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SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
 FORM 10-Q (Mark One) þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004 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 o INDICATE BY CHECK MARK WHETHER THE REGISTRANT IS AN ACCELERATED FILER (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes o     No x THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANTS COMMON STOCK ON MAY
14, 2004 WAS AS FOLLOWS: Common Stock (par value $10,000.00 per share)
    
    300 shares outstanding REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION I(1)(a) AND
(b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE
FORMAT.




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|                            |                                                              |                                              |  |  |  |  |  | 
|--------------------------- | ------------------------------------------------------------ | -------------------------------------------- |  |  |  |  |  | 
|                            |                                                              | BALANCE SHEET                               
|                            |                                                              | STATEMENT OF INCOME AND COMPREHENSIVE INCOME
|                            |                                                              | STATEMENT OF CASH FLOWS                     
|                            |                                                              | NOTES TO FINANCIAL STATEMENTS               
|PART II  OTHER INFORMATION
|                            | Item 1. Legal Proceedings                                   
|                            | Item 2. Changes in Securities and Use of Proceeds           
|                            | Item 3. Defaults Upon Senior Securities                     
|                            | Item 4. Submissions of Matters to a Vote of Security Holders
|                            | Item 5. Other Information                                   
|                            | Item 6. Exhibits and Reports on Form 8-K                    
|SIGNATURES                 
|Exhibit Index              
|EXHIBIT 31.1               
|EXHIBIT 31.2               
|EXHIBIT 32                 



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FIRST SUNAMERICA LIFE INSURANCE COMPANY

INDEX

|                               |                                                                                                      |  |           |       | 
|------------------------------ | ---------------------------------------------------------------------------------------------------- |  | --------- | ----- | 
|                               |                                                                                                      |  | Page     
|                               |                                                                                                      |  | Number(s)
|                               |                                                                                                      |  |          
|Part I  Financial Information |                                                                                                      |  |           |      
|                               | Balance Sheet (Unaudited) -
March 31, 2004 and December 31, 2003                                     |  |           | 2     | 
|                               | Statement of Income and Comprehensive Income (Unaudited)-
Three Months Ended March 31, 2004 and 2003 |  |           | 3-4   | 
|                               | Statement of Cash Flows (Unaudited) -
Three Months Ended March 31, 2004 and 2003                     |  |           | 5-6   | 
|                               | Notes to Financial Statements (Unaudited)                                                            |  |           | 7-10  | 
|                               | Managements Discussion and Analysis of Financial
Condition and Results of Operations                |  |           | 11-25 | 
|                               | Quantitative and Qualitative Disclosures About Market
Risk                                           |  |           | 26    | 
|                               | Disclosure Controls & Procedures                                                                     |  |           | 26    | 
|Part II  Other Information    |                                                                                                      |  | 27-28     |      
|                               | Exhibits and Reports on Form 8-K                                                                     |  |           | 29    | 

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
BALANCE SHEET
(Unaudited)

|                                                          |                                                                                                                                                            |   |                |           |              |   |           |           | 
|--------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------- | --------- | ------------ | - | --------- | --------- | 
|                                                          |                                                                                                                                                            |   | March 31,      |           | December 31,
|                                                          |                                                                                                                                                            |   | 2004           |           | 2003        
|                                                          |                                                                                                                                                            |   |                |           |             
|                                                          |                                                                                                                                                            |   | (in thousands)
|ASSETS                                                    |                                                                                                                                                            |   |                |           |              |   |           |          
|Investments and cash:                                     |                                                                                                                                                            |   |                |           |              |   |           |          
|                                                          | Cash and short-term investments                                                                                                                            |   | $              | 36,835    |              |   | $         | 104,011   | 
|                                                          | Bonds, notes and redeemable preferred stocks
available for sale, at fair value (amortized
cost: March 31, 2004, $2,805,642;
December 31, 2003, $2,617,647) |   |                | 2,900,146 |              |   |           | 2,657,812 | 
|                                                          | Mortgage loans                                                                                                                                             |   |                | 217,544   |              |   |           | 215,521   | 
|                                                          | Policy loans                                                                                                                                               |   |                | 34,415    |              |   |           | 35,251    | 
|                                                          | Common stocks available for sale, at
fair value (cost: March 31, 2004, $188;
December 31, 2003, $291)                                                      |   |                | 198       |              |   |           | 295       | 
|                                                          | Securities lending collateral                                                                                                                              |   |                | 354,201   |              |   |           | 154,756   | 
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|                                                          | Total investments and cash                                                                                                                                 |   |                | 3,543,339 |              |   |           | 3,167,646 | 
|                                                         
|Variable annuity assets held in separate accounts         |                                                                                                                                                            |   | 449,487        |           |              |   | 438,224   |          
|Accrued investment income                                 |                                                                                                                                                            |   | 29,196         |           |              |   | 27,577    |          
|Deferred acquisition costs                                |                                                                                                                                                            |   | 154,125        |           |              |   | 162,947   |          
|Income taxes currently receivable from Parent             |                                                                                                                                                            |   |               |           |              |   | 1,360     |          
|Other assets                                              |                                                                                                                                                            |   | 20,679         |           |              |   | 16,728    |          
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|TOTAL ASSETS                                              |                                                                                                                                                            | $ | 4,196,826      |           |              | $ | 3,814,482 |          
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY                      |                                                                                                                                                            |   |                |           |              |   |           |          
|Reserves, payables and accrued liabilities:               |                                                                                                                                                            |   |                |           |              |   |           |          
|                                                          | Reserves for fixed annuity contracts                                                                                                                       |   | $              | 2,679,964 |              |   | $         | 2,490,145 | 
|                                                          | Reserves for universal life insurance
contracts                                                                                                            |   |                | 229,791   |              |   |           | 232,271   | 
|                                                          | Income tax currently payable to Parent                                                                                                                     |   |                | 2,330     |              |   |           |          | 
|                                                          | Securities lending payable                                                                                                                                 |   |                | 354,201   |              |   |           | 154,756   | 
|                                                          | Payable to brokers                                                                                                                                         |   |                | 19,962    |              |   |           | 40,852    | 
|                                                          | Other liabilities                                                                                                                                          |   |                | 22,495    |              |   |           | 66,814    | 
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|Total reserves, payables and accrued liabilities          |                                                                                                                                                            |   | 3,308,743      |           |              |   | 2,984,838 |          
|                                                         
|Variable annuity liabilities related to
separate accounts |                                                                                                                                                            |   | 449,487        |           |              |   | 438,224   |          
|Deferred income taxes                                     |                                                                                                                                                            |   | 60,218         |           |              |   | 41,895    |          
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|Total liabilities                                         |                                                                                                                                                            |   | 3,818,448      |           |              |   | 3,464,957 |          
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|Shareholders equity:                                     |                                                                                                                                                            |   |                |           |              |   |           |          
|                                                          | Common stock                                                                                                                                               |   |                | 3,000     |              |   |           | 3,000     | 
|                                                          | Additional paid-in capital                                                                                                                                 |   |                | 259,428   |              |   |           | 259,428   | 
|                                                          | Retained earnings                                                                                                                                          |   |                | 69,856    |              |   |           | 68,657    | 
|                                                          | Accumulated other comprehensive income                                                                                                                     |   |                | 46,094    |              |   |           | 18,440    | 
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|                                                          | Total shareholders equity                                                                                                                                 |   |                | 378,378   |              |   |           | 349,525   | 
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                |                                                                                                                                                            | $ | 4,196,826      |           |              | $ | 3,814,482 |          
|                                                          |                                                                                                                                                            |   |                |           |              |   |           |          

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
For the three months ended March 31, 2004 and 2003
(Unaudited)

|                                                            |                                                                   |                                                          |        |                |        |      |        |        |        | 
|----------------------------------------------------------- | ----------------------------------------------------------------- | -------------------------------------------------------- | ------ | -------------- | ------ | ---- | ------ | ------ | ------ | 
|                                                            |                                                                   |                                                          |        | 2004           |        | 2003
|                                                            |                                                                   |                                                          |        |                |        |     
|                                                            |                                                                   |                                                          |        | (in thousands)
|REVENUES                                                    |                                                                   |                                                          |        |                |        |      |        |       
|                                                            | Fee income:                                                       |                                                          |        |                |        |      |        |        |       
|                                                            |                                                                   | Variable annuity fees                                    |        | $              | 2,197  |      |        | $      | 1,890  | 
|                                                            |                                                                   | Universal life insurance policy fees, net of reinsurance |        |                | 1,526  |      |        |        | 1,385  | 
|                                                            |                                                                   | Surrender charges                                        |        |                | 549    |      |        |        | 481    | 
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|                                                            | Total fee income                                                  |                                                          |        | 4,272          |        |      |        | 3,756  |       
|                                                           
|                                                            | Investment income                                                 |                                                          |        | 40,002         |        |      |        | 24,886 |       
|                                                            | Net realized investment gains (losses)                            |                                                          |        | (1,157         | )      |      |        | 1,155  |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|                                                           
|Total revenues                                              |                                                                   |                                                          | 43,117 |                |        |      | 29,797 |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|BENEFITS AND EXPENSES                                       |                                                                   |                                                          |        |                |        |      |        |       
|                                                            | Interest expense:                                                 |                                                          |        |                |        |      |        |        |       
|                                                            |                                                                   | Interest credited to fixed annuity contracts             |        |                | 21,671 |      |        |        | 13,520 | 
|                                                            |                                                                   | Interest credited to universal life insurance contracts  |        |                | 2,703  |      |        |        | 2,742  | 
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|                                                            | Total interest expense                                            |                                                          |        | 24,374         |        |      |        | 16,262 |       
|                                                           
|                                                            | General and administrative expenses                               |                                                          |        | 3,025          |        |      |        | 2,472  |       
|                                                            | Amortization of deferred acquisition costs                        |                                                          |        | 7,978          |        |      |        | 5,250  |       
|                                                            | Annual commissions                                                |                                                          |        | 494            |        |      |        | 182    |       
|                                                            | Claims on universal life contracts, net of reinsurance recoveries |                                                          |        | 1,290          |        |      |        | 1,276  |       
|                                                            | Guaranteed minimum death benefits                                 |                                                          |        | 483            |        |      |        | 215    |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|Total benefits and expenses                                 |                                                                   |                                                          | 37,644 |                |        |      | 25,657 |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|PRETAX INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE |                                                                   |                                                          | 5,473  |                |        |      | 4,140  |       
|                                                           
|Income tax expense                                          |                                                                   |                                                          | 2,260  |                |        |      | 1,686  |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE        |                                                                   |                                                          | 3,213  |                |        |      | 2,454  |       
|                                                           
|Cumulative effect of accounting change, net of tax          |                                                                   |                                                          | (2,014 | )              |        |      |       |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       
|NET INCOME                                                  |                                                                   | $                                                        | 1,199  |                |        | $    | 2,454  |       
|                                                            |                                                                   |                                                          |        |                |        |      |        |       

