SECURITIES AND EXCHANGE
      COMMISSIONWASHINGTON, D.C. 20549FORM
      10-Q (Mark One)/X/
    QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
    1934OR/   /
    TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
    1934For the quarterly period ended
      June 30, 2001Commission File No.  
      33-5014FIRST SUNAMERICA LIFE INSURANCE
      COMPANY Incorporated in New
    York
    06-0992729(IRS Employer
      Identification No.)733 Third Avenue, 4th Floor,
      New York, New York 10017Registrant's telephone number, including
      area code:    (800) 272-3007INDICATE 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 August 13,
      2001 WAS AS FOLLOWS:Common Stock (par value $10,000.00
      per share)
    300 shares outstanding





FIRST SUNAMERICA LIFE INSURANCE
      COMPANYINDEX PageNumber(s)Part I - Financial
      InformationBalance Sheet (Unaudited) -
      June 30, 2001 and December 31, 2000
    3Statement of Income and
      Comprehensive Income (Unaudited) - Three Months and Six Months Ended June
      30, 2001 and 2000
    4-5Statement of Cash Flows
      (Unaudited) - Six Months Ended June 30, 2001 and 2000
    6-7Notes to Financial Statements
      (Unaudited)
    8Management's Discussion and
      Analysis of Financial Condition and Results of Operations
    9-21Quantitative and Qualitative
      Disclosures About Market Risk
    22Part II - Other
      Information
    23-24







FIRST SUNAMERICA LIFE
      INSURANCE COMPANY BALANCE SHEET(Unaudited)June
      30,2001
    
    December
      31,2000(In
    thousands)ASSETSInvestments and cash:Cash and short-term
      investments
    
    $
    7,746
    
    $
    40,704Bonds, notes and redeemable
      preferredstocks available for sale, at fairvalue (amortized cost: June 2001,$1,189,848; December 2000,
    $1,269,340)
    
    
    1,177,817
    
    
    1,237,469Common stocks available for sale,
      at fairvalue (cost: June 2001 andDecember 2000, $812)
    
    
    588
    
    
    785Mortgage loans
    
    
    179,159
    
    
    167,408Policy loans
    
    
    38,118
    
    
    39,881Total investments and
cash
    
    
    1,403,428
    
    
    1,486,247Variable annuity assets held in
      separateaccounts
    
    
    532,722
    
    
    565,547Accrued investment income
    
    
    13,827
    
    
    14,809Deferred acquisition
costs
    
    
    111,724
    
    
    124,451Income taxes currently receivable
      from Parent
    
    
    ---
    
    
    8,067Defered income taxes
    
    
    5,776
    
    
    7,914Other assets
    
    
    1,519
    
    
    7,338TOTAL ASSETS
    
    $
    2,068,996
    
    $
    2,214,373LIABILITIES AND SHAREHOLDER'S
      EQUITYReserves, payables and accrued
      liabilities:Reserves for fixed annuity
      contracts
    
    $
    1,083,562
    
    $
    1,180,665Reserves for universal life
      insurancecontracts
    
    
    250,779
    
    
    256,318Income taxes currently payable to
      Parent
    
    
    309
    
    
    ---Other liabilities
    
    
    19,023
    
    
    24,215Total reserves, payables and
      accruedliabilities
    
    
    1,353,673
    
    
    1,461,198Variable annuity liabilities
      related toseparate accounts
    
    
    532,722
    
    
    565,547Shareholder's equity:Common Stock
    
    
    3,000
    
    
    3,000Additional paid-in
capital
    
    
    144,428
    
    
    144,428Retained earnings
    
    
    38,329
    
    
    49,689Accumulated other comprehensive
      loss
    
    
    (3,156
    )
    
    (9,489
    )Total shareholder's
equity
    
    
    182,601
    
    
    187,628TOTAL LIABILITIES AND SHAREHOLDER'S
      EQUITY
    
    $
    2,068,996
    
    $
    2,214,373


See accompanying notes to financial
      statements.3


FIRST SUNAMERICA LIFE
      INSURANCE COMPANYSTATEMENT OF INCOME AND COMPREHENSIVE INCOMEFor
      the three months and six months ended June 30, 2001 and
      2000(Unaudited)Three
      Months
    
    Six
      Months2001
    
    2000
    
    2001
    
    2000(In
    thousands)Investment income
    
    $
    26,597
    
    $
    31,661
    
    $
    53,512
    
    $
    64,497Interest expense on:Fixed annuity contracts
    
    
    (13,217
    )
    
    (16,164
    )
    
    (26,989
    )
    
    (34,469
    )Universal life insurance
      contracts
    
    
    (2,927
    )
    
    (3,087
    )
    
    (5,858
    )
    
    (6,219
    )Total interest expense
    
    
    (16,144
    )
    
    (19,251
    )
    
    (32,847
    )
    
    (40,688
    )NET INVESTMENT INCOME
    
    
    10,453
    
    
    12,410
    
    
    20,665
    
    
    23,809NET REALIZED INVESTMENT
      LOSSES
    
    
    (2,864
    )
    
    (2,231
    )
    
    (13,493
    )
    
