<PAGE>   1
==============================================================================

                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                 -----------
                                  FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                       COMMISSION FILE NUMBER: 1-11396
                       JOHN ALDEN FINANCIAL CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                             <C>
                         DELAWARE                                              59-2840712
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)  (I.R.S. EMPLOYER IDENTIFICATION NO.)
        7300 CORPORATE CENTER DRIVE, MIAMI, FLORIDA                            33126-1223
         (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                              (ZIP CODE)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 715-3767

         SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                   NAME OF EACH EXCHANGE ON
           TITLE OF EACH CLASS                         WHICH REGISTERED
--------------------------------------------------------------------------------
      COMMON STOCK, PAR VALUE $.01                 NEW YORK STOCK EXCHANGE
     PREFERRED SHARE PURCHASE RIGHT                NEW YORK STOCK EXCHANGE

         SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                     NONE

    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. [X] YES [ ] NO

    INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K [X].

    THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF MARCH 16, 1998 WAS APPROXIMATELY $522,462,746.

    AS OF MARCH 16, 1998, 24,526,104 SHARES OF THE REGISTRANT'S COMMON STOCK
WERE OUTSTANDING.

    DOCUMENTS INCORPORATED BY REFERENCE. THE INFORMATION CALLED FOR BY PART III
IS INCORPORATED BY REFERENCE TO THE DEFINITIVE PROXY STATEMENT FOR THE 1998
ANNUAL MEETING OF STOCKHOLDERS OF THE COMPANY, WHICH WILL BE FILED ON OR BEFORE
APRIL 30, 1998.


==============================================================================


<PAGE>   2



                              TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
PART I.....................................................................  1

ITEM 1.   BUSINESS.........................................................  1
          Historical Perspective...........................................  1
          Anticipated Sale of the Company..................................  1
          Business Strategy................................................  2
          Sale of Discontinued Operations..................................  4
          Investments......................................................  5
          Reinsurance......................................................  5
          Competition......................................................  6
          Government Regulation............................................  7
          Employees........................................................  9
          Ratings.......................................................... 10

ITEM 2.   PROPERTIES....................................................... 10

ITEM 3.   LEGAL PROCEEDINGS................................................ 10

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............. 11

PART II.................................................................... 12

ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.............................................. 12
          Principal Markets and Sales Prices............................... 12
          Holders.......................................................... 12
          Dividends........................................................ 12

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA............................. 13

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS.............................. 16

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................... 26

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE......................................... 26

ITEM 10.  EXECUTIVE OFFICERS OF THE REGISTRANT............................. 26

PART III................................................................... 28

PART IV.................................................................... 29

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          FORM 8-K......................................................... 29
</TABLE>


The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. This Form 10-K, the Company's Annual Report to
Stockholders, any Form 10-Q and any Form 8-K of the Company and any other
written or oral statements made by or on behalf of the Company may include
forward-looking statements which reflect the Company's current views with
respect to future events and financial performance. These forward-

<PAGE>   3
looking statements are subject to certain uncertainties and other factors that
could cause actual results to differ materially from such statements. These
uncertainties and other factors (which are described in more detail elsewhere in
this Form 10-K) include, but are not limited to, uncertainties relating to
general economic conditions and cyclical industry conditions, uncertainties
relating to federal and state government and regulatory policies, volatile and
unpredictable developments (including utilization of medical services), medical
inflation, the uncertainties of the reserving process, the competitive
environment in which the Company operates, the uncertainties inherent in the
development and introduction into the marketplace of the Company's new small
group health insurance product, the ability of the Company to obtain desired
contracts and pricing with providers, the ability to obtain dividend approval
from state regulators, the uncertainties regarding the timing of the assumption
of policies coinsured with SunAmerica, the ability to modify or replace
computerized systems to be year 2000 compliant, and the ability of the Company
to control costs. There can be no certainty as to the timing of the consummation
of the acquisition of the Company as described below or obtaining approval from
regulators and stockholders for the proposed sale of the Company. The words
"believe", "expect", "anticipate", "project" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.


<PAGE>   4


                                    PART I

ITEM 1.           BUSINESS

HISTORICAL PERSPECTIVE

      John Alden Financial Corporation (the "Company") is an insurance holding
company that, through its subsidiaries, is principally engaged in providing
group health insurance to small businesses. For more than 25 years, the Company
has provided comprehensive group health benefit packages to employers through
its small group health insurance products. The Company is one of the largest
insurance company providers in the group market, selling primarily to groups
with fewer than 50 employees, while concentrating on groups with fewer than 25
employees. The Company offers traditional group indemnity products and "managed
indemnity" products, which have provider network, utilization review and case
management features to contain costs. The Company has offered these products in
47 states.

      In addition to the small group health insurance products, the Company's
healthcare business includes two other related product lines. Through Alden Risk
Management Services ("ARMS"), the Company provides healthcare stop-loss
reinsurance products to a number of organizations that bear a significant
portion of their own risk, including employer groups whose benefit programs are
self-funded. Through a joint venture corporation, the Company also offers health
maintenance organization ("HMO") products in the South Florida market.

      During recent years, the healthcare industry has undergone a substantial
transformation, primarily caused by healthcare legislation, originally at the
state level and, more recently, also at the federal level (the "reforms") and
the growth of managed care organizations. The reforms include, among other
things, guaranteed issue, mandated benefits, premium rate limits (including
"community rating" and "modified community rating"), guaranteed renewability,
minimum loss ratio mandates and risk adjustment mechanisms which allocate losses
of individual carriers to group carriers. Among other things, such legislation
places certain limits on the Company's ability to reprice its products to
reflect increasing medical costs. A large number of the states in which the
Company sells health insurance have adopted some form of healthcare reform
legislation and approximately two thirds of the states have enacted reforms
limiting the use of individual underwriting. Additionally, the healthcare
industry has seen rapid growth of HMO's and other managed care organizations.
Finally, the healthcare providers are organizing themselves in new ways such as
Physician Hospital Organizations ("PHO's").

      In response to these varied changes in the environment in which the
Company operates, the Company has undergone its own transformation. Beginning in
late 1994 and throughout 1995, the Company conducted a strategic evaluation of
its operations. As a result of this evaluation, the Company determined that it
needed to focus all of its energies and resources on its healthcare operations.
In addition, on March 27, 1996, the Board of Directors of the Company authorized
the sale of its Asset Accumulation Segment, which included substantially all of
the annuity business (the "Annuity Operations"), and the Western Diversified
Group, the principal subsidiaries of the Company that market credit life and 
disability and retail service warranty coverage (see "Sale of Discontinued
Operations"). The sale of the Annuity Operations occurred on March 31, 1997,
and the sale of the Western Diversified Group occurred on September 30, 1997.
During the first quarter of 1998, the Company also discontinued its marketing
of products written by third party insurers.

ANTICIPATED SALE OF THE COMPANY

      On March 9, 1998, the Company entered into an agreement to merge with a
wholly-owned subsidiary of Fortis, Inc. ("Fortis"), a wholly-owned subsidiary
of Fortis Amev, Netherlands, and Fortis AG, Belgium, as a result of which,
among other things, the Company will become a wholly-owned subsidiary of Fortis
and each outstanding share of the Company's common stock will be converted into
the right to receive $22.50 in cash.  Consummation of the merger is subject to
regulatory and stockholder approvals, as well as other customary terms and
conditions.  It is anticipated that the merger will be consummated during 1998. 
In connection with and as a condition to Fortis entering into the agreement to
merge, the Company granted an option to Fortis to acquire, under certain
circumstances, common stock of the Company representing up to 19.9% of the
Company's outstanding common stock at an exercise price of $22.50 per share. 
See Note 2 to the Company's Consolidated Financial Statements.  Further
description of the merger agreement is set forth in the Company's current 
report on Form 8-K dated March 9, 1998 filed with the Securities and Exchange 
Commission.



                                       1
<PAGE>   5

BUSINESS STRATEGY

Small Group Health Insurance Products

      The Company has continued its efforts to strengthen its products and
negotiate new and better contracts with its providers. This strategy is designed
to reduce the risks created in its marketplace by healthcare reforms and
changing patterns of behavior by providers while offering customers attractive,
high quality, affordable products. In this pursuit, during early 1996, the
Company began a major project to design benefit plans that were more easily
understood and administered by providers and which steer customers into selected
provider networks. The strategy resulted in the development of a new product
which has been introduced in 31 states representing most of the states in which
the Company expects to focus its marketing efforts. It has been designed to
offer customers the high quality, affordable features they demand, reward
policyholders for using the Company's selected local provider system, generate
stronger relationships with providers and reduce the risks healthcare reforms
have created in the marketplace. The features of the new product, while not
unique, were designed to be similar to, and competitive with, the key features
of products offered by the Company's competitors. In response to increasing
restrictions on the Company's ability to use individual underwriting and in
order to better spread medical risks, the Company increased its marketing
efforts to groups having five to fifteen employees, which are slightly larger
groups than those to which the Company has made most of its sales in the past
(see "Healthcare Marketing"). Sales of the new product have in fact been to
larger groups than the average group size of the old product. During 1997,
approximately 59.7% of all certificates issued by the Company were with respect
to groups having five or more employees representing 58.7% of the annualized
gross premiums. The Company is currently increasing its efforts to sell to the
three and four life groups and ten to fifty life groups. Although there can be
no assurance as to the success of this new product in the competitive healthcare
industry, it has been designed to be more attractive to providers and customers
thereby increasing demand in the marketplace and sales. It is anticipated that
the cost of implementing this strategy may result in an increase in the group
gross expense ratio over the next several quarters and possibly thereafter.

      The new product employs greater differentials between in-network and
out-of-network benefits to increase steerage to contracted providers.
Out-of-network benefits are now subject to certain higher coinsurance
percentages, reimbursements based upon in-network negotiated levels or Medicare
allowable levels, separate and higher deductibles and out-of-pocket limits.
Certain medical services, such as preventive benefits, are only available
in-network. The new product includes limits on transplants and outpatient
therapies. Changes in both the type of benefit and the amount covered have been
made, especially in the types of benefits that are particularly prone to over
utilization. Additionally, certain markets now have "value plans" available that
will appeal to a healthier segment of the market and compete in low-cost areas
of the market. The new product is designed to be "provider network friendly".
Plan designs can be customized for the local marketplace and medical delivery
system. The number of plan designs offered in each market has been reduced to
make administration by the provider easier than the traditional group product.
Additionally, the new product employs greater use of co-pays, as provider
networks generally prefer co-pays over deductibles since they are more
understandable and easier to administer. Beginning in the second quarter of
1998, the Company will add a new feature to the new product called Employee
Level Selection. This feature will allow insureds to choose different networks,
which may be more convenient to employees of an employer with multiple
locations.

      In addition to the development of the new product, as part of the
Company's business strategy, during 1996 the Company began exiting certain
markets and/or states in which it determined that it could not operate on a
profitable basis. This included ceasing to offer coverage through certain
purchasing alliances and the exiting of the State of Kentucky. In the first
quarter of 1997, the Company decided to stop selling small group insurance plans
in California, Maryland and New Jersey, and to terminate existing small group
insurance plans in these states. By the end of the third quarter 1997, virtually
all of the policies in these states had expired. The Company is focusing its
marketing efforts and resources in those markets and states in which it believes
it can best increase profitability and market


                                       2
<PAGE>   6

share. Conversely, the Company intends to reduce its marketing efforts and
significantly reduce its financial exposure and may, in some cases, withdraw
from business in those states where legislative reform and intense competition
have significantly increased the risk profile of writing small employer health
coverage. The Company continues to monitor the business in the various states,
and based on competitive and regulatory issues, the Company may decide to exit
additional states.  It is possible that the Company could experience an
increase in the group medical loss ratio for existing business in additional
exit states, if any.

      During the first quarter of 1997, the Company reduced the number of
service centers for its group business from seven to three. The Company believes
it gained efficiencies as well as cost reductions from the consolidation.

      Another changing part of the healthcare mix is the providers themselves.
Providers are now organizing in a manner that allows them to contract directly
with a selected number of payors rather than through an intermediary
organization such as a Preferred Provider Organization ("PPO"). The Company
believes that characteristics of a PHO as compared to characteristics of a PPO
include smaller, higher-quality groups, greater discounts and stronger medical
management.

      As of December 31, 1997, the Company's small group indemnity and managed
indemnity products covered approximately 284,000 employees and approximately
544,000 total insureds, including dependents.

      In the third quarter of 1994, the Company entered into an HMO joint
venture, NHP Holding Company, Inc. ("NHP"), with Dimension Physician-Hospital
Organization, Inc. ("Dimension"), to serve the South Florida area. Dimension
included five leading hospitals and approximately 1,600 physicians and, through
its existing HMO, provided medical coverage to approximately 11,000 people.
Currently, NHP's South Florida HMO network includes 30 hospitals and
approximately 4,400 physicians. At December 31, 1997, NHP was providing medical
coverage to approximately 111,000 people throughout South Florida, including
approximately 13,000 Medicare customers and approximately 10,000 Medicaid
customers. Through its small group business, the Company may also pursue
opportunities to market HMO-like insurance products in other areas.

Healthcare Stop-loss Reinsurance Products

      ARMS's business consists primarily of providing healthcare stop-loss
reinsurance coverage and related insurance products to employers that elect to
self-insure a portion of their employee medical benefit programs. These products
cover the employers' risk of catastrophic claims in excess of deductible amounts
on both specific and aggregate bases. In 1997, the Company exited the portion of
its stop-loss reinsurance business that was issued to managed care organizations
and HMO's and this portion is currently in runoff. At December 31, 1997, the
Company's healthcare stop-loss reinsurance products to employers covered
approximately 868,000 lives.

Healthcare Marketing

      Sales of the Company's small group health insurance products are
diversified geographically. At the current time, business is actively marketed
in 31 states and the District of Columbia. The small group health insurance
products are marketed primarily through the Company's captive marketing
organization, North Star Marketing Corporation, which markets products through
approximately 56,000 independent insurance agents. Group insurance generally is
a small part of the business of the independent insurance agents contacted by
the marketing organization. No single agent accounts for a significant portion
of the group product sales. The ability of the Company to provide a detailed
explanation of the Company's products, competitive information that will assist
the agent to make the sale, and service support to the insured group, enables
the Company to meet the agents' need for timely information and other service
support. This, in turn, enhances the ability of the Company to compete on a
basis other than price or agent compensation alone. The sales representatives'
compensation is based on both the amount of insurance sold and the first year
loss ratios on their sales.

