with the
Securities  and  Exchange Commission (the "SEC"). Forward-looking statements are
statements  not  based  on  historical  information  and  which relate to future
operations,  strategies,  financial  results, or other developments.  Statements
using verbs such as "expect," "anticipate," "believe" or words of similar import
generally  involve  forward-looking statements.  Without limiting the foregoing,
forward-looking  statements  include  statements  which  represent the Company's
beliefs  concerning  future  levels  of  sales  and redemptions of the Company's
products, investment spreads and yields, or the earnings or profitability of the
Company's  activities.

     Forward-looking  statements  are  necessarily  based  on  estimates  and
assumptions  that  are  inherently subject to significant business, economic and
competitive  uncertainties  and  contingencies,  many  of  which  are beyond the
Company's  control and many of which are subject to change.  These uncertainties
and  contingencies  could  cause  actual results to differ materially from those
expressed  in  any  forward-looking  statements  made  by,  or on behalf of, the
Company.  Whether  or  not actual results differ materially from forward-looking
statements  may  depend  on numerous foreseeable and unforeseeable developments.
Some  may  be national in scope, such as general economic conditions, changes in
tax  law  and  changes  in interest rates.  Some may be related to the insurance
industry  generally,  such  as  pricing competition, regulatory developments and
industry  consolidation.  Others may relate to the Company specifically, such as
credit,  volatility  and  other  risks  associated with the Company's investment
portfolio.  Investors  are  also  directed  to  consider  other  risks  and
uncertainties  discussed  in  documents  filed by the Company with the SEC.  The
Company  disclaims  any  obligation  to  update  forward-looking  information.

RESULTS  OF  OPERATIONS

     NET  INCOME  totaled  $3.4  million  in 1998, compared with $4.3 million in
1997.

     PRETAX  INCOME  totaled $5.6 million in 1998, compared with $7.2 million in
1997.  The decline primarily resulted from a decrease in net realized investment
gains  and  from  increases  in  amortization  of deferred acquisition costs and
general  and  administrative  expenses, which were partially offset by increased
net  investment  income  and  variable  annuity  fees.

     NET  INVESTMENT  INCOME,  which  is the spread between the income earned on
invested  assets  and  the  interest  paid  on  fixed  annuities  and  other
interest-bearing  liabilities,  increased  to  $9.6  million  in  1998 from $8.5
million in 1997.  These amounts equal 2.54% on average invested assets (computed
on  a daily basis) of $1.51 billion in 1998 and 2.17% on average invested assets
of  $1.58  billion  in  1997.





































                                       10
<PAGE>
     Net investment spreads include the effect of income earned on the excess of
average  invested  assets over average interest-bearing liabilities. This excess
amounted  to  $67.8  million  in  1998 and $30.9 million in 1997. The difference
between  the  Company's  yield  on  average invested assets and the rate paid on
average interest-bearing liabilities (the "Spread Difference") was 2.31% in 1998
and  2.06%  in  1997.

     Investment  income  (and  the  related  yields  on average invested assets)
totaled  $28.0  million  (7.42%) in 1998, compared with $29.9 million (7.57%) in
1997.  Investment  yields  were  lower  in 1998 primarily because of a generally
declining  interest  rate  environment.

     Total  interest  expense equaled $18.4 million in 1998 and $21.3 million in
1997.  The  average  rate  paid on all interest-bearing liabilities was 5.10% in
1998,  compared with 5.51% in 1997.  Interest-bearing liabilities averaged $1.44
billion  in  1998  and  $1.55 billion in 1998.  The decrease in the average rate
paid  on interest-bearing liabilities primarily resulted from a reduction in the
average crediting rate on the Company's closed block of fixed annuities due to a
generally  declining  interest  rate  environment.

     The  modest  decline  in average invested assets in 1998 reflects a similar
modest  decline  in average interest-bearing liabilities, which results from the
combined  effect of decreased sales of the Company's fixed rate products and net
exchanges  from  fixed  accounts  into the separate accounts of variable annuity
contracts.  Fixed  annuity premiums totaled $19.4 million in 1998, compared with
$30.8  million  in  1997  and  are  largely  premiums  for the fixed accounts of
variable  annuity  products.  These  amounts  represent  5%  and 8% of the fixed
annuity  reserve  balances  at  the  beginning  of  the  respective  periods.

     NET  REALIZED  INVESTMENT  GAINS  totaled $0.8 million in 1998, compared to
$2.1  million in 1997.  Net realized investment gains in 1998 include impairment
writedowns of $1.7 million.  There were no impairment writedowns in 1997.  Thus,
net gains from sales and redemptions of investments totaled $2.5 million in 1998
and  $2.1  million  in  1997.

