-------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003
                          COMMISSION FILE NO. 001-31256

                                   CLARK, INC.
             (Exact name of Registrant as specified in its charter)

        DELAWARE                                          52-2103926
(State of Incorporation)                              (I.R.S. Employer
                                                      Identification No.)

     102 SOUTH WYNSTONE PARK DRIVE
       NORTH BARRINGTON, ILLINOIS                            60010
(Address of principal executive offices)                  (Zip code)

                  Registrant's telephone number: (847) 304-5800


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 [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).   Yes[X]   No [ ]

         As of November 1, 2003, the registrant had outstanding 18,472,103
shares of common stock.

<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                 PAGE
<S>                                                                                              <C>
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.....................................................................   4
     Condensed Consolidated Balance Sheets as of September 30, 2003
           and December 31, 2002.................................................................   4
     Condensed Consolidated Statements of Income for the three
          months and nine months ended September 30, 2003 and 2002 (Restated)....................   5
     Condensed Consolidated Statements of Cash Flows for the
           nine months ended September 30, 2003 and 2002 (Restated)..............................   7
     Notes to Condensed Consolidated Financial Statements........................................   9

Item 2. Management's Discussion and Analysis of Financial
             Condition and Results of Operations.................................................  26

Item 3. Quantitative and Qualitative Disclosures About Market Risk...............................  45

Item 4. Controls and Procedures..................................................................  46

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings........................................................................  46

Item 2. Changes in Securities and Use of Proceeds................................................  47

Item 4. Submission of Matters to a Vote of Security Holders......................................  47

Item 6. Exhibits and Reports on Form 8-K.........................................................  47

SIGNATURES.......................................................................................  48

EXHIBITS
       Index to Exhibits.........................................................................  49
</TABLE>

                                       2

<PAGE>

                           FORWARD-LOOKING STATEMENTS

This Form 10-Q may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such statements are identified by
words such as "anticipate," "believe," "estimate," "expect," "intend,"
"predict," "project," and similar expressions. When we make forward-looking
statements, we are basing them on management's beliefs and assumptions, using
information currently available to us. These forward-looking statements are
subject to risks, uncertainties and assumptions, including but not limited to,
risks, uncertainties and assumptions related to the following:

         o        changes in tax legislation;
         o        federal and state regulations;
         o        general economic conditions;
         o        competitive factors and pricing pressures;
         o        our dependence on key consultants and services of key
                  personnel;
         o        our dependence on persistency of existing business;
         o        our ability to achieve our earnings projections;
         o        risks associated with acquisitions;
         o        significant intangible assets;
         o        our dependence on a select group of insurance companies; and
         o        our dependence on information processing systems and risk of
                  errors or omissions.

If one or more of these or other risks or uncertainties materialize, or if our
underlying assumptions prove to be incorrect, actual results may vary materially
from those anticipated. Any forward-looking statements you read in this Form
10-Q or the documents incorporated herein by reference reflect our current views
with respect to future events and are subject to these and other risks,
uncertainties and assumptions relating to our operations, results of operations,
growth strategy and liquidity. You should specifically consider the factors
identified in our Form 10-K for the year ended December 31, 2002, included under
the caption "Risk Factors," which could cause actual results to differ
materially from those indicated by the forward-looking statements. In light of
the foregoing risks and uncertainties, you should not unduly rely on such
forward-looking statements when deciding whether to buy, sell or hold any of our
securities. We disclaim any intent or obligation to update or alter any of the
forward-looking statements whether in response to new information, unforeseen
events, changed circumstances or otherwise.

                                       3
<PAGE>

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

                          CLARK, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
                                   (UNAUDITED)
             (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                              SEPTEMBER 30,          DECEMBER 31,
                                                                                   2003                  2002
                                                                             -----------------      ----------------
<S>                                                                          <C>                    <C>
                                                     ASSETS
CURRENT ASSETS
   Cash and cash equivalents                                                         $ 13,636              $ 14,524
   Restricted cash                                                                     14,095                14,065
   Accounts and notes receivable, net                                                  52,398                64,262
   Prepaid income taxes                                                                 6,947                 3,253
   Deferred income taxes                                                                1,607                 1,252
   Other current assets                                                                 2,984                 2,945
                                                                             -----------------      ----------------
      TOTAL CURRENT ASSETS                                                             91,667               100,301
                                                                             -----------------      ----------------
INTANGIBLE ASSETS - NET
      Net present value of inforce revenue                                            460,249               479,561
      Goodwill                                                                        123,523               117,803
      Non-compete agreements                                                            6,996                 2,831
                                                                             -----------------      ----------------
          TOTAL INTANGIBLE ASSETS - NET                                               590,768               600,195
                                                                             -----------------      ----------------
EQUIPMENT AND LEASEHOLD IMPROVEMENTS - NET                                             14,315                15,064
OTHER ASSETS                                                                           19,038                19,010
                                                                             -----------------      ----------------
      TOTAL ASSETS                                                                   $715,788              $734,570
                                                                             =================      ================


                                         LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
   Accounts payable                                                                    $7,142              $ 11,065
   Accrued liabilities                                                                 44,912                44,807
   Deferred revenue                                                                     3,641                 2,349
   Recourse debt maturing within one year                                              18,443                11,154
   Non-recourse debt maturing within one year                                          11,620                11,521
                                                                             -----------------      ----------------
      TOTAL CURRENT LIABILITIES                                                        85,758                80,896
                                                                             -----------------      ----------------
LONG-TERM RECOURSE DEBT                                                                67,776               101,905
LONG-TERM NON-RECOURSE DEBT                                                           280,372               293,479
DEFERRED INCOME TAXES                                                                  15,679                 8,837
DEFERRED COMPENSATION                                                                   5,713                 3,779
INTEREST RATE SWAP                                                                        621                     -
OTHER NON-CURRENT LIABILITIES                                                           6,232                 4,552
COMMITMENTS AND CONTINGENCIES (NOTE 17)
STOCKHOLDERS' EQUITY
   Preferred stock
          Authorized - 1,000,000 shares; $.01 par value, none issued                        -                     -
   Common stock
          Authorized - 40,000,000 shares; $.01 par value Issued and outstanding-
          18,423,905 shares at September 30, 2003 and
          18,060,518 shares at December 31, 2002                                          185                   181
   Paid-in capital                                                                    188,535               183,980
   Retained earnings                                                                   65,287                56,961
   Other comprehensive loss                                                              (370)                    -
                                                                             -----------------      ----------------
TOTAL STOCKHOLDERS' EQUITY                                                            253,637               241,122
                                                                             -----------------      ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                           $715,788              $734,570
                                                                             =================      ================
</TABLE>


     See accompanying notes to condensed consolidated financial statements.

                                       4
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
             (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                NINE MONTHS ENDED
                                                               SEPTEMBER 30,                     SEPTEMBER 30,
                                                      --------------------------------- --------------------------------
                                                           2003             2002              2003            2002
                                                      --------------  ----------------- ---------------  ---------------
                                                                       (AS RESTATED,                     (AS RESTATED,
                                                                        SEE NOTE 18)                      SEE NOTE 18)
<S>                                                   <C>             <C>               <C>              <C>
REVENUE
   First year commissions and related fees                  $30,295        $35,246             $87,842          $84,758
   Renewal commissions and related fees                      34,419         17,889             111,490           71,140
   Consulting fees                                           11,668          8,910              35,990           24,399
   Reimbursable expenses                                      1,470            768               4,426            3,440
                                                      --------------  -------------     ---------------  ---------------
TOTAL REVENUE                                                77,852         62,813             239,748          183,737
                                                      --------------  -------------     ---------------  ---------------
OPERATING EXPENSES
   Commissions and fees                                      21,166         18,971              67,988           59,208
   General and administrative                                38,953         37,237             121,907          100,195
   Reimbursable expenses                                      1,470            768               4,426            3,440
   Amortization                                               5,769          2,163              16,144            6,091
   Settlement of litigation                                       -              -              (1,500)               -
                                                      --------------  -------------     ---------------  ---------------
TOTAL OPERATING EXPENSES                                     67,358         59,139             208,965          168,934
                                                      --------------  -------------     ---------------  ---------------
OPERATING INCOME                                             10,494          3,674              30,783           14,803
OTHER INCOME                                                     88             58                 269              192
INTEREST
   Income                                                        58             87                 242              266
   Expense                                                   (6,080)          (588)            (18,247)          (1,429)
                                                      --------------  -------------     ---------------  ---------------
                                                             (6,022)          (501)            (18,005)          (1,163)
                                                      --------------  -------------     ---------------  ---------------
Income before taxes and cumulative effect of change
     in accounting principle, net of tax                      4,560          3,231              13,047           13,832
Income taxes                                                  1,809          1,487               4,723            5,807
                                                      --------------  -------------     ---------------  ---------------
Income before cumulative effect of change in
accounting principle, net of tax                              2,751          1,744               8,324            8,025
Cumulative effect of change in accounting principle,
    net of tax                                                    -              -                   -             (523)
                                                      --------------  -------------     ---------------  ---------------
NET INCOME                                                 $  2,751       $  1,744            $  8,324         $  7,502
                                                      ==============  =============     ===============  ===============
</TABLE>


  See accompanying notes to these condensed consolidated financial statements.

                                       5
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
                                   (UNAUDITED)
             (DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE DATA)


<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                NINE MONTHS ENDED
                                                               SEPTEMBER 30,                     SEPTEMBER 30,
                                                      --------------------------------- --------------------------------
                                                           2003             2002              2003            2002
                                                      --------------  ----------------- ---------------  ---------------
                                                                       (AS RESTATED,                     (AS RESTATED,
                                                                        SEE NOTE 18)                      SEE NOTE 18)
<S>                                                   <C>             <C>               <C>              <C>

Basic Earnings per Common Share, before cumulative
effect of change in accounting principle                       $0.15           $0.10             $0.46             $0.48
   Cumulative effect of change in accounting principle             -               -                 -             (0.03)
                                                       --------------   -------------    --------------  ----------------
Basic Earnings per Common Share                                $0.15           $0.10             $0.46             $0.45
                                                       ==============   =============    ==============  ================
Weighted average shares outstanding - Basic               18,399,980      16,845,529        18,281,336        16,753,347
                                                       ==============   =============    ==============  ================

Diluted Earnings per Common Share, before cumulative
effect of change in accounting principle                       $0.15           $0.10             $0.45             $0.46
   Cumulative effect of change in accounting principle             -               -                 -             (0.03)
                                                       --------------   -------------    --------------  ----------------
Diluted Earnings per Common Share                              $0.15           $0.10             $0.45             $0.43
                                                       ==============   =============    ==============  ================
Weighted average shares outstanding - Diluted             18,700,694     17,160,676         18,645,244        17,289,292
                                                       ==============   =============    ==============  ================
</TABLE>

  See accompanying notes to these condensed consolidated financial statements.

                                       6
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                          ----------------------------------------------
                                                                                 2003                      2002
                                                                          -------------------       --------------------
                                                                                                       (AS RESTATED,
                                                                                                       SEE NOTE 18)
<S>                                                                       <C>                       <C>
OPERATING ACTIVITIES
   Net income                                                                        $ 8,324                    $ 7,502
   Adjustments to reconcile net income to cash provided by operating
     activities:
     Depreciation and amortization                                                    20,217                      8,829
     Cumulative effect of change in accounting principle                                   -                        892
     Stock compensation                                                                  345                        574
     Deferred income taxes                                                             6,738                       (840)
     Loss on disposal of assets                                                          426                          -
     Changes in operating assets and liabilities (excluding the
     effects of acquisitions):
     Accounts and notes receivable                                                    13,076                     16,174
     Other current assets                                                                (83)                    (1,686)
     Other assets                                                                        (28)                    (7,961)
     Accounts payable                                                                 (4,190)                       341
     Income taxes                                                                     (3,414)                    (3,155)
     Accrued liabilities                                                              (2,303)                   (10,261)
     Deferred revenue                                                                  1,292                      1,849
     Non-current liabilities                                                           3,797                          -
     Deferred compensation                                                             1,934                      1,381
                                                                          -------------------       --------------------
Cash provided by operating activities                                                 46,131                     13,639
                                                                          -------------------       --------------------
INVESTING ACTIVITIES
   Purchases of businesses, including contingent payments on prior year
     acquisitions                                                                     (4,491)                   (16,527)
   Purchases of fixed assets                                                          (3,750)                    (5,020)
                                                                          -------------------       --------------------
Cash used in investing activities                                                     (8,241)                   (21,547)
                                                                          -------------------       --------------------
FINANCING ACTIVITIES
   Proceeds from borrowings                                                           23,500                     22,000
   Repayment of borrowings                                                           (63,348)                    (7,775)
   Change in cash restricted for the repayment of non-recourse notes                     (30)                         -
   Exercise of stock options                                                           1,100                        494
   Financing costs                                                                         -                       (458)
   Settlement of interest rate swap                                                        -                     (2,043)
                                                                          -------------------       --------------------
Cash (used in) provided by financing activities                                      (38,778)                    12,218
                                                                          -------------------       --------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                    (888)                     4,310
   CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                   14,524                     10,207
                                                                          -------------------       --------------------
   CASH AND CASH EQUIVALENTS AT END OF PERIOD                                        $13,636                    $14,517
                                                                          ===================       ====================
</TABLE>


  See accompanying notes to these condensed consolidated financial statements.

                                       7
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                          ----------------------------------------------
                                                                                 2003                      2002
                                                                          -------------------       --------------------
                                                                                                       (AS RESTATED,
                                                                                                       SEE NOTE 18)
<S>                                                                       <C>                       <C>
Supplemental Disclosure for Cash Paid during the Period:
-------------------------------------------------------
   Interest paid                                                            $        16,279           $         1,122
   Income taxes, net of refunds                                                       1,400                    10,218

Supplemental Non-Cash Information:
---------------------------------
   Fair value of common stock issued in connection with acquisitions,
   including contingent payments on prior acquisitions                      $         3,054           $         6,532
                                                                          ===================       ====================

</TABLE>

  See accompanying notes to these condensed consolidated financial statements.

                                       8
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

   (Tables shown in thousands of dollars, except share and per share amounts)

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The condensed consolidated financial statements include
the accounts of Clark, Inc. (formerly Clark/Bardes, Inc.) ("the Company") and
its wholly owned subsidiaries. Through the Company's six operating segments,
Executive Benefits Practice, Banking Practice, Healthcare Group, Human Capital
Practice, Pearl Meyer & Partners, and Federal Policy Group, the Company designs,
markets and administers compensation and benefit programs for companies
supplementing and securing employee benefits and provides executive compensation
and related consulting services to U.S. corporations, banks and healthcare
organizations. The Company assists its clients in using customized life
insurance products to finance their long-term benefit liabilities. In addition,
the Company owns Clark Securities, Inc. ("CSI") (formerly Clark/Bardes Financial
Services, Inc.), a registered broker-dealer through which it sells all its
securities products and receives related commissions. All intercompany amounts
and transactions have been eliminated in the accompanying condensed consolidated
financial statements.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by GAAP for complete
financial statements. In the Company's opinion, all adjustments, including
normally recurring accruals, considered necessary for a fair presentation have
been included. Operating results for the nine months ended September 30, 2003
are not necessarily indicative of the results that may be expected for the year
ending December 31, 2003 or any other period.