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF INCOME AND COMPREHENSIVE INCOME
For the three months ended March 31, 2004 and 2003
(Unaudited)

|                                        |                                                                                                                                                                  |                            |        |                |        |   |       |       |       | 
|--------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | -------------- | ------ | - | ----- | ----- | ----- | 
|                                        |                                                                                                                                                                  |                            |        | 2004           | 2003  
|                                        |                                                                                                                                                                  |                            |        |                |       
|                                        |                                                                                                                                                                  |                            |        | (in thousands)
|OTHER COMPREHENSIVE INCOME, NET OF TAX: |                                                                                                                                                                  |                            |        |                |        |   |       |      
|                                        | Net unrealized gains on fixed maturity and equity
securities available for sale identified in the current
period less amortization of deferred acquisition costs |                            | $      | 41,698         |        |   | $     | 2,606 |      
|                                       
|                                        | Less reclassification adjustment for net
realized (gains) losses included in net income                                                                          |                            |        | 847            |        |   |       | (582  | )    
|                                       
|                                        | Income tax expense                                                                                                                                               |                            |        | (14,891        | )      |   |       | (709  | )    
|                                        |                                                                                                                                                                  |                            |        |                |        |   |       |      
|                                        |                                                                                                                                                                  | OTHER COMPREHENSIVE INCOME |        |                | 27,654 |   |       |       | 1,315 | 
|                                        |                                                                                                                                                                  |                            |        |                |        |   |       |      
|COMPREHENSIVE INCOME                    |                                                                                                                                                                  | $                          | 28,853 |                |        | $ | 3,769 |      
|                                        |                                                                                                                                                                  |                            |        |                |        |   |       |      

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS
For the three months ended March 31, 2004 and 2003
(Unaudited)

|                                                                                  |                                                     |                                                            |          |                |         |      |         |          |        |  
|--------------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------------------------------- | -------- | -------------- | ------- | ---- | ------- | -------- | ------ | -
|                                                                                  |                                                     |                                                            |          | 2004           |         | 2003
|                                                                                  |                                                     |                                                            |          |                |         |     
|                                                                                  |                                                     |                                                            |          | (in thousands)
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                                     |                                                            |          |                |         |      |         |         
|Net income                                                                        |                                                     | $                                                          | 1,199    |                |         | $    | 2,454   |         
|Adjustments to reconcile net income to
net cash provided by operating activities: |                                                     |                                                            |          |                |         |      |         |         
|                                                                                  | Cumulative effect of accounting change, net of tax  |                                                            |          | 2,014          |         |      |         |         |       
|                                                                                  | Interest credited to:                               |                                                            |          |                |         |      |         |          |       
|                                                                                  |                                                     | Fixed annuity contracts                                    |          |                | 21,671  |      |         |          | 13,520 |  
|                                                                                  |                                                     | Universal life insurance contracts                         |          |                | 2,703   |      |         |          | 2,742  |  
|                                                                                  | Net realized investment (gains) losses              |                                                            |          | 1,157          |         |      |         | (1,155   | )     
|                                                                                  | Accretion of net discounts on investments           |                                                            |          | 1,558          |         |      |         | 508      |       
|                                                                                  | Amortization of deferred acquisition costs          |                                                            |          | 7,978          |         |      |         | 5,250    |       
|                                                                                  | Acquisition costs deferred                          |                                                            |          | (13,767        | )       |      |         | (10,558  | )     
|                                                                                  | Provision for deferred income taxes                 |                                                            |          | 4,517          |         |      |         | 3,714    |       
|                                                                                  | Change in:                                          |                                                            |          |                |         |      |         |          |       
|                                                                                  |                                                     | Accrued investment income                                  |          |                | (1,619  | )    |         |          | 49     |  
|                                                                                  |                                                     | Income taxes currently (receivable from) payable to Parent |          |                | 3,690   |      |         |          | (2,028 | )
|                                                                                  |                                                     | Other liabilities                                          |          |                | (10,859 | )    |         |          | (1,551 | )
|                                                                                  | Other, net                                          |                                                            |          | (686           | )       |      |         | (768     | )     
|                                                                                  |                                                     |                                                            |          |                |         |      |         |         
|NET CASH PROVIDED BY OPERATING ACTIVITIES                                         |                                                     |                                                            | 19,556   |                |         |      | 12,177  |         
|                                                                                  |                                                     |                                                            |          |                |         |      |         |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                                                     |                                                            |          |                |         |      |         |         
|Purchases of:                                                                     |                                                     |                                                            |          |                |         |      |         |         
|                                                                                  | Bonds, notes and redeemable preferred stocks        |                                                            |          | (450,974       | )       |      |         | (212,422 | )     
|                                                                                  | Mortgage loans                                      |                                                            |          | (6,394         | )       |      |         | (7,454   | )     
|                                                                                  | Other investments, excluding short-term investments |                                                            |          | (13            | )       |      |         | (3       | )     
|Sales of:                                                                         |                                                     |                                                            |          |                |         |      |         |         
|                                                                                  | Bonds, notes and redeemable preferred stocks        |                                                            |          | 183,211        |         |      |         | 104,288  |       
|                                                                                  | Other investments, excluding short-term investments |                                                            |          | 102            |         |      |         |         |       
|Redemptions and maturities of:                                                    |                                                     |                                                            |          |                |         |      |         |         
|                                                                                  | Bonds, notes and redeemable preferred stocks        |                                                            |          | 56,116         |         |      |         | 38,738   |       
|                                                                                  | Mortgage loans                                      |                                                            |          | 4,419          |         |      |         | 3,167    |       
|                                                                                  | Other investments, excluding short-term investments |                                                            |          | 849            |         |      |         | 763      |       
|                                                                                  |                                                     |                                                            |          |                |         |      |         |         
|NET CASH USED IN INVESTING ACTIVITIES                                             |                                                     | $                                                          | (212,684 | )              |         | $    | (72,923 | )       
|                                                                                  |                                                     |                                                            |          |                |         |      |         |         

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
STATEMENT OF CASH FLOWS (Continued)
For the three months ended March 31, 2004 and 2003
(Unaudited)

|                                                                         |                                    |   |                |         |      |   |         |         |  
|------------------------------------------------------------------------ | ---------------------------------- | - | -------------- | ------- | ---- | - | ------- | ------- | -
|                                                                         |                                    |   | 2004           |         | 2003
|                                                                         |                                    |   |                |         |     
|                                                                         |                                    |   | (in thousands)
|CASH FLOWS FROM FINANCING ACTIVITIES:                                    |                                    |   |                |         |      |   |         |        
|Deposits received on:                                                    |                                    |   |                |         |      |   |         |        
|                                                                         | Fixed annuity contracts            |   | $              | 183,002 |      |   | $       | 138,770 |  
|                                                                         | Universal life insurance contracts |   |                | 1,818   |      |   |         | 7,489   |  
|Net exchanges to (from) the fixed accounts of variable annuity
contracts |                                    |   | (5,713         | )       |      |   | 3,712   |        
|Withdrawal payments on:                                                  |                                    |   |                |         |      |   |         |        
|                                                                         | Fixed annuity contracts            |   |                | (37,832 | )    |   |         | (32,409 | )
|                                                                         | Universal life insurance contracts |   |                | (2,398  | )    |   |         | (2,678  | )
|Claims and annuity payments on:                                          |                                    |   |                |         |      |   |         |        
|                                                                         | Fixed annuity contracts            |   |                | (9,073  | )    |   |         | (6,590  | )
|                                                                         | Universal life insurance contracts |   |                | (3,852  | )    |   |         | (4,603  | )
|                                                                         |                                    |   |                |         |      |   |         |        
|NET CASH PROVIDED BY FINANCING ACTIVITIES                                |                                    |   | 125,952        |         |      |   | 103,691 |        
|                                                                         |                                    |   |                |         |      |   |         |        
|NET INCREASE (DECREASE) IN CASH AND SHORT-TERM INVESTMENTS               |                                    |   | (67,176        | )       |      |   | 42,945  |        
|CASH AND SHORT-TERM INVESTMENTS AT BEGINNING OF PERIOD                   |                                    |   | 104,011        |         |      |   | 37,955  |        
|                                                                         |                                    |   |                |         |      |   |         |        
|CASH AND SHORT-TERM INVESTMENTS AT END OF PERIOD                         |                                    | $ | 36,835         |         |      | $ | 80,900  |        
|                                                                         |                                    |   |                |         |      |   |         |        
|SUPPLEMENTAL CASH FLOW INFORMATION:                                      |                                    |   |                |         |      |   |         |        
|                                                                         | Interest paid on indebtedness      |   | $              | 682     |      |   | $       | 130     |  
|                                                                         |                                    |   |                |         |      |   |         |        
|                                                                         | Net income taxes paid by Parent    |   | $              | 355     |      |   | $       |        |  
|                                                                         |                                    |   |                |         |      |   |         |        

See accompanying notes to financial statements.