     The  Company sold or redeemed invested assets, principally bonds and notes,
aggregating  $322.9  million  and $254.8 million in 1998 and 1997, respectively.
Sales  of  investments  result  from  the  active  management  of  the Company's
investment  portfolio.  Because  redemptions  of  investments  are  generally
involuntary  and  sales  of  investments  are  made  in  both rising and falling
interest  rate  environments, net gains and losses from sales and redemptions of
investments  fluctuate  from  period to period, and represent 0.65% and 0.53% of
average  invested  assets  in  1998  and  1997,  respectively.  Active portfolio
management  involves  the  ongoing  evaluation  of  asset  sectors,  individual
securities  within  the investment portfolio and the reallocation of investments
from  sectors that are perceived to be relatively overvalued to sectors that are
perceived  to  be  relatively  undervalued.  The  intent of the Company's active
portfolio  management  is to maximize total returns on the investment portfolio,
taking  into  account  credit,  option,  liquidity  and  interest-rate  risk.

     VARIABLE  ANNUITY  FEES are based on the market value of assets in separate
accounts  supporting variable annuity contracts.  Such fees totaled $1.2 million
in  1998  and  $0.7  million  in  1997.  These  increased fees reflect growth in
average  variable  annuity  assets,  principally due to increased market values,
receipt  of  variable  annuity  premiums  and  net  exchanges  into the separate
accounts from the fixed accounts of variable annuity contracts, partially offset
by  surrenders.  Variable annuity assets averaged $305.4 million during 1998 and
$180.9  million  during  1997. Variable annuity premiums, which exclude premiums
allocated  to  the  fixed  accounts  of  variable annuity  products,  aggregated
$17.0  million  in  1998,  and  $16.6  million  in




































                                       11
<PAGE>
1997.  These  amounts  represent 25% and 39% of variable annuity reserves at the
beginning  of  the  respective  periods.

     Sales of variable annuity products (which include premiums allocated to the
fixed accounts) ("Variable Annuity Product Sales") amounted to $33.9 million and
$23.6  million in 1998 and in 1997, respectively, and primarily reflect sales of
the  Company's  flagship  variable  annuity, Polaris.  Polaris is a multimanager
variable  annuity  that  offers  investors  a  choice of 26 variable funds and 6
guaranteed  fixed-rate  funds.  Increases  in Variable Annuity Product Sales are
due,  in  part,  to market share gains through enhanced distribution efforts and
growing  consumer  demand  for flexible retirement savings products that offer a
variety of equity, fixed income and guaranteed fixed account investment choices.
Industry  sales  of  variable  annuities  have  slowed  as  investors  paused to
re-evaluate  their  investment  decisions  in  light  of  volatile markets.  The
Company  believes  that  fluctuating  market  conditions  increase  the value of
financial  planning  services  and make the flexibility and security of variable
annuities  even  more  attractive.

     The  Company  has encountered increased competition in the variable annuity
marketplace  during  recent  years  and  anticipates that the market will remain
highly competitive for the foreseeable future.  Also, from time to time, Federal
initiatives  are  proposed which could affect the taxation of variable annuities
and  annuities  generally  (See  "Regulation").

     SURRENDER  CHARGES  on fixed and variable annuities totaled $0.7 million in
1998  and  $1.0  million  in  1997.  Surrender charges generally are assessed on
annuity  withdrawals  at  declining  rates  during  the  first seven years of an
annuity  contract.  Withdrawal  payments,  which include surrenders and lump-sum
annuity  benefits, totaled $53.6 million in 1998, compared with $57.7 million in
1997.  These  payments represent 12.7% and 13.6%, respectively, of the aggregate
of  average  fixed  and variable annuity reserves.  Withdrawals include variable
annuity  payments  from  the  separate  accounts  totaling $3.9 million (5.1% of
average  variable  annuity  reserves)  in 1998 and $2.0 million (4.4% of average
variable  annuity  reserves)  in  1997.

     GENERAL  AND  ADMINISTRATIVE EXPENSES totaled $1.5 million in 1998 and $1.0
million  in 1997.  General and administrative expenses remain closely controlled
through  a  company-wide cost containment program and continue to represent less
than  1%  of  average  total  assets.

     AMORTIZATION  OF  DEFERRED  ACQUISITION COSTS totaled $5.0 million in 1998,
compared  with  $4.0  million  in  1997.  The increase in amortization primarily
reflects  the  additional  Variable  Annuity  Product  Sales  and the subsequent
amortization  of  related  deferred  commissions and other direct selling costs.

     ANNUAL  COMMISSIONS  represent  renewal  commissions,  including those paid
quarterly  in  arrears  to  maintain the persistency of certain of the Company's
fixed  and  variable  annuity  contracts.  Annual commissions totaled $90,000 in
1998  and  $68,000  in  1997.

     INCOME TAX EXPENSE totaled $2.2 million in 1998, compared with $2.9 million
in  1997,  representing  effective  annualized  tax rates of 39% and 41% for the
respective  periods.