The balance sheet at December 31, 2002 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by GAAP for complete financial statements.

For further information, including a summary of significant accounting policies,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended December 31, 2002.

On June 9, 2003, the Company, (formerly known as Clark/Bardes, Inc.) changed its
name to Clark, Inc. On April 24, 2003, the Company's operating entity, (formerly
known as Clark/Bardes Consulting, Inc.) changed its name to Clark Consulting,
Inc.

2.  RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS ") No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which nullifies Emerging Issues
Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred, rather
than at the date of commitment to an exit or disposal plan. The Company adopted
SFAS No. 146 as of January 1, 2003, as described in Note 4.

                                       9
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under that guarantee and must disclose that information
in its interim and annual financial statements. The initial recognition and
initial measurement provisions of FIN No. 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN No. 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. The Company adopted FIN No. 45 as
of January 1, 2003 and the adoption of this interpretation did not have a
material impact on the Company's condensed consolidated financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest
Entities--an interpretation of ARB No. 51. FIN No. 46 provides guidance on the
identification of entities for which control is achieved through means other
than voting rights (variable interest entities or "VIE") and how to determine
when and which business enterprises should consolidate the VIE. FIN No. 46
requires that both the primary beneficiary and all other enterprises with a
significant variable interest in a VIE make additional disclosures. The
requirements of FIN 46 are effective for financial statements of interim or
annual periods ending after December 15, 2003. The Company does not expect that
the adoption of this interpretation will have a material impact on its condensed
consolidated financial statements.

In accordance with EITF Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables, a vendor should evaluate all deliverables in an arrangement to
determine whether they represent separate units of accounting. The evaluation
must be performed at the inception of the arrangement and as each item in the
arrangement is delivered. EITF 00-21 is effective for revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The Company
adopted EITF Issue No. 00-21 as of July 1, 2003, and the adoption of the
requirements of the consensus reached in this issue did not have a material
impact on its condensed consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting of derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. The Company adopted SFAS No. 149 as of July 1, 2003, and the adoption
of this statement did not have a material impact on its condensed consolidated
financial statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Instruments
with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes
standards for classifying and measuring certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 is effective for
all financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company adopted SFAS No. 150 as of July 1, 2003, and
the adoption of this statement did not have a material impact on its condensed
consolidated financial statements.

                                       10
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

3.  ACQUISITIONS

On September 30, 2003, the Company acquired Executive Benefit Solutions, LLC.
Based in Memphis, Tennessee, Executive Benefits Solutions, LLC specializes in
providing strategic compensation, benefit, and bank-owned life insurance
portfolio consulting services to banks in the Northeast. The consideration
consisted of a total cash purchase price of $11.5 million of which $10 million
is contingent and payable on the attainment of established financial performance
criteria over the next three and one half years. The purchase price has been
allocated to the assets and liabilities acquired with the excess purchase price
currently reflected as goodwill pending completion of a valuation by an
independent valuation firm. As such, the allocation of purchase price is
preliminary. Upon completion of such valuation, the allocation of purchase price
will be finalized in accordance with the provisions of SFAS No. 141, Business
Combinations. This acquisition is included in the Banking Practice.

Long, Miller & Associates, LLC. - On November 26, 2002, the Company acquired
Long, Miller & Associates, LLC ("LongMiller"). Based in Greensboro, North
Carolina, LongMiller specializes in bank-owned life insurance portfolio
services. The acquisition combined the two largest distributors of bank-owned
life insurance, as LongMiller was merged into the Company's existing Banking
Practice. The purchase price was $403.5 million before acquisition costs of
approximately $736 thousand, consisted of a cash payment at closing of $346.1
million, $37.4 million of asset-backed notes, and 1,196,888 shares of the
Company's common stock valued at $20 million. The cash portion of the
acquisition was financed by borrowing $87.5 million from the Company's existing
debt facility, with the remainder through a capital markets transaction
involving the securitization of a majority of the inforce revenues of
LongMiller. The Company has allocated $4.4 million to tangible assets acquired,
$5.2 million to non-compete agreements and the remaining amount is allocated to
inforce revenue. The non-compete agreements and inforce revenue are being
amortized over 7 years and 30 years respectively. The results of LongMiller are
included beginning November 26, 2002.

The unaudited pro forma information below presents the Company's results as if
the acquisition of LongMiller had occurred on January 1, 2002.

                              THREE MONTHS ENDED        NINE MONTHS ENDED
                              SEPTEMBER 30, 2002        SEPTEMBER 30, 2002
                             ----------------------    ---------------------
Pro Forma
  Revenue                                  $79,083                 $230,816
  Net income                                 3,223                   10,487
  Diluted earnings per share                  0.18                     0.57

                                       11
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

4.  RESTRUCTURING COSTS

During the first quarter of 2003, management decided to consolidate the business
support services of the Executive Benefits Practice in Dallas, Texas. As a
result, the Company intends to significantly reduce operations in the Los
Angeles, California and Bethesda, Maryland offices. The moves from Los Angeles
and Bethesda are expected to be substantially completed by July 31, 2004 and
September 30, 2004, respectively. There were 68 individuals who were notified of
the restructuring with some being offered relocation packages and others being
terminated with severance packages that include varying retention bonus
incentives. In accordance with SFAS No. 146, the total expected cost of this
restructuring (approximately $1.6 million) is being recognized ratably starting
in March 2003. During the nine months ended September 30, 2003, the Company
recorded expense of approximately $575 thousand. In the third quarter 2003,
there were adjustments to the reserve related to employees who forfeited their
severance by not staying through their retention date. The above amounts are
included in general and administrative expenses on the condensed consolidated
income statement. A summary of the activity in the reserve account as of
September 30, 2003 is follows:

<TABLE>
<CAPTION>
                                RESERVE BALANCE       YEAR TO DATE        CASH                              RESERVE BALANCE
                                JANUARY 1, 2003         EXPENSE         PAYMENTS       ADJUSTMENTS       SEPTEMBER 30, 2003
                                ------------------    --------------    -----------    --------------    ---------------------
<S>                             <C>                   <C>               <C>            <C>               <C>
Employee  termination benefits          $ -               $575            ($305)           ($23)                 $247
</TABLE>

5.  CONTINGENT CONSIDERATION

As a result of the Company's acquisition program, the Company has approximately
$32.2 million of potential additional consideration issuable over the next three
and one half years to the former owners of the Company's acquired entities. Of
this amount, approximately $9.5 million is accrued on the balance sheet as of
September 30, 2003. If and when the acquired entities meet certain criteria
stipulated in the purchase agreements, these amounts are payable as additional
consideration. A summary of the amounts payable if the criteria are met is as
follows for acquisitions that were completed as of September 30, 2003 (dollar
amounts in millions):

<TABLE>
<CAPTION>
      POTENTIAL AMOUNTS PAYABLE IN            CASH                  SHARES (1)                 SHARE VALUE
                                        ------------------    -----------------------    ------------------------
      <S>                               <C>                   <C>                        <C>
                 2004                         $9.4                   312,349                      $4.2
                 2005                          8.2                   179,828                       2.4
                 2006                          4.9                    48,351                       0.6
                 2007                          2.5                      -                           -
                                        ------------------    -----------------------    ------------------------
                                             $25.0                   540,528                      $7.2
                                        ==================    =======================    ========================
<FN>
(1)      Number of shares determined based upon the closing price of the
         Company's common stock at September 30, 2003 of $13.34 per share.
</FN>
</TABLE>

                                       12
<PAGE>
                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

6.  ACCOUNTS RECEIVABLE

Major categories of accounts receivable are as follows:

<TABLE>
<CAPTION>
                                                                AS OF                           AS OF
                                                         SEPTEMBER 30, 2003               DECEMBER 31, 2002
                                                     ----------------------------     --------------------------
     <S>                                             <C>                              <C>
     Accounts receivable - trade                                         $53,654                        $64,181
     Loans receivable                                                        179                          1,170
     Accounts receivable allowance                                        (1,435)                        (1,089)
                                                     ----------------------------     --------------------------
                                                                         $52,398                        $64,262
                                                     ============================     ==========================
</TABLE>


A summary of the activity in the allowance for uncollectible accounts
receivables is as follows:

<TABLE>
<CAPTION>
                                                          NINE MONTHS ENDED                   YEAR ENDED
                                                         SEPTEMBER 30, 2003               DECEMBER 31, 2002
                                                     ----------------------------     ---------------------------
     <S>                                             <C>                              <C>
     Beginning balance                                                   ($1,089)                          ($822)
     Write offs                                                              646                             638
     Expense                                                                (992)                           (905)
                                                     ----------------------------     ---------------------------
     Ending balance                                                      ($1,435)                        ($1,089)
                                                     ============================     ===========================
</TABLE>

As of September 30, 2003 and December 31, 2002, there were approximately $2.0
million and $1.6 million, respectively, of unbilled receivables included in
accounts receivable on the condensed consolidated balance sheets. These unbilled
amounts, the majority of which relate to in-process consulting projects, are
typically billed during the quarter immediately following the reporting period.

                                       13
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

7.   GOODWILL AND OTHER INTANGIBLE ASSETS

Changes in the carrying amount of goodwill between December 31, 2002 and
September 30, 2003, by reporting units are as follows:

<TABLE>
<CAPTION>
                                    BALANCE          ACQUIRED                                               BALANCE
                                   JANUARY 1,         DURING                             IMPAIRMENT      SEPTEMBER 30,
                                      2003          THE PERIOD      EARNOUTS/ETC.          CHARGE            2003
                                  ------------     ------------    ---------------     -------------    ---------------
<S>                               <C>              <C>             <C>                 <C>              <C>
Executive Benefits Practice           $16,952              $ -              $ 150                $-           $ 17,102
Banking Practice                       40,488              608                462                 -             41,558
Healthcare Group                       14,076                -                  -                 -             14,076
Management Science Associates           5,010                -                  -                 -              5,010
Human Capital Practice                 15,193                -                  -                 -             15,193
Pearl Meyer & Partners                 21,788                -                  -                 -             21,788
Federal Policy Group                    4,266                -              4,500                 -              8,766
Corporate                                  30                                   -                                   30
                                  ------------     ------------    ---------------     -------------    ---------------
     TOTAL                           $117,803             $608             $5,112                $-           $123,523
                                  ============     ============    ===============     =============    ===============
</TABLE>

    Information regarding the Company's other intangible assets follows:

<TABLE>
<CAPTION>
                                       AS OF SEPTEMBER 30, 2003                     AS OF DECEMBER 31, 2002
                                ----------------------------------------    -----------------------------------------
                                   GROSS       ACCUMULATED                     GROSS      ACCUMULATED
                                   AMOUNT     AMORTIZATION      NET           AMOUNT      AMORTIZATION       NET
                                ------------- -------------- -----------    ------------ --------------- ------------
<S>                             <C>           <C>            <C>            <C>          <C>             <C>
Net present value of  inforce
 revenue                            $499,704       ($39,455)   $460,249        $503,895        ($24,334)    $479,561

Non-compete  agreements                9,660         (2,664)      6,996           4,472          (1,641)       2,831
                                ------------- -------------- -----------    ------------ --------------- ------------
     Total                          $509,364       ($42,119)   $467,245        $508,367        ($25,975)    $482,392
                                ============= ============== ===========    ============ =============== ============
</TABLE>

Amortization expense of other intangible assets was $5.8 million and $2.2
million for the three months ended September 30, 2003 and September 30, 2002,
respectively, and $16.1 million and $6.1 million for the nine months ended
September 30, 2003 and September 30, 2002, respectively.

The Company estimates that its amortization for 2003 through 2007 for intangible
assets related to all acquisitions consummated through September 30, 2003 will
be approximately as follows:

                                  Year                    Amount
                                  ----                    ------
                                  2003                   $21,528
                                  2004                    17,970
                                  2005                    15,129
                                  2006                    14,601
                                  2007                    14,250

                                       14
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

8.  TRUST PREFERRED DEBT

On May 23, 2003, the Company raised approximately $14.5 million from its
participation in a pooled trust preferred transaction, in which it issued $15.0
million aggregate principal amount of long-term subordinated debt securities
with a floating rate based on three month LIBOR plus a spread of 420 basis
points (5.3% as of September 30, 2003). The Company used the net proceeds to pay
down the term portion of its credit facility. The pooled trust preferred debt is
payable in one payment due in 30 years with interest paid quarterly.


9.  INTEREST RATE SWAPS

The Company has limited transactions that fall under the accounting rules of
SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as
amended by SFAS No. 137, SFAS No. 138 and SFAS No. 149. From time to time, the
Company uses financial instruments, including interest rate swap agreements, to
manage exposure to movements in interest rates. On January 7, 2003, the Company
entered into two interest rate swaps with a total notional value of $50 million
to hedge $50 million of outstanding LIBOR-based debt. These swaps have been
designated as cash flow hedges. As such, the changes in the fair value of the
interest rate swaps are recorded in other comprehensive income ("OCI") for the
effective portion of the hedge, while the ineffective portion is recorded
immediately in earnings. Amounts are reclassified from OCI to earnings as the
interest rate swaps affect earnings. There have been no charges to earnings for
ineffectiveness for the three or nine months ended September 30, 2003. The fair
value of these interest rate swap agreements, based upon market quotes, was a
liability of approximately $621 thousand at September 30, 2003. The notional
amount of the interest rate swap amortizes $2.5 million per quarter. The terms
of these interest rate swaps are as follows:

<TABLE>
<CAPTION>
                                                                                                     FAIR VALUE AS OF
     EFFECTIVE                               NOTIONAL AMOUNT AT   FIXED RATE TO    VARIABLE RATE        SEPTEMBER 30,
        DATE             MATURITY DATE       SEPTEMBER 30, 2003      BE PAID      TO BE RECEIVED           2003
--------------------- --------------------- --------------------- --------------- ---------------- ---------------------
<S>                   <C>                   <C>                   <C>             <C>              <C>
  January 7, 2003      December 31, 2007          $23,800             2.85%            LIBOR               $330
  January 7, 2003      December 31, 2007          $18,700             2.92%            LIBOR                291
                                                                                                           ----
                        Total                                                                              $621
                                                                                                           ====
</TABLE>

                                       15
<PAGE>
                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003


10.   EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
common share:

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                  NINE MONTHS ENDED
                                                         SEPTEMBER 30,                      SEPTEMBER 30,
                                               ----------------------------------  ---------------------------------
                                                    2003              2002              2003              2002
                                               ---------------- -----------------  ---------------   ---------------
<S>                                            <C>              <C>                <C>               <C>
NUMERATOR:
Income, before cumulative effect of change in
accounting principle                                    $2,751            $1,744           $8,324           $8,025
Cumulative effect of change in accounting
principle, net of tax                                        -                 -                -             (523)
                                               ---------------- -----------------  ---------------   --------------
Numerator for basic and diluted earnings per
common share                                            $2,751           $ 1,744           $8,324            $7,502
                                               ================ =================  ===============   ===============

DENOMINATOR
Basic earnings per common share -
   weighted average shares outstanding              18,399,980        16,845,529       18,281,336        16,753,347
Effect of dilutive securities:
   Stock options                                       169,208           280,665          168,456           468,409
   Contingent shares earned not issued                 131,506            34,482          195,452            67,536
                                               ---------------- -----------------  ---------------   ---------------
Diluted earnings per share - weighted average
shares plus assumed conversions                     18,700,694        17,160,676       18,645,244        17,289,292
                                               ================ =================  ===============   ===============

PER COMMON SHARE
Basic Earnings per Common Share, before
cumulative effect of change in accounting
principle                                                $0.15             $0.10            $0.46             $0.48
Cumulative effect of change in accounting
principle                                                    -                 -                -             (0.03)
                                               ---------------- -----------------  ---------------   ---------------
Basic earnings per Common Share                          $0.15             $0.10            $0.46             $0.45
                                               ================ =================  ===============   ===============

Diluted Earnings per Common Share, before
cumulative effect of change in accounting
principle                                                $0.15             $0.10            $0.45             $0.46
Cumulative effect of change in accounting
principle                                                    -                 -                -             (0.03)
                                               ---------------- -----------------  ---------------   ---------------
Diluted Earnings per Common Share                        $0.15             $0.10            $0.45             $0.43
                                               ================ =================  ===============   ===============
</TABLE>

For the three and nine months ended September 30, 2003, there are approximately
903 thousand and 873 thousand, respectively, of outstanding stock options which
are not included in the calculations as they are antidilutive. For the three and
nine months ended September 30, 2002, there are approximately 923 thousand and
524 thousand, respectively, of outstanding stock options which are not included
in the calculations as they are antidilutive. The range of grant prices for all
stock options was between $4.80 and $30.30 at September 30, 2003 and September
30, 2002.