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)



|1. |  | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | First SunAmerica Life Insurance Company (the Company) is a New
York-domiciled life insurance company principally engaged in the business
of writing fixed and variable annuities for retirement savings in the
State of New York. The Company is a direct wholly owned subsidiary of
SunAmerica Life Insurance Company (the Parent), which is a wholly owned
subsidiary of AIG Retirement Services, Inc. (AIGRS)(formerly AIG
SunAmerica Inc.), a subsidiary of American International Group, Inc.
(AIG). AIG is a holding company, which through its subsidiaries is
engaged in a broad range of insurance and insurance-related activities,
financial services, retirement services and asset management.                                                                                                                                                                                                                                                 
|  
|   |  | 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
March 31, 2004 and December 31, 2003, the results of its operations for
the three months ended March 31, 2004 and 2003 and its cash flows for the
three months ended March 31, 2004 and 2003. The results of operations
for the three months ended March 31, 2004 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, 2003,
contained in the Companys 2003 Annual Report on Form 10-K. Certain
prior period items have been reclassified to conform to the current
periods presentation.                                                                         
|  
|2. |  | RECENTLY ISSUED ACCOUNTING STANDARDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | In July 2003, the American Institute of Certified Public Accountants
issued Statement of Position 03-1, Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and for
Separate Accounts (SOP 03-1). This statement was effective as of
January 1, 2004, and requires the Company to recognize a liability for
guaranteed minimum death benefits and other living benefits related to
its variable annuities and modifies certain disclosures and financial
statement presentations for these products. In addition, SOP 03-1
addresses the presentation and reporting of separate accounts and the
capitalization and amortization of sales inducements. The Company
reported for the first quarter of 2004 a one-time cumulative accounting
charge upon adoption of $2,014,000 ($3,098,000 pre-tax) to reflect the
liability and the related impact of deferred acquisition costs (DAC) as
of January 1, 2004.
|  
|   |  | The Company issues variable annuities for which the investment risk is
generally borne by the contract holder in all, but the fixed-rate account
options. For many of the Companys variable annuities, the Company
contractually guarantees to the contract holder either (a) total deposits
made to the contract less any partial withdrawals plus a minimum return
(and in two minor instances, no minimum returns), or (b) the highest
contract value on a specified anniversary date minus any withdrawals
following the contract anniversary. These guarantees are payable in the
event of death and are referred to as guaranteed minimum death benefits
(GMDB).                                                                                                                                                                                                                                                                                           
|  
|   |  | The assets supporting the variable portion of variable annuities are
carried at fair value and reported as summary total variable annuity
assets held in separate accounts with an equivalent summary total
reported for liabilities. Amounts assessed against the contract holders
for mortality, administrative, and other services are included in
variable annuity fees and changes in liabilities for minimum guarantees
are included in guaranteed minimum death benefits, in the statement of
income and comprehensive income. Separate account net investment income,
net investment gains and losses, and the related liability changes are
offset within the same line item in the statement of income and
comprehensive income.                                                                                                                                                                                                                        

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##### Table of Contents



FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)



|2. |  | RECENTLY ISSUED ACCOUNTING STANDARDS (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The GMDB liability is determined each period end by estimating the
expected value of death benefits in excess of the projected account
balance and recognizing the excess ratably over the accumulation period
based on total expected assessments. The Company regularly evaluates
estimates used and adjusts the additional liability balance, with a
related charge or credit to benefit expense, if actual experience or
other evidence suggests that earlier assumptions should be revised.
|  
|   |  | Details concerning the Companys guaranteed benefits exposures as of
March 31, 2004 are as follows:                                                                                                                                                                                                                                                                                                                                                                                             

|                       |                                          |  |                |         |                  |  |                     |         |  
|---------------------- | ---------------------------------------- |  | -------------- | ------- | ---------------- |  | ------------------- | ------- | -
|                       |                                          |  |                |         |                  |  | Highest Specified  
|                       |                                          |  |                |         |                  |  | Anniversary Account
|                       |                                          |  |                |         |                  |  | Value Minus        
|                       |                                          |  | Return of Net  |         | Withdrawals Post
|                       |                                          |  | Deposits       |         | Anniversary     
|                       |                                          |  |                |         |                 
|                       |                                          |  | (in thousands)
|In the event of death: |                                          |  |                |         |                  |  |                     |        
|                       | Account value                            |  | $              | 147,255 |                  |  | $                   | 604,174 |  
|                       | Net amount at risk (a)                   |  |                | 633     |                  |  |                     | 75,154  |  
|                       | Average attained age of contract holders |  |                | 65      |                  |  |                     | 62      |  
|                       |                                          |  |                |         |                  |  |                     |        
|                       | Range of guaranteed minimum return rates |  |                | 0       | %                |  |                     | 0       | %



---

|(a) |  | Net amount at risk represents the guaranteed benefit
expense in excess of the current account value, if all contract
holders died at the same balance sheet date.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The following summarizes the liability for guaranteed of benefits on
variable contracts reflected in the general account:
| |  | -------------------------------------------------------------------------------------------------------------------------

|                              |  |                |       |  
|----------------------------- |  | -------------- | ----- | -
|                              |  | (in thousands)
|Balance at January 1, 2004(b) |  | $              | 1,640 |  
|Incurred guarantee benefits   |  |                | 483   |  
|Paid guarantee benefits       |  |                | (483  | )
|                              |  |                |       |  
|Balance at March 31, 2004     |  | $              | 1,640 |  
|                              |  |                |       |  



---

|(b) |  | Includes amounts from the one-time cumulative accounting
change resulting from the adoption of SOP 03-1.
|--- |  | --------------------------------------------------------------------------------------------------------

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##### Table of Contents



FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)



|2. |  | RECENTLY ISSUED ACCOUNTING STANDARDS (Continued)                                                      
|-- |  | ------------------------------------------------------------------------------------------------------
|  
|   |  | The following assumptions and methodology were used to determine the GMDB
liability at March 31, 2004:



| |  |  | Data used was 5,000 stochastically generated investment performance scenarios.
| | - |  | ------------------------------------------------------------------------------
|
| |  |  | Mean investment performance assumption was 10%.                               
|
| |  |  | Volatility assumption was 16%.                                                
|
| |  |  | Mortality was assumed to be 64% of the 75-80 ALB table.                       
|
| |  |  | Lapse rates vary by contract type and duration and range from 1% to 30%.      
|
| |  |  | The discount rate was approximately 8%.                                       



|   |  | The Company currently offers enhanced crediting rates or bonus payments
to contract holders on certain of its products. These sales inducements
are deferred and amortized over the life of the policy using the same
methodology and assumptions used to amortize DAC. The Company previously
deferred these sales inducements as part of DAC and reported the
amortization of such amounts as part of DAC amortization. Upon
implementation of SOP 03-1, the Company reclassified sales inducements of
$18.6 million from DAC to deferred sales inducements, which are reported
in other assets on the balance sheet. For the three months ended March
31, 2004, sales inducements of $2.6 million was deferred. Amortization
of the deferred sales inducements is reported as part of amortization of
deferred acquisition costs on the statement of income and comprehensive
income. For the three months ended March 31, 20004, amortization of
sales inducements was $0.6 million. Prior period balance sheet and
statement of income and comprehensive income presentation has been
reclassified to conform to the new presentation.                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | CONTINGENT LIABILITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Various lawsuits against the Company have arisen in the ordinary course
of business. Contingent liabilities arising from litigation, income
taxes and other matters are not considered material in relation to the
financial position of the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | The Companys current financial strength and counterparty credit ratings
from Standard & Poors are based in part on a guarantee (the Guarantee)
of the Companys insurance policy obligations by American Home Assurance
Company (American Home), a subsidiary of AIG, and a member of an AIG
intercompany pool, and the belief that the Company is viewed as
a strategically important member of AIG. The Guarantee is
unconditional and irrevocable, and policyholders have the right to
enforce the Guarantee directly against American Home.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | The Companys current financial strength rating from Moodys is based in
part on a support agreement between the Company and AIG (the Support
Agreement), pursuant to which AIG has agreed that AIG will cause the
Company to maintain a policyholders surplus of not less than $1 million
or such greater amount as shall be sufficient to enable the Company to
perform its obligations under any policy issued by it. The Support
Agreement also provides that if the Company needs funds not otherwise
available to it to make timely payment of its obligations under policies
issued by it, AIG will provide such funds at the request of the Company.
The Support Agreement is not a direct or indirect guarantee by AIG to any
person of any obligation of the Company. AIG may terminate the Support
Agreement with respect to outstanding obligations of the Company only
under circumstances where the Company attains, without the benefit of the
Support Agreement, a financial strength-rating equivalent to that held by
the Company with the benefit of the Support Agreement. Policyholders
have the right to cause the Company to enforce its rights against AIG
and, if the Company fails or refuses to take timely action to enforce the
Support Agreement or if the

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FIRST SUNAMERICA LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)



|3. |  | CONTINGENT LIABILITIES (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Company defaults in any claim or payment owed to such policyholder when
due, have the right to enforce the Support Agreement directly against
AIG.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | American Home does not publish financial statements, although it files
statutory annual and annual reports with the New York State Insurance
Department, where such reports are available to the public. AIG is a
reporting company under the Securities Exchange Act of 1934, and
publishes annual reports on Form 10-K and annual reports on Form 10-Q,
which are available from the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                        
|  
|   |  | At March 31, 2004, the Company was obligated to purchase approximately
$6,000,000 of asset backed securities in the ordinary course of business.
The expiration dates of these commitments are as follows: $1,000,000 in
2004 and $5,000,000 in 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|4. |  | RELATED-PARTY MATTERS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | On October 31, 2003, the Company entered into an existing credit
agreement under which the Company agreed to make loans to AIG in an
aggregate amount of $5,000,000. This commitment expires on October 30,
2004. There was no outstanding balance under this agreement at March 31,
2004.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | On January 1, 2004, the Company entered into an administrative services
agreement with AIG SunAmerica Asset Management Corp. (SAAMCo), whereby
SAAMCo will pay a percentage on all assets invested through the
Companys variable annuity products in exchange for services performed
(Administrative Service Agreement). SAAMCo is the investment advisor
or business manager for certain trusts that hold deposits from the
Companys variable annuity products. Amounts paid or accrued to the
Company under this agreement totaled $0.4 million in 2004 and are
included in variable annuity fees in the statement of income and
comprehensive income. A fee of $0.4 million was paid under a different
agreement in 2003.