    (3,744
    )Fee income:Variable annuity fees
    
    
    2,054
    
    
    2,263
    
    
    4,147
    
    
    4,467Universal life insurance fees,
      net
    
    
    326
    
    
    110
    
    
    1,363
    
    
    610Surrender charges
    
    
    515
    
    
    1,242
    
    
    1,211
    
    
    2,014TOTAL FEE INCOME
    
    
    2,895
    
    
    3,615
    
    
    6,721
    
    
    7,091GENERAL AND ADMINISTRATIVE
      EXPENSES
    
    
    (1,590
    )
    
    (1,190
    )
    
    (2,351
    )
    
    (2,144
    )AMORTIZATION OF DEFERREDACQUISITION COSTS
    
    
    (3,346
    )
    
    (4,809
    )
    
    (7,548
    )
    
    (9,618
    )ANNUAL COMMISSIONS
    
    
    (234
    )
    
    (94
    )
    
    (409
    )
    
    (267
    )PRETAX INCOME BEFORE CUMULATIVE
      EFFECTOF CHANGE IN ACCOUNTING
      PRINCIPLE
    
    
    5,314
    
    
    7,701
    
    
    3,585
    
    
    15,127Income tax expense
    
    
    (2,260
    )
    
    (3,395
    )
    
    (1,525
    )
    
    (6,274
    )INCOME BEFORE CUMULATIVE EFFECT
      OFCHANGE IN ACCOUNTING
      PRINCIPLE
    
    
    3,054
    
    
    4,306
    
    
    2,060
    
    
    8,853CUMULATIVE EFFECT OF CHANGE
      INACCOUNTING PRINCIPLE, NETOF TAX (Note 2)
    
    
    (520
    )
    
    ---
    
    
    (520
    )
    
    ---NET INCOME
    
    $
    2,534
    
    $
    4,306
    
    $
    1,540
    
    $
    8,853




See accompanying notes to financial
      statements.4


FIRST SUNAMERICA LIFE
      INSURANCE COMPANYSTATEMENT OF INCOME AND COMPREHENSIVE INCOMEFor
      the three months and six months ended June 30, 2001 and
      2000(Unaudited)Three
      Months
    
    Six
      Months2001
    
    2000
    
    2001
    
    2000(In
    thousands)OTHER COMPREHENSIVE INCOME
      (LOSS),NET OF TAX:Net unrealized gains (losses) on
      debtand equity securities available forsale identified in the currentperiod (net of income tax expenseof $1,331 for the six months of2001 and income tax benefit of$1,480, $5,673 and $9,601 for thethree months of 2001 and 2000and six months of 2000, respectively)
    
    
    (2,749
    )
    
    (10,535
    )
    
    2,472
    
    
    (17,831
    )Less reclassification adjustment
      fornet realized losses included in netincome (net of income tax benefitof $310 and $642 for the secondquarters of 2001 and 2000,respectively, and $2,079 and $963for the six months of 2001 and2000, respectively.
    
    
    576
    
    
    1,192
    
    
    3,861
    
    
    1,788OTHER COMPREHENSIVE INCOME
      (LOSS)
    
    
    (2,173
    )
    
    (9,343
    )
    
    6,333
    
    
    (16,043
    )COMPREHENSIVE INCOME (LOSS)
    
    $
    361
    
    $
    (5,037
    )
    $
    7,873
    
    $
    (7,190
    )




See accompanying notes to financial
      statements.5


FIRST SUNAMERICA LIFE
      INSURANCE COMPANYSTATEMENT OF CASH FLOWSFor the six months ended
      June 30, 2001 and 2000(Unaudited)2001
    
    2000(In
    thousands)CASH FLOWS FROM OPERATING
      ACTIVITIES:Net income
    
    $
    1,540
    
    $
    8,853Adjustments to reconcile net income
      to netcash provided by operating
      activities:Cumulative effect of change
      inaccounting principle
    
    
    520
    
    
    ---Interest credited to:Fixed annuity contracts
    
    
    26,989
    
    
    34,469Universal life insurance contracts
    
    
    5,858
    
    
    6,219Net realized investment
      losses
    
    
    13,493
    
    
    3,744Accretion of net discounts
    oninvestments
    
    
    (1,775
    )
    
    (2,090
    )Provision (benefit)for deferred
      income taxes
    
    
    (992
    )
    
    5,170Change in:Accrued investment income
    
    
    982
    
    
    3,201Deferred acquisition
costs
    
    
    2,827
    
    
    5,190Income taxes
      receivable/payable
    
    
    8,376
    
    
    (3,654
    )Other liabilities
    
    
    (1,162
    )
    
    (5,568
    )Other, net
    
    
    4,001
    
    
    280NET CASH PROVIDED BY OPERATING
      ACTIVITIES
    
    
    60,657
    
    
    55,814CASH FLOWS FROM INVESTING
      ACTIVITIES:Purchases of:Bonds, notes and redeemable
      preferred stocks
    
    
    (110,389
    )
    
    (10,333
    )Mortgage loans
    
    
    (23,052
    )
    
    (6,352
    )Other investments, excluding
      short-terminvestments
    
    
    (139
    )
    
    ---Sales of:Bonds, notes and redeemable
      preferred stocks
    
    
    98,374
    
    
    146,538Other investments, excluding
      short-terminvestments
    
    
    ---
    
    
    485Redemptions and maturities
      of:Bonds, notes and redeemable
      preferred stocks
    