                                       16
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

11.  EMPLOYEE COMPENSATION

SFAS No. 123, Accounting for Stock-Based Compensation, established accounting
and disclosure requirements using a fair value based method of accounting for
stock-based employee compensation plans. The Company has elected to remain on
the method of accounting described in Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees, for employees and directors as
allowed under SFAS No. 123. However, the Company accounts for stock options
granted to non-employees other than directors under the provisions of SFAS No.
123.

The pro forma information regarding net income and earnings per share required
by SFAS No. 123 has been determined as if the Company accounted for its
stock-based compensation plans under the fair value method. The fair value of
each option grant was estimated at the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
grants in 2003 and 2002, respectively:

                                                  SEPTEMBER 30,
                                           ----------------------------
                                               2003          2002
                                           ------------- --------------
Dividend yield                                 None          None
Volatility                                    63.4%          64.2%
Risk-free interest rates                       5.2%           5.4%
Expected life (years)                           5              6

Had compensation cost for the Company's stock-based compensation plans been
determined in accordance with SFAS No. 123, as amended by SFAS No. 148,
Accounting for Stock-Based Compensation - Transition and Disclosure - An
Amendment of FASB Statement No. 123, its net income and earnings per share would
have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                               THREE MONTHS
                                                                   ENDED           NINE MONTHS ENDED
                                                                 SEPTEMBER             SEPTEMBER
                                                             ------------------   ---------------------
                                                              2003      2002        2003       2002
                                                             -------- ---------   ---------- ----------
<S>                                                          <C>      <C>         <C>        <C>
NET INCOME
  As reported..............................................   $2,751    $1,744       $8,324     $7,502
  Add: stock-based employee compensation expense
  included in reported
  net income, net of related tax effect....................        -       340          206        340

  Deduct: stock option compensation expense, net of tax....     (591)     (873)      (1,206)    (1,939)
                                                             -------- ---------   ---------- ----------
  Pro forma................................................   $2,160    $1,211       $7,324     $5,903
                                                             ======== =========   ========== ==========

BASIC EARNINGS PER COMMON SHARE

 As reported...............................................    $0.15     $0.10        $0.46      $0.45

 Pro forma.................................................    $0.12     $0.07        $0.40      $0.35

DILUTED EARNINGS PER COMMON SHARE

  As reported..............................................    $0.15     $0.10        $0.45      $0.43

  Pro forma................................................    $0.12     $0.07        $0.39      $0.34
</TABLE>


                                       17
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

12.  COMPREHENSIVE INCOME

Under SFAS No. 130, Comprehensive Income, the Company reports changes in
stockholders' equity that result from either recognized transactions or other
economic events, excluding capital stock transactions, which affect
stockholders' equity. Shown below are the differences between net income and
comprehensive income (dollars in thousands):

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED             NINE MONTHS ENDED
                                                     SEPTEMBER 30,                  SEPTEMBER 30,
                                                -------------------------     --------------------------
                                                   2003         2002              2003         2002
                                                ------------ ------------     ------------- ------------
<S>                                             <C>          <C>              <C>           <C>
Net income                                           $2,751       $1,744            $8,324       $7,502
Change in fair value of interest
  rate swap, net of tax                                 223            -              (370)           -
                                                ------------ ------------     ------------- ------------
Comprehensive income                                 $2,974       $1,744            $7,954       $7,502
                                                ============ ============     ============= ============
</TABLE>

13.  SIGNIFICANT RISKS AND UNCERTAINTIES

Federal tax laws create certain advantages for the purchase of life insurance
products; therefore, the life insurance products underlying the benefit programs
marketed by the Company are vulnerable to adverse changes in laws and
interpretation. Any proposal or enactment of changes in federal tax laws that
would reduce or eliminate such advantages could result in the surrender of
existing policies. As a result of any such proposals or enactments, the Company
could lose a substantial amount of renewal revenue and its ability to write new
business could be materially impaired.

There have been several recent legislative proposals to change the federal tax
laws with respect to business-owned life insurance. On September 17, 2003, the
Senate Finance Committee approved legislation proposed by Sen. Jeff Bingaman
(D-NM) that would tax the death benefits taxpayers receive from certain policies
on the lives of former employees. Following an intensive lobbying effort by the
insurance industry, the Finance Committee on October 1, 2003, agreed to
reconsider the September 17 vote at a later date; the Committee also agreed that
any such legislation would not apply to policies purchased before the "date of
enactment" of such legislation. Finance Committee Member Kent Conrad (D-ND) has
developed an alternative to the Bingaman proposal that generally would preserve
the tax-free treatment of death benefits of business-owned life insurance
purchased to fund employee benefit programs. The Conrad proposal appears to be
supported by a majority of Finance Committee Members. If Congress were to adopt
the Bingaman proposal or other legislation limiting the tax-free payment of
death benefits on such policies or otherwise adversely affecting the tax
treatment of the policies, future Company revenues from sale of business-owned
life insurance policies could materially decline.

In recent years, the Internal Revenue Service ("IRS") has undertaken a major
enforcement initiative to disallow the interest deductions on certain leveraged
business-owned life insurance programs sold during or prior to 1995. The IRS has
prevailed on the majority of cases it has litigated related to this initiative
and last year made a temporary (now expired) public settlement offer to address
ongoing cases. While the Company stopped selling leveraged business-owned life
insurance programs after 1995 and the Company does not expect any material
adverse impact on its revenue from this enforcement initiative, it is impossible
to determine the impact of this initiative on a client's decision to continue or
surrender an existing leveraged business-owned life insurance program.

                                       18
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

There also have been several recent legislative proposals to change the federal
tax laws with respect to nonqualified deferred compensation. On October 28,
2003, the House Ways and Means Committee approved legislation that would modify
the times at which distributions are permitted from nonqualified deferred
compensation arrangements, impact the design of other provisions common in many
such plans and disallow certain arrangements that result in shielding deferred
compensation from claims of an employer's creditors. The Senate Finance
Committee approved similar legislation on October 1, 2003; the Finance Committee
measure also would limit investment options under nonqualified deferred
compensation arrangements and remove a 1978 moratorium on Treasury Department
regulatory guidance on the tax treatment of these compensation arrangements. If
legislative proposals affecting nonqualified deferred compensation are enacted,
future compensation deferrals under arrangements the Company markets could be
reduced, with a resulting reduction in the Company's revenues from these
arrangements.

In September 2003, the Treasury Department finalized regulations changing the
manner in which split dollar life insurance arrangements will be taxed. The new
tax treatment is, in certain respects, less attractive than the historical tax
treatment of split dollar arrangements. This initiative has significantly
reduced the amount of revenue generated from new split dollar arrangements and
may further reduce revenue from existing split dollar arrangements in the near
term.

14.   CARRIER INCENTIVE CONTRACTS

During the third quarter of 2003, the Company completed agreements with two of
its core insurance carriers, which will generate additional revenue on its
existing blocks of business with these carriers. The length of one of the
contracts is five and one half years and the other contract is one year. The
contracts automatically renew each year unless notice is given by one of the
parties. The agreements resulted in revenue of $2.7 million for the third
quarter and provide for additional payments upon certain conditions and
measurement dates. The future payment amounts are based on the cash value (or
fair value) of the Company's existing inforce business with these carriers at
specified dates of measurement. Future payment amounts would be negatively
impacted by potential future surrenders of the inforce business or non-renewal
of the agreements and positively impacted by asset growth of these contracts.

15.   SEGMENTS AND RELATED INFORMATION

The Company has six reportable segments:

         o        Executive Benefits Practice - markets, designs, implements,
                  administers and finances non-qualified benefit plans for
                  companies of all sizes including Fortune 1000 companies and
                  other companies which can benefit from the Company's products
                  and services.

         o        Banking Practice - offers compensation consulting, executive
                  and director benefit programs and bank-owned life insurance to
                  the bank market.

         o        Healthcare Group - provides specialized compensation and
                  benefit services for large and medium sized not-for-profit
                  healthcare organizations.

         o        Human Capital Practice - provides compensation, benefits and
                  human resources consulting services and products to major
                  companies including technology and intellectual capital
                  companies.

         o        Pearl Meyer & Partners - specializes in executive compensation
                  and retention programs.

         o        Federal Policy Group - provides a variety of legislative and
                  regulatory strategic services.

As of January 1, 2003, the Company transferred the operations of Coates Kenney
from its Executive Benefits Practice to its Human Capital Practice. As a result,
the segment information as of and for the periods ended September 30, 2002 have
been reclassified to reflect this transfer.

LongMiller, acquired on November 26, 2002, became part of the existing Banking
Practice.

                                       19
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

The amounts reflected below for the Human Capital Practice segment reflect the
results of and information related to the Rewards and Performance Group, which
was transferred to the Human Capital Practice effective May 16, 2002.

On February 25, 2002, the Company acquired the Federal Policy Group from
PricewaterhouseCoopers LLP.

The six reportable segments operate as independent and autonomous business units
with a central corporate staff in North Barrington, Illinois responsible for
finance, strategic planning, human resources and company-wide policies. Each
segment has its own client base as well as its own marketing, administration,
and management.

The Company evaluates performance and allocates resources based on operating
income before income taxes, interest and corporate administrative expenses. The
accounting policies of the reporting segments are the same as those described in
the summary of significant accounting policies, as described in Note 1 "Nature
of Operations and Summary of Significant Accounting Policies" in the Company's
Annual Report on Form 10-K for the year ended December 31, 2002.

Segment information for the three and nine month periods ended September 30,
2003 is as follows:

                                       20
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED           NINE MONTHS ENDED
                                                        SEPTEMBER 30,               SEPTEMBER 30,
                                                 ---------------------------- ---------------------------
                                                     2003          2002           2003         2002
                                                 ---------------------------- ---------------------------
<S>                                              <C>              <C>         <C>           <C>
REVENUES FROM EXTERNAL CUSTOMERS
     Executive Benefits Practice                       $17,347       $15,302       $ 58,830     $ 66,655
     Banking Practice                                   37,821        25,971        112,283       58,088
     Healthcare Group                                    9,151         9,594         27,668       29,055
     Human Capital Practice                              5,089         3,526         16,960        9,829
     Pearl Meyer & Partners                              3,331         3,016         10,150        9,172
     Federal Policy Group                                3,966         2,780         10,963        6,590
                                                 ---------------------------- ---------------------------
                  Total segments - reported             76,705        60,189        236,854      179,389
     Corporate/CSI                                       1,147         2,624          2,894        4,348
                                                 ---------------------------- ---------------------------
                   Total consolidated - reported       $77,852       $62,813       $239,748     $183,737
                                                 ============================ ===========================
OPERATING INCOME (LOSS)
     Executive Benefits Practice                     $      50       ($2,602)       $ 4,023      $ 4,409
     Banking Practice                                   11,488         6,995         30,620       11,602
     Healthcare Group                                    1,623         1,995          4,089        5,067
     Human Capital Practice                             (1,434)       (3,008)        (3,375)      (3,288)
     Pearl Meyer & Partners                                519           423          1,490        1,152
     Federal Policy Group                                1,911         1,097          5,163        2,738
                                                 ---------------------------- ---------------------------
                     Total segments - reported          14,157         4,900         42,010       21,680
     Corporate/CSI                                      (3,663)       (1,226)       (11,227)      (6,877)
     Other income                                           88            58            269          192
     Interest - net                                     (6,022)         (501)       (18,005)      (1,163)
                                                 ---------------------------- ---------------------------
                      Income before taxes              $ 4,560        $3,231        $13,047      $13,832
                                                 ============================ ===========================
DEPRECIATION AND AMORTIZATION
     Executive Benefits Practice                        $1,280        $1,202        $ 3,765       $3,667
     Banking Practice                                    4,533           648         12,550        1,747
     Healthcare Group                                      741           716          2,203        2,183
     Human Capital Practice                                 81            60            240          161
     Pearl Meyer & Partners                                159           164            476          476
     Federal Policy Group                                  102           129            302          298
                                                 ---------------------------- ---------------------------
                     Total segments - reported           6,896         2,919         19,536        8,532
     Corporate/CSI                                         269           158            681          297
                                                 ---------------------------- ---------------------------
                     Total consolidated -
                                      reported          $7,165        $3,077        $20,217       $8,829
                                                 ============================ ===========================
CAPITAL EXPENDITURES
     Executive Benefits Practice                          $123         $  58        $   956         $275
     Banking Practice                                      465           247          1,266        1,305
     Healthcare Group                                       79           265            496          735
     Human Capital Practice                                  2            61            206          742
     Pearl Meyer & Partners                                 27           164             46          315
     Federal Policy Group                                   44             4             44           67
                                                 ---------------------------- ---------------------------
                     Total segments - reported             740           799          3,014        3,439
     Corporate/CSI                                         107           117            736        1,581
                                                 ---------------------------- ---------------------------
                     Total consolidated -
                                      reported            $847          $916         $3,750       $5,020
                                                 ============================ ===========================

                                                                              SEPTEMBER 30,   DECEMBER 31,
IDENTIFIABLE ASSETS                                                               2003            2002
                                                                              ---------------------------
     Executive Benefits Practice                                                   $ 74,721     $ 82,988
     Banking Practice                                                               510,723      526,485
     Healthcare Group                                                                35,959       36,793
     Human Capital Practice                                                          27,420       29,055
     Pearl Meyer & Partners                                                          26,748       29,211
     Federal Policy Group                                                            13,248        7,413
                                                                              ---------------------------
                  Total segments - reported                                         688,819      711,945
     Deferred income taxes                                                            1,607        1,252
     Corporate/CSI                                                                   25,362       21,373
                                                                              ---------------------------
                   Total consolidated - reported                                   $715,788     $734,570
                                                                              ===========================
</TABLE>

                                       21
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

16.  RELATED PARTY TRANSACTIONS

The Company leases 16,266 square feet of office space and hanger space for the
corporate aircraft from entities owned by the Company's Chairman and Chief
Executive Officer, for approximately $445 thousand annually. The office space
lease expires on February 21, 2009.