10



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##### Table of Contents



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 March 31, 2004 (2004) and March 31, 2003 (2003) 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.

The Company has one business segment, annuity operations, which consists
of the sale and administration of deposit-type insurance contracts, such as
fixed and variable annuities and universal life insurance contracts. The
Company focuses primarily on the marketing of fixed annuity products.

CRITICAL ACCOUNTING POLICIES

The Company considers among its most critical accounting policies those
policies with respect to valuation of certain financial instruments,
amortization of deferred acquisition costs and valuation of reserves
for guaranteed benefits. In the implementation of each of
the aforementioned policies, management is required to exercise its judgment on
both a quantitative and qualitative basis. Further explanation of how
management exercises that judgment follows:

VALUATION OF CERTAIN FINANCIAL INSTRUMENTS: Gross unrealized losses on
debt and equity securities available for sale amounted to $9.2 million at March
31, 2004. In determining if and when a
decline in fair value below amortized cost is other-than-temporary, the Company
evaluates at each reporting period the market conditions, offering prices,
trends of earnings, price multiples, and other key measures for our investments
in debt and marketable equity securities. In particular, for debt, the Company
assesses the probability that all amounts due are collectible according to the
contractual terms of the obligation. When such a decline in value is deemed to
be other-than-temporary, the Company recognizes an impairment loss in the
current period operating results to the extent of the decline (See also
discussion within Capital Resources and Liquidity herein).

Securities in our portfolio with a carrying value of approximately $552.0
million at March 31, 2004 do not have readily determinable market prices. For
these securities, we estimate their fair value with internally prepared
valuations (including those based on estimates of future profitability).
Otherwise, we use our most recent

11



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##### Table of Contents



purchases and sales of similar unquoted securities, independent broker
quotes or comparison to similar securities with quoted prices when possible to
estimate the fair value of those securities. All such securities are classified
as available for sale. Our ability to liquidate our positions in these
securities will be impacted to a significant degree by the lack of an actively
traded market, and we may not be able to dispose of these investments in a
timely manner. Although we believe our estimates reasonably reflect the fair
value of those securities, our key assumptions about the risk-free interest
rates, risk premiums, performance of underlying collateral, if any, and other
factors may not reflect those of an active market.

AMORTIZATION OF DEFERRED ACQUISITION COSTS: The Company amortizes
deferred acquisition costs (DAC) based on a percentage of expected gross
profits (EGPs) over the life of the underlying policies. EGPs are computed
based on assumptions related to the underlying policies written, including
their anticipated duration, net spreads earned during the life of the
contracts, costs of providing policy guarantees and the level of expenses
necessary to maintain the policies. The Company revises future DAC
assumptions, referred to herein as a DAC unlocking, when estimates of future
gross profits to be realized on its annuity policies are revised. Increases in
future EGPs may result from higher interest spread and/or lower surrender rate
assumptions, while decreases in future EGPs may result from lower interest
spread and/or higher surrender rate assumptions. DAC amortization for the
current period is reduced when future EGPs are increased and increased when
future EGPs are decreased.

RESERVE FOR GUARANTEED BENEFITS: Pursuant to the adoption of Statement of
Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain
Nontraditional Long-Duration Contracts and for Separate Accounts (SOP 03-1)
on January 1, 2004, the Company is required to recognize a liability for
guaranteed minimum death benefits (GMDB). In calculating the projected
liability, five thousand stochastically generated investment performance
scenarios were developed with a mean investment performance of 10%. Additional
assumptions are made for mortality, lapse rates of return and the volatility of
equity markets.

On January 1, 2004, the Company entered into an administrative services
agreement with AIG SunAmerica Asset Management Corp. (SAAMCo), whereby SAAMCo
will pay a percentage on all assets invested through the Companys Variable
Annuity products in exchange for services performed. (Administrative Service
Agreement). SAAMCo is the investment advisor or business manager for certain
trusts that hold deposits from the Companys variable annuity products. .
Amounts paid or accrued to the Company under this agreement totaled $0.4
million in 2004 and are included in variable annuity fees in the statement of
income and comprehensive income. A fee of $0.4 million was paid under a
different agreement in 2003.

RESULTS OF OPERATIONS

NET INCOME totaled $1.2 million in 2004 compared with $2.5 million in
2003.

PRETAX INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE totaled $5.5
million in 2004, compared with $4.1 million in 2003. The increase in 2004
compared to 2003 was primarily due to higher net investment spread, partially
offset by higher DAC amortization and net realized investment losses.

INCOME TAX EXPENSE totaled $2.3 million in 2004 and $1.7 million in 2003,
representing effective tax rates of 41% in both 2004 and 2003.

CUMULATIVE EFFECT OF ACCOUNTING CHANGE, NET OF TAX reflected the adoption
of SOP 03-1 on January 1, 2004. The Company recorded a loss of $2.0 million,
net of tax, which is recognized in the statement of income and comprehensive
income as a cumulative effect of accounting change for the quarter ended March
31, 2004.

NET INVESTMENT SPREAD, a non-GAAP measure which represents investment
income earned on invested assets less interest credited to fixed annuity
contracts, is a key measurement used by the Company in evaluating the
profitability of its fixed annuity business. Accordingly, the Company presents
an analysis of net investment spread because the Company has determined this
measure to be useful and meaningful.

12



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##### Table of Contents



In evaluating its investment yield and net investment spread, the Company
calculates average invested assets using the amortized cost of bonds, notes and
redeemable preferred stock. This basis does not include unrealized gains and
losses, which are reflected in the carrying value (i.e., fair value) of those
investments pursuant to Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities. In the
calculation of average invested assets, the Company excludes cash collateral
received from the securities lending program, which is offset by a securities
lending payable in the same amount. The Company participates in a securities
lending program with an affiliated agent, pursuant to which it lends its
securities and primarily takes cash as collateral with respect to the
securities lent. Participation in securities lending agreements provides
additional net investment income for the Company, resulting from investment
income earned on the collateral, less interest paid on the securities lending
agreements and the related management fees paid to administer the program.

An analysis of net
investment spread and a reconciliation to pretax income is
presented in the following table:

|                                                        |  |                              |         |      |  |   |         |  
|------------------------------------------------------- |  | ---------------------------- | ------- | ---- |  | - | ------- | -
|                                                        |  | Three months ended March 31,
|                                                        |  |                             
|                                                        |  | 2004                         |         | 2003
|                                                        |  |                              |         |     
|                                                        |  | (in thousands)              
|Investment income                                       |  | $                            | 40,002  |      |  | $ | 24,886  |  
|Interest credited to fixed annuity contracts            |  |                              | (21,671 | )    |  |   | (13,520 | )
|Interest credited to universal life insurance contracts |  |                              | (2,703  | )    |  |   | (2,742  | )
|                                                        |  |                              |         |      |  |   |         |  
|Net investment spread                                   |  |                              | 15,628  |      |  |   | 8,624   |  
|Net realized investment (losses) gains                  |  |                              | (1,157  | )    |  |   | 1,155   |  
|Fee income, net of reinsurance                          |  |                              | 4,272   |      |  |   | 3,756   |  
|General and administrative expenses, net of deferrals   |  |                              | (3,025  | )    |  |   | (2,472  | )
|Amortization of DAC                                     |  |                              | (7,978  | )    |  |   | (5,250  | )
|Annual commissions                                      |  |                              | (494    | )    |  |   | (182    | )
|Claims on UL contracts, net of reinsurance recoveries   |  |                              | (1,290  | )    |  |   | (1,276  | )
|Guaranteed minimum death benefits                       |  |                              | (483    | )    |  |   | (215    | )
|                                                        |  |                              |         |      |  |   |         |  
|Pretax income                                           |  | $                            | 5,473   |      |  | $ | 4,140   |  
|                                                        |  |                              |         |      |  |   |         |  

Net investment spread totaled $15.6 million in 2004 and $8.6 million in
2003. These amounts equal 2.06% on average invested assets (computed on a
daily basis) of $3.03 billion in 2004 and 2.00% on average invested assets of
$1.73 billion in 2003. The increase in the net investment spread rate was
primarily due to the decline in overall rates paid in 2004 compared to 2003, as
the Company issued new fixed annuities at rates below the prior year average
rates. The components of net investment spread were as follows:

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|                                                                 |  |                              |            |      |  |   |            |  
|---------------------------------------------------------------- |  | ---------------------------- | ---------- | ---- |  | - | ---------- | -
|                                                                 |  | Three months ended March 31,
|                                                                 |  |                             
|                                                                 |  | 2004                         |            | 2003
|                                                                 |  |                              |            |     
|                                                                 |  | (in thousands)              
|Net investment spread                                            |  | $                            | 15,628     |      |  | $ | 8,624      |  
|Average invested assets                                          |  |                              | 3,031,376  |      |  |   | 1,725,080  |  
|Average interest-bearing liabilities                             |  |                              | (2,843,739 | )    |  |   | (1,601,847 | )
|                                                                 |  |                              |            |      |  |   |            |  
|Yield on average invested assets                                 |  |                              | 5.28       | %    |  |   | 5.77       | %
|Rate paid on average interest bearing liabilities                |  |                              | 3.43       |      |  |   | 4.06       |  
|                                                                 |  |                              |            |      |  |   |            |  
|Difference between yield and interest rate paid                  |  |                              | 1.85       | %    |  |   | 1.71       | %
|                                                                 |  |                              |            |      |  |   |            |  
|Net investment spread as a percentage of average
invested assets |  |                              | 2.06       | %    |  |   | 2.00       | %
|                                                                 |  |                              |            |      |  |   |            |  

Growth in average invested assets resulted primarily from increased sales
in 2004 and 2003 relating to the marketing of an increased number of fixed annuity
distribution partners in New York. Changes in average invested assets also
reflect sales of fixed account options of the Companys variable annuity
products, and renewal deposits on its universal life products (UL Deposits).
Sales of fixed annuities and fixed account options (Fixed Annuity Deposits)
and UL Deposits totaled $225.7 million in 2004 and $168.0 million in 2003. In
the fourth quarter of 2003, Fixed Annuity Deposits totaled $474.0 million. The
increase in Fixed Annuity Deposits in 2004 over same quarter in the prior year
is due primarily to an increase of over 40% in the number of fixed annuity
distribution partners in New York from March 31, 2003 to March 31, 2004. In
response to the low interest rate environment, the Company reduced the minimum
rate paid on its fixed annuity products below the historically prevailing rate
in order to maintain the appropriate margin. The Company does not intend to
write business below its targeted rates of return to gain market
share and
anticipates further declines in Fixed Annuity Deposits in coming months until
the interest rate environment improves.

Investment income (and the related yields on average invested assets)
totaled $40.0 million (5.28%) in 2004 compared with $24.9 million (5.77%) in
2003. The decrease in the investment yield in 2004 compared to 2003 primarily
reflects a lower prevailing interest rate environment. Investment income has
been reduced by expenses incurred to manage the investment portfolio of $0.3
million in 2004 and $0.1 million in 2003. These expenses are included as a
reduction of investment income in the statement of income and comprehensive
income.

Interest expense totaled $24.4 million in 2004 and $16.3 million in 2003.
The average rate paid on all interest-bearing liabilities was 3.43% in 2004
compared with 4.06% in 2003. Interest-bearing liabilities averaged $2.84
billion during 2004 and $1.60 billion during 2003. The decline in overall rates
paid in 2004 compared to 2003 resulted primarily from the impact of a declining
interest rate environment, as the Company issued new fixed annuities at rates
below the prior year average rates.

NET REALIZED INVESTMENT GAINS (LOSSES) totaled $1.2 million of losses in
2004, compared with net realized investment gains of $1.2 million in 2003 and
include impairment writedowns of $0.4 million and $0, respectively. Thus, net
realized losses from sales and redemptions of investments totaled $0.8 million
in 2004, compared with net realized gains from sales and redemptions of
investments of $1.2 million in 2003.

The Company sold or redeemed invested assets, principally bonds and notes,
aggregating $230.5 million in 2004 and $145.1 million in 2003. 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 0.10% and 0.26% of average
invested assets for 2004

14



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and 2003, 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 $0.4 million of provisions applied to bonds
in 2004. There were no impairments in 2003. On an annualized basis, impairment
writedowns represent 0.06% of average invested assets for 2004. For the twenty
quarters ended March 31, 2004, impairment writedowns as a percentage of average
invested assets have ranged from 0.00% to 3.99% and have averaged 0.77%. Such
writedowns are based upon estimates of the fair value of invested assets and
recorded when declines in the value of such assets are considered to be other
than temporary. Actual realization will be dependent upon future events.

VARIABLE ANNUITY FEES are based on the market value of assets in separate
accounts supporting variable annuity contracts. Such fees totaled $2.2 million
in 2004 and $1.9 million in 2003. The increased fees in 2004 as compared to
2003 primarily reflects the more favorable equity market conditions since the
early part of 2003, and the resulting favorable impact on market values of
assets in the separate accounts. Variable annuity fees represent 1.96% and
1.94% of average variable annuity assets in 2004 and 2003, respectively.
Variable annuity assets averaged $448.3 million and $389.3 million during the
respective periods. Variable annuity deposits, which exclude deposits
allocated to the fixed accounts of variable annuity products, totaled $10.1
million in 2004 and $6.0 million in 2003. On an annualized basis, these
amounts represent 9% and 6% 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 Change in Average
Invested Assets) are not classified as variable annuity deposits. Accordingly,
changes in variable annuity deposits 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 deposits allocated to
the fixed accounts) (Variable Annuity Product Sales) amounted to $28.1
million and $15.8 million in 2004 and 2003, respectively. The increase in
Variable Annuity Product Sales reflects the favorable equity market conditions
in 2004 and the latter part of 2003.

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 annuities
(see Regulation).

UNIVERSAL LIFE INSURANCE FEES, NET OF REINSURANCE amounted to $1.5 million
in 2004 and $1.4 million in 2003 and are net of reinsurance premiums of $1.6
million $1.7 million, respectively. Universal life insurance fees consist of
mortality charges, up-front fees earned on deposits received and administrative
fees, net of reinsurance premiums. The administrative fees are assessed based
on the number of policies in force as of the end of each month. The Company
acquired its universal life contracts as part of the acquisition of business
from MBL Life Assurance Corporation on July 1, 1999 and does not actively
market such contracts. Such fees represent 2.7% and 2.4% of average reserves
for universal life insurance contracts in the respective periods.

SURRENDER CHARGES on fixed annuity, variable annuity and universal life
contracts totaled $0.5 million in both 2004 and 2003. Surrender charge periods
range from zero to nine years from the date a deposit is received. Surrender
charges generally are assessed on withdrawals at declining rates. Withdrawal
payments, which exclude claims and annuitization payments, totaled $52.4
million in 2004 compared with $48.5 million in 2003. These payments, when
expressed as a percentage of average related reserves, represent 6.5% and 9.9%
for 2004 and 2003, respectively.

GENERAL AND ADMINISTRATIVE EXPENSES totaled $3.0 million in 2004 and $2.5
million in 2003. 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.

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AMORTIZATION OF DEFERRED ACQUISITION COSTS totaled $8.0 million in 2004,
compared to $5.3 million in 2003. The increase in amortization in 2004 was
primarily related to the increase in investment spread, partially offset by
higher net realized investment losses.

ANNUAL COMMISSIONS totaled $0.5 million in 2004 and $0.2 million in 2003.
Annual commissions represent renewal commissions paid quarterly in arrears to
maintain the persistency of certain of the Companys products. Substantially
all of the Companys currently available annuity products allow for an annual
commission payment option in return for a lower immediate commission.

CLAIMS ON UNIVERSAL LIFE INSURANCE CONTRACTS, NET OF REINSURANCE
RECOVERIES totaled $1.3 million in both 2004 and 2003 (net of reinsurance
recoveries of $1.4 million in 2004 and $1.6 in 2003).

GUARANTEED MINIMUM DEATH BENEFITS on variable annuity contracts totaled
$0.5 million in 2004 compared with $0.2 million in 2003.
Downturns in equity markets could increase these expenses.

A majority of the Companys variable annuity products are issued with a
death benefit feature, which provides that, upon the death of a contractholder,
the contractholders beneficiary will receive the greater of (1) the
contractholders account value, or (2) a guaranteed minimum death benefit that
varies by product. The Company bears the risk that death claims
following a decline in the financial markets may exceed contractholder account
balances, and that the fees collected under the contract are insufficient to
cover the costs of the benefit to be provided. On January 1, 2004, the Company
recorded a liability for GMDB (see Note 2 to Financial Statements) pursuant to
adoption of a new accounting standard, SOP 03-1.

CAPITAL RESOURCES AND LIQUIDITY

SHAREHOLDERS EQUITY increased to $378.4 million at March 31, 2004 from
$349.5 million at December 31, 2003, due to $1.2 million of net income recorded
in 2004 and $27.7 million in other comprehensive income.