FINANCIAL  CONDITION  AND  LIQUIDITY

     SHAREHOLDER'S  EQUITY decreased to $184.7 million at December 31, 1998 from
$186.1 million at September 30, 1998, primarily due to the $4.8 million decrease
in  accumulated  other  comprehensive  income, which was partially offset by the
$3.4  million  of  net  income  recorded  in  1998.




































                                       12
<PAGE>
     INVESTED  ASSETS  at  December  31,  1998  totaled  $1.52 billion and $1.55
billion  at September 30, 1998.  The Company manages most of its invested assets
internally.  The  Company's  general investment philosophy is to hold fixed-rate
assets  for  long-term  investment.  Thus, it does not have a trading portfolio.
However, the Company has determined that all of its portfolio of bonds and notes
(the  "Bond Portfolio") is available to be sold in response to changes in market
interest  rates,  changes  in  relative  value  of  asset sectors and individual
securities,  changes  in  prepayment risk, changes in the credit quality outlook
for  certain  securities, and the Company's need for liquidity and other similar
factors.

     THE BOND PORTFOLIO, which constitutes 87% of the Company's total investment
portfolio, had an aggregate fair value that exceeded its amortized cost by $19.8
million  at  December  31,  1998,  compared  with  an excess of $41.2 million at
September  30,  1998.

     At  December  31,  1998, the Bond Portfolio included $1.26 billion of bonds
rated  by  Standard  &  Poor's  Corporation  ("S&P"),  Moody's Investors Service
("Moody's"),  Duff  & Phelps Credit Rating Co. ("DCR"), Fitch Investors Service,
L.P.  ("Fitch") or the National Association of Insurance Commissioners ("NAIC"),
and  $48.9  million  of bonds rated by the Company pursuant to statutory ratings
guidelines  established  by the NAIC.  At December 31, 1998, approximately $1.21
billion  of the Bond Portfolio was investment grade, including $556.7 million of
U.S.  government/agency  securities  and  mortgage-backed  securities  ("MBSs").

     At  December  31, 1998, the Bond Portfolio included $103.0 million of bonds
that  were not investment grade.  These non-investment-grade bonds accounted for
5.1%  of  the  Company's  total  assets  and  6.7%  of  its  invested  assets.

     Non-investment-grade securities generally provide higher yields and involve
greater  risks  than investment-grade securities because their issuers typically
are  more  highly  leveraged  and more vulnerable to adverse economic conditions
than  investment-grade  issuers.  In  addition,  the  trading  market  for these
securities  is  usually  more limited than for investment-grade securities.  The
Company  had  no  material  concentrations of non-investment-grade securities at
December  31,  1998.

     The  table  on  the  following page summarizes the Company's rated bonds by
rating  classification  as  of  December  31,  1998.





















































                                       13

<PAGE>

<TABLE>
<CAPTION>

                                        RATED BONDS BY RATING CLASSIFICATION
                                               (dollars in thousands)

                                             Issues  not  rated  by  S&P/Moody's/
   Issues  Rated  by  S&P/Moody's/DCR/Fitch      DCR/Fitch,  by  NAIC Category                   Total
-------------------------------------------  ---------------------------------  -----------------------------------
S&P/(Moody's)                     Estimated       NAIC               Estimated               Estimated   Percent of
[DCR] {Fitch}         Amortized        fair   category   Amortized        fair   Amortized        fair     invested
 category (1)              cost       value        (2)        cost       value        cost       value       assets
-------------------  ----------  ----------  ---------  ----------  ----------  ----------  ----------  -----------
<S>                  <C>         <C>         <C>        <C>         <C>         <C>         <C>         <C>
AAA+ to A-
  (Aaa to A3)
  [AAA to A-]
  {AAA to A-}        $  897,695  $  922,819         1   $   87,841  $   89,976  $  985,536  $1,012,795       66.85%
BBB+ to BBB-
  (Baal to Baa3)
  [BBB+ to BBB-]
  {BBB+ to BBB-}        162,432     164,483         2       32,853      33,071     195,285     197,554       13.04 

BB+ to BB-
  (Ba1 to Ba3)
  [BB+ to BB-]
  {BB+ to BB-}            2,481       2,484         3        2,389       2,315       4,870       4,799        0.32 

B+ to B-
  (B1 to B3)
  [B+ to B-]
  {B+ to B-}             97,642      89,952         4        7,077       6,420     104,719      96,372        6.36 

CCC+ to C
  (Caa to C)
  [CCC]
  {CCC+ to C-}                0           0         5          728         620         728         620        0.04 

CI to D
  [DD]
  {D}                         0           0         6        2,500       1,250       2,500       1,250        0.08 
                     ----------  ----------             ----------  ----------  ----------  ----------             