On May 16, 2003, the Company acquired an inforce revenue stream from the
president of one of the Company's practices for approximately $900 thousand. The
inforce revenue relates to policies sold when he was a consultant prior to his
employment by the Company as practice president. The inforce revenue is being
amortized over 30 years in the Executive Benefits Practice segment.

During the first quarter 2003, the Company paid Randy Pohlman, a member of its
Board of Directors, $40 thousand as a referral fee. This amount was accrued in
the Company's financial statements as of December 31, 2002.

Robert Long became a member of the Company's Board of Directors, filling a
vacant seat, in January 2003 in connection with the LongMiller acquisition. He
received a substantial amount of the proceeds, including asset-backed notes,
from the November 2002 purchase of LongMiller.

On September 25, 2002, the Company entered into an Administrative Services
Agreement and Bonus Forfeiture Agreement with an affiliate of AUSA Holding,
Inc., one of its principal stockholders. During 2002, the Company received $2.5
million for services rendered prior to and through September 30, 2002 and
recognized a total of $3.2 million in the last half of 2002, pursuant to this
agreement. Under the terms of this agreement, the Company expects to continue to
receive approximately $2.5 million annually from the carrier for a period of 30
years depending upon certain conditions. Of this annual amount, $2.0 million is
included in the cash flows securitizing the asset-backed notes issued to finance
the acquisition of LongMiller, and the Company will not have access to this cash
for general corporate purposes until the securitization notes are fully paid.
This revenue, net of amounts provided for chargebacks, is being recognized on a
monthly basis beginning in October 2002. The amounts received are subject to
chargeback (reimbursement of a portion of amounts received) if any policies
under this agreement are surrendered or if there is a section 1035 exchange. Any
chargeback amounts are deducted from the next scheduled payment. The Company
received payments of approximately $1.3 million and $2.5 million during the
three and nine months ended September 30, 2003, respectively under the terms of
this agreement.

In 2003, the Company terminated three split dollar policies with three of its
officers. One remaining split dollar policy with an officer is expected to be
terminated in the fourth quarter of 2003. The Company has not paid any premiums
on these policies since before July 2002.

17.  LITIGATION

From time to time, the Company is involved in various claims and lawsuits
incidental to its business, including claims and lawsuits alleging breaches of
contractual obligations under agreements with its consultants. During the nine
months ended September 30, 2003, the Company received $1.5 million from the
favorable settlement of a lawsuit.

The following is a summary of the current material legal proceedings pending
against the Company.

                                       22
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

WILLIAM L. MACDONALD, SR. V. CLARK/BARDES CONSULTING, INC.

On April 10, 2003, William L. MacDonald, Sr., the former Chairman of the
Executive Benefits Practice, filed suit in Los Angeles, California Superior
Court alleging wrongful termination and seeking damages of $10.1 million and a
declaration that all of his non-competition and non-solicitation provisions were
unenforceable. On April 11, 2003, the Company filed proceedings in the Circuit
Court of Cook County, Illinois to enforce the non-competition and
non-solicitation covenants agreed to by Mr. MacDonald when the Company purchased
Mr. MacDonald's business, Compensation Resource Group, Inc., in September of
2000. In light of the California suit, the Illinois litigation was stayed
pending the outcome of proceeding in the California court.

The Company responded to Mr. MacDonald's suit by requesting the California court
to transfer the matter to arbitration as provided for in several of the
contracts at issue, and to enter a temporary restraining order prohibiting Mr.
MacDonald from competing with the Company and contacting its clients, in aid of
and pending the outcome of the arbitration. On May 1, 2003, the Court granted
the Company's motion and entered a temporary restraining order prohibiting Mr.
MacDonald from contacting certain clients of the Company. On June 5, 2003, the
court entered a preliminary injunction which prohibits Mr. MacDonald and persons
acting in concert with him from soliciting clients of the Company's Executive
Benefits Practice. On July 24, 2003, the court issued its order granting the
Company's Motion to Compel Arbitration and those proceedings have been commenced
by both the Company and Mr. MacDonald. The Company denies any wrongdoing and
intends to vigorously defend Mr. MacDonald's claims. The Company also intends to
vigorously pursue the enforcement of Mr. MacDonald's non-competition and
non-solicitation covenants.

FRIEDA SHUSTER, ET AL. V. HYDER MIRZA, ET AL. INCLUDING CLARK/BARDES, INC.

On May 30, 2001, the Company was named a defendant in a lawsuit filed in the
District Court of LaSalle County, Texas alleging gross negligence in connection
with the death of an employee when the private aircraft in which he was
traveling on company business crashed. Damages are unspecified. The trial has
been scheduled to begin in February 2004. The Company denies any and all claims
and allegations in this action and intends to vigorously defend this matter. The
matter is covered by existing insurance.

18.  RESTATED QUARTERLY RESULTS

Subsequent to issuance of the Company's condensed consolidated financial
statements for the three and nine month periods ended September 30, 2002, the
Company's management determined that revenue recognized under its administrative
service agreements should have been recognized on a straight-line basis at the
Executive Benefits Practice. During the fourth quarter of 2002, the Company
completed an analysis of the services provided and timing thereof and determined
that because of changes in the timing of the services provided, revenue under
these agreements should have been recognized on a straight-line basis during
2002. Historically, these fees were recognized 75% in the renewal month and 25%
ratably over the remainder of the annual service agreement. In addition, during
the fourth quarter of 2002, the Company restated its 2002 quarterly results to
reflect a timing difference whereby CSI was under-recognizing revenue in the
period earned. This restatement for CSI had no impact on 2002 results for the
full year.

As a result, the condensed consolidated financial statements for the three and
nine month periods ended September 30, 2002 have been restated from the amounts
previously reported. Certain reclassifications of 2002 amounts have been made to
conform with the 2003 presentation. A summary of the significant effects of the
restatement is as follows:

                                       23
<PAGE>


                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED              NINE MONTHS ENDED
                                                              SEPTEMBER 30,                  SEPTEMBER 30,
                                                     ---------------------------------------------------------------
                                                           2002           2002             2002           2002
                                                     ---------------------------------------------------------------
                                                      (AS PREVIOUSLY  (AS RESTATED)   (AS PREVIOUSLY  (AS RESTATED)
                                                        REPORTED)                        REPORTED)
<S>                                                  <C>              <C>              <C>             <C>
REVENUE
    First year commissions and related fees                   $36,042        $35,246           $86,899      $84,758
    Renewal commissions and related fees                       17,665         17,889            72,247       71,140
    Consulting fees                                             8,215          8,910            22,156       24,399
    Reimbursable expenses                                         768            768             3,440        3,440
                                                     ---------------------------------------------------------------
TOTAL REVENUE                                                  62,690         62,813           184,742      183,737
                                                     ---------------------------------------------------------------
OPERATING EXPENSES
  Commissions and fees                                         18,971         18,971            59,208       59,208
  General and administrative                                   37,237         37,237           100,195      100,195
  Reimbursable expenses                                           768            768             3,440        3,440
  Amortization                                                  2,163          2,163             6,091        6,091
                                                     ---------------------------------------------------------------
TOTAL OPERATING EXPENSE                                        59,139         59,139           168,934      168,934
                                                     ---------------------------------------------------------------
OPERATING INCOME                                                3,551          3,674            15,808       14,803
OTHER INCOME                                                       58             58               192          192
INTEREST
   Income                                                          87             87               266          266
   Expense                                                       (588)          (588)           (1,429)      (1,429)
                                                     ---------------------------------------------------------------
                                                                 (501)          (501)           (1,163)      (1,163)
                                                     ---------------------------------------------------------------
Income before taxes and cumulative effect of change
   in accounting principle, net of tax                          3,108          3,231            14,837       13,832
Income taxes                                                   (1,431)        (1,487)           (6,217)      (5,807)
                                                     ---------------------------------------------------------------
Income, before cumulative effect of change in
accounting principle, net of tax                                1,677          1,744             8,620        8,025
Cumulative effect of change in accounting principle,
   net of tax                                                       -              -              (523)        (523)
                                                     ---------------------------------------------------------------
NET INCOME                                                    $ 1,677        $ 1,744           $ 8,097      $ 7,502
                                                     ===============================================================

Basic Earnings per Common Share, before cumulative
 effect of change in accounting principle                       $0.10          $0.10             $0.51        $0.48
     Cumulative effect of change in accounting
principle                                                           -              -             (0.03)       (0.03)
                                                     ---------------------------------------------------------------
Basic Earnings per Common Share                                 $0.10          $0.10             $0.48        $0.45
                                                     ===============================================================
Weighted average shares outstanding - Basic                16,845,529     16,845,529        16,753,347   16,753,347
                                                     ---------------------------------------------------------------

Diluted Earnings per Common Share, before
cumulative effect of change in accounting principle             $0.10          $0.10             $0.50        $0.46
     Cumulative effect of change in accounting
principle                                                           -              -             (0.03)       (0.03)
                                                     ---------------------------------------------------------------
Diluted Earnings per Common Share                               $0.10          $0.10             $0.47        $0.43
                                                     ===============================================================
Weighted average shares outstanding - Diluted              17,160,676     17,160,676        17,289,292   17,289,292
                                                     ---------------------------------------------------------------
</TABLE>


                                       24
<PAGE>

                          CLARK, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)
                               SEPTEMBER 30, 2003

19.  SUBSEQUENT EVENTS

On October 7, 2003, the Company acquired Blackwood Planning Corporation. Based
in West Palm Beach, Florida, Blackwood Planning specializes in providing
strategic compensation, benefit and bank-owned life insurance portfolio
consulting services to banks in the Southeast. The consideration consists of a
total purchase price of $6.3 million, consisting of approximately $1.3 million
in cash and 44,298 shares of Clark, Inc. stock paid at closing, and
approximately $4.4 million of which is payable over the next three and one half
years based on achieving certain revenue targets.

As of October 1, 2003, the Company reorganized its executive compensation
consulting practices. As part of this reorganization, some of the operations and
employees of Human Capital Practice were transferred to Pearl Meyer & Partners.
Amendments to certain employment agreements will be made. As a result, the
segment information as of and for the periods ended December 31, 2002 and 2001
will be reclassified to reflect this transfer.


                                       25
<PAGE>

                                      *****

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS
          (Tables shown in thousands of dollars, except share and
          per share amounts)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our financial statements, the
notes thereto and other information appearing elsewhere in this Form 10-Q.

BUSINESS

The condensed consolidated financial statements reflect the accounts of Clark,
Inc. (formerly Clark/Bardes, Inc.) ("Clark") and its wholly owned subsidiaries.
Through our six operating segments, Executive Benefits Practice, Banking
Practice, Healthcare Group, Human Capital Practice, Pearl Meyer & Partners, and
Federal Policy Group, we design, market and administer compensation and benefit
programs for companies supplementing and securing employee benefits and provide
executive compensation and related consulting services to U.S. corporations,
banks and healthcare organizations. We assist our clients in using customized
life insurance products to finance their long-term benefit liabilities. In
addition, we own Clark Securities, Inc. (formerly Clark/Bardes Financial
Services, Inc.), a registered broker-dealer through which we sell all our
securities products and receive a commission.

On June 9, 2003, the Company (formerly known as Clark/Bardes, Inc.) changed its
name to Clark, Inc. On April 24, 2003, the Company's operating entity (formerly
known as Clark/Bardes Consulting, Inc.) changed its name to Clark Consulting,
Inc.

As discussed in Note 18 in the notes to the condensed consolidated financial
statements, we have restated our financial statements for the three and nine
month periods ended September 30, 2002. This management discussion and analysis
gives effect to this restatement.

General economic conditions and market factors, such as changes in interest
rates and stock prices, can affect our commission and fee income and the extent
to which clients keep their policies inforce year after year. Equity returns and
interest rates can effect the sale and profitability of many employee benefit
programs whether they are financed by life insurance or other financial
instruments. For example, if interest rates increase, competing products could
become attractive to potential purchasers of the programs we market. Further, a
prolonged decrease in stock prices can effect the sale and profitability of our
clients' programs that are linked to stock market indices.

                                       26
<PAGE>


CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. The Securities and Exchange Commission ("SEC") has defined a
company's critical accounting policies as those that are most important to the
portrayal of its financial condition and the results of operations, and which
require us to make difficult and subjective judgments, often as a result of the
need to make estimates of matters that are inherently uncertain. Based on this
definition, we have identified the following critical accounting policies and
judgments. Although we believe that our estimates and assumptions are
reasonable, they are based upon information available when they are made. Actual
results may differ significantly from these estimates under different
assumptions and conditions.

REVENUE SOURCES AND RECOGNITION

Our operating segments derive their revenue primarily from:

         o        commissions paid by the insurance companies issuing the
                  policies underlying our benefit programs;
         o        program design and administrative service fees paid by our
                  clients;
         o        executive compensation and benefit consulting fees; and
         o        fees for legislative liaison and related advisory services.

Our commission revenue is normally long term and recurring, is typically paid
annually and usually extends for a period of ten years or more after the sale.
Commissions paid by insurance companies vary by policy and by program and
typically represent a percentage of the premium or the cash surrender value of
the insurance policies underlying the program.

First Year Commission Revenue and Related Fees. First year commission revenue
and related fees are derived from two principal sources: (a) the commission we
earn when the client first purchases the policies, which revenue is recognized
at the time the application is substantially completed, the client is
contractually committed to purchase the insurance policies and the premiums are
paid by the client to the insurance company; and (b) fees for the services
related to the enrollment and initial administration of the benefit programs and
underlying policies.

         Our first year commission revenue is frequently subject to chargeback,
         which means that insurance companies retain the right to recover
         commissions in the event policies prematurely terminate. The chargeback
         schedules differ by product and usually apply to first year commission
         only. A typical chargeback schedule, based on a percent of first year
         commission and the year in which the termination occurs, is as follows:

           Year 1                                         100%
           Year 2 and 3                                    50%
           Year 4                                          25%
           Year 5 and beyond                                0%

         While the commission revenue is subject to chargeback, our experience
         has indicated that less than 1% of revenue recognized has ever been
         refunded to insurance companies pursuant to such chargeback provisions.
         Given the homogenous nature of such cases and historical information
         about chargebacks, we believe we are able to accurately estimate the
         revenue earned. We maintain a chargeback allowance, using historical
         information to determine adequacy.

Renewal Commission Revenue and Related Fees. Renewal commission revenue is the
commission we earn on the policies underlying the benefit programs we have sold
in prior years that continue to remain inforce. Renewal revenue is recognized on
the date that the renewal premium is due or paid to the insurance company
depending on the type of policy.