INVESTED ASSETS at March 31, 2004 totaled $3.54 billion, compared with
$3.17 billion at December 31, 2003. The following table summarizes the
Companys investment portfolio at March 31, 2004 and December 31, 2003.

|                                |  |                                        |           |                   |  |            |       |           |  |   |           |            |  |  |       |  
|------------------------------- |  | -------------------------------------- | --------- | ----------------- |  | ---------- | ----- | --------- |  | - | --------- | ---------- |  |  | ----- | -
|                                |  | March 31, 2004                         |           | December 31, 2003
|                                |  |                                        |           |                  
|                                |  |                                        |           |                   |  | Percent of |       |           |  |   |           | Percent of
|                                |  | Fair Value                             |           | Portfolio         |  | Fair Value |       | Portfolio
|                                |  |                                        |           |                   |  |            |       |          
|                                |  | (in thousands, except for percentages)
|Bond Portfolio:                 |  |                                        |           |                   |  |            |       |           |  |   |           |            |  |  |       |  
|U.S. government securities      |  | $                                      | 18,587    |                   |  |            | 0.5   | %         |  | $ | 18,054    |            |  |  | 0.6   | %
|Mortgage-backed securities      |  |                                        | 777,602   |                   |  |            | 21.9  |           |  |   | 634,640   |            |  |  | 20.0  |  
|Securities of public utilities  |  |                                        | 45,593    |                   |  |            | 1.3   |           |  |   | 131,158   |            |  |  | 4.1   |  
|Corporate bonds and notes       |  |                                        | 1,381,211 |                   |  |            | 39.0  |           |  |   | 1,248,590 |            |  |  | 39.4  |  
|Other debt securities           |  |                                        | 677,153   |                   |  |            | 19.1  |           |  |   | 625,370   |            |  |  | 19.8  |  
|                                |  |                                        |           |                   |  |            |       |           |  |   |           |            |  |  |       |  
|Total Bond Portfolio            |  |                                        | 2,900,146 |                   |  |            | 81.8  |           |  |   | 2,657,812 |            |  |  | 83.9  |  
|                               
|Mortgage loans                  |  |                                        | 217,544   |                   |  |            | 6.1   |           |  |   | 215,521   |            |  |  | 6.8   |  
|Common stocks                   |  |                                        | 198       |                   |  |            | 0.0   |           |  |   | 295       |            |  |  | 0.0   |  
|Cash and short-term investments |  |                                        | 36,835    |                   |  |            | 1.1   |           |  |   | 104,011   |            |  |  | 3.3   |  
|Other                           |  |                                        | 388,616   |                   |  |            | 11.0  |           |  |   | 190,007   |            |  |  | 6.0   |  
|                                |  |                                        |           |                   |  |            |       |           |  |   |           |            |  |  |       |  
|Total investments and cash      |  | $                                      | 3,543,339 |                   |  |            | 100.0 | %         |  | $ | 3,167,646 |            |  |  | 100.0 | %
|                                |  |                                        |           |                   |  |            |       |           |  |   |           |            |  |  |       |  

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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 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 82% of the Companys total
investment portfolio at March 31, 2004, had an aggregate fair value that was
$94.5 million greater than its amortized cost at March 31, 2004, compared with
$40.2 million at December 31, 2003. The increase in net unrealized gains on
the Bond Portfolio during 2004 principally reflects the decline in prevailing
interest rates and the corresponding effect on the fair value of the Bond
Portfolio at March 31, 2004.

At March 31, 2004, the Bond Portfolio had an aggregate fair value of $2.90
billion and an aggregate amortized cost of $2.81 billion. At March 31, 2004,
the Bond Portfolio included $2.70 billion of bonds rated by Standard & Poors
(S&P), Moodys Investors Services (Moodys), Fitch (Fitch) or the
National Association of Insurance Commissioners (NAIC), and $200.6 million of
bonds rated by the Company pursuant to statutory ratings guidelines established
by the NAIC. At March 31, 2004, approximately $2.66 billion of the Bond
Portfolio was investment grade, including $794.8 million of U.S.
government/agency securities and mortgage-backed securities (MBS).

At March 31, 2004, the Bond Portfolio included $237.7 million of bonds
that were not investment grade. These non-investment-grade bonds accounted for
approximately 5.7% of the Companys total assets and approximately 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. An economic downturn could produce higher than average issuer
defaults on the non-investment-grade securities, which could cause the
Companys investment returns and net income to decline. At March 31, 2004, the
Companys non-investment-grade portfolio consisted of 57 issues with no single
issuer representing more than 10% of the total non-investment grade bond
portfolio. These non-investment-grade securities are comprised of bonds
spanning 11 industries with 21% of these assets concentrated in basic
industrial products, 15% concentrated in financial institutions, 14%
concentrated in non-cyclical consumer products and 11% concentrated in
telecommunications. No other industry concentration constituted more than 10%
of these assets.

The table on the following page summarizes the Companys rated bonds by
rating classification as of March 31, 2004.

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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
|                                           |  |                         |           |      
|                                           |  |                         |           |       |  |           |           |           |  |                                   |   |           |  |           |         |          |  |   |         |           |  |          |           |  |  |   |           |  |  | Percent
|                                           |  |                         |           |       |  | Estimated |           | NAIC      |  |                                   |   |           |  | Estimated |         |          |  |   |         | Estimated |  | of total
|S&P/Moodys/Fitch                          |  | Amortized               |           | fair  |  | Category  |           | Amortized |  | fair                              |   | Amortized |  | fair      |         | invested
|Category (1)                               |  | cost                    |           | value |  | (2)       |           | Cost      |  | value                             |   | cost      |  | value     |         | assets  
|                                           |  |                         |           |       |  |           |           |           |  |                                   |   |           |  |           |         |         
|AAA+ to A-
(Aaa to A3)
[AAA to A-]         |  | $                       | 1,750,285 |       |  | $         | 1,806,153 |           |  |                                   | 1 |           |  | $         | 170,025 |          |  | $ | 178,415 |           |  | $        | 1,920,310 |  |  | $ | 1,984,568 |  |  |         | 62.65 | %
|BBB+ to BBB-
(Baa1 to Baa3)
[BBB+ to BBB-] |  |                         | 582,558   |       |  |           | 605,024   |           |  |                                   | 2 |           |  |           | 70,286  |          |  |   | 72,832  |           |  |          | 652,844   |  |  |   | 677,856   |  |  |         | 21.40 | %
|BB+ to BB-
(Ba1 to Ba3)
[BB+ to BB-]       |  |                         | 55,339    |       |  |           | 56,008    |           |  |                                   | 3 |           |  |           | 16,138  |          |  |   | 17,321  |           |  |          | 71,477    |  |  |   | 73,329    |  |  |         | 2.31  | %
|B+ to B-
(B1 to B3)
[B+ to B-]             |  |                         | 11,868    |       |  |           | 11,992    |           |  |                                   | 4 |           |  |           | 5,994   |          |  |   | 6,039   |           |  |          | 17,862    |  |  |   | 18,031    |  |  |         | 0.57  | %
|CCC+ to C
(Caa to C)
[CCC]                 |  |                         | 9,915     |       |  |           | 9,562     |           |  |                                   | 5 |           |  |           | 1,600   |          |  |   | 2,033   |           |  |          | 11,515    |  |  |   | 11,595    |  |  |         | 0.37  | %
|C1 to D
([DD)
[D]                          |  |                         |          |       |  |           |          |           |  |                                   | 6 |           |  |           | 131,634 |          |  |   | 134,767 |           |  |          | 131,634   |  |  |   | 134,767   |  |  |         | 4.25  | %
|                                           |  |                         |           |       |  |           |           |           |  |                                   |   |           |  |           |         |          |  |   |         |           |  |          |           |  |  |   |           |  |  |         |       |  
|TOTAL RATED
ISSUES                         |  | $                       | 2,409,965 |       |  | $         | 2,488,739 |           |  |                                   |   |           |  | $         | 395,677 |          |  | $ | 411,407 |           |  | $        | 2,805,642 |  |  | $ | 2,900,146 |  |  |         |       |  
|                                           |  |                         |           |       |  |           |           |           |  |                                   |   |           |  |           |         |          |  |   |         |           |  |          |           |  |  |   |           |  |  |         |       |  

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 non-defaulted 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 $200.6 million of assets that were rated by the Company
pursuant to applicable NAIC rating guidelines.                                                                                                                                                                                                                                              

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The valuation of invested assets involves obtaining a fair value for each
security. The source for the fair value is generally from market exchanges,
with the exception of non-traded securities.

Another aspect of valuation pertains to impairment. As a matter of
policy, the determination that a security has incurred an other-than-temporary
decline in value and the amount of any loss recognition requires the judgment
of the Companys management and a continual review of its investments. In
general, a security is considered a candidate for impairment if it meets any of
the following criteria:



| |  |  | Trading at a significant discount to par, amortized cost (if lower)
or cost for an extended period of time;                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | The occurrence of a discrete credit event resulting in: (i) the
issuer defaulting on a material outstanding obligation; (ii) the issuer
seeking protection from creditors under the bankruptcy laws or similar
laws intended for the court supervised reorganization of insolvent
enterprises; or (iii) the issuer proposing a voluntary reorganization
pursuant to which creditors are asked to exchange their claims for cash
or securities having a fair value substantially lower than the par
value of their claims; or
|
| |  |  | In the opinion of the Companys management, it is unlikely the
Company will realize a full recovery on its investment, irrespective of
the occurrence of one of the foregoing events.                                                                                                                                                                                                                                                                                                                                       

Once a security has been identified as potentially impaired, the amount of
such impairment is determined by reference to that securitys contemporaneous
market price.

The Company has the ability to hold any security to its stated maturity.
Therefore, the decision to sell reflects the judgment of the Companys
management that the security sold is unlikely to provide, on a relative value
basis, as attractive a return in the future as alternative securities entailing
comparable risks. With respect to distressed securities, the sale decision
reflects managements judgment that the risk-discounted anticipated ultimate
recovery is less than the value achieved on sale.

As a result of these policies, the Company recorded pretax impairment
writedowns of $0.4 million in the 2004 that consisted primarily of one
individual impairment loss. No other individual impairment loss exceeded 10%
of the Companys net income for the three months ended March 31, 2004.

Excluding the impairments noted above, the changes in fair value for the
Companys Bond Portfolio, which constitutes the vast majority of the Companys
investments, were recorded as a component of other comprehensive income in
shareholders equity as unrealized gains or losses.

At March 31, 2004, the Companys Bond Portfolio had gross unrealized gains
of $103.7 million and gross unrealized losses of $9.2 million. Four issuers
accounted for 48% of unrealized losses.