    
    78,739
    
    
    44,135Mortgage loans
    
    
    11,551
    
    
    19,723Other investments, excluding
      short-terminvestments
    
    
    1,903
    
    
    1,358Short-term investments transferred
      to AnchorNational Life Insurance Company
      relating toassumption reinsurance transaction
      with MBLLife Assurance
Corporation
    
    
    ---
    
    
    (16,741
    )NET CASH PROVIDED BY INVESTING
      ACTIVITIES
    
    $
    56,987
    
    $
    178,813




See accompanying notes to financial
      statements.6


FIRST SUNAMERICA LIFE
      INSURANCE COMPANYSTATEMENT OF CASH FLOWS (Continued)For the six
      months ended June 30, 2001 and 2000(Unaudited)2001
    
    2000(In
    thousands)CASH FLOWS FROM FINANCING
      ACTIVITIES:Premium receipts on:Fixed annuity contracts
    
    $
    29,636
    
    $
    19,690Universal life insurance contracts
    
    
    6,126
    
    
    6,323Net exchanges from the fixed
      accountsof variable annuity contracts
    
    
    (18,633
    )
    
    (27,782
    )Withdrawal payments on:Fixed annuity contracts
    
    
    (111,561
    )
    
    (177,042
    )Universal life insurance contracts
    
    
    (14,931
    )
    
    (17,754
    )Claims and annuity payments
      on:Fixed annuity contracts
    
    
    (15,005
    )
    
    (17,723
    )Universal life insurance contracts
    
    
    (9,304
    )
    
    (11,412
    )Net repayments of othershort-term financings
    
    
    (4,030
    )
    
    (22,074
    )Dividend payment to
Parent
    
    
    (12,900
    )
    
    ---NET CASH USED BY FINANCING
      ACTIVITIES
    
    
    (150,602
    )
    
    (247,774
    )NET DECREASE IN CASH ANDSHORT-TERM INVESTMENTS
    
    
    (32,958
    )
    
    (13,147
    )CASH AND SHORT-TERM INVESTMENTS
      ATBEGINNING OF PERIOD
    
    
    40,704
    
    
    29,350CASH AND SHORT-TERM INVESTMENTS
      ATEND OF PERIOD
    
    $
    7,746
    
    $
    16,203SUPPLEMENTAL CASH FLOW
      INFORMATION:Net income taxes paid to (received
      from)Parent
    
    $
    (5,858
    )
    $
    5,681


See accompanying notes to financial
      statements.7


**FIRST SUNAMERICA LIFE INSURANCE
      COMPANYNOTES TO FINANCIAL STATEMENTS
      (Unaudited)**  1.
    BASIS OF PRESENTATIONFirst SunAmerica Life Insurance Company (the
      "Company") is a direct wholly owned subsidiary of Sunamerica Life
      Insurance Company (the "Parent"), which is an indirect wholly owned
      subsidiary of American International Group, Inc. ("AIG"), an international
      insurance and financial services holding company. The Company is a New
      York-domiciled life insurance company engaged primarily in the sale and
      administration of deposit type insurance contracts, including fixed and
      variable annuities and universal life contracts in the State of New
      York.
      In the opinion of the Company, the
      accompanying unaudited financial statements contain all adjustments
      necessary, consisting of normal recurring items, to present fairly the
      Company's financial position as of June 30, 2001 and December 31, 2000,
      the results of its operations for the three months and six months ended
      June 30, 2001 and 2000 and its cash flows for the six months ended June
      30, 2001 and 2000.  The results of operations for the three months
      and six months ended June 30, 2001 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 year ended December 31, 2000, contained in
      the Company's 2000 Annual Report on Form 10-K.  Certain prior year
      items have been reclassified to conform to the current period's
      presentation.2.
    RECENTLY ISSUED ACCOUNTING
      STANDARDIn June 1998, the Financial Accounting
      Standards Board ("FASB") issued Statement of Financial Accounting
      Standards No. 133, Accounting for Derivative Instruments and Hedging
      Activities ("SFAS 133"). SFAS 133 was postponed by SFAS 137, Accounting
      for Derivative Instruments and Hedging Activities- Deferral of the
      Effective Date of FASB No. 133, and is now effective for the Company as of
      January 1, 2001. Because of the Company's minimal use of derivatives, the
      new Statement has no impact on either the earnings or the financial
      position of the Company at June 30, 2001.
      In November 1999, the Emerging Issues Task
      Force ("EITF") of the FASB issued EITF 99-20, Recognition of Interest
      Income and Impairment on Purchased and Retained Interests in Securitized
      Financial Assets ("EITF 99-20").  This pronouncement changes the
      accounting requirements for interests in many asset backed securities,
      including collaterized debt obligations, commercial mortgage backed
      securities and residential mortgage-backed securities.  EITF 99-20
      requires that interest income on securities within its scope be recognized
      prospectively, with changes in expected future cash flows reflected in
      reported yields going forward.  In addition, if cash flows are
      expected to decrease, EITF 99-20 may require investors to recognize
      impairment losses.  EITF 99-20 is effective for the Company as of
      April 1, 2001.  The adoption of EITF 99-20 on April 1, 2001 resulted
      in a loss of $520,000, net of tax, which is being recognized and reported
      in the statement of income and comprehensive income as a cumulative effect
      of an accounting change.