                                       27
<PAGE>

Consulting fee revenue. Consulting fee revenue consists of fees of Human Capital
Practice, Pearl Meyer and Federal Policy Group for the services we perform in
advising our clients on their executive compensation programs and related
consulting services, retirement, benefit, actuarial, pension savings plan design
and management, people strategy, compensation surveys, institutional registered
investment advisory services and fees from legislative and regulatory policy
matters. These fees are generally based on a rate per hour arrangement and are
earned when the service is rendered. Some of our consulting clients pay a
retainer at the beginning of a project. These revenues are recognized ratably
over the term of the engagement. Consulting fee revenue generated by the
Executive Benefits Practice, Banking Practice and Healthcare Group are included
as first year revenue in the accompanying condensed consolidated income
statement.

Administrative service fee revenue. Administrative service fee revenue consists
of fees we charge our clients for the administration of their benefit programs
and are earned when services are rendered. These revenues are included as
renewal commissions and related fees revenue in the accompanying condensed
consolidated income statement.

During the fourth quarter of 2002, we completed an analysis of the services
provided and timing thereof under our administrative service agreements at our
Executive Benefits Practice. As a result of this analysis, we determined that
because of changes in the timing of the services being provided, revenue under
these agreements should have been recognized on a straight-line basis during
2002 and restated our financial statements accordingly. Historically, these fees
were recognized 75% in the renewal month and 25% ratably over the remainder of
the annual service agreement.

We record revenue on a gross basis when we are the primary obligor in the
arrangement or when we bear the credit risk in the arrangement. We record
revenue on a net basis when another party is the primary obligor in the
arrangement or when another party bears the credit risk.

In accordance with Emerging Issues Task Force ("EITF") Issue No. 01-14, Income
Statement Characterization of Reimbursements Received for "Out-of-Pocket"
Expenses Incurred, reimbursements received for out-of-pocket expenses incurred
are characterized as revenues and are shown as a separate component of total
revenue. Similarly, related reimbursable expenses are also shown separately
within operating expenses. EITF Issue No. 01-14 was effective as of January 1,
2002.

Success fee arrangements. In our Human Capital Practice and Federal Policy
Group, we are involved in certain client engagements under which we receive a
success fee upon meeting certain objectives. We recognize revenue on these
engagements only when we have verifiable information that the objectives have
been met even if the services were performed in prior periods.

Carrier incentive contracts. We enter into certain carrier incentive contracts
under which we receive payments based upon the cash value of our existing
inforce revenue with these carriers. We recognize these revenues as they are
earned as outlined in the related contract. Revenue in the year of execution is
recorded as first year revenue in the condensed consolidated income statement.
Revenue earned in subsequent years is recorded as renewal revenue in the
condensed consolidated income statement.

INTANGIBLE ASSETS

We have intangible assets representing the excess of the costs of acquired
businesses over the fair values of the tangible net assets associated with an
acquisition. Intangible assets consist of the net present value of estimated
future cash flows from policies inforce at the acquisition date, non-compete
agreements with the former owners of acquired businesses and assets, other
identifiable intangibles and goodwill. Non-compete agreements are amortized over
the period of the agreements and other identifiable intangibles are amortized
over their useful lives.

                                       28
<PAGE>

The net present value of inforce revenue is typically amortized over 30 years
(the expected average policy duration). The determination of the amortization
schedule involves making certain assumptions related to persistency, expenses,
and discount rates that are used in the calculation of the carrying value of
inforce revenue. If any of these assumptions change or actual experience differs
materially from the assumptions used, it could affect the carrying value of the
inforce revenue.

We are required to assess potential impairments of long-lived assets in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, if events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. In assessing the recoverability of goodwill and the net present
value of future cash flows from policies inforce, we must make assumptions
regarding estimated future cash flows and other factors to determine the fair
value of the respective assets. If these estimates and related assumptions
change in the future, we may be required to record impairment charges. As of
January 1, 2002, amortization of goodwill ceased and is tested annually for
impairment. We perform this test during the fourth quarter or whenever changes
in circumstances indicate impairment might exist in accordance with SFAS No.
142.

EMPLOYEE COMPENSATION

We account for stock-based compensation to employees using the intrinsic value
method prescribed in Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees. Under APB Opinion No. 25, compensation
cost for stock options is measured as the excess, if any, of the quoted market
price of our stock at the date of grant over the amount an employee must pay to
acquire the stock. Generally, common stock options issued to employees do not
result in compensation expense because the exercise price of the option equals
the market price of the underlying stock on the date of grant. However,
compensation expense may be incurred for options issued to employees if the
options are contingent upon meeting certain performance criteria.

SFAS No. 123, Accounting for Stock-Based Compensation, established accounting
and disclosure requirements using a fair value based method of accounting for
stock-based employee compensation plans. We have elected to remain on the APB
No. 25 method of accounting as described above for employees and directors as
allowed under SFAS No. 123. However, we account for stock options granted to
non-employees other than directors under the provisions of SFAS No. 123.

The pro forma information regarding net income and earnings per share required
by SFAS No. 123 has been determined as if we accounted for our stock based
compensation plans under the fair value method. The fair value of each option
grant was estimated at the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for grants in 2003
and 2002, respectively:

                                                    SEPTEMBER 30,
                                              ---------------------------
                                                 2003            2002
                                              ------------    -----------
Dividend yield                                       None           None
Volatility                                          63.4%          64.2%
Risk-free interest rates                             5.2%           5.4%
Expected life (years)                                   5              6

Had compensation cost for our stock-based compensation plans been determined in
accordance with SFAS No. 123, as amended by SFAS No. 148, Accounting for
Stock-Based Compensation - Transition and Disclosure - An Amendment of FASB
Statement No. 123, our net income and earnings per share would have been reduced
to the pro forma amounts indicated below:

                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                                           NINE MONTHS
                                                                 THREE MONTHS ENDED           ENDED
                                                                     SEPTEMBER               SEPTEMBER
                                                                 -------------------    --------------------
                                                                   2003      2002         2003       2002
                                                                 --------- ---------    --------- ----------
<S>                                                              <C>       <C>          <C>       <C>
NET INCOME
  As reported                                                      $2,751    $1,744       $8,324     $7,502
  Add: stock-based employee compensation expense
  included in reported
  net income, net of related tax effect                                 -       340          206        340

Deduct: stock option compensation expense, net of tax                (591)     (873)      (1,206)    (1,939)
                                                                 --------- ---------    --------- ----------
  Pro forma                                                        $2,160    $1,211       $7,324     $5,903
                                                                 ========= =========    ========= ==========

BASIC EARNINGS PER COMMON SHARE

 As reported                                                        $0.15     $0.10        $0.46      $0.45

 Pro forma                                                          $0.12     $0.07        $0.40      $0.35

DILUTED EARNINGS PER COMMON SHARE

  As reported                                                       $0.15     $0.10        $0.45      $0.43

  Pro forma                                                         $0.12     $0.07        $0.39      $0.34
</TABLE>


OVERVIEW OF RESULTS OF OPERATIONS

Total revenues for the three months ended September 30, 2003 was $77.9 million,
an increase of 23.9% from revenues of $62.8 million in the third quarter of
2002. Third quarter 2003 operating income was $10.5 million, as compared to $3.7
million in the comparable 2002 period. We reported net income for the third
quarter 2003 of $2.8 million, or $0.15 per diluted share, compared to net income
of $1.7 million, or $0.10 per diluted share, for the same period last year.

For the nine months ended September 30, 2003, total revenue was $239.7 million,
an increase of 30.5% from revenues of $183.7 million for the first nine months
of 2002. Operating income was $30.8 million, a 108.0% increase from operating
income of $14.8 million in the comparable period of 2002. Net income for the
nine months ended September 30, 2003 was $8.3 million, or $0.45 per diluted
share, compared to $7.5 million, or $0.43 per diluted share, for the nine months
ended September 30, 2002.

                                       30
<PAGE>

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED SEPTEMBER 30,          NINE MONTHS ENDED SEPTEMBER 30,
                                          ------------------------------------     -----------------------------------
                                            2003        2002       % CHANGE          2003       2002       % CHANGE
                                          ---------- ------------ ------------     --------- ------------ ------------
<S>                                       <C>        <C>          <C>              <C>       <C>          <C>
REVENUE
   First year commissions and related
fees                                        $30,295      $35,246      (14.0%)       $87,842      $84,758         3.6%
   Renewal commissions and related fees      34,419       17,889        92.4%       111,490       71,140        56.7%
   Consulting fees                           11,668        8,910        31.0%        35,990       24,399        47.5%
   Reimbursable expenses                      1,470          768        91.4%         4,426        3,440        28.7%
                                          ---------- ------------ ------------     --------- ------------ ------------
            TOTAL REVENUE                    77,852       62,813        23.9%       239,748      183,737        30.5%

OPERATING EXPENSE
    Commissions and fees                     21,166       18,971        11.6%        67,988       59,208        14.8%
     % of revenue                             27.2%        30.2%                      28.4%        32.2%
    General and administrative               38,953       37,237         4.6%       121,907      100,195        21.7%
     % of revenue                             50.0%        59.3%                      50.8%        54.5%
    Reimbursable expenses                     1,470          768        91.4%         4,426        3,440        28.7%
    Amortization                              5,769        2,163       166.7%        16,144        6,091       165.0%
    Settlement of litigation                      -            -            -        (1,500)           -         100%
                                          ---------- ------------ ------------     --------- ------------ ------------
OPERATING INCOME                             10,494        3,674       185.6%        30,783       14,803       108.0%
     % of revenue                             13.5%         5.8%                      12.8%         8.1%
OTHER INCOME (EXPENSE)                           88           58        51.7%           269          192        40.1%
INTEREST INCOME                                  58           87      (33.3%)           242          266       (8.7%)
INTEREST EXPENSE                             (6,080)        (588)      934.0%       (18,247)      (1,429)           -
                                          ---------- ------------ ------------     --------- ------------ ------------
Income before taxes and cumulative
effect of change in accounting
principle, net of tax                         4,560        3,231        41.1%        13,047       13,832       (5.9%)
Income taxes                                 (1,809)      (1,487)       21.7%        (4,723)      (5,807)     (18.7%)
                                          ---------- ------------ ------------     --------- ------------ ------------
Income before cumulative effect of
change in accounting principle, net
of tax                                        2,751        1,744        57.7%         8,324        8,025         3.7%
Cumulative effect of change in
     accounting principle                         -            -            -             -         (523)           -
                                          ---------- ------------ ------------     --------- ------------ ------------
NET INCOME                                  $ 2,751      $ 1,744        57.7%       $ 8,324      $ 7,502        11.0%
                                          ========== ============ ============     ========= ============ ============

Per common share - diluted
     Net income                               $0.15        $0.10                     $0.45         $0.43
     Weighted average shares             18,700,694   17,160,676                18,645,244    17,289,292
</TABLE>

                                       31
<PAGE>

Quarter ended September 30, 2003 compared to quarter ended September 30, 2002

Revenue. Total revenue for the three months ended September 30, 2003 was $77.9
million, an increase of 23.9% from revenues of $62.8 million in third quarter
2002. First year commission revenue during third quarter 2003 was $30.3 million
compared to $35.2 million in the third quarter of 2002. First year commission
revenue in the third quarter 2003 included $2.7 million related to agreements
with two of our core insurance carriers in which we received additional payments
and revenue based on the cash value of our existing inforce revenue with these
carriers. The length of one of the contracts is five and one half years and the
other contract is one year. The contracts automatically renew each year unless
notice is given by one of the parties. These agreements are expected to generate
$750 thousand per quarter starting in the fourth quarter of 2003 for the Banking
Practice and increasing to $1.1 million per quarter starting in the third
quarter of 2004, of which, $850 thousand is for the Banking Practice and $200
thousand is for the Executive Benefits Practice. First year commission revenue
in the third quarter 2002 included $2.5 million related to an agreement with
another core insurance carrier. Under the thirty-year agreement, renewal
revenues have also been affected each quarter since execution of the agreement
with $625 thousand of revenue reflected in the third quarter 2003. The expected
revenue streams are based on our existing inforce business with these carriers,
and would be negatively impacted by potential future surrenders of the inforce
business or non-renewal of the agreements and positively impacted by asset
growth of these contracts.

As a result of legislation proposed on September 17, 2003, that would have
negatively impacted the insurance programs we sell after that date, we
experienced a significant slow down in new business revenue after the proposed
legislation. The effective date in the proposed legislation has since been
changed to date of enactment, if passed, and as a result, we do not expect
additional slowdown in new business revenue in the near-term. Renewal revenue,
which increased $16.5 million over the prior period, benefited significantly
(approximately $11.1 million) from the November 2002 acquisition of Long, Miller
& Associates, LLC ("LongMiller"). Quarterly consulting fee revenue growth was
particularly strong in the Federal Policy Group.

Commission and fee expense. Commission and fee expense for the three months
ended September 30, 2003 was $21.2 million, or 27.2% of total revenue, compared
to $19.0 million or 30.2% of total revenue in third quarter 2002. The percentage
paid in commission expense declined primarily due to an increasing number of
employee consultants who have a lower commission rate than independent
consultants. Also, there was an increase in renewal revenue, which also has a
lower commission rate and consulting fee revenue from the three months ended
September 30, 2002. We do not pay commission, or any other related expenses, on
the revenue associated with the carrier incentive contracts. With the
acquisition of Federal Policy Group and the formation of our Human Capital
Practice, we continue to expand our fee-based revenue (an increase of 31.0% over
the three months ended September 30, 2002), which should continue to favorably
affect commission expense as a percentage of total revenue.

General and administrative expense. General and administrative expense for the
three months ended September 30, 2003 was $39.0 million, or 50.0% of total
revenue, compared to $37.2 million, or 59.3% of total revenue, for the three
months ended September 30, 2002. The lower percentage of general and
administrative expense to revenue reflects good expense control across all
practices and the relatively lower costs associated with the revenue stream from
the LongMiller acquisition.

Amortization. Amortization expense for the three months ended September 30, 2003
was $5.8 million compared to $2.2 million in the prior year. The increase is
primarily due to the amortization of inforce revenue attributed to the November
2002 acquisition of LongMiller.

Other income. In the third quarter of 2003 and 2002, we received rental income
of approximately $88 thousand and $58 thousand, respectively, from several
tenants.

Interest expense - net. Net interest expense for the three months ended
September 30, 2003 was $6.0 million compared to $501 thousand in 2002. To fund
the November 2002 acquisition of LongMiller, we borrowed approximately $87.5
million on our line of credit and issued $305 million of non-recourse
asset-backed notes. The acquisition-related debt significantly increased our net
interest expense from the three months ended September 30, 2003 compared to the
three months ended September 30, 2002.

                                       32
<PAGE>

Income taxes. Income taxes for the three months ended September 30, 2003 were
$1.8 million at an effective tax rate of 39.7% compared to $1.5 million at an
effective tax rate of 46.0% for the three months ended September 30, 2002. The
effective tax rate for the three months ended September 30, 2002 resulted from a
change in our year-to-date income tax rate from 40.8% to 41.9% during the
quarter. We expect our income tax rate to be approximately 40% in future
periods.

Net Income. Net income for the three months ended September 30, 2003 was $2.8
million, or $0.15 per diluted common share, versus net income of $1.7 million,
or $0.10 per diluted share, for the same period last year.