At March 31, 2004, the fair value of the Companys Bond Portfolio
aggregated $2.90 billion. Of this aggregate fair value, approximately 0.03%
represented securities trading at or below 75% of amortized cost. The impact
of unrealized losses on net income will be further mitigated upon realization,
because realization will result in current decreases in the amortization of
certain deferred acquisition costs and decreases in income taxes.

At March 31, 2004, approximately $394.8 million, at amortized cost, of the
Bond Portfolio had a fair value of $385.6 million resulting in an aggregate
unrealized loss of $9.2 million. Unrealized losses for the Bond Portfolio and
equity securities did not reflect any significant industry concentrations.

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##### Table of Contents



The amortized cost of the Bond Portfolio in an unrealized loss position at
March 31, 2004, by contractual maturity, is shown below.

|                                       |  |                |         | 
|-------------------------------------- |  | -------------- | ------- | 
|                                       |  | Amortized Cost
|                                       |  |               
|                                       |  | (in thousands)
|Due in one year or less                |  | $              |        | 
|Due after one year through five years  |  |                | 65,017  | 
|Due after five years through ten years |  |                | 132,849 | 
|Due after ten years                    |  |                | 196,950 | 
|                                       |  |                |         | 
|Total                                  |  | $              | 394,816 | 
|                                       |  |                |         | 

The aging of the Bond Portfolio in an unrealized loss position at March
31, 2004 is shown below:

|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|---------------------------- |  | ------------------------- | ------- | ----------------------- |  | ----- | ------ | ---- |  | --------- | -- | ---------- |  | ---- | ----- | ---- |  | --------- | ------ | ---------- |  |  | - |  |  | - | ------- |  |  | - | ------ | - |  |  | -- | 
|                             |  | Less than or Equal to 20% |         | Greater than 20% to 50% |  |       |        |      |  |           |    |            |  |      |       |     
|(dollars in thousands)       |  | of Amortized Cost         |         | of Amortized Cost       |  | Total
|                             |  |                           |         |                         |  |      
|                             |  | Amortized                 |         | Unrealized              |  |       |        |      |  | Amortized |    | Unrealized |  |      |       |      |  | Amortized |        | Unrealized |  |  |   | 
|Months                       |  | Cost                      |         | Loss                    |  | Items |        | Cost |  | Loss      |    | Items      |  | Cost |       | Loss |  | Items    
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |          
|Investment Grade
Bonds       |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|0-6                          |  | $                         | 218,036 |                         |  | $     | (3,196 | )    |  |           | 32 |            |  | $    |      |      |  | $         |       |            |  |  |  |  |  | $ | 218,036 |  |  | $ | (3,196 | ) |  |  | 32 | 
|7-12                         |  |                           | 74,745  |                         |  |       | (925   | )    |  |           | 17 |            |  |      |      |      |  |           |       |            |  |  |  |  |  |   | 74,745  |  |  |   | (925   | ) |  |  | 17 | 
|>12                          |  |                           | 34,061  |                         |  |       | (656   | )    |  |           | 9  |            |  |      | 5,000 |      |  |           | (1,190 | )          |  |  | 1 |  |  |   | 39,061  |  |  |   | (1,846 | ) |  |  | 10 | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|Total                        |  | $                         | 326,842 |                         |  | $     | (4,777 | )    |  |           | 58 |            |  | $    | 5,000 |      |  | $         | (1,190 | )          |  |  | 1 |  |  |   | 331,842 |  |  |   | (5,967 | ) |  |  | 59 | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|Below Investment
Grade
Bonds |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|0-6                          |  | $                         | 5,192   |                         |  | $     | (28    | )    |  |           | 2  |            |  | $    |      |      |  | $         |       |            |  |  |  |  |  | $ | 5,192   |  |  | $ | (28    | ) |  |  | 2  | 
|7-12                         |  |                           | 36,476  |                         |  |       | (404   | )    |  |           | 2  |            |  |      | 61    |      |  |           | (21    | )          |  |  | 1 |  |  |   | 36,537  |  |  |   | (425   | ) |  |  | 3  | 
|>12                          |  |                           | 20,272  |                         |  |       | (2,545 | )    |  |           | 7  |            |  |      | 973   |      |  |           | (273   | )          |  |  | 1 |  |  |   | 21,245  |  |  |   | (2,818 | ) |  |  | 8  | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|Total                        |  | $                         | 61,940  |                         |  | $     | (2,977 | )    |  |           | 11 |            |  | $    | 1,034 |      |  | $         | (294   | )          |  |  | 2 |  |  | $ | 62,974  |  |  | $ | (3,271 | ) |  |  | 13 | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|Total Bonds                  |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|0-6                          |  | $                         | 223,228 |                         |  | $     | (3,224 | )    |  |           | 34 |            |  | $    |      |      |  | $         |       |            |  |  |  |  |  | $ | 223,228 |  |  | $ | (3,224 | ) |  |  | 34 | 
|7-12                         |  |                           | 111,221 |                         |  |       | (1,329 | )    |  |           | 19 |            |  |      | 61    |      |  |           | (21    | )          |  |  | 1 |  |  |   | 111,282 |  |  |   | (1,350 | ) |  |  | 20 | 
|>12                          |  |                           | 54,333  |                         |  |       | (3,201 | )    |  |           | 16 |            |  |      | 5,973 |      |  |           | (1,463 | )          |  |  | 2 |  |  |   | 60,306  |  |  |   | (4,664 | ) |  |  | 18 | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 
|Total                        |  | $                         | 388,782 |                         |  | $     | (7,754 | )    |  |           | 69 |            |  | $    | 6,034 |      |  | $         | (1,484 | )          |  |  | 3 |  |  | $ | 394,816 |  |  | $ | (9,238 | ) |  |  | 72 | 
|                             |  |                           |         |                         |  |       |        |      |  |           |    |            |  |      |       |      |  |           |        |            |  |  |   |  |  |   |         |  |  |   |        |   |  |  |    | 

In 2004, the pretax realized losses incurred with respect to the sale of
fixed securities in the Bond Portfolio were $1.9 million. The aggregate fair
value of securities sold was $48.9 million, which was approximately 96.2% of
amortized cost. The average period of time that securities sold at a loss
during 2004 were trading continuously at a price below amortized cost was
approximately 13 months.

The valuation for the Companys Bond Portfolio comes from market exchanges
or dealer quotations, with the exception of non-traded securities. The Company
considers non-traded securities to mean certain fixed income investments and
certain structured securities. The aggregate fair value of these securities at
March 31, 2004 was approximately $551.6 million.

The methodology used to estimate fair value of non-traded fixed income
investments is by reference to traded securities with similar attributes and
using a matrix pricing methodology. This technique takes into account such
factors as the industry, the securitys rating and tenor, its coupon rate, its
position in the capital structure of the issuer and other relevant factors.
The change in fair value is recognized as a component of other comprehensive
income.

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For certain structured securities, the carrying value is based on an
estimate of the securitys future cash flows pursuant to the requirements of
Emerging Issues Task Force Issue No. 99-20 Recognition of Interest Income and
Impairment on Purchased and Retained Beneficial Interests in Securitized
Financial Assets. The change in carrying value is recognized in income.

Each of these investment categories is regularly tested to determine if
impairment in value exists. Various valuation techniques are used with respect
to each category in this determination.

Senior secured loans (Secured Loans) are included in the Bond Portfolio
and aggregated $85.8 million at March 31, 2004. Secured Loans are senior to
subordinated debt and equity and are secured by assets of the issuer. At March
31, 2004, Secured Loans consisted of $49.3 million of privately traded
securities and $36.5 million of publicly traded securities. These Secured Loans
are composed of loans to borrowers spanning 10 industries, with 45% of these
assets concentrated in the utilities industry, 12% concentrated in basic
industrial products, 11% concentrated in capital goods and 10% concentrated in
the telecommunications industry. 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, 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 $217.5 million at March 31, 2004 and consisted
of 79 commercial first mortgage loans with an average loan balance of
approximately $2.8 million, collateralized by properties located in 26 states.
Approximately 44% of this portfolio was office, 21% was multifamily
residential, 14% was industrial, 12% was retail and 9% was other types. At
March 31, 2004, approximately 26%, 11%, 10% and 10% of this portfolio was
secured by properties located in California, Texas, Michigan and New York,
respectively. No more than 10% of this portfolio was secured by properties
located in any other single state. At March 31, 2004, four mortgage loans had
an outstanding balance of $10 million or more, which collectively aggregated
approximately 22% of this portfolio. At March 31, 2004, approximately 21% of
the mortgage loan portfolio consisted of loans with balloon payments due before
March 31, 2007. During 2004 and 2003, 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 March 31, 2004, approximately 19% 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 $34.4 million at March 31, 2004, compared to $35.3
million at December 31, 2003, and primarily represent loans taken against
universal life insurance policies.

SECURITIES LENDING COLLATERAL totaled $354.2 million at March 31, 2004,
compared to $154.8 million at December 31, 2003, and consisted of cash
collateral invested in highly rated short-term securities received in
connection with the Companys securities lending program. Although the cash
collateral is currently invested in highly rated short-term securities, the
applicable collateral agreements permit the cash collateral to be invested in
highly liquid short and long-term investment portfolios. At least 75% of the
portfolios short-term investments must have external issue ratings of A-1/P-1,
one of the highest ratings for short-term credit quality. Long-term
investments include corporate notes with maturities of five years or less and a
credit rating by at least two nationally

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recognized statistical rating organizations (NRSRO), with no less than a
S&P rating of A or equivalent by any other NRSRO.

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 81% of the Companys fixed annuity and universal life reserves
had surrender penalties or other restrictions at March 31, 2004.