TOTAL RATED ISSUES   $1,160,250  $1,179,738             $  133,388  $  133,652  $1,293,638  $1,313,390
                     ==========  ==========             ==========  ==========  ==========  ==========             
<FN>

Footnotes  appear  on  the  following  page.














































</TABLE>


                                       14

<PAGE>

Footnotes  to  the  table  of  Rated  Bonds  by  Rating  Classification
      -----------------------------------------------------------------------

(1)     S&P and Fitch rate debt securities in rating categories ranging from AAA
(the  highest) to D (in payment default).  A plus (+) or minus (-) indicates the
debt's  relative  standing within the rating category.  A security rated BBB- or
higher  is considered investment grade.  Moody's rates debt securities in rating
categories ranging from Aaa (the highest) to C (extremely poor prospects of ever
attaining  any  real  investment  standing).  The  number  1, 2 or 3 (with 1 the
highest  and  3  the  lowest)  indicates the debt's relative standing within the
rating  category.  A  security  rated  Baa3  or  higher is considered investment
grade.  DCR  rates  debt  securities  in rating categories ranging from AAA (the
highest)  to  DD  (in  payment  default).  A plus (+) or minus (-) indicates the
debt's  relative  standing within the rating category.  A security rated BBB- or
higher  is  considered  investment  grade.  Issues  are categorized based on the
highest  of  the  S&P,  Moody's,  DCR  and  Fitch  ratings  if rated by multiple
agencies.

(2)     Bonds and short-term promissory instruments are divided into six quality
categories  for NAIC rating purposes, ranging from 1 (highest) to 5 (lowest) for
nondefaulted  bonds  plus  one category, 6, for bonds in or near default.  These
six  categories  correspond  with the S&P/Moody's/DCR/Fitch rating groups listed
above, with categories 1 and 2 considered investment grade.  The NAIC categories
include  $48.9  million  of  assets  that  were rated by the Company pursuant to
applicable  NAIC  rating  guidelines.






































































                                       15
<PAGE>
     Senior  secured  loans ("Secured Loans") are included in the Bond Portfolio
and aggregated $119.7 million at December 31, 1998.  Secured Loans are senior to
subordinated  debt  and  equity,  and  are  secured by assets of the issuer.  At
December  31,  1998, Secured Loans consisted of $95.6 million of publicly traded
securities and $24.1 million of privately traded securities. These Secured Loans
are  composed of loans to 61 borrowers spanning 16 industries, with 23% of these
assets  concentrated in utilities and 13% concentrated in aerospace-defense.  No
other  industry  concentration  constituted  more  than  9%  of  these  assets.

     While  the  trading market for the Company's privately traded Secured Loans
is  more  limited  than  for  publicly  traded  issues, management believes that
participation  in  these  transactions  has  enabled  the Company to improve its
investment yield.  As a result of restrictive financial covenants, these Secured
Loans  involve  greater  risk  of  technical  default  than  do  publicly traded
investment-grade securities.  However, management believes that the risk of loss
upon  default  for  these Secured Loans is mitigated by such financial covenants
and  the  collateral  values underlying the Secured Loans. The Company's Secured
Loans  are  rated  by  S&P,  Moody's,  DCR,  Fitch,  the NAIC or by the Company,
pursuant  to  comparable  statutory  ratings guidelines established by the NAIC.

     MORTGAGE LOANS aggregated $176.7 million at December 31, 1998 and consisted
of  174  commercial  first  mortgage  loans  with  an  average  loan  balance of
approximately  $1.0  million,  collateralized by properties located in 34 states
and  the  District of Columbia.  Approximately 35% of this portfolio was retail,
26%  was office, 15% was industrial, 13% was multifamily residential and 11% was
other  types.  At  December  31,  1998,  approximately 17% of this portfolio was
secured  by  properties  located  in  New  York, approximately 16% by properties
located  in  California, and approximately 11% by properties located in Michigan
and  no  more than 9% of this portfolio was secured by properties located in any
other  single  state. At December 31, 1998, one mortgage loan had an outstanding
balance  of  $10  million  or  more,  which represented approximately 6% of this
portfolio,  and  approximately  29%  of the mortgage loan portfolio consisted of
loans  with  balloon payments due before January 1, 2002.  During 1998 and 1997,
loans  delinquent  by more than 90 days, foreclosed loans and restructured loans
have  not  been  significant  in  relation to the total mortgage loan portfolio.

     At December 31, 1998, approximately 60% of the mortgage loans were seasoned
loans  underwritten to the Company's standards and purchased at or near par from
other financial institutions.  Such loans generally have higher average interest
rates  than  loans  that  could be originated today. The balance of the mortgage
loan  portfolio  has  been  originated  by the Company under strict underwriting
standards.  Commercial  mortgage loans on properties such as offices, hotels and
shopping  centers  generally  represent  a higher level of risk than do mortgage
loans  secured  by  multifamily residences.  This greater risk is due to several
factors,  including the larger size of such loans and the more immediate effects
of general economic conditions on these commercial property types.  However, due
to  the  seasoned nature of the Company's mortgage loan portfolio and its strict
underwriting  standards,  the Company believes that it has prudently managed the
risk  attributable  to  its mortgage loan portfolio while maintaining attractive
yields.