      In the past, the Company's use of individual medical underwriting and its
policy features and pricing were better suited to the small group marketplace of
businesses having fewer than five employees. As of December 31, 1997,
approximately 50.2% of all employees insured by the Company were in groups
consisting of


                                       3
<PAGE>   7

five or more employees, which groups accounted for approximately 45.0% of the
annualized gross premiums in force at such date. In response to increasing
restrictions on the Company's ability to use individual medical underwriting and
in order to better spread medical risks, the Company has increased its marketing
efforts to business groups with five to fifteen employees. This segment of the
small group market may have characteristics that differ from those of slightly
smaller group sizes, and may be more sensitive to the identity of provider
systems, pricing, product characteristics and other competitive factors. There
can be no assurance that the Company will be able to successfully market the new
product. In the first quarter of 1998, the Company ceased marketing products
written by third party insurers.

      To reach self-insured employer groups, ARMS uses 20 regional marketing
employees to market to unaffiliated third party administrators ("TPAs"). These
TPAs are generally small, independent businesses specializing in benefits
administration services. ARMS has sold employer excess-loss insurance through
approximately 250 TPAs nationwide, representing approximately 1,100 self-insured
employers.

SALE OF DISCONTINUED OPERATIONS

      On March 31, 1997, the Company sold substantially all of its Annuity
Operations to SunAmerica Life Insurance Company ("SunAmerica"). The transaction
included the sale of all of the common stock of John Alden Life Insurance
Company of New York, the then New York-domiciled subsidiary of the Company,
("JANY") and the coinsurance of substantially all of the annuity business of
another subsidiary, John Alden Life Insurance Company ("JALIC"). The coinsurance
was initially on an indemnity basis and the parties agreed to transition the
business to an assumption basis as soon as practical. In certain states, the
transition to an assumption basis is subject to policyholder approval. To the
extent that such transition does not take place with respect to any particular
policy, the policy will remain reinsured on an indemnity basis. As of December
31, 1997, approximately 70% of the ceded annuity reserves have either
transitioned to an assumption basis or lapsed. The majority of the remaining 
policies are expected to be assumed by December 31, 1998.

      As consideration for the Annuity Operations, SunAmerica paid the Company
approximately $238.2 million. The consideration represented approximately $162.3
million of premium paid to acquire the business and approximately $75.9 million
of adjusted capital and surplus of JANY. It did not include any capital and
surplus used to support the annuity business in JALIC, which remained in JALIC.

      On September 30, 1997, the Company sold all of the common stock of
substantially all of the subsidiaries comprising the Western Diversified
Group to Protective Life Insurance Company.

      As a result of the sales of the Annuity Operations and Western Diversified
Group, the Company recorded a net deferred gain of approximately $45.0 million.
This amount was net of estimated transaction expenses, taxes, goodwill and other
adjustments relating to these transactions. During the three months ended
December 31, 1997, the Company recognized approximately $24.0 million of the net
deferred gain in income as a result of the assumption of policy reserves by
SunAmerica. The Company expects to recognize the majority of the remainder of
the net deferred gain by December 31, 1998.

      The Company's available capital was enhanced by both the after-tax gain
generated from the transactions and by the release of the net capital previously
allocated to support these businesses. The Company continues to evaluate the
best uses of its capital, including the approximately $200 million of excess
capital generated from the sale of the Company's annuity and credit businesses.
In the event that the sale of the Company does not occur, this capital may be
used to repurchase common stock, pay dividends, reduce debt, acquire blocks of
business or for general corporate purposes, or for a combination of two or more
of such uses. During December 1997 and January 1998, the Company repurchased
approximately 1.1 million shares of common stock for a total purchase price of
approximately $25.9 million.




                                       4
<PAGE>   8


INVESTMENTS

      The Company's investment portfolio at December 31, 1996 aggregated
approximately $6.0 billion. At December 31, 1997, after the disposition of
discontinued operations, the Company's investment portfolio aggregated
approximately $1.0 billion as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                           ----------------------------------------
                                                                                 1997                  1996
                                                                           ------------------    ------------------
<S>                                                                        <C>                   <C>           
Debt securities:
   Held-to-maturity securities...........................................  $       44,780        $       45,357
   Available-for-sale securities.........................................         550,585             4,248,774
   Trading account securities............................................           3,504                 4,518
Equity securities........................................................              23                82,098
Mortgage loans...........................................................         145,770             1,449,242
Investment in real estate, at cost, less accumulated depreciation........          40,354                39,903
Real estate owned........................................................           3,021                11,483
Policy loans and other notes receivable..................................          32,091                75,186
Short-term investments...................................................         196,218                 6,371
                                                                           ------------------    ------------------
   Total invested assets.................................................  $    1,016,346        $    5,962,932
                                                                           ==================    ==================
</TABLE>

      The composition of the Company's debt securities as of December 31, 1997
is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                     DECEMBER 31, 1997
                                                                           --------------------------------------
                                                                                AMOUNT                  %
                                                                           -----------------     ----------------
<S>                                                                        <C>                    <C>  
RATING (1):
AAA (2)................................................................      $      183,880            30.7%
AA.....................................................................              90,918            15.2
A......................................................................             259,655            43.3
BBB....................................................................              64,416            10.8
                                                                           -----------------     ----------------
  Total................................................................      $      598,869           100.0%
                                                                           =================     ================
</TABLE>

-------------------

(1) Debt securities are classified according to the lowest rating by a
    nationally recognized statistical rating organization. Debt securities not
    rated by any such organization are classified according to the rating
    assigned to them by the NAIC as follows: NAIC class 1 is considered
    equivalent to an A or higher rating; class 2, BBB; class 3, BB; and classes
    4-6, B and below.

(2) Includes approximately $48,506,000 of U.S. government and agency debt
    securities.

    See Note 6 to the Company's consolidated financial statements for further
discussion regarding invested assets.

REINSURANCE

      The Company has entered into a variety of reinsurance arrangements under
which it cedes business to other insurance companies to mitigate risk exposure
and to permit premium and asset growth while maintaining acceptable risk-based
capital ratios. The different types of reinsurance arrangements used by the
Company are described below.

      The Company uses stop-loss reinsurance to mitigate its risk exposure. The
Company chooses retention limits for such reinsurance based upon the risk
distributions of each product line rather than the broader risk distribution of
the Company as a whole. The Company believes that the small group health risk
distribution is sufficiently large, and thus it does not purchase excess
reinsurance on that line.

                                       5
<PAGE>   9

      The Company uses reinsurance to manage its aggregate retained risk
exposures in order to maintain risk-based capital ratios (see "-- Government
Regulation -- Risk-Based Capital and Investment Reserve Requirements") while
sustaining growth and making debt service payments. Rather than depending solely
on limiting business written, at the cost of both foregone profits and
reductions in general expense economies of scale, the Company has instead made
coinsurance its primary means of controlling growth in risk exposure. Since the
business coinsured has been the Company's more mature product lines, for which
the reinsurers have considerable historical data from which to derive pricing
comfort, the Company seeks to limit reinsurance costs by participating in the
ongoing profits on such coinsured business under contractual formulas. In
addition, such profit sharing provisions compensate the Company for its
marketing efforts, since the reinsurers are generally unable to generate
sufficient business through their own distribution networks. Substantially all
of the Company's group accident and health insurance business has been coinsured
under a Group Reinsurance Agreement with London Life Insurance Company and
Transamerica Occidental Life Insurance Company (the "Group Reinsurance
Agreement"). See further discussion in "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital Resources
-- Reinsurance".

      As discussed above, in conjunction with the sale of the Annuity
Operations, the Company entered into a coinsurance agreement with SunAmerica
relating to substantially all of the JALIC annuity business. This coinsurance
was initially on an indemnity basis and the parties agreed to transition the
business to an assumption basis as soon as practical. In certain states, the
transition to an assumption basis is subject to policyholder approval. To the
extent that such transition does not take place with respect to any particular
policy, the policy will remain reinsured on an indemnity basis. As of December
31, 1997, approximately 70% of the ceded annuity reserves have either
transitioned to an assumption basis or lapsed. The majority of the remaining 
policies are expected to be assumed by December 31, 1998. At December
31, 1997, there are assets held in trust directly or indirectly available for
payments to policyholders supporting the remainder of the ceded reserves.
SunAmerica is rated "A+ (Superior)" by A.M. Best and Company ("A.M. Best").

      For excess stop-loss and catastrophe reinsurance, where reinsurance cash
flows are small and disproportionate to risk, the Company generally restricts
reinsurance arrangements to established professional reinsurers with an A.M.
Best rating of "A+ (Superior)" or other rating agency equivalent designations.
For health coinsurance, where reinsurer cash buildups are minimal, the Company
applies the same reinsurer minimum standards.

      The reinsurance of risk does not relieve the Company of its original
liability to policyholders. The ceded business is included in contract holder
liabilities and is reflected as reinsurance receivables or investment deposits
recoverable on the Company's consolidated balance sheet. Receivables from
reinsurers and investment deposits recoverable aggregated $187.1 million and
$970.7 million at December 31, 1997 and December 31, 1996, respectively.
Additionally, included in other assets at December 31, 1997 in the accompanying
consolidated balance sheet was approximately $1.4 billion of investment contract
deposits recoverable on the JALIC coinsurance, net of a similar amount of
contract holder liabilities related to the discontinued operations.

COMPETITION

      The Company operates in a highly competitive environment. There are
numerous insurance companies, managed care providers and other entities that
compete with the Company, many of which have greater resources than the Company.
The Company believes that the principal competitive factors in the sale of
insurance are product features, price, commission structure, perceived stability
of the insurer, service, name recognition and managed care capability. Many
other insurance companies compete for sales in the Company's markets. In
addition, the Company's ability to compete is affected, in part, by its ability
to recruit, train and retain quality marketing and sales representatives.

      The Company competes in the healthcare industry primarily with other large
health insurers, Blue Cross and Blue Shield associations and managed care
providers, the most significant of which are HMO's.

      State and federal legislative reforms, the rapid growth of HMO's and
managed care organizations and new forms of healthcare provider organizations
have negatively impacted the Company's ability to compete. See



                                       6
<PAGE>   10

"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Statement of Income Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Business Outlook".

GOVERNMENT REGULATION

General Regulation

      As an insurance holding company, the Company is subject to regulation by
the states in which its insurance subsidiaries are domiciled or transact
business. Most states have enacted legislation that requires each insurance
company in a holding company system to register with the insurance regulatory
authority of its state of domicile and furnish to it financial and other
information concerning the operations of companies within the holding company
system that may materially affect the operations, management or financial
condition of the insurers within the system. All transactions within a holding
company system affecting insurers must be fair and equitable, and each insurer's
policyholder surplus following any transaction must be both reasonable in
relation to its outstanding liabilities and adequate for its needs. State laws
also require prior notice or regulatory agency approval of changes in control of
an insurer or its holding company; certain inter-company transfers of assets
within the holding company structure may also require notice to or approval from
the regulatory agency.

      In addition, the laws of various states establish regulatory agencies with
broad administrative powers to grant and revoke licenses to transact business,
regulate trade practices, license agents, require statutory financial statements
and prescribe the type and amount of investments permitted.

      The insurance subsidiaries of the Company may be required by the
applicable insurance codes of the states in which they operate to file rates and
policy forms in connection with certain insurance products. In most cases, such
rates and/or policy forms must be approved by the relevant insurance department
prior to use. Many states require the inclusion of specified provisions in
insurance policies issued or delivered in the state. The foregoing state
regulation and supervision are designed primarily to ensure the financial
stability of insurance companies and to protect policyholders, rather than
stockholders or creditors.

      Insurance companies are required to file detailed statutory annual
statements with the state insurance regulators in each of the states in which
they transact business, and their business and accounts are subject to
examination at any time. In addition, insurance regulators periodically examine
the insurer's financial condition, adherence to statutory accounting practices,
and compliance with insurance department rules and regulations. Applicable state
insurance laws, rather than federal bankruptcy laws, apply to the liquidation or
the reorganization of insurance companies.

      The NAIC has adopted a small group model law to limit the differentials in
rates carriers can charge between new business and renewal business and with
respect to similar demographic groups. The NAIC also has adopted a model law to
assure access to health insurance by all small employer groups. This model law
would make health insurance available to all small groups by requiring coverage
of all employees and their dependents in a group, by limiting the applicability
of pre-existing condition exclusions, by requiring carriers to offer a basic
plan exempt from certain mandated benefits as well as a standard plan, and by
establishing mechanisms to spread the risk of high risk employees to small group
carriers. NAIC model laws are binding upon the Company only to the extent that
they are adopted by states in which the Company's insurance subsidiaries are
domiciled or conduct business. States may enact NAIC model laws as proposed or
with variations from the proposed text, or laws which have the same effect as
the NAIC model laws.



                                       7
<PAGE>   11

Regulatory Changes

      The NAIC and insurance regulators periodically re-examine existing laws
and regulations and their application to insurance companies. The NAIC has
formed committees and appointed advisory groups to study and formulate
regulatory proposals or model acts. Recently, this re-examination has focused on
insurance company investment and solvency issues and, in some instances, has
resulted in new interpretations of existing law, development of new laws and the
implementation of non-statutory guidelines.

      Many states have enacted small group reforms that either go further than
or are unique in their approach compared to the NAIC model law. A large number
of the states in which the Company sells health insurance have adopted some form
of healthcare reform legislation and approximately two-thirds of the states have
enacted reforms limiting the use of individual underwriting. Such reform
legislation included the NAIC small group model law reforms discussed above, as
well as guaranteed renewal and mandated loss ratios. Insurance reform will
likely continue at the state level. These state reforms have restricted the
Company's ability to adjust pricing based on underwriting and to maintain
targeted profit margins for its products. In certain states, such reforms could
preclude the Company from competing profitably, causing the Company to withdraw
from doing business in such state. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Results of Operations --
Statement of Income Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Business Outlook".

      In 1996, Congress enacted HR 3103 ("Health Insurance Portability and
Accountability Act", or "HIPAA"), also commonly referred to as the
Kennedy-Kassenbaum Bill. HIPAA provisions applicable to both insured and
self-funded employer group coverage include minimum standards for pre-existing
condition exclusions, waiver of pre-existing condition exclusions for
individuals meeting minimum prior coverage requirements and prohibition of
health related exclusion of individuals from employer group coverage. HIPAA also
provides guaranteed acceptance of small employers with 2 to 50 employees for
insured coverage. In other respects, HIPAA's group and small group provisions
are largely in line with state small group reform laws already enacted by the
large majority of states. In the individual market, HIPAA requires guaranteed
acceptance for eligible individuals moving out of group plans who have at least
18 months of prior coverage. However, most states have or are expected to amend
their laws to alleviate any inconsistencies with the federal minimum standards.
States which have not already enacted all of the HIPAA group and small group
standards may enact state reforms consistent with HIPAA. The final outcome of
state amendments or new legislation, as well as federal regulations addressing
these provisions, cannot be predicted.

Regulation of Dividends and Other Payments from Insurance Subsidiaries

      The Company is a legal entity separate and distinct from its subsidiaries.
As a holding company with no business operations other than holding the stock of
its subsidiaries, its primary sources of cash needed to meet its obligations,
including principal and interest payments under its credit agreement, are
dividends and other payments from its insurance and non-insurance subsidiaries.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Cash Flows".