8


**FIRST SUNAMERICA LIFE INSURANCE
      COMPANYMANAGEMENT'S DISCUSSION AND ANALYSISOF 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 and six months ended June 30, 2001 and June 30, 2000
      follows. Certain prior period amounts have been reclassified to conform to
      the current period's presentation.
      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 $2.5
      million in the second quarter of 2001, compared with $4.3 million in the
      second quarter of 2000.  For the six months, net income amounted to
      $1.5 million in 2001 compared to $8.9 million in 2000.
      CUMULATIVE EFFECT OF
      CHANGE IN ACCOUNTING PRINCIPLE, NET OF TAX reflects the adoption of EITF
      99-20 on April 1, 2001.  The Company recorded a loss of $520,000, net
      of tax, which is recognized in the statement of income and comprehensive
      income as a cumulative effect of accounting change (see Note 2 of Notes to
      Financial Statements).




9


PRETAX INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
      totaled $5.3 million in the second quarter of 2001 compared with $7.7
      million in the second quarter of 2000.  For the six months, pretax
      income before cumulative effect of change in accounting principle totaled
      $3.6 million in 2001, compared with $15.1 million in 2000. The decline in
      2001 results compared to 2000 in both periods primarily resulted from
      increased net realized investment losses, decreased net investment income
      and reduced surrender charge income, partially offset by decreased
      amortization of deferred acquisition costs.
      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, totaled $10.5 million in the second quarter
      of 2001, down from $12.4 million in the second quarter of 2000. 
      These amounts equal 2.91% on average invested assets (computed on a daily
      basis) of $1.44 billion in the second quarter of 2001 compared with 2.87%
      on average invested assets of $1.73 billion in the second quarter of
      2000.  For the six months, net investment income declined to $20.7
      million in 2001 from $23.8 million in 2000, representing 2.82% of average
      invested assets of $1.47 billion in 2001 and 2.68% of average invested
      assets of $1.78 billion in 2000.
      Net investment spreads include the effect of income earned or interest
      paid on the difference between average invested assets and average
      interest-bearing liabilities. In the second quarter of 2001, average
      invested assets exceeded average interest-bearing liabilities by $79.8
      million, compared with $77.3 million in the second quarter of 2000. 
      For the six months, average invested assets exceeded average
      interest-bearing liabilities by $82.8 million in 2001 compared with $72.0
      million in 2000.  The difference between the Company's yield on
      average invested assets and the rate paid on average interest-bearing
      liabilities (the "Spread Difference") was 2.64% in the second quarter of
      2001 and 2.66% in the second quarter of 2000.  For the six months,
      the spread difference was 2.55% in 2001 and 2.48% in 2000.Investment income (and the related yield on average invested assets)
      totaled  $26.6 million (7.40%) in the second quarter of 2001, $31.7
      million (7.31%) in the second quarter of 2000, $53.5 million (7.30%) in
      the six months of 2001 and $64.5 million (7.25%) in the six months of
      2000.  Increase in yields primarily reflects improved performance of
      senior secured loan portfolio.
      Expenses incurred to manage the investment portfolio amounted to $0.5
      million in the second quarter of 2001, $0.5 million in the second quarter
      of 2000, $1.2 million in the six months of 2001 and $1.0 million in the
      six months of 2000.  These expenses are included as a reduction of
      investment income in the statement of income.
      Total interest expense equaled $16.1 million in the second quarter of 2001
      and $19.3 million in the second quarter of 2000.  For the six months,
      interest expense aggregated $32.8 million in 2001, compared with $40.7
      million in 2000.  The average rate paid on all interest-bearing
      liabilities was 4.76% in the second quarter of 2001, compared with 4.65%
      in the second quarter of 2000.  For the six months, the average rate
      paid on all interest-bearing liabilities was 4.75% for 2001 and 4.77% for
      2000. Interest-bearing liabilities averaged $1.36 billion during the
      second quarter of 2001, $1.65 billion during the second quarter of 2000,
      $1.38 billion during the six months of 2001 and $1.71 billion during the
      six months of 2000.  The decrease in average liabilities in 2001
      resulted primarily from withdrawals on certain closed blocks of
      business.  The lower interest rate paid in second quarter of 2000
      results primarily from adjustments to the crediting rates of certain
      closed blocks of business.