     ASSET-LIABILITY  MATCHING  is utilized by the Company to minimize the risks
of  interest rate fluctuations and disintermediation.  The Company believes that
its  fixed-rate liabilities should be backed by a portfolio principally composed
of  fixed-rate  investments  that  generate  predictable  rates  of return.  The
Company  does  not  have a specific target rate of return. Instead, its rates of
return  vary  over  time depending on the current interest rate environment, the
slope  of  the  yield  curve,  the  spread  at  which






































                                       16
<PAGE>
fixed-rate  investments  are  priced  over the yield curve, and general economic
conditions.  Its  portfolio  strategy  is  constructed  with  a  view to achieve
adequate  risk-adjusted  returns  consistent  with  its investment objectives of
effective  asset-liability  matching,  liquidity  and  safety.  The  Company's
fixed-rate products incorporate surrender charges or other restrictions in order
to  encourage  persistency.  Approximately  89%  of  the Company's fixed annuity
reserves  had  surrender  penalties  or other restrictions at December 31, 1998.

     As  part  of  its asset-liability matching discipline, the Company conducts
detailed  computer  simulations that model its fixed-rate assets and liabilities
under  commonly  used  stress-test interest rate scenarios.  With the results of
these  computer  simulations, the Company can measure the potential gain or loss
in fair value of its interest-rate sensitive instruments and seek to protect its
economic  value  and  achieve  a predictable spread between what it earns on its
invested  assets and what it pays on its liabilities by designing its fixed-rate
products  and conducting its investment operations to closely match the duration
of  the  fixed-rate assets to that of its fixed-rate liabilities.  The Company's
fixed-rate  assets  include:  cash  and short-term investments; bonds and notes;
and  mortgage  loans.  At  December 31, 1998, these assets had an aggregate fair
value  of  $1.57  billion  with  a duration of 3.8.  At December 31, 1998, these
liabilities  had  an  aggregate  fair  value  (determined  by discounting future
contractual  cash  flows  by  related market rates of interest) of $1.47 billion
with  a duration of 3.6.  The Company's potential exposure due to a relative 10%
increase  in  prevailing interest rates from their December 31, 1998 levels is a
loss  of  $3.4 million in fair value of its fixed-rate assets that is not offset
by  a  decrease  in  the  fair value of its fixed-rate liabilities.  Because the
Company  actively manages its assets and liabilities and has strategies in place
to minimize its exposure to loss as interest rate changes occur, it expects that
actual  losses  would  be  less  than  the  estimated  potential  loss.

     Duration is a common option-adjusted measure for the price sensitivity of a
fixed-maturity  portfolio  to  changes  in  interest  rates.  It  measures  the
approximate  percentage  change in market value of a if interest rates change by
100  basis points, recognizing the changes in cash flows resulting from embedded
options  such  as  policy surrenders, investment prepayments and bond calls.  It
also  incorporates  the assumption that the Company will continue to utilize its
existing  strategies  of  pricing  its  fixed  annuity  products, allocating its
available  cash  flow  amongst  its  various  investment  portfolio  sectors and
maintaining sufficient levels of liquidity.  Because the calculation of duration
involves estimation and incorporates assumptions, potential changes in portfolio
value  indicated  by  the portfolio's duration will likely be different from the
actual  changes  experienced  under  given  interest  rate  scenarios,  and  the
differences  may  be  material.

     The  Company  also  seeks  to  provide liquidity from time to time by using
reverse  repurchase  agreements  ("Reverse Repos"), and by investing in MBSs. It
also  seeks  to enhance its spread income by using Reverse Repos.  Reverse Repos
involve  a sale of securities and an agreement to repurchase the same securities
at  a  later date at an agreed upon price and are generally over-collateralized.
MBSs  are generally investment-grade securities collateralized by large pools of
mortgage  loans.  MBSs generally pay principal and interest monthly.  The amount
of  principal  and interest payments may fluctuate as a result of prepayments of
the  underlying  mortgage  loans.