      The Company's available capital was enhanced by both the after-tax gain
generated from the sale of its annuity and credit businesses and by the release
of the net capital previously allocated to support these businesses. The Company
continues to evaluate the best uses of its capital, including the approximately
$200 million of excess capital generated from the sale of the Company's annuity
and credit businesses. In the event that the sale of the Company does not occur,
this capital may be used to repurchase common stock, pay dividends, reduce debt,
acquire blocks of business or for general corporate purposes, or for a
combination of two or more of such uses. During December 1997 and January 1998,
the Company repurchased approximately 1.1 million shares of common stock for a
total purchase price of approximately $25.9 million.

      The Company's insurance subsidiaries are subject to various regulatory
restrictions on the maximum amount of payments including loans, cash advances,
contracts for services or other related company transactions


                                       8
<PAGE>   12

that they may enter into with the Company or any of its subsidiaries or
affiliates without obtaining prior regulatory approval. As a Minnesota-domiciled
insurance company, JALIC is subject to Minnesota requirements that life
insurance company dividends must receive prior regulatory approval if their fair
market value, together with that of other dividends or distributions made within
the preceding 12 months, exceeds the greater of: (i) 10% of the insurer's
surplus as regards policyholders as of the 31st day of December next preceding;
or (ii) the net gain from operations of the insurer, not including realized
investment gains, for the 12-month period ending the 31st day of December next
preceding. The Minnesota dividend statute requires notice to the Minnesota
Commissioner of Commerce for dividend payments made by an insurance carrier
within five days after declaration and at least ten days prior to payment. The
Minnesota statute generally also limits payment of dividends to a carrier's
unassigned surplus less 25% of unassigned surplus attributable to unrealized
capital gains. As a Texas-domiciled insurance company, Houston National Life
Insurance Company, a subsidiary of the Company and the parent of JALIC,
("HNLIC") is subject to Texas requirements that life insurance company dividends
must receive prior regulatory approval if their fair market value, together with
that of other dividends or distributions made within the preceding 12 months,
exceeds the greater of: (i) 10% of the insurer's surplus as regards
policyholders as of the preceding December 31st; or (ii) the statutory net gain
from operations of the insurer for the 12-month period ending the preceding
December 31st. With the approval of the state regulators, JALIC made an
extraordinary dividend distribution of approximately $200 million to HNLIC
during 1997, which in turn distributed approximately $188 million to the
Company. Because of these dividend distributions, any dividends paid by JALIC or
HNLIC before June 21, 1998 would be considered extraordinary and would require
prior approval. On or after that date, approximately $76.7 million is available
for dividend distribution without prior approval.

Risk-Based Capital and Investment Reserve Requirements

      The Risk-Based Capital for Life and/or Health Insurers Model Act (the
"Model Act") is used by insurance regulators to monitor the solvency of
insurers. It provides for four different levels of regulatory action, each of
which may be triggered if an insurer's Total Adjusted Capital (as defined in the
Model Act) is less than a corresponding "level" of risk-based capital. The Model
Act establishes capital requirements for four categories of risk: asset risk,
insurance risk, interest rate risk and business risk. For each category, the
capital requirement is determined by applying factors to various asset, premium
and reserve items, with the factor being higher for those items with greater
underlying risk and lower for less risky items.

      Applying the NAIC formula as of December 31, 1997, the Total Adjusted
Capital of the Company's principal life insurance subsidiary, JALIC, was
substantially above the level necessary to trigger any action under the Model
Act.

Assessments Against Insurers

      Under insolvency or guaranty laws in most states in which the Company
operates, insurers can be assessed for policyholder losses incurred by insolvent
insurance companies. The timing of any future assessments on the Company under
these laws cannot be reasonably estimated and is beyond the control of the
Company. Most of these laws do provide, however, that an assessment may be
excused or deferred if it would threaten an insurer's financial strength, and
some assessments paid by the Company pursuant to these laws may be used as
credits for a portion of the Company's premium taxes. The Company has recorded
an assessment liability of $3.3 million at December 31, 1997.

EMPLOYEES

      The Company had approximately 1,790 employees as of March 1, 1998, and
considers its employee relations to be good. The Company's employees are not
represented by labor unions.



                                       9
<PAGE>   13


RATINGS

      JALIC is currently rated "A- (Excellent)" by A.M. Best, "BBB+ (Adequate)"
by Standard & Poor's Rating Group ("S & P") for claim-paying ability and "Baa2"
by Moody's Investors Service ("Moody's") for income financial strength. Upon the
announcement of the proposed sale of the Company, A.M. Best announced that its
current rating of JALIC is under review with developing implications. In
addition, S & P announced that it has revised its CreditWatch implications on
JALIC's rating to positive from developing and Moody's announced that it has
placed JALIC's rating on review for possible upgrade.

ITEM 2.      PROPERTIES

      The Company's headquarters are located in Miami, Florida, where it owns
approximately 55 acres of an office park with the following improvements: (i) a
seven-story office building containing approximately 231,000 rentable square
feet of office space, (ii) three six-story office buildings containing
approximately 130,000 rentable square feet per building and (iii) five
single-story buildings and two mid-rise buildings containing, in the aggregate,
approximately 384,000 rentable square feet of office and warehouse space. The
Company occupies the entire seven-story building, a portion of the space in one
of the six-story buildings, and space in two of the single-story buildings.

      The Company currently owns an office building in Boise, Idaho containing
50,000 rentable square feet of office space. During 1998, the Company entered
into an agreement to sell this property and intends to enter into a ten year
lease with the buyer. The Company also leases approximately forty sales offices
and three service centers throughout the United States. The Company believes
that its present facilities are adequate for its current needs.

ITEM 3.      LEGAL PROCEEDINGS

      The Company is involved in various legal proceedings incidental to the
conduct of its business. While it is not possible to determine the ultimate
disposition of each of these proceedings, the Company believes that the ultimate
disposition of such proceedings, individually and in the aggregate (including
the lawsuits discussed below), will not have a material adverse effect on the
Company's financial position, results of operations or cash flows.

      During the period of April 1995 through May 1995, the Company and certain
of its officers and directors were named as defendants in a series of putative
class actions alleging violations of the federal securities laws. The actions,
Christopher W. Aronson, et. al. v. John Alden Financial Corporation, et. al.; In
Re: John Alden Financial Corporation Securities Litigation, all of which were
filed in the United States District Court for the Southern District of Florida
(the "Court"), have been consolidated. In October 1995, the plaintiffs filed a
Consolidated Amended Complaint purportedly on behalf of a class of persons who
purchased the Company's common stock, par value $.01 per share (the "Common
Stock") during the period of October 27, 1994 through May 3, 1995 seeking
unspecified damages, fees, costs and interest. The first of the original
complaints was filed after the Company revised its previously announced earnings
for the fourth quarter of 1994 to reflect an unanticipated increase in claims
received in 1995 for medical services rendered in 1994. The remainder of the
original complaints were filed after the Company increased reserves during the
first quarter of 1995 to reflect a further increase in such claims. On September
30, 1996, the Court denied the defendants' motion to dismiss the Consolidated
Amended Complaint and the Court certified a class of those persons who purchased
the Company's Common Stock during the period between October 27, 1994 through
May 3, 1995. Discovery in this lawsuit is ongoing. The Company and individual
defendants deny any wrongdoing, believe they have meritorious defenses against
the claims asserted, and intend to vigorously defend the lawsuit.

      The Company and certain of its officers and directors have been named as
defendants in actions entitled Hanf v. Johnson, et al., C.A. No. 16241NC, filed
on March 10, 1998, and Abramsky v. Johnson, et al., C.A. No. 16235NC, filed
March 9, 1998, in the Court of Chancery of the State of Delaware. The plaintiffs
allege that they are owners of the Company's common stock and that they are
bringing the actions as class actions. Plaintiffs challenge the proposed sale of
the Company to Fortis and allege that the Company is not being sold for the
highest price possible. For relief, plaintiffs seek an injunction against 


                                       10
<PAGE>   14

consummation of the proposed transaction with Fortis and an award of damages.
The Company and individual defendants deny any wrongdoing, believe they have
meritorious defenses against the claims asserted, and intend to vigorously
defend the lawsuit.

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

      None.



                                       11
<PAGE>   15


                                   PART II

ITEM 5.      MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
             STOCKHOLDER MATTERS

PRINCIPAL MARKETS AND SALES PRICES

      The Company's Common Stock is listed and principally traded on the New
York Stock Exchange ("NYSE") under the ticker symbol "JA". The Company's Common
Stock is also traded on the following regional exchanges: the Boston Stock
Exchange, the Philadelphia Stock Exchange, the Midwest Stock Exchange and the
Pacific Stock Exchange.

      The following table sets forth the price range of the Company's Common
Stock and the cash dividends per share of Common Stock declared for the periods
shown. The Common Stock prices are the closing sale price as reported on the
NYSE.

<TABLE>
<CAPTION>
                                         PRICE RANGE            
                                 ----------------------------   DIVIDENDS
                                     HIGH           LOW         DECLARED
                                 -------------  -------------  ------------
<S>                               <C>           <C>            <C>  
    1996
    ----
    First Quarter.............     $21-5/8       $17-5/8          $0.11
    Second Quarter............      24-1/8        18-3/8           0.11
    Third Quarter.............      22-1/8        18-1/4           0.12
    Fourth Quarter............      20-1/2        16-5/8           0.12
                                                                       
    1997                                                               
    ----                                                               
    First Quarter.............      20-1/8        16-3/4           0.12
    Second Quarter............      22-1/8        16-3/8           0.12
    Third Quarter.............      31-3/4        20-7/8           0.12
    Fourth Quarter............     31-5/16       22-5/16           0.12
</TABLE>

      On March 9, 1998, the Company entered into an agreement to merge with a
wholly-owned subsidiary of Fortis as a result of which, among other things, the
Company will become a wholly-owned subsidiary of Fortis and each outstanding
share of the Company's common stock will be converted into the right to receive
$22.50 in cash.

HOLDERS

      As of March 16, 1998, the approximate number of record holders of the
Company's Common Stock was 560 and the approximate number of beneficial owners
was 7,200.

DIVIDENDS

      On March 8, 1998, the Board of Directors of the Company declared a
dividend of $0.12 per share of Common Stock to holders of record on March 31,
1998, aggregating approximately $2.9 million and declared a preferred stock
dividend in the amount of approximately $0.7 million, both payable on April 20,
1998.

      The Company's 9% cumulative preferred stock ranks prior to the Common
Stock as to payment of dividends and, therefore, no payment of dividends can be
made to the holders of the Common Stock unless all accrued dividends have been
paid to the holders of the 9% cumulative preferred stock. As an insurance
holding company, the Company depends on dividends and other permitted payments
from its insurance subsidiaries to pay cash dividends to stockholders. The
payment of dividends and such other payments by the insurance subsidiaries are
restricted by the laws of each insurance subsidiary's state of domicile and each
state where the subsidiary conducts business. State insurance regulators have
authority in certain circumstances to block payments of dividends and other
amounts by the insurance subsidiaries that would otherwise be permitted without
regulatory approval. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations --


                                       12
<PAGE>   16

Liquidity and Capital Resources" and "Business -- Government Regulation". In
addition, the Company's credit agreement prohibits it from declaring cash
dividends on its Common Stock in an annual aggregate amount in excess of certain
specified limits.

ITEM 6.     SELECTED CONSOLIDATED FINANCIAL DATA

      The following historical financial data for the ten years ended December
31, 1997 have been derived from the Consolidated Financial Statements of the
Company audited by Price Waterhouse LLP, independent accountants. The following
selected financial data of the Company should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the Company's audited Consolidated Financial Statements appearing
elsewhere herein.

      On March 27, 1996, the Board of Directors of the Company authorized the
sale of its Annuity Operations and the Western Diversified Group. As a result of
this action, beginning in 1996, the Company has reported the results of
operations of the Annuity Operations and Western Diversified Group as
discontinued operations. The Consolidated Statements of Income for the years
ended December 31, 1995 and 1994 have been restated to reflect the results of
these operations as discontinued operations. Accordingly, the Statement of
Income Data for the years ended December 31, 1995 and 1994 has also been
restated.

      Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standard No. 128, "Earnings per Share". In accordance with this
statement, per share amounts for each year presented have been restated to
comply with the provisions of the statement.



                                       13
<PAGE>   17


SELECTED FINANCIAL DATA
JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------  -----------
                                                                                  ACTUAL                                            
(In thousands, except per share                    ------------------------------------------------------------------    PRO FORMA  
 and ratio data)                                       1997          1996          1995          1994         1993        1992 (1)  
-----------------------------------------------------------------------------------------------------------------------  -----------
<S>                                                <C>           <C>           <C>           <C>          <C>           <C>        
STATEMENT OF INCOME DATA:
   Gross insurance premiums and
      contract charges earned                      $ 1,531,663   $ 1,838,254   $ 1,936,262   $ 1,792,087  $ 1,661,229   $ 1,380,634
   Net insurance premiums and
      contract charges earned                          928,901     1,024,574     1,053,035       939,913      930,588       753,744
   Net investment income                                69,293        45,460        50,388        38,145      353,869       329,494
   Total revenues                                    1,050,049     1,114,682     1,156,464     1,071,198    1,406,784     1,185,063
   Gross claims incurred on insurance
      products                                       1,141,307     1,396,695     1,458,365     1,226,531    1,039,693       872,269
   Net claims incurred on insurance
      products                                         670,192       749,051       763,099       609,767      555,517       456,688
   Interest expense                                      5,332         6,615         8,413         6,067        6,096         6,886
   Total benefits and expenses                       1,058,799     1,116,353     1,186,984     1,000,971    1,279,204     1,082,850
   Net (loss) income before cumulative effect
      of change in accounting principle:
        Continuing operations                           (7,791)       (1,711)      (18,900)       48,625           --            -- 
        Discontinued operations                         29,679        32,647        25,308        27,690           --            -- 
          Total                                         21,888        30,936         6,408        76,315       80,044        64,523
   Net income (loss)                                    21,888        30,936         6,408        75,774       83,126        64,523
   Net income (loss) applicable to
      common stock                                      20,538        29,586         5,058        74,424       81,776        63,176
   Per common share:
      Net income (loss) before cumulative
        effect of change in accounting principle:
        Continuing operations                            (0.36)        (0.12)        (0.80)         1.92           --            -- 
        Discontinued operations                           1.17          1.29          1.00          1.12           --            -- 
          Total                                           0.81          1.17          0.20          3.04         3.36          2.71
      Net income (loss)                                   0.81          1.17          0.20          3.02         3.49          2.71

   Average common shares outstanding                    25,400        25,295        25,328        24,623       23,422        23,308
   Cash dividends declared per
          common share                             $      0.48   $      0.46   $      0.44   $      0.40  $      0.27           N/A

BALANCE SHEET DATA:
   Total invested assets                           $ 1,016,346   $ 5,962,932   $ 6,114,770   $ 5,675,743  $ 4,988,946   $ 4,366,105
   Total assets                                      1,479,932     7,671,249     7,696,030     6,962,133    6,131,288     5,553,481
   Short-term debt                                      41,500        25,000        15,063        22,679       30,875        19,676
   Long-term debt                                       35,000        76,500        92,000       102,399       92,754       105,966
   Redeemable securities                                15,286        18,687        19,416        20,181       23,776        51,114
   Stockholders' equity                                450,910       465,211       477,231       406,724      344,197       198,561

OTHER DATA:
   Operating income (loss) applicable to
      common stock                                 $    (4,313)  $    32,832   $     4,100   $    83,278  $    82,767   $    71,214
   Operating income (loss) per common share              (0.17)         1.30          0.16          3.38         3.53          3.05
   Operating income before interest,
      taxes and preferred stock dividends                3,528        59,295        19,159       133,631      139,949       121,303
   Group gross medical loss ratio                         75.4%         76.3%         75.0%         69.7%        64.9%         65.0%
   Group gross combined ratio                            103.1%        100.0%        100.2%         94.8%        90.6%         90.1%
</TABLE>

(1)  The pro forma statement of income data and other related data for the
     year ended December 31, 1992 were prepared assuming the Company's
     initial public offering of its common stock (the "IPO") occurred on
     January 1, 1992. The pro forma balance sheet data as of December 31,
     1992 and related other data were prepared assuming the IPO occurred
     on December 31, 1992.