10


DECLINE IN AVERAGE INVESTED ASSETS largely resulted from the surrenders of
      certain closed blocks of fixed annuity policies.  Changes in average
      invested assets also reflect sales of fixed annuities and the fixed
      account options of the Company's variable annuity products ("Fixed Annuity
      Premiums"), and renewal premiums on its universal life products ("UL
      Premiums") partially offset by net exchanges from fixed accounts into the
      separate accounts of variable annuity contracts. Fixed Annuity Premiums
      and UL Premiums totaled $18.5 million in the second quarter of 2001, $19.2
      million in the second quarter of 2000, $38.1 million in the six months of
      2001 and $34.9 million in the six months of 2000 and are largely premiums
      for the fixed accounts of variable annuities.  On an annualized
      basis, these premiums represent 5%, 4%, 5% and 4%, respectively, of the
      related reserve balances at the beginning of the respective periods.
      NET REALIZED INVESTMENT LOSSES totaled $2.9 million in the second quarter
      of 2001 compared with $2.2 million in the second quarter of 2000 and
      include impairment writedowns of $2.5 million and $2.2 million,
      respectively.  For the six months, net realized investment losses
      totaled $13.5 million in 2001 compared with $3.7 million in 2000 and
      include impairment writedowns of $13.6 million and $3.4 million,
      respectively.  Thus, net realized losses from sales and redemptions
      of investments totaled $0.4 million in the second quarter of 2001 and net
      realized gains totaled $0.1 million in the six months of 2001, compared to
      net losses from  sales and redemptions of investments of $0.1 million
      and $0.3 million in the second quarter and six months of 2000,
      respectively.The Company sold or redeemed invested assets, principally bonds and notes,
      aggregating $108.6 million in the second quarter of 2001, $99.0 million in
      the second quarter of 2000, $190.4 million in the six months of 2001 and
      $212.6 million in the six months of 2000.  Sales of investments
      resulted 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,
      on an annualized basis, 0.11%, 0.02%, 0.02% and 0.04% of average invested
      assets in the second quarter of 2001, the second quarter of 2000, the six
      months of 2001 and the six months of 2000, 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.
      Impairment writedowns include $2.5 million, $2.2 million, $13.6 million
      and $3.4 million of provisions applied to bonds in the second quarter of
      2001, the second quarter of 2000, the six months of 2001 and the six
      months of 2000 respectively.  On an annualized basis, impairment
      writedowns represent 0.69%, 0.50%, 1.86% and 0.38% of average invested
      assets in the respective periods.  For the twenty quarters ended June
      30, 2001, impairment writedowns as an annualized percentage of average
      invested assets have ranged up to 3.99% and have averaged 0.62%. Such
      writedowns are made when the Company has determined that the applicable
      assets have suffered other than temporary declines in the net realizable
      value. Actual realization will be dependent upon future events.  The
      Company recorded $0.8 million ($0.5 million net of tax) of additional
      impairments pursuant to the implementation of EITF 99-20 (See Note 2 of
      Notes to Financial Statements).  This adjustment was recorded as a
      cumulative effect of change in accounting principle in the accompanying
      statement of income & comprehensive income.


11


VARIABLE ANNUITY FEES are based on the market value of assets in separate
      accounts supporting variable annuity contracts.  Such fees totaled
      $2.1 million in the second quarter of 2001 and $2.3 million in the second
      quarter of 2000.  For the six months, variable annuity fees totaled
      $4.1 million in 2001, compared with $4.5 million in 2000.  The
      decreased fees reflect a decline in average variable annuity assets,
      principally due to a decline in market values and to surrenders, partially
      offset by receipt of variable annuity premiums and net exchanges into the
      separate accounts from the fixed accounts of variable annuity
      contracts.  On an annualized basis, variable annuity fees represent
      1.54% of average variable annuity assets in all periods presented.
      Variable annuity assets averaged $532.2 million, $589.5 million, $539.4
      million and $581.7 million during the second quarters of 2001 and 2000 and
      the six months of 2001 and 2000, respectively.  Variable annuity
      premiums, which exclude premiums allocated to the fixed accounts of
      variable annuity products, totaled $6.8 million and $8.9 million in the
      second quarters of 2001 and 2000, respectively. For the six months,
      variable annuity premiums totaled $12.3 million and $18.9 million in 2001
      and 2000, respectively.  On an annualized basis, these amounts
      represent 5%, 6%, 4% and 7% of variable annuity reserves at the beginning
      of the respective periods.   Transfers from the fixed accounts
      of the Company's variable annuity products to the separate accounts (see
      "Decline in Average Invested Assets") are not classified as variable
      annuity premiums. Accordingly, changes in variable annuity premiums are
      not necessarily indicative of the ultimate allocation by customers among
      fixed and variable account options of the Company's variable annuity
      products.
      Sales of variable annuity products (which include premiums allocated to
      the fixed accounts) ("Variable Annuity Product Sales") amounted to $18.8
      million, $18.2 million, $38.7 million, and $35.2 million in the second
      quarters of 2001 and 2000 and the six months of 2001 and 2000,
      respectively.  Variable Annuity Product Sales primarily reflect sales
      of the Company's flagship variable annuity line, Polaris.  Polaris is
      a multimanager variable annuity that offers investors a choice of 31
      variable funds and a number of guaranteed fixed-rate funds.  Variable
      Annuity Product Sales have increased in 2001, principally due to both new
      and enhanced relationships with New York based investment firms as well as
      the addition of four new funds offered by Polaris in December 2000.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 that could affect the
      taxation of variable annuities and annuities generally (See "Regulation").
      UNIVERSAL LIFE INSURANCE FEES amounted to $0.3 million and $0.1 million in
      the second quarters of 2001 and 2000, respectively.  For the six
      months, universal life insurance fees totaled $1.4 million in 2001 and
      $0.6 million in 2000. Universal life insurance fees consist of mortality
      charges, up-front fees earned on premiums received and administrative
      fees, net of the excess mortality expense on these contracts.  The
      Company does not actively market universal life insurance contracts. Such
      fees annualized represent 0.53%, 0.17%, 1.11% and 0.47% of average
      reserves for universal life insurance contracts in the respective
      periods.  Universal life insurance fees have increased in 2001,
      principally as a result of improved mortality experience, which fluctuates
      and cannot necessarily be expected to continue in future periods.
      SURRENDER CHARGES on fixed and variable annuity contracts and universal
      life contracts totaled $0.5 million in the second quarter of 2001 and $1.2
      million in the second quarter of 2000.  For the six months, such
      surrender charges totaled $1.2 million in 2001 and $2.0 million in
      2000.