     There  are risks associated with some of the techniques the Company uses to
provide  liquidity,  enhance  its  spread  income  and  match  its  assets  and
liabilities.  The  primary  risk associated with the Company's Reverse Repos  is
counterparty  risk.    The  Company  believes,  however,  that  the






































                                       17
<PAGE>
counterparties  to  its  Reverse  Repos are financially responsible and that the
counterparty  risk  associated  with  those  transactions is minimal.  It is the
Company's  policy that these agreements are entered into with counterparties who
have  a  debt  rating  of A/A2 or better from both S&P and Moody's.  The Company
continually  monitors its credit exposure with respect to those agreements.  The
primary  risk  associated with MBSs is that a changing interest rate environment
might  cause prepayment of the underlying obligations at speeds slower or faster
than  anticipated  at  the  time  of their purchase.  As part of its decision to
purchase  an  MBS,  the Company assesses the risk of prepayment by analyzing the
security's projected performance over an array of interest-rate scenarios.  Once
an  MBS  is  purchased,  the  Company  monitors its actual prepayment experience
monthly  to reassess the relative attractiveness of the security with the intent
to  maximize  total  return.

     INVESTED  ASSETS  EVALUATION  is  routinely  conducted  by  the  Company.
Management  identifies  monthly  those  investments  that  require  additional
monitoring  and  carefully  reviews  the  carrying values of such investments at
least  quarterly to determine whether specific investments should be placed on a
nonaccrual  basis  and  to  determine  declines  in value that may be other than
temporary.  In  making these reviews for bonds, management principally considers
the  adequacy  of  any  collateral,  compliance  with contractual covenants, the
borrower's  recent  financial  performance,  news  reports  and other externally
generated information concerning the creditor's affairs. In the case of publicly
traded  bonds,  management also considers market value quotations, if available.
For  mortgage  loans,  management generally considers information concerning the
mortgaged  property  and,  among other things, factors impacting the current and
expected payment status of the loan and, if available, the current fair value of
the  underlying  collateral.

     The  carrying values of investments that are determined to have declines in
value  that are other than temporary are reduced to net realizable value and, in
the case of bonds, no further accruals of interest are made.  The provisions for
impairment  on  mortgage  loans are based on losses expected by management to be
realized  on  transfers of mortgage loans to real estate, on the disposition and
settlement  of mortgage loans and on mortgage loans that management believes may
not  be collectible in full. Accrual of interest is suspended when principal and
interest  payments  on  mortgage  loans  are  past  due  more  than  90  days.

     DEFAULTED INVESTMENTS, comprising all investments that are in default as to
the  payment of principal or interest, totaled $2.4 million at December 31, 1998
and  constituted 0.2% of total invested assets.  At September 30, 1998 defaulted
investments  totaled $1.2 million and constituted 0.1% of total invested assets.

     SOURCES  OF  LIQUIDITY  are readily available to the Company in the form of
the  Company's  existing  portfolio  of cash and short-term investments, Reverse
Repo  capacity on invested assets and, if required, proceeds from invested asset
sales.  At  December 31, 1998, approximately $1.01 billion of the Company's Bond
Portfolio had an aggregate unrealized gain of $34.6 million, while approximately
$299.3  million  of the Bond Portfolio had an aggregate unrealized loss of $14.8
million.  In  addition,  the  Company's  investment portfolio currently provides
approximately  $14.8  million  of monthly cash flow from scheduled principal and
interest  payments.  Historically, cash flows from operations and from the sales
of  the  Company's  annuity products have been more than sufficient in amount to
satisfy  the  Company's  liquidity  needs.

     Management  is  aware  that  prevailing  market  interest  rates  may shift
significantly  and  has  strategies  in  place  to  manage either an increase or
decrease  in  prevailing  rates.  In  a  rising  interest  rate environment, the
Company's  average  cost  of  funds  would  increase  over time as it prices its




































                                       18
<PAGE>

new  and  renewing  annuities  to  maintain a generally competitive market rate.
Management  would  seek  to  place new funds in investments that were matched in
duration  to,  and  higher  yielding than, the liabilities assumed.  The Company
believes  that liquidity to fund withdrawals would be available through incoming
cash  flow, the sale of short-term or floating-rate instruments or Reverse Repos
on the Company's substantial MBS segment of the Bond Portfolio, thereby avoiding
the  sale  of  fixed-rate  assets  in  an  unfavorable  bond  market.

     In a declining rate environment, the Company's cost of funds would decrease
over  time,  reflecting  lower  interest crediting rates on its fixed annuities.
Should  increased  liquidity  be  required for withdrawals, the Company believes
that  a  significant  portion  of  its investments could be sold without adverse
consequences in light of the general strengthening that would be expected in the
bond  market.

YEAR  2000

     The  Company  relies  significantly on computer systems and applications in
its  daily  operations.  Many  of  these  systems  are  not  presently year 2000
compliant,  which means that because they have historically used only two digits
to  identify  the  year  in  a  date, they will fail to distinguish dates in the
"2000s"  from dates in the "1900s."  The Company's business, financial condition
and  results  of  operations  could  be materially and adversely affected by the
failure  of  the Company's systems and applications (and those operated by third
parties  interfacing  with  the  Company's systems and applications) to properly
operate  or  manage  these  dates.