                                       14
<PAGE>   18


SELECTED FINANCIAL DATA
JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                                         ACTUAL
(In thousands, except per share                  ----------------------------------------------------------------------------------
 and ratio data)                                     1992            1991             1990             1989             1988
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>              <C>              <C>              <C>              <C>       
STATEMENT OF INCOME DATA:
Gross insurance premiums and
   contract charges earned                       $1,380,634       $1,205,796       $  982,464       $  734,630       $  567,827
Net insurance premiums and
   contract charges earned                          753,744          931,900          897,786          666,197          490,611
Net investment income                               329,494          332,294          332,015          301,790          282,473
Total revenues                                    1,185,063        1,338,916        1,228,949          969,124          778,895
Gross claims incurred on insurance
   products                                         872,269          788,975          651,906          467,089          357,501
Net claims incurred on insurance
   products                                         456,688          579,172          590,145          426,068          324,342
Interest expense                                     15,226           24,316           32,093           35,637           30,411
Total benefits and expenses                       1,092,230        1,260,578        1,202,616          949,479          779,351
Net (loss) income before cumulative effect
   of change in accounting principle:
     Continuing operations                               --               --               --               --               --
     Discontinued operations                             --               --               --               --               --
       Total                                         57,856           49,134           12,073           11,186           (2,181)
Net income (loss)                                    57,856           55,904           12,073           11,186           (2,181)
Net income (loss) applicable to
   common stock                                      54,829           51,772            9,814            9,012           (4,341)
Per common share:
   Net income (loss) before cumulative
     effect of change in accounting principle:
     Continuing operations                               --               --               --               --               --
     Discontinued operations                             --               --               --               --               --
       Total                                           3.08             2.83             0.62             0.57            (0.27)
   Net income (loss)                                   3.08             3.25             0.62             0.57            (0.27)

Average common shares outstanding                    17,786           15,930           15,930           15,930           15,930
Cash dividends declared per
      common share                               $     0.06               --               --               --               --

BALANCE SHEET DATA:
   Total invested assets                         $4,359,992       $4,003,019       $3,171,096       $3,165,005       $2,662,832
   Total assets                                   5,543,489        5,208,575        4,502,069        4,075,482        3,429,552
   Short-term debt                                   21,154           97,089           18,891           18,609            8,592
   Long-term debt                                    94,496          115,586          214,213          259,986          247,653
   Redeemable securities                             51,114           64,834           58,585           50,890           48,420
   Stockholders' equity                             198,561           73,227           14,694           10,321            1,592

OTHER DATA:
   Operating income (loss) applicable to
      common stock                               $   62,870       $   20,728       $   16,144       $   13,306       $   (2,260)
   Operating income (loss) per common share            3.53             1.32             1.01             0.83            (0.14)
   Operating income before interest,
      taxes and preferred stock dividends           120,263           65,792           68,035           61,800           33,105
   Group gross medical loss ratio                      65.0%            67.8%            67.0%            68.5%            72.4%
   Group gross combined ratio                          90.1%            92.9%            93.3%            94.9%            98.8%
</TABLE>



                                       15
<PAGE>   19






ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

                               GENERAL OVERVIEW

ANTICIPATED SALE OF COMPANY

      On March 9, 1998, the Company entered into an agreement to merge with a
wholly-owned subsidiary of Fortis as a result of which, among other things, the
Company will become a wholly-owned subsidiary of Fortis and each outstanding
share of the Company's common stock will be converted into the right to receive
$22.50 in cash.  Consummation of the merger is subject to regulatory and
stockholder approvals, as well as other customary terms and conditions.  It is
anticipated that the merger will be consummated during 1998.  In connection
with and as a condition to Fortis entering into the agreement to merge, the
Company granted an option to Fortis to acquire, under certain circumstances,
common stock of the Company representing up to 19.9% of the Company's
outstanding common stock at an exercise price of $22.50 per share.  See  Note 2
to the Company's Consolidated Financial Statements.  Further description of the
merger agreement is set forth in the Company's current report on Form 8-K dated
March 9, 1998 filed with the Securities and Exchange Commission.

SALE OF DISCONTINUED OPERATIONS

      On March 31, 1997, the Company sold its Annuity Operations to SunAmerica.
The transaction included the sale of all of the common stock of JANY and the
coinsurance of substantially all of the annuity business of JALIC. This
coinsurance was initially on an indemnity basis and the parties agreed to
transition the business to an assumption basis as soon as practical. In certain
states, the transition to an assumption basis is subject to policyholder
approval. To the extent that such transition does not take place with respect to
any particular policy, the policy will remain reinsured on an indemnity basis.
As of December 31, 1997, approximately 70% of the ceded annuity reserves have
either transitioned to an assumption basis or lapsed. The majority of
the remaining policies are expected to be assumed by December 31, 1998.

      As consideration for the Annuity Operations, SunAmerica paid the Company
approximately $238.2 million. The consideration represented an approximately
$162.3 million premium paid to acquire the business and approximately $75.9
million of adjusted capital and surplus of JANY. It did not include any capital
and surplus used to support the annuity business in JALIC, which remained in
JALIC.

      On September 30, 1997, the Company sold all of the common stock of
substantially all of the subsidiaries which comprise the Western Diversified
Group (the principal subsidiaries of the Company that market credit life and
disability and retail service warranty coverage) to Protective Life Insurance
Company.

      As a result of the sales of the Annuity Operations and Western Diversified
Group, the Company recorded a net deferred gain of approximately $45.0 million.
This amount was net of estimated transaction expenses, taxes, goodwill and other
adjustments relating to these transactions. During the three months ended
December 31, 1997, the Company recognized approximately $24.0 million of the net
deferred gain in income as a result of the assumption of policy reserves by
SunAmerica. The Company expects to recognize the majority of the remainder of
the net deferred gain by December 31, 1998.

      The Company's available capital was enhanced by both the after-tax gain
generated from the transactions and by the release of the net capital previously
allocated to support these businesses. The Company continues to evaluate the
best uses of its capital, including the approximately $200 million of excess
capital generated from the sale of the Company's annuity and credit businesses.
In the event that the sale of the Company does not occur, this capital may be
used to repurchase common stock, pay dividends, reduce debt, acquire blocks of
business or for general corporate purposes, or for a combination of two or more
of such uses. During December 1997 and January 1998, the Company repurchased
approximately 1.1 million shares of common stock for a total purchase price of
approximately $25.9 million.





                                       16
<PAGE>   20


ACCOUNTING CHANGES

      See Note 3 to the consolidated financial statements for a complete
discussion of the impact of the adoption of new accounting pronouncements.
During 1997, the Company adopted Statement of Financial Accounting Standards No.
128 "Earnings per Share", effective January 1, 1997. The Company has restated
prior years' earnings per share data in accordance with this
statement.

                            RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
RESULTS SUMMARY
                                                              YEAR ENDED DECEMBER 31,
                                                    ---------------------------------------------
                                                       1997              1996              1995
                                                    ----------        ----------        ---------
                                                           (In millions, except per share data)
<S>                                                 <C>               <C>               <C>        
Operating income (loss) (1):
  Continuing operations ........................      $(12.3)            $(5.0)           $(18.7)
  Discontinued operations ......................         8.0              37.8              22.8 
    Total ......................................        (4.3)             32.8               4.1 
Net income (loss):                                                                               
  Continuing operations ........................        (7.8)             (1.7)            (18.9)
  Discontinued operations (2) ..................        29.7              32.6              25.3 
    Total ......................................        21.9              30.9               6.4 
Net income applicable to common stock ..........        20.5              29.6               5.1 
Operating income (loss) per common share (1):                                                    
  Continuing operations ........................       (0.48)            (0.20)            (0.74)
  Discontinued operations ......................        0.31              1.50              0.90 
    Total ......................................       (0.17)             1.30              0.16 
Net income per common share ....................        0.81              1.17              0.20 
Average common shares outstanding ..............      25,400            25,295            25,328 
Average common and potentially dilutive                                                          
  shares outstanding ...........................      25,759            25,651            25,721 
</TABLE>

-------------------

(1) Applicable to common stock excluding net realized investment gains (losses)
    and is after preferred stock dividends.

(2) Net income from discontinued operations for the year ended December 31, 1997
    includes $24.0 million of recognition of the deferred gain on the sale of
    the discontinued operations.

     Operating loss from continuing operations increased to $12.3 million, or
$0.48 per common share, for the year ended December 31, 1997 from $5.0 million,
or $0.20 per common share, for the year ended December 31, 1996. The increase in
operating loss was primarily due to $38.5 million of pre-tax severance and
related charges and other expenses attributable to discontinued product lines
incurred during the year ended December 31, 1997 as a result of the Company's
reduction in force and continued strategic evaluation of its operations. During
the year ended December 31, 1996, $6.7 million of pre-tax severance and other
charges were incurred. Excluding these charges, continuing operations improved
to operating income of $12.7 million, or $0.51 per common share, for the year
ended December 31, 1997 from an operating loss of $0.6 million, or $0.03 per
common share, for the year ended December 31, 1996. This improvement was
primarily attributable to increased investment income earned on the proceeds
from the sale of the Annuity Operations on March 31, 1997, the discontinuance of
certain products included in the Company's stop-loss reinsurance product line in
1996 and a reduction in corporate expenses. See further discussion below
regarding these variances. These improvements were partially offset by a
reduction in income earned from the Company's group division resulting primarily
from a decrease in gross earned premiums to $1,105.6 million in 1997 from
$1,523.4 million in 1996. The group gross medical loss ratio decreased to 75.4%
for the year ended December 31, 1997 from 76.3% for the year ended December 31,
1996 and the group gross expense ratio, excluding the severance and other
charges discussed above, increased to 26.0% from 24.5% during these periods.

                                       17
<PAGE>   21

     Operating loss from continuing operations decreased to $5.0 million, or
$0.20 per common share, for the year ended December 31, 1996 from $18.7 million,
or $0.74 per common share, for the year ended December 31, 1995. Included in the
operating loss for the year ended December 31, 1995 is a pre-tax charge of $10.0
million for claims incurred in relation to the group product in 1994, as
discussed below. In addition, the 1995 operating loss includes $26.2 million of
pre-tax charges related to intangible asset write-offs, severance and other
charges related to the Company's strategic evaluation of operations including
additional losses related to a discontinued product in the stop-loss reinsurance
product line. Excluding these charges and the 1996 charges discussed above,
continuing operations decreased to an operating loss of $0.6 million, or $0.03
per common share, for the year ended December 31, 1996 from operating income of
$4.8 million, or $0.19 per common share, for the year ended December 31, 1995.
This decrease was primarily attributable to an increase in the group gross
medical loss ratio to 76.3% in 1996 from 74.3% in 1995, excluding the $10.0
million charge relating to claims incurred in 1994, as discussed above, and a
decrease in group gross earned premiums to $1,523.4 million in 1996 from
$1,680.6 million in 1995. See further discussion below regarding these
variances. These items were partially offset by a decrease in the group gross
expense ratio to 24.5% for the year ended December 31, 1996 from 25.5% for the
year ended December 31, 1995, excluding the charges discussed above.

STATEMENT OF INCOME DATA

      The Company's continuing operations primarily consist of its group health
business, its joint venture HMO and its stop-loss reinsurance business. The
Company reports the results of operations of the Annuity Operations and the
Western Diversified Group as discontinued operations.