12


Surrender charges generally are assessed on
      withdrawals at declining rates during the first seven years of a
      contract.  Withdrawal payments, which exclude claims and lump-sum
      annuity benefits, totaled $73.8 million in the second quarter of 2001,
      compared with $118.4 million in the second quarter of 2000. For the six
      months, such withdrawal payments totaled $144.4 million in 2001 and $211.6
      million in 2000. Annualized, these payments, when expressed as a
      percentage of average fixed and variable annuity and universal life
      reserves, represent 16.0%, 21.0%, 15.4% and 19.0% for the second quarters
      of 2001 and 2000 and the six months of 2001 and 2000, respectively. 
      Withdrawal rates were higher in 2000 due to higher surrenders on certain
      closed blocks of fixed annuity business.  Withdrawals include
      variable annuity payments from the separate accounts totaling $9.2 million
      (6.9% of average variable annuity reserves), $8.6 million (5.8% of average
      variable annuity reserves), $17.9 million (6.7% of average variable
      annuity reserves) and $16.9 million (5.8% of average variable annuity
      reserves) in the second quarters of 2001 and 2000 and the six months of
      2001 and 2000, respectively.  Management does not anticipate a
      significant increase in the level of withdrawal payments relative to fixed
      and variable annuity and universal life reserves.
      GENERAL AND ADMINISTRATIVE EXPENSES totaled $1.6 million in the second
      quarter of 2001 and $1.2 million in 2000.  For the six months,
      general and administrative expenses totaled $2.4 million in 2001 and $2.1
      million in 2000. 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 $3.3 million in the
      second quarter of 2001, compared with $4.8 million in the second quarter
      of 2000. For the six months, such amortization totaled $7.5 million in
      2001, compared with $9.6 million in 2000.  The decrease in
      amortization in 2001 is principally due to the increase in net realized
      capital losses.
      ANNUAL COMMISSIONS totaled $0.2 million in the second quarter of 2001 and
      $0.1 million in the second quarter of 2000. For the six months, annual
      commissions totaled $0.4 million in 2001 and $0.3 million in 2000. 
      Annual commissions represent renewal commissions paid quarterly in arrears
      to maintain the persistency of certain Company's fixed and variable
      annuity contracts.  Substantially all of the Company's currently
      available variable annuity products allow for an annual commission payment
      option in return for a lower immediate commission.  The Company
      estimates that approximately 75% of the average balances of its variable
      annuity products is currently subject to such annual commissions. 
      Based on current sales, this percentage is expected to increase in future
      periods.
      INCOME TAX EXPENSE totaled $2.3 million in the second quarter of 2001,
      compared with $3.4 million in the second quarter of 2000, representing
      effective annualized tax rates of 43% and 44%, respectively.  For the
      six months, such expenses totaled $1.5 million in 2001 and $6.3 million in
      2000, representing an effective annualized tax rate of 43% and 41% for
      2001 and 2000, respectively.


13


FINANCIAL CONDITION AND
      LIQUIDITY
      SHAREHOLDER'S EQUITY declined to $182.6 million at June 30, 2001 from
      $187.6 million at December 31, 2000, due primarily to a $12.9 million
      dividend paid to its Parent on April 2, 2001 partially offset by $6.3
      million decrease in accumulated other comprehensive loss and net income of
      $1.5 million recorded in 2001.
      INVESTED ASSETS at June 30, 2001 totaled $1.40 billion, compared with
      $1.49 billion at December 31, 2000.  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, notes and redeemable
      preferred stocks (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, the
      Company's need for liquidity and other similar factors.THE BOND PORTFOLIO, which constituted 84% of the Company's total
      investment portfolio at June 30, 2001, had an amortized cost that was
      $12.0 million greater than its aggregate fair value at June 30, 2001 and
      $31.9 million greater than its aggregate fair value at December 31,
      2000.  The decrease in net unrealized losses on the Bond Portfolio
      during 2001 reflects impairment writedowns recorded in 2001 as well as the
      decline in prevailing interest rates and the corresponding effect on the
      fair value of the Bond Portfolio at June 30, 2001.
      At June 30, 2001, the Bond Portfolio (excluding $0.1 million of redeemable
      preferred stocks) included $1.18 billion of bonds rated by Standard &
      Poor's Corporation ("S&P"), Moody's Investors Service ("Moody's"),
      Fitch ("Fitch") or the Securities Valuation Office of the National
      Association of Insurance Commissioners ("NAIC"), and $2.0 million of bonds
      rated by the Company pursuant to statutory ratings guidelines established
      by the NAIC.  At June 30, 2001, approximately $1.10 billion of the
      Bond Portfolio was investment grade, including $530.9 million of U.S.
      government/agency securities and mortgage-backed securities ("MBSs").
      At June 30, 2001, the Bond Portfolio included $76.4 million of bonds that
      were not investment grade.  These non-investment-grade bonds
      accounted for approximately 3.7% of the Company's total assets and
      approximately 5.4% 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 issuer
      concentrations of non-investment-grade securities at June 30, 2001.
      The table on the following page summarizes the Company's rated bonds by
      rating classification as of June 30, 2001.