Nine months ended September 30, 2003 compared to nine months ended September 30,
2002

Revenue. Total revenues for the nine months ended September 30, 2003 were $239.7
million, an increase of 30.5% from revenues of $183.7 million in the nine months
ended September 30, 2002. First year commission revenue for the nine months
ended September 30, 2003, included $2.7 million related to agreements with two
of our core insurance carriers in which we received additional payments and
revenue based on the cash value of our existing in force revenue with these
carriers. These agreements are expected to generate $750 thousand per quarter
starting in the fourth quarter of 2003 for the Banking Practice and increasing
to $1.1 million per quarter starting in the third quarter of 2004, of which,
$850 thousand is for the Banking Practice and $200 thousand is for the Executive
Benefits Practice. The expected revenue streams are based on our existing
inforce business with these carriers, and would be negatively impacted by
potential future surrenders of the inforce business or non-renewal of the
agreements and positively impacted by asset growth of these contracts. The
Banking Practice, which increased total revenue by $54.2 million over the prior
period, benefited significantly (approximately $35.1 million) from the November
2002 acquisition of Long, Miller & Associates, LLC ("LongMiller") and a strong
community bank market. Federal Policy Group results were strong reflecting good
overall demand for its services and includes a $2.8 million success fee recorded
and collected during the first quarter 2003. However, the Executive Benefits
Practice, as expected by management, continued to underperform when compared to
the nine months ended September 30, 2002 due to the weak economic environment,
which has slowed the benefit plan implementation process with its corporate
clients. Consulting fees as a percentage of total revenue increased to 15.0% for
the nine months ended September 30, 2003 compared to 13.3% in the nine months
ended September 30, 2002. This increase is primarily due to the formation and
growth of our Human Capital Practice through the addition of the Arthur Andersen
("Andersen") partners and employees in May 2002 and the acquisition of Federal
Policy Group in February 2002.

Commission and fee expense. Commission and fee expense for the nine months ended
September 30, 2003 was $68.0 million, or 28.4% of total revenue compared to
$59.2 million, or 32.2% of total revenue, for the nine months ended September
30, 2002. The percentage paid in commission expense declined primarily due to an
increasing number of employee consultants who have a lower commission rate than
independent consultants. Also, there was an increase in renewal revenue, which
also has a lower commission rate and consulting fee revenue from the nine months
ended September 30, 2002. We do not pay commission, or any other related
expenses, on the revenue associated with the carrier incentive contracts. With
the acquisition of Federal Policy Group and the formation of our Human Capital
Practice, we continue to expand our consulting fee revenue (an increase of 47.5%
over the nine months ended September 30, 2002), which should continue to
favorably affect commission expense as a percentage of revenue.

General and administrative expense. General and administrative expense for the
nine months ended September 30, 2003 was $121.9 million, or 50.8% of total
revenue, compared to $100.2 million, or 54.5% of total revenue for the nine
months ended September 30, 2002. General and administrative expenses increased
for the nine months ended September 30, 2003 from prior year as a result of the
2002 acquisitions, such as LongMiller and Federal Policy Group and the hiring of
Andersen Human Capital Practice partners and employees, included for the entire
nine months of 2003. General and administrative expense for the nine months
ended September 30, 2003 included approximately $2.4 million in charges,
primarily related to severance costs and lease terminations in our Executive
Benefits Practice, Healthcare Group and Human Capital Practice and approximately
$800 thousand relating to the corporate re-branding effort as a result of our
name change. A non-cash charge of $345 thousand was incurred in the first
quarter of 2003 related to stock compensation expense.

                                       33
<PAGE>

Amortization. Amortization expense for the nine months ended September 30, 2003
was $16.1 million compared to $6.1 million in the prior year. The increase is
primarily due to the amortization of inforce revenue attributed to the November
2002 acquisition of LongMiller.

Settlement of litigation - During the nine months ended September 30, 2003, we
received $1.5 million from a favorable lawsuit settlement.

Other income. For the nine months ended September 30, 2003 and 2002, we received
rental income of approximately $269 thousand and $192 thousand, respectively,
from several tenants.

Interest expense - net. Net interest expense for the nine months ended September
30, 2003 was $18.0 million compared to $1.2 million in 2002. As a result of the
November 2002 acquisition of LongMiller, we borrowed approximately $87.5 million
on our line of credit and issued $305 million of non-recourse asset-backed
notes. The acquisition-related debt significantly increased our net interest
expense from the nine months ended September 30, 2003 compared to the nine
months ended September 30, 2002.

Income taxes. Income taxes for the nine months ended September 30, 2003 were
$4.7 million at an effective tax rate of 36.2% compared to $5.8 million at an
effective tax rate of 41.9% for the nine months ended September 30, 2002. The
effective tax rate for the nine months ended September 30, 2003 reflects $509
thousand of net state tax refunds relating to prior years. The decrease in the
effective tax rate is primarily related to the trueup of the estimated 2002
state tax liability. We expect a normalized effective income tax rate to be
approximately 40% in future periods.

Net Income. Net income for the nine months ended September 30, 2003 was $8.3
million, or $0.45 per diluted common share, versus net income of $7.5 million,
or $0.43 per diluted share, for the same period last year.


                                       34
<PAGE>

The tables that follow present the operating results of our six segments for the
three and nine months ended September 30, 2003 and 2002.

         EXECUTIVE BENEFITS PRACTICE
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                  SEPTEMBER 30,           SEPTEMBER 30,
                                                              ----------------------- -----------------------
                                                                     2003       2002         2003       2002
                                                              ----------------------- -----------------------
         <S>                                                  <C>           <C>         <C>         <C>
         REVENUE
              First year commissions and related fees             $ 4,849     $5,488      $17,531    $23,439
              Renewal commissions and related fees                 12,452      9,769       41,113     43,040
              Reimbursable expenses                                    46         45          186        176
                                                              ----------------------- -----------------------
                  TOTAL REVENUE                                    17,347     15,302       58,830     66,655
         OPERATING EXPENSES
              Commissions and fees                                  7,564      7,624       25,474     33,348
                 % of revenue                                       43.6%      49.8%        43.3%      50.0%
              General and administrative                            8,643      9,091       26,072     25,567
                  % of revenue                                      49.8%      59.4%        44.3%      38.4%
               Reimbursable expenses                                   46         45          186        176
              Amortization                                          1,044      1,144        3,075      3,155
                                                              ----------------------- -----------------------
         OPERATING (LOSS) INCOME                                   $   50    ($2,602)     $ 4,023    $ 4,409
                  % of revenue                                       0.3%    (17.0%)         6.8%       6.6%
                                                              ======================= =======================
</TABLE>

         As of January 1, 2003, we transferred the operations of Coates Kenney
         from Executive Benefits Practice to Human Capital Practice. As a
         result, the three months and nine months ended September 30, 2002
         segment information has been reclassified to reflect this transfer.

         First year revenue was significantly lower in the Executive Benefits
         Practice, reflecting the continued difficult economic and legislative
         environment, which most directly affects this segment of the business.
         First year revenue for the three months ended September 30, 2003
         includes approximately $785 thousand from the execution of a contract
         with one of our insurance carriers. Renewal revenue increased over the
         three months ended September 30, 2003 reflecting good persistency on
         inforce business and the timing of premiums payments. Commission
         expense as a percentage of total revenue declined from 49.8% for the
         three months ended September 30, 2002 to 43.6% for the three months
         ended September 30, 2003 due to the mix of sales by employee
         consultants who are paid on a lower commission grid. General and
         administrative expense for the three months ended September 30, 2003
         includes approximately $240 thousand of restructuring charges recorded
         in accordance with Statement of Financial Accounting Standards
         ("SFAS ") No. 146, Accounting for Costs Associated with Exit or
         Disposal Activities for the consolidation of the business support
         services.

         Trends in the nine month results ended September 30, 2003 as compared
         to the period in 2002 were generally the same as those experienced for
         the quarter. However, renewal revenue declined from the nine months
         ended September 30, 2002 as a result of previously discussed split
         dollar legislation in the footnotes to the condensed consolidated
         financial statements and lower deferrals into corporate compensation
         plans. General and administrative expense was impacted by approximately
         $575 thousand of restructuring charges for the consolidation of the
         business support services and $711 thousand of charges associated with
         other severance agreements and lease terminations.

                                       35
<PAGE>

         BANKING PRACTICE

<TABLE>
<CAPTION>
                                                                   THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                     SEPTEMBER 30,           SEPTEMBER 30,
                                                                 ----------------------- -----------------------
                                                                     2003       2002         2003       2002
                                                                 ----------------------- -----------------------
         <S>                                                     <C>           <C>         <C>         <C>
         REVENUE
              First year commissions and related fees               $18,374    $20,158      $50,596    $37,402
              Renewal commissions and related fees                   19,404      5,794       61,575     20,616
              Reimbursable expenses                                      43         19          112         70
                                                                 ----------------------- -----------------------
                  TOTAL REVENUE                                      37,821     25,971      112,283     58,088
         OPERATING EXPENSES
              Commissions and fees                                   12,657     10,274       39,429     23,117
                 % of revenue                                         33.5%      39.6%        35.1%      39.8%
              General and administrative                              9,467      8,283       30,727     22,135
                  % of revenue                                        25.0%      31.9%        27.4%      38.1%
              Reimbursable expenses                                      43         19          112         70
              Amortization                                            4,166        400       11,395      1,164
                                                                 ----------------------- -----------------------
         OPERATING INCOME                                           $11,488    $ 6,995      $30,620    $11,602
                  % of revenue                                        30.4%      26.9%        27.3%      20.0%
                                                                 ======================= =======================
</TABLE>

         Total first year revenue decreased 8.9% to $18.4 million for the three
         months ended September 30, 2003 from $20.2 million for the three months
         ended September 30, 2002. The decrease in revenue was primarily due to
         the legislative uncertainty surrounding the effective date of pending
         legislation that would potentially negatively impact the insurance
         programs we sell. In addition, renewal revenue for the three months
         ended September 30, 2003 includes $500 thousand related to the
         Administrative Services Agreement entered into on September 25, 2002
         with an affiliate of AUSA Holding, Inc along with $1.9 million in first
         year revenue from the execution of contracts with two other insurance
         carriers. With interest rates remaining at very low historical levels,
         there is some uncertainty about sustaining revenue growth due to
         product capacity and pricing concerns. Approximately $11.1 million of
         the increase in renewal revenue is attributable to the securitized
         inforce revenue stream from the acquisition of LongMiller. Commission
         expense for the three months ended September 30, 2003 was $12.7
         million, or 33.5% of revenue, compared to $10.3 million, or 39.6% of
         revenue, in the same period in 2002. The commission expense as a
         percentage of revenue continues to decrease as a result of a higher
         percentage of first year revenue produced by employee consultants
         versus the prior year. In addition, a larger percentage of total
         revenue consists of renewal revenue which has a lower commission
         expense percentage. We do not pay commission expense on the revenue
         associated with the carrier incentive contracts. General and
         administrative expense for the three months ended September 30, 2003
         was $9.5 million, or 25.0% of revenue, compared to $8.3 million or
         31.9% of revenue, for the comparable period in 2002. The lower
         percentage of general and administrative expenses to revenue reflects
         the relatively lower costs associated with the revenue stream from the
         LongMiller acquisition.

         Trends in the nine month results ending September 30, 2003 as compared
         to the period in 2002 were generally the same as those experienced for
         the quarter.

                                       36
<PAGE>

         HEALTHCARE GROUP
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                  SEPTEMBER 30,           SEPTEMBER 30,
                                                              ----------------------- -----------------------
                                                                     2003       2002         2003       2002
                                                              ----------------------- -----------------------
         <S>                                                  <C>           <C>         <C>         <C>
         REVENUE
              First year commissions and related fees                $6,551     $7,134      $18,514    $20,542
              Renewal commissions and related fees                    1,937      2,168        7,109      6,511
              Reimbursable expenses                                     663        292        2,045      2,002
                                                              ------------------------- -----------------------
                  TOTAL REVENUE                                       9,151      9,594       27,668     29,055
         OPERATING EXPENSES
              Commissions and fees                                      945      1,073        3,085      2,743
                 %  of revenue                                        10.3%      11.2%        11.2%       9.4%
              General and administrative                              5,499      5,782       17,187     17,887
                  %  of revenue                                       60.1%      60.3%        62.1%      61.6%
              Reimbursable expenses                                     663        292        2,045      2,002
              Amortization                                              421        452        1,262      1,356
                                                              ------------------------- -----------------------
         OPERATING INCOME                                            $1,623     $1,995      $ 4,089    $ 5,067
                  %  of revenue                                       17.7%      20.8%        14.8%      17.4%
                                                              ========================= =======================
</TABLE>

         Healthcare Group revenues were lower for the three and nine months
         ended September 30, 2003 compared to the prior year. Healthcare's 2002
         performance was strong and the current Healthcare environment has been
         challenging especially in the areas of labor services, rank and file
         compensation and physician services. For the nine months ended
         September 30, 2003, commission and general and administrative expenses
         include approximately $435 thousand and $335 thousand, respectively,
         for costs associated with a severance agreement. Even with the
         inclusion of these expenses, general and administrative expenses
         declined by 3.9% as a result of cost control measures.

                                       37
<PAGE>

         HUMAN CAPITAL PRACTICE
<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                  SEPTEMBER 30,           SEPTEMBER 30,
                                                              ----------------------- -----------------------
                                                                     2003       2002         2003       2002
                                                              ----------------------- -----------------------
         <S>                                                  <C>           <C>         <C>         <C>
         REVENUE
              Consulting fees                                      $4,897     $3,492        $16,397   $9,693
              Reimbursable expenses                                   192         34            563      136
                                                              ----------------------- -----------------------
                  TOTAL REVENUE                                     5,089      3,526         16,960    9,829
         OPERATING EXPENSES
              General and administrative                            6,331      6,500         19,772   12,981
                  %  of revenue                                    124.4%     184.3%         116.6%   132.1%
              Reimbursable expenses                                   192         34            563      136
                                                              ----------------------- -----------------------
         OPERATING LOSS                                           ($1,434)   ($3,008)       ($3,375) ($3,288)
                  %  of revenue                                   (28.2%)    (85.3%)        (19.9%)  (33.5%)
                                                              ======================= =======================
</TABLE>

         As of January 1, 2003, we transferred the operations of Coates Kenney
         from Executive Benefits Practice to Human Capital Practice. As a
         result, the three and nine months ended September 30, 2002 segment
         information has been reclassified to reflect this transfer. In May
         2002, the Human Capital Practice was formed by combining our existing
         Rewards and Performance Group with the addition of 10 partners and 74
         other employees from the Arthur Andersen Human Capital Practice.

         The nine months ended September 30, 2003 results benefited from
         approximately $500 thousand of success fees on contingent assignments.
         General and administrative expenses for the nine months ended September
         30, 2003 include severance charges of approximately $300 thousand. The
         Human Capital Practice results continue to be negatively affected by
         the challenging economic climate.