                                       18
<PAGE>   22


      The following tables recast the accompanying Consolidated Statements of
Income for continuing operations for the years ended December 31, 1997, 1996 and
1995 as a percent of net insurance premiums and contract charges earned ("net
premiums") and provide other relevant information:

<TABLE>
<CAPTION>
                                                                                                              POINT CHANGE
                                                                                                         ------------------------
                                                                                                           POSITIVE (NEGATIVE)
                                                                     YEAR ENDED DECEMBER 31,                     EFFECT
                                                             ----------------------------------------    ------------------------
                                                              1997 (1)        1996           1995          1997          1996
                                                             -----------    ----------    -----------    ----------    ----------
<S>                                                          <C>            <C>           <C>             <C>           <C>
Revenues:
   Gross insurance premiums and contract charges earned.....   167.5%         179.4%        183.9%        (11.9)%        (4.5)%
   Ceded insurance premiums and contract charges earned.....   (67.5)         (79.4)        (83.9)         11.9           4.5
                                                             -----------    ----------    -----------    ----------    ----------
      Net insurance premiums and contract charges earned....   100.0          100.0         100.0            --            --
   Net investment income....................................     7.7            4.4           4.8           3.3          (0.4)
   Other income.............................................     5.3            4.1           5.3           1.2          (1.2)
   Net realized investment gains (losses)...................     0.5            0.3          (0.2)          0.2           0.5
                                                             -----------    ----------    -----------    ----------    ----------
      Total revenues........................................   113.5          108.8         109.9           4.7          (1.1)
                                                             -----------    ----------    -----------    ----------    ----------
Benefits and expenses:
   Gross claims incurred on insurance products..............   127.7          136.3         138.5           8.6           2.2
   Ceded claims incurred on insurance products..............   (52.7)         (63.2)        (66.0)        (10.5)         (2.8)
                                                             -----------    ----------    -----------    ----------    ----------
      Net claims incurred on insurance products.............    75.0           73.1          72.5          (1.9)         (0.6)
                                                             -----------    ----------    -----------    ----------    ----------
   Universal life and investment-type contract benefits:
      Interest credited to account balances.................     1.5            1.3           1.2          (0.2)         (0.1)
      Benefit claims incurred in excess of account balances.     0.5            0.5           0.4            --          (0.1)
   Decrease in life insurance reserves......................    (0.5)            --          (0.2)          0.5          (0.2)
                                                             -----------    ----------    -----------    ----------    ----------
      Total benefits........................................    76.5           74.9          73.9          (1.6)         (1.0)
                                                             -----------    ----------    -----------    ----------    ----------
   Commissions..............................................     7.1            7.5           7.9           0.4           0.4
   General expenses.........................................    28.2           24.0          28.4          (4.2)          4.4
   Amortization of purchased intangibles....................     0.5            0.5           0.5            --            --
   Amortization of deferred policy acquisition costs........     1.6            1.4           1.3          (0.2)         (0.1)
   Interest expense.........................................     0.6            0.6           0.8            --           0.2
                                                             -----------    ----------    -----------    ----------    ----------
      Total expenses........................................    38.0           34.0          38.9          (4.0)          4.9
                                                             -----------    ----------    -----------    ----------    ----------
      Total benefits and expenses...........................   114.5          108.9         112.8          (5.6)          3.9
                                                             -----------    ----------    -----------    ----------    ----------
Loss from continuing operations before
   benefit for income taxes and minority
   interest in joint venture's (income) loss................    (1.0)          (0.1)         (2.9)         (0.9)          2.8
Benefit for income taxes....................................    (0.2)          (0.2)         (0.9)           --          (0.7)
Minority interest in joint venture's (income) loss..........    (0.1)          (0.2)          0.2           0.1          (0.4)
                                                             -----------    ----------    -----------    ----------    ----------
Net loss from continuing operations.........................    (0.9)%         (0.1)%        (1.8)%        (0.8)%         1.7%
                                                             ===========    ==========    ===========    ==========    ==========
</TABLE>


<TABLE>
<CAPTION>
                                                                                                           PERCENTAGE CHANGE
                                                                                                     -------------------------------
                                                              YEAR ENDED DECEMBER 31,                  POSITIVE (NEGATIVE) EFFECT
                                                    ---------------------------------------------    -------------------------------
                                                       1997             1996             1995             1997            1996
                                                    ------------     ------------    -------------   ---------------  --------------
<S>                                                 <C>              <C>              <C>             <C>              <C>    
Other relevant information:
   Group insured data:
      Employers (2)............................       110,000          183,000          235,000         (39.9)%          (22.1)%
      Employee lives...........................       284,000          474,000          620,000         (40.1)           (23.5)
      Group covered lives (3)..................       544,000          901,000        1,190,000         (39.6)           (24.3)
      HMO covered lives........................       111,000           81,000           43,000          37.0             88.4
         Total covered lives...................       655,000          982,000        1,233,000         (33.3)           (20.4)
   Group gross medical loss ratio..............          75.4%            76.3%            75.0%          0.9             (1.3)
</TABLE>

------------------

(1)   For the year ended December 31, 1997, the effects of the assumption of a
      block of life insurance under a reinsurance treaty, which increased gross
      premiums and contract charges earned ("gross premiums") and benefits by
      approximately $35.9 million, have been excluded from this table. The
      transaction resulted in no net income or loss.

(2)   Includes 22,000, 32,000 and 40,000 groups, each group made up of one
      individual, as of December 31, 1997, 1996 and 1995, respectively, marketed
      through an association trust.

(3)   For the year ended December 31, 1997, group covered lives includes 45,000
      lives insured under the Company's new product introduced in April 1997, as
      discussed below.



                                       19
<PAGE>   23

      During the year ended December 31, 1997, the Company assumed a block of
life insurance, which had the effect of increasing gross premiums and benefits
by approximately $35.9 million. This reinsurance treaty had no effect on the net
results of operations for the year ended December 31, 1997. All subsequent
discussion of results of operations will exclude the effects of this reinsurance
treaty. Excluding the effects of this treaty, gross premiums decreased 18.6% to
$1,495.7 million for the year ended December 31, 1997 from $1,838.3 million for
the year ended December 31, 1996 and 5.1% to $1,838.3 million in 1996 from
$1,936.3 million for the year ended December 31, 1995. These decreases were
primarily attributable to a decrease in group covered lives during these
periods, partially offset by premium rate increases and growth in the premiums
earned in the Company's joint venture HMO. Group covered lives have declined
from 1,190,000 at December 31, 1995 to 901,000 at December 31, 1996 and to
544,000 at December 31, 1997. The NHP joint venture was formed in the third
quarter of 1994 with a physician hospital organization. Covered lives in the HMO
have increased from 43,000 at December 31, 1995 to 81,000 at December 31, 1996
and to 111,000 at December 31, 1997. The Company's 50% share of the net income
(loss) of NHP was $1.0 million, $2.1 million and ($2.0) million for the years
ended December 31, 1997, 1996 and 1995, respectively. As discussed below, net
income of NHP for the year ended December 31, 1996 included release of a
valuation allowance relating to prior year tax losses.

      Consistent with the Company's objective of maintaining profit margins at
the risk of reducing market share, the Company began to significantly increase
rates on its new and renewal business effective January 1, 1995, with larger
increases targeted to the higher risk business. The Company raised its 1995
premium rates higher than the majority of the competition as it believes it was
among the first major participants in the small group market to recognize the
increased level of utilization and the rising medical cost trends. The Company
also began to take additional actions that were designed to enable it to better
control the future medical loss ratios on its group business with a strong
emphasis on the high risk business. These actions included, where appropriate or
available, improving discounts from providers, redesigning benefits, improving
underwriting techniques, implementing a lower commission structure and
discontinuing portions of such business, if warranted.

      During 1996, the Company continued to experience relatively high gross
medical loss ratios. The group gross medical loss ratio increased to 76.3% for
the year ended December 31, 1996 from 75.0% for the year ended December 31,
1995. In response, the Company significantly increased premium rates, improved
provider discount arrangements, redesigned benefit packages, modified commission
structures and discontinued portions of the business as deemed advisable. In
1996, the Company ceased marketing in the State of Kentucky and terminated
certain other marketing arrangements. While the number of group covered lives
decreased 24.3% to 901,000 at December 31, 1996 from 1,190,000 at December 31,
1995, the rate increases offset, in part, the decline in covered lives.
Additionally, gross premiums from the Company's HMO joint venture increased
191.8% in 1996 to $107.4 million from $36.8 million in 1995.

      In the first quarter of 1997, the Company decided to stop selling small
group insurance plans in California, Maryland, and New Jersey and to terminate
existing small group insurance plans in these states. In addition, the Company
began the introduction of a new product in April 1997 and as of December 1997 is
offering this product in 31 states which represents most of the states in which
the Company expects to focus its marketing efforts. These various actions
contributed to a 39.6% decrease in group covered lives to 544,000 at December
31, 1997 from 901,000 at December 31, 1996, which resulted in the decrease in
group earned premium noted above. Partially offsetting this decrease was an
87.9% increase in gross premiums from the Company's HMO joint venture to $201.8
million in 1997 from $107.4 million in 1996.

      Net investment income increased 52.3% to $69.3 million for the year ended
December 31, 1997 from $45.5 million for the year ended December 31, 1996. As a
percentage of net premiums, net investment income increased to 7.7% for the year
ended December 31, 1997 from 4.4% for the year ended December 31, 1996. This
increase was primarily attributable to the proceeds of the sale of the Annuity
Operations as discussed above.

      Other income consists primarily of profit sharing provisions in accordance
with a Group Reinsurance Agreement with London Life Insurance Company and
Transamerica Occidental Life Insurance Company (the "Group Reinsurance
Agreement"). See further discussion in "Liquidity and Capital Resources --
Reinsurance". 


                                       20
<PAGE>   24

The amount of these profit sharing provisions has fluctuated between these
periods due primarily to changes in the group gross medical loss ratio.

      Total benefits decreased 10.9% to $683.6 million for the year ended
December 31, 1997 from $767.6 million for the year ended December 31, 1996 and
1.4% to $767.6 million for 1996 from $778.3 million for the year ended December
31, 1995. During 1995, the Company received sufficient information to enable it
to conclude that the initial premium rates on its provider excess stop-loss
reinsurance product line were insufficient to pay the anticipated claims on
pre-1995 business. Accordingly, the Company recorded charges of $5.8 million
relating to its 50% exposure in this business. In 1996, the Company increased
premium rates, revised benefits and coverage allowances, raised the amount of
business ceded to 100% and ultimately reached a decision to discontinue this
product line. Estimated losses during the run-off period were accrued for in
1996. Also, in the first quarter of 1995, the Company recorded a charge of $10.0
million for claims incurred in 1994 relating to the group product. As a
percentage of net premiums, total benefits were 76.5%, 74.9% and 73.9% for the
years ended December 31, 1997, 1996 and 1995, respectively. These increases are
primarily attributable to the decrease in the size of the group division
relative to the other product lines of the Company which generally incur a
higher ratio of benefits to net premiums than the group division. The group
gross medical loss ratio was 75.4%, 76.3% and 74.3% (excluding the $10.0 million
charge discussed above) for the years ended December 31, 1997, 1996 and 1995,
respectively. The decrease in the medical loss ratio from 1996 to 1997 is
generally attributable to the premium rate increases and other actions which
have been taken by the Company during the past two years. Much of the gross
medical loss ratio improvement over the prior year is recorded as an experience
refund under the Group Reinsurance Agreement and is included in other income, as
discussed above.

      Commissions, as a percent of net premiums, were 7.1%, 7.5% and 7.9% for
the years ended December 31, 1997, 1996 and 1995, respectively. These decreases
were primarily due to the relative decrease in new group product sales, which
incur a higher commission rate than renewals. In addition, the decrease has been
affected by the increase in sales of the HMO product, which incur a lower
commission rate than group products.

      General expenses increased 2.2% to $251.6 million for the year ended
December 31, 1997 from $246.1 million for the year ended December 31, 1996 and
decreased 17.6% to $246.1 million for 1996 from $298.6 million for the year
ended December 31, 1995. As a percentage of net premiums, general expenses were
28.2%, 24.0% and 28.4% for the years ended December 31, 1997, 1996 and 1995,
respectively. During the year ended December 31, 1997, the Company restructured
its operations in conjunction with the closing of the sales of the Annuity
Operations and Western Diversified Group and anticipated reduced premium volume
in its group operations. Accordingly, the Company reduced its workforce by
approximately 1,000 employees or 36% during 1997. In addition, during the three
months ended December 31, 1997, the Company recognized an impairment of
intangible assets relating to operations to be disposed of and severance and
other charges relating to further reductions in workforce resulting from the
continued decrease in premium volume in the group operations. Accordingly, the
Company incurred a total pre-tax charge to continuing operations of $35.0
million during 1997. During the years ended December 31, 1996 and 1995, the
Company incurred pre-tax charges of $6.7 million and $20.4 million,
respectively, related to its strategic evaluation of operations. Excluding these
charges for all periods, general expenses decreased 9.5% to $216.6 million for
the year ended December 31, 1997 from $239.4 million for the year ended December
31, 1996, which was a 13.9% decrease from $278.2 million for the year ended
December 31, 1995. These decreases are primarily due to the reduction in
workforce and other expense reductions which have been implemented during 1997
and 1996.

      The Company's income tax provisions differ from the amounts determined by
multiplying total income before income taxes by the statutory federal income tax
rate of 35% primarily due to permanent differences including goodwill
amortization, non-taxable investment income, non-deductible expenses, changes in
tax valuation allowances and other items. During 1995, the Company increased its
valuation allowance for the tax losses from NHP by $1.5 million, bringing the
total for such valuation allowance to $3.7 million at December 31, 1995. During
1996, the Company determined that the valuation allowance was no longer
necessary.




                                       21
<PAGE>   25

                             BUSINESS DEVELOPMENT

      On March 9, 1998, the Company entered into an agreement to merge with a
wholly-owned subsidiary of Fortis as a result of which, among other things, the
Company will become a wholly-owned subsidiary of Fortis and each outstanding
share of the Company's common stock will be converted into the right to receive
$22.50 in cash.  Consummation of the merger is subject to regulatory and
stockholder approvals, as well as other customary terms and conditions.  It is
anticipated that the merger will be consummated during 1998.  In connection
with and as a condition to Fortis entering into the agreement to merge, the
Company granted an option to Fortis to acquire, under certain circumstances,
common stock of the Company representing up to 19.9% of the Company's
outstanding common stock at an exercise price of $22.50 per share.  See  Note 2
to the Company's Consolidated Financial Statements.  Further description of the
merger agreement is set forth in the Company's current report on Form 8-K dated
March 9, 1998 filed with the Securities and Exchange Commission.

      In January 1997, the Company announced that it would be focusing its
marketing efforts and resources in those markets and states in which it believes
it can best increase profitability and market share. In connection with this
strategy, in the first quarter of 1997, the Company decided to stop selling
small group insurance plans in California, Maryland and New Jersey and to
terminate existing small group insurance plans in these states. The Company
began the introduction of a new product in April 1997 and as of December 1997 is
offering this product in 31 states which represents most of the states in which
the Company expects to focus its marketing efforts. As the Company exits the
states noted above and possibly other states, and until the new product is sold
in sufficient quantities to exceed lapses of the existing inforce product, the
Company may experience further reductions in group covered lives, and as a
result, in gross premiums. If gross premiums decline at a faster rate than the
Company is able to reduce general expenses, the group gross expense ratio could
increase. It is also possible that the Company could experience an increase in 
the group medical loss ratio for existing business in additional exit states, if
any.

      The Company has generally experienced a higher gross medical loss ratio in
the fourth quarter versus other quarters of the year. The Company believes that
these higher medical loss ratios are primarily due to increased incidence of
claims associated with the colder, winter climate and the fact that insureds
generally exceed the calendar year deductible and out-of-pocket expense limits
of their policies by that time of year. The Company has also generally
experienced relatively higher gross medical loss ratios with groups that have
been inforce for a longer period of time. New business has generally provided
relatively lower gross medical loss ratios compared to the renewing inforce
business. The Company cannot predict the extent to which these historical
patterns will continue, increase or decrease in the future.

      Historically, group insurance business has been subject to pricing and
profitability cycles that are driven by competitive price pressures within the
industry. These pressures and other factors make it difficult to predict with
certainty the effect pricing changes will have on the Company's profitability.
Traditionally, the cycle has been characterized by a period of higher
profitability, which has fostered intense price competition and aggressive
marketing by new entrants and existing companies striving to increase market
share, thereby resulting in lower profitability. The lower profitability
typically resulted in a withdrawal of competitors and a firming of prices,
resulting once again in increased profitability and a renewal of the cycle.
There are factors in the current cycle that were not present in previous cycles.
One significant factor is small group and individual healthcare legislative
reform and its effect on medical underwriting and pricing. Small group and
individual healthcare reforms, primarily at the state level and increasingly at
the federal level, include legislation on matters such as guaranteed issue,
mandated benefits, premium rate limits (including community rating and modified
community rating), guaranteed renewability, minimum loss ratio mandates, risk
adjustment mechanisms which allocate losses of individual carriers to group
carriers, and other reforms. Additionally, managed care providers, the most
significant of which are HMO's, now represent a more significant source of
competition than in previous cycles.