14


RATED BONDS BY RATING
      CLASSIFICATION(Dollars in
      thousands)**Issues
      Rated by S&P/Moody's/Fitch**
    ****
    **Issues not rated by
      S&P/Moody's Fitch, by NAIC Category**
    ****
    **Total****S&P   category
      (1)**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **NAICcategory(2)**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **Amortizedcost**
    ****
    **Estimatedfairvalue**
    ****
    **Percent ofinvestedassets**AAA+ to
      A-(A11 to A3)[AAA to A-]{AAA to A-}
    
    $ 900,777
    
    $ 904,411
    
    1
    
    $ 18,238
    
    $ 18,177
    
    $ 919,015
    
    $ 922,588
    
    65.74
    %BBB+ to
      BBB-(Baa1 to Baa3)[BBB+ to BBB-]{BBB+ to BBB-}
    
    158,724
    
    157,990
    
    2
    
    20,662
    
    20,722
    
    179,386
    
    178,712
    
    12.73
    %BB+ to
      BB-(Ba1 to Ba3)[BB+ to BB-]{BB+ to BB-}
    
    17,696
    
    16,722
    
    3
    
    1,929
    
    1,754
    
    19,625
    
    18,476
    
    1.32
    %B+ to
    B-(B1 to B3)[B+ to B-]{B+ to B-}
    
    59,406
    
    47,296
    
    4
    
    1,997
    
    1,900
    
    61,403
    
    49,196
    
    3.51
    %CCC+ to
      C(Caa to C)[CCC]{CCC+ to C-}
    
    9,650
    
    8,415
    
    5
    
    ---
    
    ---
    
    9,650
    
    8,415
    
    0.60
    %CI to
    D[DD]{D}
    
    589
    
    281
    
    6
    
    ---
    
    ---
    
    589
    
    281
    
    0.02
    %TOTAL RATED
      ISSUES
    
    $1,146,842
    
    $1,135,115
    
    
    
    $ 42,826
    
    $ 42,553
    
    $1,189,668
    
    $1,177,668Footnotes appear on the following
      page.




15


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. Issues are categorized based on
      the highest of the S&P, Moody's 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/Fitch rating groups listed above, with categories
      1 and 2 considered investment grade.  The NAIC categories include
      $2.0 million of assets that were rated by the Company pursuant to
      applicable NAIC rating guidelines.




16


Senior secured loans ("Secured Loans") are included in the Bond Portfolio
      and aggregated $55.9 million at June 30, 2001.  Secured Loans are
      senior to subordinated debt and equity and are secured by assets of the
      issuer.  At June 30, 2001, Secured Loans consisted of $18.7 million
      of publicly traded securities and $37.2 million of privately traded
      securities. These Secured Loans are composed of loans to borrowers
      spanning 7 industries, with 28% of these assets concentrated in energy,
      25% concentrated in utilities and 13% concentrated in leisure and
      gaming.  No other industry concentration constituted more than 10% 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, Fitch, the NAIC or by the Company, pursuant to comparable
      statutory ratings guidelines established by the NAIC.MORTGAGE LOANS aggregated $179.2 million at June 30, 2001 and consisted of
      112 commercial first mortgage loans with an average loan balance of
      approximately $1.6 million, collateralized by properties located in 32
      states.  Approximately 27% of this portfolio was office, 25% was
      retail, 18% was multifamily residential, 15% was industrial and 15% was
      other types.  At June 30, 2001, approximately 29% of this portfolio
      was secured by properties located in California, approximately 13% by
      properties located in Michigan, approximately 7% by properties located in
      New York, approximately 6% by properties located in Wisconsin and no more
      than 5% of this portfolio was secured by properties located in any other
      single state.  At June 30, 2001, one mortgage loan had an outstanding
      balance of $10.0 million or more, which represented approximately 6% of
      this portfolio. At June 30, 2001, approximately 26% of the mortgage loan
      portfolio consisted of loans with balloon payments due before July 1,
      2004.  During 2001 and 2000, 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 June 30, 2001, approximately 43% 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.
      POLICY LOANS totaled $38.1 million at June 30, 2001 compared to $39.9
      million at December 31, 2000 and are primarily loans taken against
      universal life policies.




17


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 fixed-rate investments are priced over the yield curve,
      default rates 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 69% of the Company's fixed
      annuity and universal life reserves had surrender penalties or other
      restrictions at June 30, 2001.
      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, notes and redeemable preferred stocks; mortgage loans;
      and policy loans.  At June 30, 2001, these assets had an aggregate
      fair value of $1.41 billion with a duration of 3.8.  The Company's
      fixed-rate liabilities are its fixed annuity and universal life insurance
      contracts.  At June 30, 2001, these liabilities had an aggregate fair
      value (determined by discounting future contractual cash flows by related
      market rates of interest) of $1.29 billion with a duration of 2.4. 
      The Company's potential exposure due to a relative 10% increase in
      prevailing interest rates from their June 30, 2001 levels is a loss of
      approximately $10.7 million, representing an increase in the fair value of
      its fixed-rate liabilities that is not offset by an increase in the fair
      value of its fixed-rate assets.  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 the market value of a portfolio 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 and universal life 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.