         PEARL MEYER AND PARTNERS

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED      NINE MONTHS ENDED
                                                                  SEPTEMBER 30,           SEPTEMBER 30,
                                                              ----------------------- -----------------------
                                                                     2003       2002         2003       2002
                                                              ----------------------- -----------------------
         <S>                                                  <C>           <C>         <C>         <C>
         REVENUE
              Consulting fees                                      $2,883     $2,638         $8,782   $8,116
              Reimbursable expenses                                   448        378          1,368    1,056
                                                              ----------------------- -----------------------
                  TOTAL REVENUE                                     3,331      3,016         10,150    9,172
         OPERATING EXPENSES
              General and administrative                            2,364      2,215          7,292    6,964
                  %  of revenue                                     71.0%      73.4%          71.8%    75.9%
              Reimbursable expenses                                   448        378          1,368    1,056
                                                              ----------------------- -----------------------
         OPERATING INCOME                                            $519       $423         $1,490   $1,152
                  %  of revenue                                     15.6%      14.0%          14.7%    12.6%
                                                              ======================= =======================
</TABLE>


         Total consulting revenue increased 10.4% to $3.3 million for the three
         months ended September 30, 2003 compared to $3.0 million for the three
         months ended September 30, 2002. The practice continues to experience
         more sales activity as a result of engagements in its areas of
         expertise of corporate governance and executive compensation. General
         and administrative expense were $2.4 million for the three months ended
         September 30, 2003 compared to $2.2 million for the three months ended
         September 30, 2002. As a result of cost control efforts, general and
         administrative expenses as a percentage of total revenue had declined.

                                       38
<PAGE>

         Trends in the nine month results ending September 30, 2003 as compared
         to the same period in 2002 were generally the same as those experienced
         for the quarter. General and administrative expenses for the nine
         months ended June 30, 2003 include severance costs of approximately
         $123 thousand.

FEDERAL POLICY GROUP

<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED      NINE MONTHS ENDED
                                                   SEPTEMBER 30,           SEPTEMBER 30,
                                               ----------------------- -----------------------
                                                      2003       2002         2003       2002
                                               ----------------------- -----------------------
         <S>                                   <C>           <C>         <C>         <C>
REVENUE
     Consulting fees                                  $3,888     $2,780       $10,812    $6,590
     Reimbursable expenses                                78          -           151         -
                                               -------------------------  ----------------------
          TOTAL REVENUE                                3,966      2,780        10,963     6,590
OPERATING EXPENSES
     General and administrative                        1,881      1,558         5,361     3,562
         %  of revenue                                 47.4%      56.0%         48.9%     54.1%
     Reimbursable expenses                                78          -           151         -
     Amortization                                         96        125           288       290
                                               -------------------------  ----------------------
OPERATING INCOME                                      $1,911     $1,097       $ 5,163    $2,738
         %  of revenue                                 48.2%      39.5%         47.1%     41.5%
                                               =========================  ======================
</TABLE>

         Results for the three months ended September 30, 2003 included
         approximately $638 thousand of revenue and approximately $264 thousand
         of operating income related to new business generated by four new
         employees hired during the second quarter of 2003.

         For the nine months ended September 30, 2003, Federal Policy Group had
         nine months of results compared to seven months for the comparable
         period in 2002. Federal Policy Group was acquired on February 25, 2002.
         Federal Policy Group experienced good overall demand for its services
         and benefited from a $2.8 million success fee recorded and collected
         during the first quarter of 2003. Results for the nine months ended
         September 30, 2003 included approximately $918 thousand of revenue and
         approximately $276 thousand of operating income related to new business
         generated by four new employees hired during the second quarter of
         2003.

                                       39
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Selected Measures of Liquidity and Capital Resources


                                              SEPTEMBER 30,        DECEMBER 31,
                                                   2003                2002
                                            ------------------   ---------------
Cash and cash equivalents                        $13,636             $14,524
Working capital (1)                              $ 5,909             $19,405
Current ratio - to one                            1.07                 1.24
Shareholders' equity per common share (2)        $13.77               $13.35
Debt to total capitalization (3)                  59.9%               63.4%

(1)      Includes restricted cash and current portion of debt associated with
         asset-backed non recourse notes
(2)      Total stockholders' equity divided by actual shares outstanding
(3)      Current debt plus long term debt divided by current debt plus long term
         debt plus stockholders' equity

As a financial company with historically strong operating cash flow, we believe
we have little need to maintain substantial cash balances. To the extent we have
net cash from operating activities, we use it to fund capital expenditures and
pay down our credit facility. We expect large cash outlays such as future
acquisitions will be financed primarily through externally available funds.
However, we can offer no assurance such funds will be available and, if so, on
terms acceptable to us.

Summarizing our cash flow, comparatively, for the nine months ended September
30, 2003 and 2002:

                                                 2003                2002
                                          ------------------   -----------------
Cash flows provided by/(used in):
   Operating activities                        $46,131             $13,639
    Investing activities                      ($ 8,241)           ($21,547)
    Financing activities                      ($38,778)            $12,218

Cash Flows from Operating Activities

Our cash flows from operating activities for the nine months ended September 30,
2003, compared with the same nine month period in 2002, were as follows:

                                                2003                2002
                                         ------------------   -----------------
Net income plus non-cash expenses             $36,050             $16,957
Changes in operating assets and
      liabilities                              10,081               (3,318)
                                         ------------------   -----------------
Cash flows from operating activities          $46,131             $13,639
                                         ==================   =================

The majority of the increase in non-cash expenses for the nine months ended
September 30, 2003 compared to the same 2002 period relates to amortization of
LongMiller (acquired November 2002) intangibles (approximately $9.0 million) and
the change in deferred income tax accounts (approximately $6.7 million). The
increase in cash relating to changes in operating assets and liabilities relates
primarily to the collection of accounts receivable based on our seasonal spike
in business every fourth quarter.

Estimated Future Gross Renewal Revenue

The following tables represent the estimated gross renewal revenue associated
with the business-owned life insurance policies owned by our clients as of
September 30, 2003. The projected gross revenues are not adjusted for mortality,
lapse or other factors that may impair realization, have not been discounted to
reflect their net present value, and do not reflect the commission expense we
must pay to consultants when we recognize the related revenue. We cannot assure
you that commissions under these policies will be received. These projected
gross revenues are based on the beliefs and assumptions of management and are
not necessarily indicative of the revenue that may actually be realized in the
future.

                                       40
<PAGE>

Non-securitized Gross Inforce Revenues. The following table represents the
estimated gross inforce revenue associated with business owned life insurance
policies owned by our clients as of September 30, 2003, not including estimated
securitized inforce revenues, which are set forth in a separate table.

<TABLE>
<CAPTION>
                                        EXECUTIVE             BANKING         HEALTHCARE
                                    BENEFITS PRACTICE        PRACTICE           GROUP           TOTAL
                                  ----------------------  ----------------  ---------------  -------------
              <S>                 <C>                     <C>               <C>              <C>
              2004                              $49,052           $44,818           $6,197       $100,067

              2005                               40,512            42,040            5,833         88,385

              2006                               35,131            42,072            5,560         82,763

              2007                               31,329            41,113            5,269         77,711

              2008                               26,862            41,147            4,761         72,770

              2009                               25,858            39,549            4,206         69,613

              2010                               25,007            40,664            3,644         69,315

              2011                               25,154            42,079            3,050         70,283

              2012                               25,057            43,366            2,251         70,674

              2013                               25,808            44,721            1,612         72,141
                                  ----------------------  ----------------  ---------------  -------------
              Total                            $309,770          $421,569          $42,383       $773,722
                                  ======================  ================  ===============  =============
                                  ----------------------  ----------------  ---------------  -------------
       September 30, 2002                      $335,538          $287,585          $40,946       $664,069
                                  ======================  ================  ===============  =============
</TABLE>

At September 30, 2003, our ten-year gross inforce revenue projection amounted to
$773.7 million. This balance represents a 16.5% increase in our residual book of
business over the September 30, 2002 balance.

Ten-year inforce revenues net of commission expense are $588.5 million and
$447.8 million as of September 30, 2003 and September 30, 2002, respectively.

Securitized Gross Inforce Revenues. The following table represents the estimated
gross inforce revenue associated with our securitized inforce bank-owned life
insurance policies as of September 30, 2003. These revenue streams are
restricted for the specific purpose of paying off our asset-backed notes, which
were issued in connection with the acquisition of LongMiller in November 2002.

                                                         SECURITIZED
                                                           BANKING
                                                          PRACTICE
                                                       ---------------
                2004                                         $ 45,726
                2005                                           44,571
                2006                                           46,064
                2007                                           48,363
                2008                                           50,556
                2009                                           52,762
                2010                                           55,060
                2011                                           56,897
                2012                                           59,150
                2013                                           62,112
                                                       ---------------
                Total September 30, 2003                     $521,261
                                                       ===============

The ten-year inforce revenues net of commission expense are $407.3 million as of
September 30, 2003.

Human Capital Practice, Pearl Meyer and Partners, and Federal Policy Group
generate fee-based revenues and do not produce inforce revenues.

                                       41
<PAGE>

Cash Used in Investing Activities

For the nine months ended September 30, 2003, approximately $4.5 million of cash
used in investing activities represented earnout payments to prior owners of
certain of our acquired businesses and the purchase of inforce revenue from one
of our practice presidents. Approximately $3.8 million was used for the purchase
of fixed assets.

A substantial amount of the purchase price of our acquisitions is paid in cash.
This is primarily due to our desire to avoid diluting our existing stockholders.
We expect acquisitions to continue to be financed primarily from available
credit lines and possible additional equity. However, we can offer no assurances
such will be the case.

Cash Flows from Financing Activities

For the nine months ended September 30, 2003, approximately $38.8 million of
cash was used primarily for the net repayment of borrowings.

On May 23, 2003, we raised approximately $14.5 million from our participation in
a pooled trust preferred transaction, in which we issued $15 million aggregate
principal amount of long-term subordinated debt securities with a floating rate,
currently around 5.3%. We used the net proceeds to pay down the term portion of
our credit facility. The pooled trust preferred debt is payable in one payment
due in 30 years with interest paid quarterly.

In order to finance the acquisition of LongMiller, we entered into a
securitization of a majority of the inforce revenues of LongMiller, raising $305
million of gross proceeds. The securitization is broken into four traunches,
each rated by Standard & Poors. The traunches consist of the A-1 and A-2 class
totaling approximately $167 million and each rated "AAA", B-class traunch of
$108 million rated "A" and the C-class traunch of $30 million rated "BBB". The
weighted average interest cost over the expected average life of the
asset-backed notes is approximately seven percent. The securitized net inforce
revenues, which are expected to be approximately $40.6 million in 2003, are used
to pay interest and principal to the bondholders as well as servicing and
related fees. Assuming the securitized notes are paid in accordance with the
payment schedule, the securitization will provide residual cash flow to us of
approximately five percent of the securitized inforce revenue while the notes
are amortizing, and our residual interest would equal approximately 28% of the
expected net present value of the securitized inforce revenue over 20 years.
Such residual interest could be substantially less if the notes do not amortize
as expected. The securitization is treated as debt, is included in the Banking
Practice segment, and is generally non-recourse to us.

As of September 30, 2003, we had restricted cash of approximately $14.1 million.
This cash is not available for general corporate purposes, but is solely used to
service the securitization indebtedness incurred to finance the acquisition of
LongMiller. A certain variable portion of the restricted cash is remitted to us
after bondholders are paid.

In May 2002, we amended our December 28, 1999 Credit Agreement to increase the
amount available under the credit facility to $125.0 million, of which $66.0
million was outstanding at September 30, 2003. We converted $50 million of the
borrowings under the revolving credit facility to term debt at December 31,
2002. Of our outstanding debt at September 30, 2003, $18.0 million is term debt.
The term debt is payable quarterly over five years under the term facility
agreement. We had $51.5 million available under our credit lines at September
30, 2003. The revolving portion of our credit facility is scheduled to terminate
on December 31, 2003, at which time any revolving debt would convert to term
debt payable in quarterly installments over five years. We are in discussions
with our lenders to extend and amend the terms of our existing credit agreement.
The expected terms of the proposed agreement are not significantly different
from our current credit agreement. The amount available under the proposed
agreement is $80 million. There is no assurance that our lenders will finalize
the terms of the proposed credit agreement.

The restrictive covenants under the existing loan agreement provide for the
maintenance of a minimum ratio of fixed charges, a maximum allowable leverage
ratio, a minimum amount of net worth (stockholders' equity), and a maximum ratio
of debt to capitalization. We were in compliance with all our restrictive
covenants as of

                                       42
<PAGE>

September 30, 2003. Our restrictive covenants may limit our borrowing ability
under our credit line.

We believe that our cash flow from operating activities will continue to provide
sufficient funds to service our debt obligations. However, as our business
grows, our working capital and capital expenditure requirements will also
continue to increase. There can be no assurance that the net cash flow from
operations will be sufficient to meet our anticipated cash flow requirements or
that we will not require additional debt or equity financing in the future.

Below is a summary of our contractual cash obligations and other commitments and
contingencies:

<TABLE>
<CAPTION>
                                                                                     2008 AND
                              2003       2004       2005       2006       2007      THEREAFTER       TOTAL
                             --------   --------   --------   --------   --------   ------------   ----------
<S>                          <C>        <C>        <C>        <C>        <C>        <C>            <C>
Debt                          $4,527    $34,057    $28,333    $23,341    $22,658       $265,295     $378,211
Operating leases               2,650     10,484     10,468      9,952      9,496         25,090       68,140
Contingent consideration           -      9,449      8,205      4,855      2,500              -       25,009
                             --------   --------   --------   --------   --------   ------------   ----------
     Total                    $7,177    $53,990    $47,006    $38,148    $34,654       $290,385     $471,360
                             ========   ========   ========   ========   ========   ============   ==========
</TABLE>

Intangible Assets

Intangible assets arise as a direct result of our acquisition program and
acquisitions have been an important contribution to our past and expected future
growth. In most of our acquisitions, we acquire very little in the way of
tangible assets; therefore a substantial portion of the purchase price is
typically allocated to intangible assets. Intangible assets, net of
amortization, arising from our purchased businesses consist of the following:

                                            SEPTEMBER 30,          DECEMBER 31,
                                                 2003                  2002
                                         -----------------     -----------------
Net present value of inforce revenue             $460,249              $479,561
Goodwill                                          123,523               117,803
Non-compete agreements                              6,996                 2,831
                                         -----------------     -----------------
          Total                                  $590,768              $600,195
                                         =================     =================
As a percentage of total assets                     82.5%                 81.7%
As a percentage of stockholders' equity            232.9%                248.9%

The present value of inforce revenue is the net discounted cash flow from the
book of business of those companies having future renewal revenue at the time we
acquired them. The amounts allocated to inforce revenue are determined using the
discounted cash flow of future commission adjusted for expected persistency,
mortality and associated costs. The balance of the excess purchase price over
the net tangible and identifiable intangible assets has been allocated to
goodwill. The inforce revenue is amortized over its period of duration, which is
normally twenty to thirty years. Many factors outside our control determine the
persistency of our inforce business and we cannot be sure that the value we
allocated will ultimately be realized.

Non-compete agreements are amortized over the periods of the agreements.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 146, Accounting for Costs
Associated with Exit or Disposal Activities, which nullifies Emerging Issues
Task Force ("EITF") Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring). SFAS No. 146 requires companies to recognize
costs associated with exit or disposal activities when they are incurred, rather
than at the date of commitment to an exit or disposal plan. We adopted SFAS No.
146 as of January 1, 2003, as described in Note 4 to the condensed consolidated
financial statements.