     The  Company's  parent  has  a  coordinated plan to repair or replace these
noncompliant  systems  and  to  obtain  similar  assurances  from  third parties
interfacing  with  the  Company's systems and applications.  In fiscal 1997, the
parent  recorded  a  $15.0  million provision for estimated programming costs to
make  necessary  repairs  of certain specific noncompliant systems. In addition,
management of the parent is making expenditures which it expects will ultimately
total  $12.3  million  to  replace  certain other specific noncompliant systems,
which  expenditures  will  be  capitalized  as software costs and amortized over
future periods.  The entire cost of these changes will be borne by the Company's
affiliates.  Both  phases  of the project are currently proceeding in accordance
with  the  plan  and  were  substantially completed by the end of calendar 1998.
Testing  of  both the repaired and replacement systems is being conducted during
calendar  1999.

     In  addition,  the  Company  has  distributed  a year 2000 questionnaire to
certain  of  its  significant  suppliers,  distributors, financial institutions,
lessors  and  others  with  which  it  does business to evaluate their year 2000
compliance plans and state of readiness and to determine the extent to which the
Company's  systems  and applications may be affected by the failure of others to
remediate  their  own  year  2000  issues.  To  date,  however,  the Company has
received  only  preliminary feedback from such parties and has not independently
confirmed  any  information received from other parties with respect to the year
2000  issues.  Therefore, there can be no assurance that such other parties will
complete  their  year  2000 conversions in a timely fashion or will not suffer a
year  2000 business disruption that may adversely affect the Company's financial
condition  and  results  of  operations.

     Because  the  Company's  year  2000  conversion is expected to be completed
prior to any potential disruption to the Company's business, the Company has not
developed  a  comprehensive  year  2000  contingency  plan.  The Company closely
monitors  the  progression  of  its plan for compliance, and if necessary, would
devote  additional resources to assure the timely completion of  its  year  2000
plan.  If  the  Company  determines  that  its  business  is  at




































                                       19
<PAGE>
material  risk  of disruption due to the year 2000 issue or anticipates that its
year 2000 conversion will not be completed in a timely fashion, the Company will
work  to  enhance  its  contingency  plans.

     The  discussion  above  contains  certain  forward-looking statements.  The
costs  of  the  year 2000 conversion, date which the Company has set to complete
such conversion and possible risks associated with the year 2000 issue are based
on the Company's current estimates and are subject to various uncertainties that
could  cause  the  actual  results  to  differ  materially  from  the  Company's
expectations.  Such  uncertainties  include,  among  others,  the success of the
Company  in  identifying  systems  and  applications  that  are  not  year  2000
compliant,  the  nature and amount of programming required to upgrade or replace
each  of  the  affected  systems and applications, the availability of qualified
personnel,  consultants  and  other  resources, and the success of the year 2000
conversion  efforts  of  others.

REGULATION

     The  Company  is  subject  to  regulation  and  supervision  by  insurance
regulatory  agencies  of  the  States  of New York, New Mexico and Nebraska, the
states in which the Company is authorized to transact business.  State insurance
laws  establish  supervisory  agencies with broad administrative and supervisory
powers.  Principal  among  these  powers  are  granting and revoking licenses to
transact  business,  regulating  marketing  and other trade practices, operating
guaranty  associations,  licensing  agents,  approving  policy forms, regulating
certain  premium  rates,  regulating  insurance  company  holding  systems,
establishing  reserve  and  valuation  requirements,  prescribing  the  form and
content  of  required  financial  statements  and reports, performing financial,
market  conduct  and  other  examinations,  determining  the  reasonableness and
adequacy  of  statutory  capital  and  surplus,  defining  acceptable accounting
principles,  regulating the type, valuation and amount of investments permitted,
and  limiting  the  amount  of  dividends  that  can  be  paid  and  the size of
transactions  that  can  be  consummated  without  first  obtaining  regulatory
approval.

     During  the last decade, the insurance regulatory framework has been placed
under increased scrutiny by various states, the federal government and the NAIC.
Various  states have considered or enacted legislation that changes, and in many
cases  increases,  the  states'  authority  to  regulate  insurance  companies.
Legislation  has been introduced from time to time in Congress that could result
in  the  federal  government  assuming  some role in the regulation of insurance
companies  or allowing combinations between insurance companies, banks and other
entities.  In  recent  years,  the  NAIC  has  developed  several model laws and
regulations  designed  to  reduce the risk of insurance company insolvencies and
market  conduct  violations.  These  initiatives  include  investment  reserve
requirements,  risk-based  capital  ("RBC") standards, codification of insurance
accounting principles, new investment standards and restrictions on an insurance
company's  ability  to  pay  dividends  to  its  stockholders.  The NAIC is also
currently  developing  model  laws  and  regulations relating to product design,
product  reserving  standards  and  illustrations for annuity products.  Current
proposals  are still being debated and the Company is monitoring developments in
this  area  and  the  effects  any  changes  would  have  on  the  Company.