18


The Company also seeks to provide liquidity by investing in MBSs. 
      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 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.  Beginning on April 1,
      2001 with the adoption of EITF 99-20, the Company recognizes impairment
      losses on securitized assets if cash flows are expected to decrease. 
      The adoption of EITF 99-20 resulted in a loss of $0.5 million, net of tax,
      which is being recognized and reported in the statement of income and
      comprehensive income as a cumulative effect of an accounting change.
      DEFAULTED INVESTMENTS, comprising all investments that are in default as
      to the payment of principal or interest, totaled $5.5 million of
      bonds  at June 30, 2001, and constituted less than 0.5% of total
      invested assets.  At December 31, 2000 defaulted investments totaled
      $7.2 million and constituted less than 0.5% 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 June 30,
      2001, approximately $504.2 million of the Company's Bond Portfolio had an
      aggregate unrealized loss of $28.8 million, while approximately $673.6
      million of the Bond Portfolio had an aggregate unrealized gain of $16.8
      million.  In addition, the Company's investment portfolio currently
      provides approximately $14.5 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.




19


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 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.
      REGULATION
      The Company, in common with other insurers, is subject to regulation and
      supervision by the states and other jurisdictions in which it does
      business.  Within the United States, the method of such regulation
      varies but generally has its source in statutes that delegate regulatory
      and supervisory powers to a state insurance official.  The regulation
      and supervision relate primarily to approval of policy forms and rates,
      the standards of solvency that must be met and maintained, including risk
      based capital measurements, the licensing of insurers and their agents,
      the nature of and limitations on investments, restrictions on the size of
      risks which may be insured under a single policy, deposits of securities
      for the benefit of policyholders, methods of accounting, periodic
      examinations of the affairs of insurance companies, the form and content
      of reports of financial condition required to be filed, and reserves for
      unearned premiums, losses and other purposes.  In general, such
      regulation is for the protection of policyholders rather than security
      holders.
      Risk based capital ("RBC") standards are designed to measure the adequacy
      of an insurer's statutory capital and surplus in relation to the risks
      inherent in its business. The standards are intended to help identify
      inadequately capitalized companies and require specific regulatory actions
      in the event an insurer's RBC is deficient.  The RBC formula develops
      a risk adjusted target level of adjusted statutory capital and surplus by
      applying certain factors to various asset, premium and reserve
      items.  Higher factors are applied to more risky items and lower
      factors are applied to less risky items.  Thus, the target level of
      statutory surplus varies not only as a result of the insurer's size, but
      also on the risk profile of the insurer's operations.




20


The RBC Model Law provides for four
      incremental levels of regulatory attention for insurers whose surplus is
      below the calculated RBC target.  These levels of attention range in
      severity from requiring the insurer to submit a plan for corrective action
      to actually placing the insurer under regulatory control.  The
      statutory capital and surplus of the Company exceeded its RBC requirements
      by a considerable margin as of June 30, 2001.
      In 1998, the NAIC adopted the codification of statutory accounting
      principles ("Codification") which replaced the NAIC's previous primary
      guidance on statutory accounting, which became effective January 1,
      2001.  Codification changes prescribed statutory accounting practices
      and has resulted in changes to the accounting practices that the Company
      uses to prepare its statutory basis financial statements. 
      Codification has been adopted by all fifty states as the prescribed basis
      of accounting.  New York, however, has made certain modifications
      (e.g., no deferred taxes will be recorded for companies domiciled in the
      State of New York).  The adoption of Codification resulted in a
      decrease to the Company's statutory surplus of approximately $14.2
      million.
      Privacy provisions of the Gramm-Leach-Bliley Act are fully effective in
      2001 and establish new consumer protections regarding the security,
      confidentiality, and uses of nonpublic personal information of
      individuals.  The law also requires financial institutions to
      disclose their privacy policies to their customers.  Additional
      privacy legislation pending in the United States Congress and several
      states is designed to provide further privacy protections to consumers of
      financial products and services.  These statutes and regulations may
      result in additional regulatory compliance costs, may limit the Company's
      ability to market its products, and may otherwise constrain the nature or
      scope of the Company's insurance and financial services
      operations.
      The Gramm-Leach-Bliley Act also allows
      combinations between insurance companies, banks, and other entities. 
      It is not yet known what effect this legislation will have on insurance
      companies.  In addition, from time to time, Federal initiatives are
      proposed that could affect the Company's businesses.  Such
      initiatives include employees 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 such 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 these proposals have a
      small likelihood of being enacted, because they would discourage
      retirement savings and there is strong public and industry opposition to
      them.




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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 18 and 19 herein.




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PART II - OTHER INFORMATION
      
      Item 1.     Legal
      Proceedings
      
      Not
      applicable.
      
      Item 2.    
      Changes in Securities and Use of Proceeds
      
      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
      There were no exhibits filed during the three months
      ended June 30, 2001.
      REPORTS ON FORM 8-K
      No current report on Form 8-K were filed by the
      Company during the three months ended June 30, 2001.




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SIGNATURES
      Pursuant to the requirements of the Securities and Exchange Act of 1934,
      the Registrant has duly caused this report to be signed on its behalf by
      the undersigned, thereunto duly authorized.


First SunAmerica Life Insurance
      Company
      
      RegistrantDated:   August 13,
      2001
    
    /s/ N. SCOTT GILLIS
      N. Scott GillisSenior Vice President(Principal
      Financial Officer)Dated:   August 13,
      2001
    
    /s/ MAURICE S. HEBERT
      Maurice S. HebertVice President and
      Controller(Principal Accounting Officer)




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