      In 1996, Congress enacted HR 3103 ("Health Insurance Portability and
Accountability Act", or "HIPAA"), also commonly referred to as the
Kennedy-Kassenbaum Bill. HIPAA provisions applicable to both insured and
self-funded employer group coverage include minimum standards for pre-existing
condition exclusions, waiver of pre-existing condition exclusions for
individuals meeting minimum prior coverage requirements and prohibition of
health related exclusion of individuals from employer group coverage. HIPAA also
provides guaranteed acceptance of small employers with 2 to 50 employees for
insured coverage. In other respects, HIPAA's group and small group provisions
are largely in line with state small group reform laws already enacted by the
large majority of states. In the individual market, HIPAA requires guaranteed
acceptance for eligible individuals moving out of group plans who have at least
18 months of prior coverage. However, most states have or are expected
to amend their laws to alleviate any inconsistencies with the federal minimum
standards. States which


                                       22
<PAGE>   26

have not already enacted all of the HIPAA group and small group standards may
enact state reforms consistent with HIPAA. The final outcome of state amendments
or new legislation, as well as federal regulations addressing these provisions,
cannot be predicted.

YEAR 2000

      The Company uses a variety of data processing hardware and software
systems to process its business. Many of these systems utilize a two-digit field
to identify a year, as has been standard in most data processing systems. A
two-digit year field will not process correctly once a change in century occurs
in the year 2000. The Company, in common with most organizations that use
automated systems, must transition its systems to a four-digit year field by the
year 2000 or arrange for other processing alternatives. In order to process
certain calculations correctly, in some instances this transition must be
completed by January 1, 1999. To date, the Company has identified certain
existing systems that will be modified to be year 2000 compliant and
modifications are currently being made to such systems. Certain other systems
have been identified to be replaced and the Company is currently proceeding with
replacing these systems. The Company is currently evaluating which other systems
will be modified to be year 2000 compliant, and which systems will be the
subject of other processing alternatives. However, if such modifications and
conversions are not completed on a timely basis, the year 2000 problem may have
a material impact on the operations of the Company. Further, even if the Company
timely completes such modifications and conversions, there can be no assurance
that the failure by vendors or other third parties to solve the year 2000
problem will not have a material impact on the operations of the Company. During
1997, the Company expended approximately $2.7 million related to the year 2000
project. The Company currently expects to incur between approximately $15.0
million and $20.0 million during 1998 and 1999 relating to the year 2000 
project.

                       LIQUIDITY AND CAPITAL RESOURCES

INDEBTEDNESS

      The Company maintains a Credit Agreement with The Chase Manhattan Bank
which was amended in July 1994 to increase the commitment amount of the term
loan to $110.0 million and to establish a revolving credit loan with a
commitment amount of $40.0 million and an expiration of July 1998 (the "Credit
Agreement"). As of December 31, 1997, the Company has $23.5 million available
under the revolving credit loan. In April 1997, the Company made a scheduled
principal payment under the Credit Agreement of $25.0 million. The principal
amount of outstanding indebtedness of the Company was $76.5 million as of
December 31, 1997 as compared to $101.5 million and $107.1 million as of
December 31, 1996 and 1995, respectively. Future required principal payments as
of December 31, 1997 are $41.5 million in 1998 and $35.0 million in 1999. As of
December 31, 1997, the Company's ratio of debt and redeemable securities to
stockholders' equity was 0.20 to 1 as compared to 0.26 and 0.27 to 1 as of
December 31, 1996 and 1995, respectively. The weighted average interest rates on
the Company's indebtedness were approximately 6.4%, 6.3% and 6.9% for 1997, 1996
and 1995, respectively.

DIVIDENDS

      The Credit Agreement restricts dividends and other distributions payable
by the Company. In any period of 12 consecutive months, the Company may pay cash
dividends on, or repurchase for cash, capital stock in an amount not to exceed
15% of net worth (representing stockholders' equity excluding net unrealized
gains (losses) on investments plus redeemable securities) as of the end of the
fiscal quarter ending on or most recently prior to the last day of such 12 month
period ($67.3 million for the 12 months ended December 31, 1997).




                                       23
<PAGE>   27


      The Company paid preferred stock dividends of approximately $0.7 million
in each April and October of 1997, 1996 and 1995. On March 8, 1998, the Company
declared a preferred stock dividend in the amount of approximately $0.7 million
and a common stock dividend of approximately $2.9 million which are both to be
paid in April 1998. A summary of common stock dividends declared or paid during
1996, 1997 and 1998 is as follows (dollars in millions, except per share
amounts):

<TABLE>
<CAPTION>
                                                      AMOUNT OF DIVIDEND
                                                 ------------------------------
  MONTH OF DECLARATION        PAYMENT MONTH       PER SHARE       AGGREGATE
-------------------------   -------------------  ------------   ---------------
<S>                         <C>                  <C>             <C>
      December 1995              January 1996       $ 0.11          $ 2.8
      March 1996                 April 1996           0.11            2.8
      June 1996                  July 1996            0.11            2.8
      September 1996             October 1996         0.12            3.0
      December 1996              January 1997         0.12            3.0
      March 1997                 April 1997           0.12            3.0
      June 1997                  July 1997            0.12            3.0
      September 1997             October 1997         0.12            3.1
      December 1997              January 1998         0.12            3.0
      March 1998                 April 1998           0.12            2.9
</TABLE>

CASH FLOWS

      The Company's sources of cash are payments of principal and interest on
the Surplus Debentures of, and dividends from, its direct life insurance
subsidiary, HNLIC, and dividends, management fees and tax allocation payments
from the Company's principal non-insurance subsidiary, JA Services, Inc.
("JASI") and JASI's subsidiaries. HNLIC's primary sources of cash are dividends
from its subsidiary, JALIC, and tax allocation payments from JALIC and its
subsidiaries. The Surplus Debentures require HNLIC to make a principal payment
to the Company of $11.0 million in 1998 and $32.0 million in 1999. JALIC paid
cash dividends to HNLIC of $225.0 million in 1997, $12.0 million in 1996 and
$30.0 million in 1995.

      Principal sources of funds at the insurance company level are insurance
premiums, contract charges earned, annuity considerations collected, net
investment income received and proceeds from investments that have been sold,
called or matured, or from loans that have been repaid. The principal uses of
these funds are the payment of operating expenses, the payment of claims and
benefits on insurance policies, the purchase of investments and the payment of
indebtedness. Net cash provided by operating activities (reflecting principally
(i) premiums and contract charges collected less claims and benefits on
insurance products plus (ii) interest collected on invested assets less (iii)
commissions and other general expenses paid, together with (iv) the inflows or
outflows from the purchases or sales of trading account securities) was $5.0
million, $301.7 million and $383.0 million in 1997, 1996 and 1995, respectively.
The net decrease in cash flows from operating activities from 1996 to 1997 was
generally due to the sale of the Annuity Operations and the reduction in the
volume of the group business, partially offset by decreased operating expenses.

      Net cash provided by (used in) investing activities (reflecting
principally investments purchased and loans made, less investments sold or
matured, and loans repaid) was $21.0 million, $36.6 million and $(186.5) million
in 1997, 1996 and 1995, respectively. In conjunction with the Company's
announcement in March 1996 that it was selling its Annuity Operations, the
Company reduced production of new mortgages in 1996 while experiencing increased
repayments. In anticipation of cash needs relating to the sale of the Annuity
Operations and the possible use of the proceeds as discussed below, the Company
maintained the additional cash generated from the mortgage repayments in cash
equivalents, as opposed to reinvesting these funds in other instruments. This
resulted in the increase in cash provided by investing activities in 1996.

      In addition to the $238.2 million purchase price for the Annuity
Operations, SunAmerica paid $33.1 million to the Company for accrued interest
and related items.  In turn, the Company paid SunAmerica $360.4 million of cash
and cash equivalents because policy reserves transferred exceeded invested
assets transferred.  Additionally, the Company's cash and cash equivalent
position was decreased by JANY's cash and cash equivalent balance at the time
of the sale of $88.5 million, which was retained by JANY.  Therefore, the
Company incurred a net outflow of cash and cash equivalents due to the sale of
the Annuity Operations of $177.6 million, as reflected in the accompanying
consolidated statement of cash flows.  Additionally, the Company increased its
cash position by $23.3 million as a result of the sale of the Western
Diversified Group.

      Cash flow from financing activities consists of net proceeds from exercise
of stock options, purchases of treasury shares, dividend payments on preferred
and common stock, additions to and repayments of indebtedness, as well as
receipts and payments on the Company's annuity and universal life products. Net
cash used in financing


                                       24
<PAGE>   28

activities was $161.8 million, $270.4 million and $155.4 million in 1997, 1996
and 1995, respectively. The Company purchased shares of common stock for
aggregate purchase prices of $22.7 million and $3.2 million during 1997 and
1995, respectively. Deposits received from universal life and investment-type
contracts were $81.7 million, $453.2 million and $886.3 million in 1997, 1996
and 1995, respectively. Payments to contract holders of these products consist
of surrenders, partial withdrawals, death claims and annuitized benefits. Such
payments for these same periods aggregated $184.7 million, $705.6 million and
$666.7 million, respectively. During 1995, the Company paid $342.0 million
pursuant to a reinsurance agreement to cede 90% of certain annuity contracts.
The amount of cash and cash equivalents at December 31, 1997, 1996 and 1995 was
$31.7 million, $167.5 million and $99.6 million, respectively.

      During the year ended December 31, 1997, the Company sold sufficient
available-for-sale securities, along with existing cash and cash equivalents, to
aggregate $188.0 million, which was dividended by the insurance subsidiaries to
the holding company. A portion of these funds were used to acquire shares of
common stock, as discussed above. In the event that the sale of the Company does
not occur, the remainder of this cash may be used to repurchase additional
common stock, pay dividends, reduce debt, acquire blocks of business or for
general corporate purposes, or for a combination of two or more of such uses.

      The Annuity Operations historically represented a significant source of
cash flows to the Company. Historically, the Annuity Operations were profitable,
generating a positive cash flow from operations. As the annuity business grew,
the considerations received historically exceeded the payments on these
contracts, producing positive cash flows from financing activities. In 1996 and
during 1997 prior to the sale of the Annuity Operations on March 31, 1997,
surrenders or other payments exceeded receipts from these contracts, producing
negative cash flows from financing activities. The operating cash flows and the
financing cash flows from the Annuity Operations provided the funds for the
majority of the investing activities of the Company. Now that the sale of the
Annuity Operations is complete, the Company no longer has the positive cash
flows from operations or negative cash flows from financing activities in
connection with this business. The Company realized net positive cash flows from
operations for the three months ended March 31, 1997 of $100.1 million, but
experienced net negative cash flows from operations of $95.1 million for the
nine months ended December 31, 1997. This decrease was primarily attributable to
the sale of the Annuity Operations, a reduction in operating income and the
timing of settlements of accruals previously established for severance and
related charges. In addition, the majority of the net negative cash flows from
financing activities of $161.8 million for the year ended December 31, 1997,
which includes payments on investment contracts, will no longer be experienced.
Future cash flows from investing activities will be reduced from historical
levels as the Company's investment portfolio has been reduced from approximately
$6.0 billion at December 31, 1996 to approximately $1.0 billion at December 31,
1997 following the sale of the Annuity Operations.

      During 1997, the Company expended approximately $2.7 million for the Year
2000 project. The Company currently expects to incur between approximately $15.0
million and $20.0 million during 1998 and 1999 relating to the year 2000
project.


      The Company believes that sufficient sources of cash flow exist which will
be available in the foreseeable future to allow the Company to fund operations
and to service its debt, redeem preferred stock and meet anticipated dividend
requirements. See Notes 6, 12, 13 and 15 to the Consolidated Financial
Statements for a discussion of liquidity, quality, composition and fair values
of the Company's invested asset portfolio.

REINSURANCE

      Substantially all of the group accident and health insurance business has
been reinsured under the Group Reinsurance Agreement which provides for the
Company and the reinsurers to share on a 50-50 basis all premiums and claims
expense. Annually, the Company receives profit sharing payments from the
reinsurers equal to the excess of reinsurers' profits over contractual floor
amounts. For years where such profits fall short of floor amounts, the
shortfalls are carried forward with interest to be applied as reductions against
future profit sharing payments. In addition, under the Group Reinsurance
Agreement, to the extent the combined ratio of the group accident and health


                                       25
<PAGE>   29

insurance business for a rolling 12-month period exceeds contractual amounts,
the Company receives a reduced profit sharing payment.

      As discussed above, in conjunction with the sale of the Annuity
Operations, the Company entered into a coinsurance agreement with SunAmerica
relating to substantially all of the JALIC annuity business. This coinsurance
was initially on an indemnity basis and the parties agreed to transition the
business to an assumption basis as soon as practical. In certain states, the
transition to an assumption basis is subject to policyholder approval. To the
extent that such transition does not take place with respect to any particular
policy, the policy will remain reinsured on an indemnity basis. As of December
31, 1997, approximately 70% of the ceded annuity reserves have either
transitioned to an assumption basis or lapsed. The majority of the
remaining policies are expected to be assumed by December 31, 1998. At December 
31, 1997, there are assets held in trust directly or indirectly available for
payments to policyholders supporting the remainder of the ceded reserves.
SunAmerica is rated "A+ (Superior)" by A.M. Best and Company.

      Receivables from reinsurers and investment deposits recoverable were
$187.1 million at December 31, 1997. Additionally, included in other assets at
December 31, 1997 in the accompanying consolidated balance sheet was
approximately $1.4 billion of investment contract deposits recoverable on the
JALIC coinsurance, net of a similar amount of contract holder liabilities
related to the discontinued operations.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      The Company's consolidated financial statements, together with the report
thereon of Price Waterhouse LLP dated March 20, 1998, are filed as part of this
Report, beginning on page F-1. Unaudited quarterly financial information is
filed as a part of this Report on page F-31.

ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL DISCLOSURE

      None.