                                       43
<PAGE>

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others, an interpretation of FASB
Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34. This
Interpretation elaborates on the existing disclosure requirements for most
guarantees, including loan guarantees such as standby letters of credit. It also
clarifies that at the time a company issues a guarantee, the company must
recognize an initial liability for the fair value, or market value, of the
obligations it assumes under that guarantee and must disclose that information
in its interim and annual financial statements. The initial recognition and
initial measurement provisions of FIN No. 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002. The disclosure
requirements of FIN No. 45 are effective for financial statements of interim or
annual periods ending after December 15, 2002. We adopted FIN No. 45 as of
January 1, 2003 and the adoption of this interpretation did not have a material
impact on our condensed consolidated financial statements.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest
Entities--an interpretation of ARB No. 51. FIN No. 46 provides guidance on the
identification of entities for which control is achieved through means other
than voting rights (variable interest entities or "VIE") and how to determine
when and which business enterprises should consolidate the VIE. FIN No. 46
requires that both the primary beneficiary and all other enterprises with a
significant variable interest in a VIE make additional disclosures. The
requirements of FIN 46 are effective for financial statements of interim or
annual periods ending after December 15, 2003. We do not expect that the
adoption of this interpretation will have a material impact on the condensed
consolidated financial statements.

In accordance with EITF Issue No. 00-21, Revenue Arrangements with Multiple
Deliverables, a vendor should evaluate all deliverables in an arrangement to
determine whether they represent separate units of accounting. The evaluation
must be performed at the inception of the arrangement and as each item in the
arrangement is delivered. EITF 00-21 is effective for revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. We adopted EITF
Issue No. 00-21 as of July 1, 2003 and the adoption of the requirements of the
consensus reached in this issue did not have a material impact on our condensed
consolidated financial statements.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting of derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 149 is generally effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after June
30, 2003. We adopted SFAS No. 149 as of July 1, 2003 and the adoption of this
statement did not have a material impact on our condensed consolidated financial
statements.

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Instruments
with Characteristics of both Liabilities and Equity. SFAS No. 150 establishes
standards for classifying and measuring certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 is effective for
all financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. We adopted SFAS No. 150 as of July 1, 2003 and the adoption
of this statement did not have a material impact on our condensed consolidated
financial statements.

RELATED PARTY TRANSACTIONS

We lease 16,266 square feet of office space and hanger space for the corporate
aircraft from entities owned by our Chairman and Chief Executive Officer, for
payments totaling approximately $445 thousand annually. The office space lease
expires on February 21, 2009.

On May 16, 2003, we acquired an inforce revenue stream from the president of one
of our practices for approximately $900 thousand. The inforce revenue relates to
policies sold when he was a consultant prior to his employment as practice
president. The inforce revenue is being amortized over 30 years in the Executive
Benefits Practice segment.

                                       44
<PAGE>

During the first quarter 2003, we paid Randy Pohlman, a member of our Board of
Directors, $40 thousand as a referral fee. This amount was accrued in our
financial statements as of December 31, 2002.

Robert Long became a member of our Board of Directors, filling a vacant seat in
January 2003 in connection with the LongMiller acquisition. He received a
substantial amount of the proceeds, including asset-backed notes, from the
November 2002 purchase of LongMiller.

On September 25, 2002, we entered into an Administrative Services Agreement and
Bonus Forfeiture Agreement with an affiliate of AUSA Holding, Inc., one of our
principal stockholders. During 2002, we received $2.5 million for services
rendered prior to and through September 30, 2002 and recognized a total of $3.2
million in the last half of 2002, pursuant to this agreement. Under the terms of
this agreement, we expect to continue to receive approximately $2.5 million
annually from the carrier for a period of 30 years depending upon certain
conditions. Of this annual amount, $2.0 million is included in the cash flows
securitizing the asset-backed notes issued to finance the acquisition of
LongMiller, and we will not have access to this cash for general corporate
purposes until the securitization notes are fully paid. This revenue, net of
amounts provided for chargebacks, is being recognized on a monthly basis
beginning in October 2002. The amounts received are subject to chargeback
(reimbursement of a portion of amounts received) if any policies under this
agreement are surrendered or if there is a section 1035 exchange. Any chargeback
amounts are deducted from the next scheduled payment. We received payments of
approximately $1.3 million and $2.5 million during the three and nine months
ended September 30, 2003, respectively under the terms of this agreement.

In 2003, we terminated three split dollar policies with three of our officers.
One remaining split dollar policy with an officer is expected to be terminated
in the fourth quarter of 2003. We have not paid any premiums on these policies
since before July 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2003, we had total outstanding indebtedness of $378.2 million,
or approximately 153.9% of total market capitalization. Of our outstanding debt,
$5.2 million was subject to fixed rates of 10.0% at September 30, 2003. Of our
outstanding debt, $18.0 million is term debt and is subject to a variable rate
based on LIBOR plus a spread (3.36% at September 30, 2003). Outstanding debt on
our credit revolver is $48.0 million, borrowed at prime and at a one month LIBOR
rate plus a spread (weighted average interest rate of 3.33% as of September 30,
2003). The amount outstanding on our pooled trust preferred debt is $15.0
million as of September 30, 2003 (average interest rate of 5.3% as of September
30, 2003).

On January 7, 2003, we entered into two interest rate swaps with a total
notional value of $50 million to hedge $50 million of LIBOR-based debt. The
notional amount of the interest rate swaps amortizes at the same rate as the
underlying debt. The terms of these interest rate swaps are as follows:

<TABLE>
<CAPTION>
    EFFECTIVE                             NOTIONAL AMOUNT AT    FIXED RATE    VARIABLE RATE     FAIR VALUE AS OF
      DATE            MATURITY DATE       SEPTEMBER 30, 2003    TO BE PAID    TO BE RECEIVED   SEPTEMBER 30, 2003
------------------ --------------------- --------------------- -------------- --------------- ---------------------
<S>                <C>                   <C>                   <C>            <C>             <C>
January 7, 2003     December 31, 2007          $23,800             2.85%          LIBOR                  $330
January 7, 2003     December 31, 2007          $18,700             2.92%          LIBOR                   291
                                                                                                         ----
                     Total                                                                               $621
                                                                                                         ====
</TABLE>

In order to finance the acquisition of LongMiller, we entered into a
securitization of a majority of the inforce revenues of LongMiller, raising $305
million of gross proceeds. The securitization is broken into four traunches,
each rated by Standard & Poors. The traunches consist of the A-1 and A-2 class
totaling approximately $167 million and each rated "AAA", the B-class traunch of
$108 million rated "A" and the C-class traunch of $30 million rated "BBB". The
weighted average interest cost over the expected average life of the
asset-backed notes is approximately seven percent. The securitized net inforce
revenues, which are approximately $40.6 million in 2003, are used to pay
interest and principal to the bondholders. Assuming the securitized notes
amortize as expected, the securitization will provide residual cash flow to us
of approximately five percent of the securitized inforce revenue while the notes
are amortizing, and our residual interest would

                                       45
<PAGE>

equal approximately 28% of the expected net present value of the securitized
inforce revenue over twenty years. Such residual interest could be substantially
less if the notes do not amortize as expected. The securitization is treated as
debt, is included in the Banking Practice segment, and is generally non-recourse
to us.

Interest rate risk - We have exposure to changing interest rates and, as
discussed in Note 9 to the financial statements, are engaged in hedging
activities to mitigate this risk. The interest rate swaps, which we have entered
into, are used to hedge our interest rate exposure on the LIBOR variable rate
debt outstanding at September 30, 2003. Interest on the remaining $38.5 million
of unhedged debt at September 30, 2003 bears interest at LIBOR plus 225 basis
points, LIBOR plus 420 basis points and prime. At our current borrowing level, a
1% change in the interest rate will have an effect of approximately $385
thousand on interest expense on an annual basis.

ITEM 4.  CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-15. Based upon, and as of the date
of that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in timely
alerting them to material information relating to our company (and its
consolidated subsidiaries) required to be included in the periodic reports we
are required to file and submit to the SEC under the Exchange Act.

There were no changes in our internal control over financial reporting during
the period covered by this report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting. We are committed to ongoing periodic reviews and enhancements of our
controls and their effectiveness and will report to our shareholders on these
reviews and enhancements in our annual and quarterly reports filed under the
Exchange Act.

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, we are involved in various claims and lawsuits incidental to
our business, including claims and lawsuits alleging breaches of contractual
obligations under agreements with our consultants. During the nine months ended
September 30, 2003, we received $1.5 million from the favorable settlement of a
lawsuit.

The following is a summary of the current material legal proceedings pending
against us.

WILLIAM L. MACDONALD, SR. V. CLARK/BARDES CONSULTING, INC.

On April 10, 2003, William L. MacDonald, Sr., the former Chairman of the
Executive Benefits Practice, filed suit in Los Angeles California Superior Court
alleging wrongful termination and seeking damages of $10.1 million and a
declaration that all of his non-competition and non-solicitation provisions were
unenforceable. On April 11, 2003, we filed proceedings in the Circuit Court of
Cook County, Illinois to enforce the non-competition and non-solicitation
covenants agreed to by Mr. MacDonald when we purchased Mr. MacDonald's business,
Compensation Resource Group, Inc., in September of 2000. In light of the
California suit, the Illinois litigation was stayed pending the outcome of
proceeding in the California court.

We responded to Mr. MacDonald's suit by requesting the California court to
transfer the matter to arbitration as provided for in several of the contracts
at issue, and to enter a temporary restraining order prohibiting Mr. MacDonald
from competing with us and contacting our clients, in aid of and pending the
outcome of the arbitration. On May 1, 2003, the Court granted our motion and
entered a temporary restraining order prohibiting Mr. MacDonald from contacting
certain clients. On June 5, 2003, the Court entered a preliminary injunction,
which prohibits Mr. MacDonald and persons acting in concert with him from
soliciting clients of our Executive Benefits Practice. On July 24, 2003, the
Court issued its order granting our Motion to Compel Arbitration and those
proceedings have been commenced by both us and Mr. MacDonald. We deny any

                                       46
<PAGE>

wrongdoing and intend to vigorously defend Mr. MacDonald's claims. We also
intend to vigorously pursue the enforcement of Mr. MacDonald's non-competition
and non-solicitation covenants.

FRIEDA SHUSTER, ET AL. V. HYDER MIRZA, ET AL. INCLUDING CLARK/BARDES, INC.

On May 30, 2001, we were named a defendant in a lawsuit filed in the District
Court of LaSalle County, Texas alleging gross negligence in connection with the
death of an employee when the private aircraft in which he was traveling on
company business crashed. Damages are unspecified. The trial has been scheduled
to begin in February 2004. We deny any and all claims and allegations in this
action and intend to vigorously defend this matter. The matter is covered by our
existing insurance.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)      The list of exhibits required by this Item 6(a) appears on the
                 Exhibit Index attached hereto.
        (b)      Reports on Form 8-K.

        On September 16, 2003, we filed an 8-K related to our intent to
securitize insurance revenue assets.

        On July 28, 2003, we filed an 8-K related to our results for three and
six months ended June 30, 2003.

                                       47
<PAGE>

SIGNATURES

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


                                           CLARK, INC.



Date     November 13, 2003                 /s/ Tom Wamberg
                                           -------------------------------------
                                                      Tom Wamberg
                                           President and Chief Executive Officer


Date     November 13, 2003                 /s/ Jeffrey W. Lemajeur
                                           -------------------------------------
                                                   Jeffrey W. Lemajeur
                                                 Chief Financial Officer

                                       48
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

3.1      Certificate of Incorporation (Incorporated herein by reference to
         Exhibit 3.1 of Clark's Registration Statement on Form S-1, File No.
         333-56799, filed with the SEC on July 15, 1998).

3.2      Certificate of Amendment of Certificate of Incorporation (Incorporated
         herein by reference to Exhibit 3.3 to Amendment No.1 to Clark's
         Registration Statement on Form S-1, File No. 333-56799, filed with the
         SEC on July 27, 1998).

3.3      Certificate of Amendment of Certificate of Incorporation (Incorporated
         herein by reference to Exhibit 5 of Clark's Registration Statement on
         Form 8-A, File No. 001-31256, filed with the SEC on February 28, 2002).

3.4      Certification of Amendment of Certification of Incorporation
         (Incorporated herein by reference to Exhibit 3.6 of Clark's Quarterly
         Report on Form 10-Q, File No. 001-31256, filed with the SEC on August
         14, 2002).

3.5      Certificate of Amendment of Certificate of Incorporation (Incorporated
         herein by reference to Exhibit 4.5 of Clark's Registration Statement on
         Form S-8, File No. 333-106538, filed with the SEC on June 26, 2003).

3.6      Bylaws of Clark, Inc. (Incorporated herein by reference to Exhibit 4.6
         of Clark's Registration Statement on Form S-8, File No. 333-106538,
         filed with the SEC on June 26, 2003).

3.7      Certificate of Designation of Series A Junior Participating Preferred
         Stock (Incorporated herein by reference to Exhibit 3.4 to Amendment No.
         2 to Clark's Registration Statement on Form S-1, File No. 333-56799
         filed with the SEC on August 11, 1998).

4.1      Specimen Certificate for shares of Common Stock, par value $.01 per
         share, of Clark Holdings, Inc. (Incorporated herein by reference to
         Exhibit 4.1 of Clark's Amendment No. 1 to the Registration Statement on
         Form S-1, File No. 333-56799, filed with the SEC on July 27, 1998).

4.2      Rights Agreement, dated as of July 10, 1998, by and between Clark
         Holdings, Inc. and The Bank of New York (Incorporated herein by
         reference to Exhibit 4.4 of Clark's Quarterly Report on Form 10-Q, File
         No. 000-24769, filed with the SEC on November 16, 1998).

10.1     Employment Agreement, dated as of September 1, 1999, by and between
         Clark/Bardes Holdings, Inc. and W.T. Wamberg (Incorporated herein by
         reference to Exhibit 10.48 of Clark/Bardes' quarterly report on Form
         10-Q, File No. 000-24769, filed with the SEC on November 12, 1999).

         (a)      First Amendment, dated March 6, 2002, to the Employment
                  Agreement by and between Clark/Bardes Holdings, Inc. and W.T.
                  Wamberg (Incorporated herein by reference to Exhibit 10.15 of
                  Clark, Inc.'s annual report on Form 10-K, File No. 000-24769,
                  filed with the SEC on March 27, 2002).

         (b)      Second Amendment, dated May 1, 2003, to the Employment
                  Agreement by and between Clark, Inc. and W.T. Wamberg.*

         (c)      Third Amendment, dated October 1, 2003, to the Employment
                  Agreement by and between Clark, Inc. and W.T. Wamberg.*

10.2     Employment Letter dated August 29, 2003 between Clark, Inc. and Jeffrey
         W. Lemajeur.*

31.1     Certification of Chief Executive Officer pursuant to Section 302 of
         Sarbanes-Oxley Act of 2002.*

31.2     Certification of Chief Financial Officer pursuant to Section 302 of
         Sarbanes-Oxley Act of 2002.*

32.1     Certification of Chief Executive Officer and Chief Financial Officer
         pursuant to Section 906 of Sarbanes-Oxley Act of 2002.*

         --------------------
         * Filed herewith

                                       49