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 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 in the Companys asset-liability modeling include: cash and
short-term investments; bonds, notes and redeemable preferred stocks; mortgage
loans; and policy loans. At March 31, 2004, these assets had an aggregate fair
value of $3.21 billion with an option-adjusted duration of 4.6 years. The
Companys fixed-rate liabilities include fixed annuity, fixed options of
variable annuity and universal life insurance contracts. At March 31, 2004,
these liabilities had an aggregate fair value (determined by discounting future
contractual cash flows by related market rates of interest) of $3.02 billion
with an option-adjusted duration of 4.9 years. The Companys potential exposure
due to a relative 10% decrease in prevailing interest rates from their March
31, 2004 levels is a loss of approximately $0.04 million, representing the
increase in fair value of its fixed rate liabilities that is not offset by an
increase in 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.

Option-adjusted duration is a common measure for the price sensitivity of
a fixed-maturity portfolio to changes in interest rates. For example, if
interest rates increase 1%, the fair value of an asset with a duration of 5.0
is expected to decrease in value by approximately 5%. The Company estimates
the option-adjusted duration of its assets and liabilities using a number of
different interest rate scenarios, assuming continuation of existing investment
and interest crediting strategies, including maintaining an appropriate level
of liquidity. Actual company and contract owner behaviors may be different
than was assumed in the estimate of option-adjusted duration and these
differences may be material.

The overall interest-credited rate environment has continued to decline in
2004. A significant portion of the Companys fixed annuity contracts
(including the fixed option of variable contracts) has reached or is near the
minimum contractual guaranteed rate (generally 3%). Continual declines in
interest rates could cause the spread between the yield on the portfolio and
the interest rate credited to policyholders to deteriorate. In 2003, the State
of New York adopted legislation reducing the minimum contractual rate that can
be credited to policyholders on new contracts to 1.5%. As a result, certain
contracts issued in 2004 and 2003 had a 1.5% minimum contractual guaranteed
rate. This will not impact the previously issued contracts.

The Company has had the ability, limited by minimum interest rate
guarantees, to respond to the generally declining interest rate environment in
the last five years by lowering crediting rates in response to lower investment
returns. The trends experienced during the three months ended March 31, 2004
and the three years ended December 31, 2003 in the Companys yield on average
invested assets and rate of interest credited on average interest-bearing
liabilities, compared to the market trend in long-term interest rates as
illustrated by the average ten-year U.S. Treasury bond rate, are presented in
the following table:

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|                                         |                                                   |  |                    |      |                         |  |      |      |      |  |      |      |  |  |      |      | 
|---------------------------------------- | ------------------------------------------------- |  | ------------------ | ---- | ----------------------- |  | ---- | ---- | ---- |  | ---- | ---- |  |  | ---- | ---- | 
|                                         |                                                   |  | Three months ended |      |                         |  |      |      |      |  |      |      |  |  |     
|                                         |                                                   |  | March 31,          |      | Year ended December 31,
|                                         |                                                   |  |                    |      |                        
|                                         |                                                   |  | 2004               |      | 2003                    |  | 2002 |      | 2001
|                                         |                                                   |  |                    |      |                         |  |      |      |     
|10-year U.S. Treasury bond rate:         |                                                   |  | 4.00               | %    |                         |  | 4.01 | %    |      |  | 4.61 | %    |  |  | 5.02 | %   
|First SunAmerica Life Insurance Company: |                                                   |  |                    |      |                         |  |      |      |      |  |      |      |  |  |      |     
|                                         | Average yield on bond portfolio                   |  |                    | 5.28 |                         |  |      | 5.77 |      |  |      | 6.98 |  |  |      | 7.01 | 
|                                         | Rate paid on average interest-bearing liabilities |  |                    | 3.43 |                         |  |      | 3.84 |      |  |      | 4.39 |  |  |      | 4.70 | 

The Company seeks to enhance its spread income with dollar roll repurchase
agreements (Dollar Roll Repos). Dollar Roll Repos involve a sale of MBS by
the Company and an agreement to repurchase substantially similar MBS at a later
date at an agreed upon price. 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 the Companys Dollar Roll Repos
is counterparty risk. The Company believes, however, that the counterparties
to its Dollar Roll 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 these 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
such a security, the Company assesses the risk of prepayment by analyzing the
securitys projected performance over an array of interest-rate scenarios.
Once such a security 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
non-accrual basis and to determine declines in value that may be other than
temporary. In conducting 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 fair 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. Impairment
losses on securitized assets are recognized if the fair value of the security
is less than its book value, and the net present value of expected future cash
flows is less than the net present value of expected future cash flows at the
most recent(prior) estimation date.

DEFAULTED INVESTMENTS, comprising all investments that are in default as
to the payment of principal or interest, totaled $0.5 million of bonds at March
31, 2004, and constituted less than 0.1% of total invested assets. At December
31, 2003, defaulted investments totaled $0.2 million of bonds and constituted
less than 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, repo
capacity on invested assets and if required, proceeds from invested

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asset sales. The Companys liquidity is primarily derived from operating
cash flows. At March 31, 2004, approximately $2.51 billion of the Bond
Portfolio had an aggregate unrealized gain of $103.7 million while
approximately $385.6 million of the Companys Bond Portfolio had an aggregate
unrealized loss of $9.2 million. In addition, the Companys investment
portfolio currently provides approximately $23.6 million of monthly cash flow
from scheduled principal and interest payments. Historically, cash flows from
operations and from the sale 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 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 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.

If a substantial portion of the Companys bond portfolio diminished
significantly in value and/or defaulted, the Company would need to liquidate
other portions of its investment portfolio and/or arrange financing. Such
events that may cause such a liquidity strain could be the result of economic
collapse or terrorist acts.

Management believes that the Companys liquid assets and its net cash
provided by operations will enable the Company to meet any foreseeable cash
requirements for at least the next twelve months.

RECENTLY ISSUED ACCOUNTING STANDARDS

In July 2003, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position 03-1, Accounting and Reporting by
Insurance Enterprises for Certain Non traditional Long-Duration Contracts and
for Separate Accounts (SOP 03-1). (For further discussion see Note 2 of
Notes to Financial Statements.)

REGULATION

The Company, in common with other insurers, is subject to regulation and
supervision by the states and 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 an
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. The RBC Model
Law provides four incremental levels of

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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 as of March 31, 2004.

The federal government does not directly regulate the business of
insurance, however, the Company and its products are governed by federal
agencies, including the SEC, the Internal Revenue Service, and the
self-regulatory organization, the National Association of Securities Dealers,
Inc. (NASD). Federal legislation and administrative policies in several
areas, including financial services regulation, pension regulation and federal
taxation, can significantly and adversely affect the insurance industry. The
federal government has from time to time considered legislation relating to the
deferral of taxation on the accretion of value within certain annuities and
life insurance products, changes in ERISA regulations, the alteration of the
federal income tax structure and the availability of Section 401(k) and
individual retirement accounts. Although the ultimate effect of any such
changes, if implemented, is uncertain, both the persistency of our existing
products and our ability to sell products may be materially impacted in the
future.

Recently there has been a significant increase in federal and state
regulatory activity relating to financial services companies, particularly
mutual fund companies and life insurers issuing variable annuity products.
These inquiries have focused on a number of issues including after-hours
trading, short-term trading (sometimes referred to as market timing), revenue
sharing arrangements and greater transparency regarding compensation
arrangements. There are several rule proposals pending at the SEC and on a
federal level, which, if passed, could have an impact on the business of the
Company.

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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 22 to 23
herein.

DISCLOSURE CONTROLS & PROCEDURES

The Companys disclosure controls and procedures are designed to ensure
that information required to be disclosed in the reports that the Company files
or submits under the Securities Exchange Act of 1934, as amended (Exchange
Act), is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.
Disclosure controls and procedures include controls and procedures designed to
ensure that information required to be disclosed by the Company in the reports
that it files or submits under the Exchange Act is accumulated and communicated
to the Companys management, including the Companys Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. The Companys management, with the participation of the
Companys Chief Executive Officer and Chief Financial Officer, have evaluated
the effectiveness of the Companys disclosure controls and procedures as of the
end of the period covered by this report. Based on the evaluation, the
Companys Chief Executive Officer and Chief Financial Officer concluded that
the disclosure controls and procedures provide reasonable assurance of
effectiveness as of the end of the period covered by this report. In addition,
there has been no change in the Companys internal control over financial
reporting that occurred during the fiscal quarter covered by this report that
has materially affected, or is reasonably likely to materially affect, the
Companys internal control over financial reporting.

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PART II  OTHER INFORMATION




Item 1. Legal Proceedings

Various lawsuits against the Company have arisen in the ordinary course of
business. Contingent liabilities arising from litigation, income taxes and
other matters are not considered material in relation to the financial
position, results of operations or cash flows of the Company.




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

None.

REPORTS ON FORM 8-K

There were no current reports on Form 8-K filed during the three months ended
March 31, 2004.

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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: May 14, 2004 |  | /s/ N. SCOTT GILLIS                                                                
|                   |  |                                                                                    
|                   |  | N. Scott Gillis
Senior Vice President,
Chief Financial Officer
and Director        
|                  
|Date: May 14, 2004 |  | /s/ STEWART POLAKOV                                                                
|                   |  |                                                                                    
|                   |  | Stewart Polakov
Senior Vice President and Controller
(Principal Accounting Officer)

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Exhibit Index

|        |  |                                        
|------- |  | ---------------------------------------
|Exhibit |  |                                        
|        |  |                                        
|(31.1)  |  | Rule 13a-14(a)/15d-14(a) Certifications
|(31.2)  |  | Rule 13a-14(a)/15d-14(a) Certifications
|32      |  | Section 1350 Certifications            

29