ITEM 10.    EXECUTIVE OFFICERS OF THE REGISTRANT

      The following table sets forth certain information concerning the
executive officers of the Company:

<TABLE>
<CAPTION>
    NAME               AGE                     POSITION
    ----               ---                     --------
<S>                    <C>                 <C>
Glendon E. Johnson      74                 President, Chairman of the Board
                                           and Chief Executive Officer

Scott L. Stanton        42                 Director, Senior Vice President
                                           and Chief Financial Officer

Gary F. Kadlec          50                 Senior Vice President -- Sales and
                                           Marketing

Mark A. Schoder         45                 Senior Vice President -- Business
                                           Development and Communications
</TABLE>


      Glendon E. Johnson has served as Chairman of the Board and Chief Executive
Officer of the Company since 1987 and of JALIC since 1984. He also served as
President of the Company from 1987 to March 1993 and since May 1995 and of JALIC
from 1984 to March 1993. Mr. Johnson is also a director of each of the 13
investment companies comprising the United Group of Mutual Funds, as well as the
following investment companies: United Funds, Inc., TMK/United Funds, Inc., and
Waddell & Reed Funds, Inc., all of which are based in Overland Park, Kansas. Mr.
Johnson has been a Director of the Company since 1987.



                                       26
<PAGE>   30

      Scott L. Stanton has served as Senior Vice President and Chief Financial
Officer of the Company since 1994. He has been a Director of the Company since
1994, a Vice President of the Company since 1987 and has been with JALIC since
1984.

      Gary F. Kadlec has served as Senior Vice President of Sales and Marketing
of the Company since June 1995. He has been a Vice President of the Company
since 1973 and has been President of North Star Marketing Corporation since
1984.

      Mark A. Schoder has served as Senior Vice President of Business
Development and Communications of the Company since September 1995. Prior to
joining the Company, he was an analyst with Alex. Brown & Sons, where he
followed the Company, as well as other life and health insurance companies.

      All executive officers hold office until their respective successors are
elected and qualified, or until their earlier resignation or removal. The
Company's executive officers devote substantially all of their business efforts
to the affairs of the Company.



                                       27
<PAGE>   31


                                   PART III


      The Proxy Statement for the 1998 Annual Meeting of Stockholders (other
than the portions thereof not deemed to be "filed" for the purposes of Section
18 of the Securities Exchange Act of 1934), which, when filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, will be incorporated
by reference in this Annual Report on Form 10-K pursuant to General Instruction
G(3) of Form 10-K, will provide the information required under Part III (Items
10, 11, 12 and 13), except for the information regarding the executive officers
of the Company, which is included in Part II of this Annual Report on Form 10-K
beginning on page 12.



                                       28
<PAGE>   32


                                   PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a)(1) The following report and consolidated financial statements are filed as
       part of this Report beginning on Page F-1:

<TABLE>
<CAPTION>
                                                                           Page
                                                                            No.
                                                                            ---
<S>                                                                         <C>
       Report of Independent Accountants.....................................F-2 
                                                                                 
       Consolidated Balance Sheets as of                                         
              December 31, 1997 and 1996.....................................F-3 
                                                                                 
       Consolidated Statements of Income for the Years                           
              Ended December 31, 1997, 1996 and 1995.........................F-4 
                                                                                 
       Consolidated Statements of Changes in Stockholders' Equity                
              for the Years Ended December 31, 1997, 1996 and 1995...........F-5 
                                                                                 
       Consolidated Statements of Cash Flows for the Years Ended                 
              December 31, 1997, 1996 and 1995...............................F-6 
                                                                                 
       Notes to Consolidated Financial Statements............................F-7 
</TABLE>

(a)(2) The following is a list of financial statement schedules filed as part of
       this Report beginning on page S-2:

<TABLE>
<CAPTION>
       Schedule Number                        Description                                 
       ---------------                        -----------                                 
       <S>                <C>                                                             
       Schedule I         Summary of Investments Other than Investments in Related Parties
                                                                                          
       Schedule II        Condensed Financial Information (Parent Company Only)           
                                                                                          
       Schedule III       Supplementary Insurance Information                             
                                                                                          
       Schedule IV        Reinsurance                                                     
                                                                                          
       Schedule V         Valuation and Qualifying Accounts                               
</TABLE>

       Schedules other than those listed above have been omitted since they are
       either not required, are not applicable, or the required information is
       shown in the financial statements or related notes.

(a)(3) See accompanying Index to Exhibits at 14(c) below.

(b)    Reports on Form 8-K.

       None.

(c)    The following is a list of all Exhibits filed as part of this Report:



                                       29
<PAGE>   33



<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
         3.1        Amended and Restated By-laws of the Registrant dated as of
                    May 17, 1995. Filed as Exhibit 3.1 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1995 (Commission File No. 1-11396) and
                    incorporated herein by reference.
             
         3.2        Amended and Restated Certificate of Incorporation of the
                    Registrant as filed with the Secretary of State of Delaware
                    on September 23, 1992. Filed as Exhibit 3.4 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
             
         3.3        Certificate of Amendment to Amended and Restated Certificate
                    of Incorporation of Registrant as filed with the Secretary
                    of State of Delaware on October 2, 1992. Filed as Exhibit
                    3.5 to the Registrant's Annual Report on Form 10-K for the
                    fiscal year ended December 31, 1992 (Commission File No.
                    1-11396) and incorporated herein by reference.
             
         3.4        Amended and Restated By-laws of the Registrant dated as of
                    September 12, 1996, filed as Exhibit 3 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1996 (Commission File No. 1-11396) and
                    incorporated herein by reference.
             
         4.1        Amended and Restated Certificate of Designation of 150,000
                    shares of 9% Cumulative Preferred Stock. Filed as Exhibit
                    4.3 to the Registrant's Annual Report on Form 10-K for the
                    fiscal year ended December 31, 1992 (Commission File No.
                    1-11396) and incorporated herein by reference.
             
         4.2        Credit Agreement among the Registrant, Certain Commercial
                    Lending Institutions (named therein) and The Chase Manhattan
                    Bank (National Association) dated February 17, 1993. Filed
                    as Exhibit 4.8 to the Registrant's Annual Report on Form
                    10-K for the fiscal year ended December 31, 1992 (Commission
                    File No. 1-11396) and incorporated herein by reference.
             
         4.3        Pledge Agreement among the Registrant, John Alden Systems
                    Company, JA Services, Inc. and The Chase Manhattan Bank
                    (National Association) dated February 17, 1993. Filed as
                    Exhibit 4.9 to the Registrant's Annual Report on Form 10-K
                    for the fiscal year ended December 31, 1992 (Commission File
                    No. 1-11396) and incorporated herein by reference.
             
         4.4        Sister Company Guarantee among John Alden Systems Company,
                    JAFCO, Western Diversified Services, Inc., JA Services,
                    Inc., John Alden Asset Management Company, Anchor Benefit
                    Consulting, Inc., LensCard Systems Corporation and The Chase
                    Manhattan Bank (National Association) dated February 17,
                    1993. Filed as Exhibit 4.10 to the Registrant's Annual
                    Report on Form 10-K for the fiscal year ended December 31,
                    1992 (Commission File No. 1-11396) and incorporated herein
                    by reference.

        10.1        Compensation Letter Agreement between the Registrant and the
                    Management Stockholders dated October 30, 1987. Filed as
                    Exhibit 10.5 to the Registrant's Registration Statement (No.
                    33-47644) on Form S-1 and incorporated herein by reference.
               
        10.2        Loan Agreement between the Registrant and General Electric
                    Capital Corporation dated October 30, 1987. Filed as Exhibit
                    10.7 to the Registrant's Registration Statement (No.
                    33-47644) on Form S-1 and incorporated herein by reference.
               
        10.3        Term Note dated October 30, 1987 in the principal amount of
                    $87,000,000. Filed as Exhibit 10.8 to the Registrant's
                    Registration Statement (No. 33-47644) on Form S-1 and
                    incorporated herein by reference.
</TABLE>



                                       30
<PAGE>   34


<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.4        Intermediate Term Note dated October 30, 1987 in the
                    principal amount of $76,350,000. Filed as Exhibit 10.9 to
                    the Registrant's Registration Statement (No. 33-47644) on
                    Form S-1 and incorporated herein by reference.
              
        10.5        Bridge Note dated October 30, 1987 in the principal amount
                    of $75,000,000. Filed as Exhibit 10.10 to the Registrant's
                    Registration Statement (No. 33-47644) on Form S-1 and
                    incorporated herein by reference.
              
        10.6        Revolving Credit Note dated October 30, 1987 in the
                    principal amount of $15,000,000. Filed as Exhibit 10.11 to
                    the Registrant's Registration Statement (No. 33-47644) on
                    Form S-1 and incorporated herein by reference.
              
        10.7        Surplus Debenture dated October 30, 1987 in the principal
                    amount of $155,000,000. Filed as Exhibit 10.12 to the
                    Registrant's Registration Statement (No. 33-47644) on Form
                    S-1 and incorporated herein by reference.
              
        10.8        Subordinated Surplus Debenture dated October 30, 1987 in the
                    principal amount of $72,000,000. Filed as Exhibit 10.13 to
                    the Registrant's Registration Statement (No. 33-47644) on
                    Form S-1 and incorporated herein by reference.
              
        10.9        Pledge and Security Agreement dated October 30, 1987, made
                    by the Registrant to General Electric Capital Corporation.
                    Filed as Exhibit 10.14 to the Registrant's Registration
                    Statement (No. 33-47644) on Form S-1 and incorporated herein
                    by reference.

       10.10        Employment Agreement dated December 13, 1988, between the
                    Registrant and Lloyd E. Gearhart. Filed as Exhibit 10.20 to
                    the Registrant's Registration Statement (No. 33-47644) on
                    Form S-1 and incorporated herein by reference.
               
       10.11        John Alden Retirement Plan as Amended and Restated effective
                    January 1, 1989. Filed as Exhibit 10.21 to the Registrant's
                    Registration Statement (No. 33-47644) on Form S-1 and
                    incorporated herein by reference.
               
       10.12        John Alden Senior Executive Supplemental Retirement Plan
                    effective January 1, 1990. Filed as Exhibit 10.22 to the
                    Registrant's Registration Statement (No. 33-47644) on
                    Form S-1 and incorporated herein by reference.
               
       10.13        Supplemental Executive Retirement Plan effective December 1,
                    1984. Filed as Exhibit 10.22 to the Registrant's
                    Registration Statement (No. 33-47644) on Form S-1 and
                    incorporated herein by reference.
               
       10.14        Indemnity Coinsurance Agreement between JALIC and Oxford
                    Life Insurance Company, dated January 1, 1989. Filed as
                    Exhibit 10.24 to the Registrant's Registration Statement
                    (No. 33-47644) on Form S-1 and incorporated herein by
                    reference.
               
       10.15        Indemnity Coinsurance Agreement between JALIC and Reliance
                    Standard Life Insurance Company dated June 30, 1990. Filed
                    as Exhibit 10.25 to the Registrant's Registration Statement
                    (No. 33-47644) on Form S-1 and incorporated herein by
                    reference.
               
       10.16        Indemnity Coinsurance Agreement between JALIC and Reliance
                    Standard Life Insurance Company dated October 31, 1990.
                    Filed as Exhibit 10.26 to the Registrant's Registration
                    Statement (No. 33-47644) on Form S-1 and incorporated herein
                    by reference.
               
       10.17        Indemnity Coinsurance Agreement between JANY and The
                    Franklin Life Insurance Company dated March 31, 1991. Filed
                    as Exhibit 10.27 to the Registrant's Registration Statement
                    (No. 33-47644) on Form S-1 and incorporated herein by
                    reference.
</TABLE>


                                       31
<PAGE>   35


<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.18       Reinsurance Agreement among JALIC, London Life Insurance
                    Company and Transamerica Occidental Life Insurance Company
                    dated October 1, 1991. Filed as Exhibit 10.28 to the
                    Registrant's Registration Statement (No. 33-47644) on Form
                    S-1 and incorporated herein by reference.
               
        10.19       Reinsurance Agreement between Western Diversified Life
                    Insurance Company and ITT Lyndon Property Insurance Company
                    dated December 1, 1991. Filed as Exhibit 10.29 to the
                    Registrant's Registration Statement (No. 33-47644) on Form
                    S-1 and incorporated herein by reference.
               
        10.20       Reinsurance Agreement between JALIC and Lincoln National
                    Reassurance Company dated December 31, 1991. Filed as
                    Exhibit 10.30 to the Registrant's Registration Statement
                    (No. 33-47644) on Form S-1 and incorporated herein by
                    reference.
               
        10.21       Letter Agreement among Merrill Lynch Capital Partners, Inc.,
                    GE Capital, ERC, the Management Stockholders and the
                    Registrant dated August 26, 1992. Filed as Exhibit 10.31 to
                    the Registrant's Annual Report on Form 10-K for the fiscal
                    year ended December 31, 1992 (Commission File No. 1-11396)
                    and incorporated herein by reference.
               
        10.22       Employment Agreement between the Registrant and Glendon E.
                    Johnson dated October 2, 1992. Filed as Exhibit 10.32 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.23       John Alden Financial Corporation Employee Stock Purchase
                    Plan. Filed as Exhibit 4.3 to the Registrant's Registration
                    Statement (No. 33-55230) on Form S-8 and incorporated herein
                    by reference.
               
        10.24       John Alden Financial Corporation Long-Term Incentive Plan.
                    Filed as Exhibit 4.5 to the Registrant's Registration
                    Statement (No. 33-56656) on Form S-8 and incorporated herein
                    by reference.
               
        10.25       Amended and Restated Registration Rights Agreement between
                    the Registrant and General Electric Capital Corporation
                    dated as of October 2, 1992. Filed as Exhibit 10.35 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.26       Amended and Restated Registration Rights Agreement between
                    the Registrant and Merrill Lynch Capital Partners, Inc.
                    dated as of October 2, 1992. Filed as Exhibit 10.36 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.27       Amended and Restated Registration Rights Agreement among the
                    Registrant and Management Stockholders dated as of October
                    2, 1992. Filed as Exhibit 10.37 to the Registrant's Annual
                    Report on Form 10-K for the fiscal year ended December 31,
                    1992 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.28       Consent and Amendment to Loan Agreement between the
                    Registrant and General Electric Capital Corporation dated
                    September 22, 1992. Filed as Exhibit 10.38 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
</TABLE>



                                       32
<PAGE>   36



<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.29       Agreement to Amend Warrant between the Registrant and
                    General Electric Capital Corporation dated September 22,
                    1992. Filed as Exhibit 10.39 to the Registrant's Annual
                    Report on Form 10-K for the fiscal year ended December 31,
                    1992 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.30       Agreement to Amend Warrant between the Registrant and
                    Employers Reinsurance Corporation dated September 22, 1992.
                    Filed as Exhibit 10.40 to the Registrant's Annual Report on
                    Form 10-K for the fiscal year ended December 31, 1992
                    (Commission File No. 1-11396) and incorporated herein by
                    reference.
               
        10.31       Amended and Restated Management Stockholders Agreement among
                    the Management Stockholders and the Registrant dated
                    February 17, 1993. Filed as Exhibit 10.42 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.32       North Star Marketing Organization Long-Term Incentive Plan.
                    Filed as Exhibit 4.3 to the Registrant's Registration
                    Statement (No. 33-56544) on Form S-8 and incorporated herein
                    by reference.
               