     The  RBC standards consist of formulas which establish capital requirements
relating  to insurance, business, assets and interest rate risks, and which help
to  identify  companies  which  are  under-capitalized  and  require  specific
regulatory  actions  in the event an insurer's RBC falls below specified levels.
The  Company  has  more  than  enough  statutory  capital to meet the NAIC's RBC
requirements  as of the most recent calendar year-end. The state of New York, in
which  the Company is domiciled, has adopted these RBC standards and the Company
is  in  compliance  with  such  laws.  Further,  for



































                                       20
<PAGE>
statutory reporting purposes, the annuity reserves of the Company are calculated
in  accordance  with  statutory  requirements  and  are  adequate  under current
cash-flow  testing  models.

     From  time  to time, Federal initiatives are proposed that could affect the
Company's  business.  Such initiatives include employee benefit plan regulations
and  tax  law  changes affecting the taxation of insurance companies and the tax
treatment  of  insurance and other investment products. Proposals made in recent
years  to  limit the tax deferral of annuities or otherwise modify the tax rules
related  to  the treatment of annuities have not been enacted.  While certain of
the  proposals,  if  implemented,  could have an adverse effect on the Company's
sales of affected products, and, consequently, on its results of operations, the
Company  believes  such  proposals  have  a  small  likelihood of being enacted,
because  they  would  discourage a retirement savings and there is strong public
and  industry  opposition  to  them.

















































































                                       21
<PAGE>
           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  quantitative  and  qualitative  disclosures  about  market  risk  are
contained in the Asset-Liability Matching section of Management's Discussion and
Analysis  of  Financial  Condition  and Results of Operations on pages 16 and 17
herein.


























































































                                       22
<PAGE>
                           PART II - OTHER INFORMATION


Item  1.  Legal  Proceedings
          ------------------

  Not  applicable.

Item  2.  Changes  in  Securities
          -----------------------

  Not  applicable.

Item  3.  Defaults  Upon  Senior  Securities
          ----------------------------------

  Not  applicable.

Item  4.  Submissions  of  Matters  to  a  Vote  of  Security  Holders
          ------------------------------------------------------------

  Not  applicable.

Item  5.  Other  Information
          ------------------

  Not  applicable.

Item  6.  Exhibits  and  Reports  on  Form  8-K
          -------------------------------------




EXHIBITS

Exhibit
  No.                             Description
-----                             -----------

  2(a)          Purchase  and  Sale Agreement, dated as of July 15, 1998, by and
among  the  Company,  SunAmerica  Inc.  ("SAI"),  Anchor National Life Insurance
Company  and MBL Life Assurance Corporation, is incorporated herein by reference
to  Exhibit  2(e)  to  SAI's 1998 Annual Report on Form 10-K, filed December 21,
1998.

  3(a)     Agreement  and Plan of Merger and Amended and Restated Certificate of
Incorporation  are  incorporated  herein  by  reference  to  Exhibit 3(a) of the
Company's  1997  Annual  Report  on  Form  10-K,  filed  December  23,  1997.

  3(b)     Bylaws,  as  amended  January  1,  1996,  are  incorporated herein by
reference to Exhibit 3(b) of the Company's quarterly report on Form 10-Q for the
quarter  ended  March  31,  1996,  dated  May  14,  1996.

  27          Financial  Data  Schedule



REPORTS  ON  FORM  8-K

No  current  report on Form 8-K was filed during the three months ended December
31,  1998.  However,  on January 15, 1999, the Company filed a current report on
Form  8-K  concerning  the  merger of its ultimate Parent, SunAmerica Inc., with
American  International  Group,  Inc.
































                                       23
<PAGE>
                                   SIGNATURES

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

                               FIRST  SUNAMERICA  LIFE  INSURANCE  COMPANY

Date:  February  12,  1998     By:/s/SCOTT  L.  ROBINSON
--------------------------     ----------------------
                               Scott  L.  Robinson
                               Senior  Vice  President  and  Director

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

Signature                     Title                                Date
---------                     -----                                ----


/s/   SCOTT  L.  ROBINSON     Senior  Vice  President  and    February 12, 1999
-------------------------                                     -----------------
      Scott  L.  Robinson       Director  (Principal
                                Financial  Officer)


/s/   N.  SCOTT  GILLIS       Senior  Vice  President  and February  12, 1999
-----------------------                                    ------------------
      N.  Scott  Gillis         Controller  (Principal
                                Accounting  Officer)

































































                                       24
<PAGE>
                     FIRST SUNAMERICA LIFE INSURANCE COMPANY
                             LIST OF EXHIBITS FILED


Exhibit
  No.               Description
-----               -----------

  27               Financial  Data  Schedule.























































                                       25