        10.33       John Alden Financial Corporation Employee Savings Incentive
                    Plan, as amended, together with Amendments 1 through 5
                    thereto. Filed as Exhibit 4.3 to the Registrant's
                    Registration Statement (No. 33-56656) on Form S-8 and
                    incorporated herein by reference.
               
        10.34       Letter agreement among the Registrant and the Management
                    Stockholders dated October 2, 1992. Filed as Exhibit 10.50
                    to the Registrant's Annual Report on Form 10-K for the
                    fiscal year ended December 31, 1992 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.35       Stock and Warrant Purchase Agreement among Emperion
                    Corporation, Electronic Data Systems Corporation and JA
                    Services, Inc. dated December 17, 1991. Filed as Exhibit
                    10.51 to the Registrant's Annual Report on Form 10-K for the
                    fiscal year ended December 31, 1992 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.36       Amendment to Stock and Warrant Purchase Agreement dated
                    December 30, 1992. Filed as Exhibit 10.52 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1992 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.37       Revolving Credit Agreement among John Alden Systems Company
                    and The Chase Manhattan Bank (National Association), Barnett
                    Bank of South Florida, N.A. and Shawmut Bank Connecticut,
                    N.A. dated December 31, 1993. Filed as Exhibit 10.53 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1993 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.38       Amended and Restated Credit Agreement among the Registrant,
                    Certain Commercial Lending Institutions (named therein) and
                    the Chase Manhattan Bank (National Association) dated as of
                    July 27, 1994. Filed as Exhibit 10.42 to the Registrant's
                    Registration Statement (No. 33-78662) on Form S-3 and
                    incorporated herein by reference.
               
        10.39       Agreement dated July 27, 1994 to Amended and Restated
                    Management Stockholders Agreement among the Management
                    Stockholders and the Registrant dated February 17, 1993.
                    Filed as Exhibit 10.54 to the Registrant's Registration
                    Statement (No. 33-78662) on Form S-3 and incorporated herein
                    by reference.
</TABLE>



                                       33
<PAGE>   37


<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.40       Plan of Complete Liquidation and Dissolution of Emperion
                    Corporation. Filed as Exhibit 10.56 to the Registrant's
                    Annual Report on Form 10-K for the fiscal year ended
                    December 31, 1994 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.41       Articles of Dissolution of Emperion Corporation dated
                    December 29, 1994. Filed as Exhibit 10.57 to the
                    Registrant's Annual Report on Form 10-K for the fiscal year
                    ended December 31, 1994 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.42       Reinsurance Agreement between JALIC and Lincoln National
                    Reinsurance Company Limited dated as of September 30, 1995.
                    Filed as Exhibit 10.1 to the Registrant's Quarterly Report
                    on Form 10-Q for the quarterly period ended September 30,
                    1995 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.43       Trust Agreement among JALIC, Lincoln National Reinsurance
                    Company Limited and The Chase Manhattan Bank, N.A. dated as
                    of October 9, 1995. Filed as Exhibit 10.2 to the
                    Registrant's Quarterly Report on Form 10-Q for the quarterly
                    period ended September 30, 1995 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.44       Amendment dated March 8, 1996 to Amended and Restated Credit
                    Agreement among the Registrant, Certain Commercial Lending
                    Institutions (named therein) and the Chase Manhattan Bank
                    (National Association) dated as of July 27, 1994. Filed as
                    Exhibit 10.44 to the Registrant's Annual Report on Form 10-K
                    for the year ended December 31, 1995 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.45       Rights Agreement, dated as of December 13, 1996, between
                    John Alden Financial Corporation and Chase Mellon
                    Shareholder Services, L.L.C. Filed as Exhibit 2 to the
                    Registrant's Form 8-K dated December 13, 1996 (Commission
                    File No. 1-11396) and incorporated herein by reference.

        10.46       Amendment dated November 1, 1996 to reinsurance agreement 
                    among JALIC, London Life Insurance Company and TransAmerica
                    Occidental Life Insurance Company dated October 1, 1991.

        10.47       Amendment dated February 28, 1997 to Employment Agreement 
                    between the Registrant and Glendon E. Johnson dated October
                    2, 1992.
               
        10.48       Stock Purchase and Sale Agreement by and between JALIC and
                    SunAmerica Life Insurance Company ("SunAmerica") dated
                    November 29, 1996. Filed as Exhibit 10.1 to the Registrant's
                    Current Report on Form 8-K filed April 15, 1997 (Commission
                    File No. 1-11396) and incorporated herein by reference.
               
        10.49       Asset Purchase and Sale Agreement by and between JALIC and
                    SunAmerica dated November 29, 1996. Filed as Exhibit 10.2 to
                    the Registrant's Current Report on Form 8-K filed April 15,
                    1997 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.50       Indemnity Reinsurance Agreement by and between JALIC and
                    SunAmerica dated as of March 31, 1997. Filed as Exhibit 10.3
                    to the Registrant's Current Report on Form 8-K filed April
                    15, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
               
        10.51       Assumption Reinsurance Agreement dated as of March 31, 1997
                    by and between JALIC and SunAmerica. Filed as Exhibit 10.4
                    to the Registrant's Current Report on Form 8-K filed April
                    15, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
</TABLE>



                                       34
<PAGE>   38





<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.52       Trust Agreement by and among SunAmerica as Grantor and JALIC
                    as Beneficiary and Bankers Trust Company as Trustee dated
                    March 31, 1997. Filed as Exhibit 10.5 to the Registrant's
                    Current Report on Form 8-K filed April 15, 1997 (Commission
                    File No. 1-11396) and incorporated herein by reference.
               
        10.53       Transition Services Agreement between JALIC and SunAmerica
                    dated March 31, 1997. Filed as Exhibit 10.6 to the
                    Registrant's Current Report on Form 8-K filed April 15, 1997
                    (Commission File No. 1-11396) and incorporated herein by
                    reference.
               
        10.54       Transition Services Agreement between JALIC and JANY dated
                    March 31, 1997. Filed as Exhibit 10.7 to the Registrant's
                    Current Report on Form 8-K filed April 15, 1997 (Commission
                    File No. 1-11396) and incorporated herein by reference.
               
        10.55       Administrative Services Agreement between JALIC and
                    SunAmerica dated March 31, 1997. Filed as Exhibit 10.8 to
                    the Registrant's Current Report on Form 8-K filed April 15,
                    1997 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.56       Interim Servicing Agreement between John Alden Asset
                    Management Company, SunAmerica and JANY dated as of March
                    31, 1997. Filed as Exhibit 10.9 to the Registrant's Current
                    Report on Form 8-K filed April 15, 1997 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.57       Asset Repurchase Agreement by and between JALIC and
                    SunAmerica dated March 31, 1997. Filed as Exhibit 10.10 to
                    the Registrant's Current Report on Form 8-K filed April 15,
                    1997 (Commission File No. 1-11396) and incorporated herein
                    by reference.
               
        10.58       Marketing Agreement dated March 28, 1997 by and between
                    SunAmerica and NSM Sales Corporation. Filed as Exhibit 10.11
                    to the Registrant's Current Report on Form 8-K filed April
                    15, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
               
        10.59       Amendment No. 1 dated March 31, 1997 to the Stock Purchase
                    and Sale Agreement dated November 29, 1996 by and between
                    JALIC and SunAmerica. Filed as Exhibit 10.12 to the
                    Registrant's Current Report on Form 8-K filed April 15, 1997
                    (Commission File No. 1-11396) and incorporated herein by
                    reference.
               
        10.60       Amendment No. 1 dated March 31, 1997 to the Asset Purchase
                    and Sale Agreement dated November 29, 1996 by and between
                    JALIC and SunAmerica. Filed as Exhibit 10.13 to the
                    Registrant's Current Report on Form 8-K filed April 15, 1997
                    (Commission File No. 1-11396) and incorporated herein by
                    reference.
               
        10.61       Amendment No. 1 to Marketing Agreement between SunAmerica
                    and NSM Sales Corporation. Filed as Exhibit 10.14 to the
                    Registrant's Current Report on Form 8-K filed April 15, 1997
                    (Commission File No. 1-11396) and incorporated herein by
                    reference.
               
        10.62       Deferred Compensation Agreement dated April 2, 1997, by and
                    between John Alden Financial Corporation and Glendon E.
                    Johnson. Filed as Exhibit 10.62 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    March 31, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.

</TABLE>



                                       35
<PAGE>   39




<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.63       Amended and Restated Employment Agreement dated November 5,
                    1997, by and between John Alden Financial Corporation and
                    Glendon E. Johnson. Filed as Exhibit 10.63 to the
                    Registrant's Quarterly Report on Form 10-Q for the quarterly
                    period ended September 30, 1997 (Commission File No.
                    1-11396) and incorporated herein by reference.
               
        10.64       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Marvin H.
                    Assofsky. Filed as Exhibit 10.64 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.65       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Glen A.
                    Spence. Filed as Exhibit 10.65 to the Registrant's Quarterly
                    Report on Form 10-Q for the quarterly period ended September
                    30, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
               
        10.66       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Scott L.
                    Stanton. Filed as Exhibit 10.66 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.67       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Michael P.
                    Andersen. Filed as Exhibit 10.67 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.68       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Lonnie R.
                    Wright, Jr. Filed as Exhibit 10.68 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.69       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Kerry D.
                    Clemmons. Filed as Exhibit 10.69 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.70       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Mark A.
                    Schoder. Filed as Exhibit 10.70 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.71       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Anne V.
                    Wardlow. Filed as Exhibit 10.71 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.72       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and William S.
                    Wilkins. Filed as Exhibit 10.72 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
</TABLE>




                                       36
<PAGE>   40

<TABLE>
<CAPTION>
       Exhibit
        Number      Exhibit
        ------      -------
<S>                 <C>
        10.73       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and William H.
                    Mauk, Jr. Filed as Exhibit 10.73 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.74       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and James H.
                    Srite. Filed as Exhibit 10.74 to the Registrant's Quarterly
                    Report on Form 10-Q for the quarterly period ended September
                    30, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
               
        10.75       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Patsy
                    Campola. Filed as Exhibit 10.75 to the Registrant's
                    Quarterly Report on Form 10-Q for the quarterly period ended
                    September 30, 1997 (Commission File No. 1-11396) and
                    incorporated herein by reference.
               
        10.76       Change of Control Employment Agreement dated November 5,
                    1997 between John Alden Financial Corporation and Gary F.
                    Kadlec. Filed as Exhibit 10.76 to the Registrant's Quarterly
                    Report on Form 10-Q for the quarterly period ended September
                    30, 1997 (Commission File No. 1-11396) and incorporated
                    herein by reference.
               
        10.77       Agreement and Plan of Merger, dated as of March 9, 1998, by
                    and among John Alden Financial Corporation, Fortis, Inc.
                    and JAFCO Acquisition Corp. Filed as Exhibit 2.1 to the 
                    Registrant's Current Report on Form 8-K filed
                    March 19, 1998 (Commission File No. 1-11396) and 
                    incorporated herein by reference.

        10.78       Stock Option Agreement, dated as of March 9, 1998, by and
                    between John Alden Financial Corporation, as issuer, and
                    Fortis, Inc., as grantee. Filed as Exhibit 2.2 to the
                    Registrant's Current Report on Form 8-K filed 
                    March 19, 1998 (Commission File No. 1-11396) and
                    incorporated herein by reference.
        
        *21.1       Subsidiaries of the Registrant.
               
        *23.1       Consent of Independent Accountants.
               
        *27.1       Financial Data Schedule.
               
        *99.1       Financial Statements of the John Alden Financial Corporation
                    Employee Stock Purchase Plan for the year ended December 31,
                    1997.
</TABLE>
-----------------------
*    Filed herewith.



                                       37
<PAGE>   41


                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Miami,
State of Florida, on the 23rd day of March 1998.

                            JOHN ALDEN FINANCIAL CORPORATION


                            By: /s/ Scott L. Stanton
                                ---------------------------------------
                                Scott L. Stanton
                                Senior Vice President and Chief
                                Financial Officer

      Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities indicated on
March 23, 1998.

<TABLE>
<CAPTION>
Signature                           Title
---------                           -----
<S>                                 <C>
/s/ Glendon E. Johnson              President, Chairman of the Board and Chief Executive Officer
----------------------------        (Principal Executive Officer)
Glendon E. Johnson                  


/s/ Scott L. Stanton                Director, Senior Vice President and Chief Financial Officer
----------------------------        (Principal Financial Officer and Principal Accounting Officer)
Scott L. Stanton                    


/s/ Norman E. Crocker               Director
----------------------------        
Norman E. Crocker


/s/ David P. Gardner                Director
----------------------------        
David P. Gardner


/s/ Edwin J. Garn                   Director
----------------------------        
Edwin J. Garn


/s/ Carl F. Geuther                 Director
----------------------------        
Carl F. Geuther


/s/ Linda Jenckes                   Director
----------------------------        
Linda Jenckes


/s/ Lynn G. Merritt                 Director
----------------------------        
Lynn G. Merritt


/s/ James L. Moorefield             Director
----------------------------        
James L. Moorefield
</TABLE>




                                       38
<PAGE>   42
/s/ Marvin Assofsky                         Director
--------------------------
Marvin Assofsky


/s/ Lonnie R. Wright                        Director
--------------------------
Lonnie R. Wright



                                      39
<PAGE>   43

               JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                               Page No.
                                                                               --------
                                                                          
<S>                                                                              <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . .    F-2
                                                                          
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . .    F-3
                                                                          
Consolidated Statements of Income . . . . . . . . . . . . . . . . . . . . . .    F-4
                                                                          
Consolidated Statements of Changes in Stockholders' Equity  . . . . . . . . .    F-5
                                                                          
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . .    F-6
                                                                          
Notes to Consolidated Financial Statements  . . . . . . . . . . . . . . . . .    F-7
</TABLE>





                                     F-1
<PAGE>   44
               Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders of
John Alden Financial Corporation


In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 29 present fairly, in all material
respects, the financial position of John Alden Financial Corporation and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.


/s/ Price Waterhouse LLP
-------------------------
PRICE WATERHOUSE LLP

Miami, Florida
March 20, 1998







                                      F-2
<PAGE>   45
                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                                                                             ------------------------------
                                     ASSETS                                                      1997              1996
                                                                                             -------------    -------------
<S>                                                                                          <C>                <C>  
Debt securities:
   Held-to-maturity securities, at amortized cost (market $46,464 and $46,884) .......       $    44,780        $    45,357
   Available-for-sale securities, at market (cost $518,018 and $4,185,263) ...........           550,585          4,248,774
   Trading account securities, at market (cost $3,411 and $4,435) ....................             3,504              4,518
Equity securities, at market (cost $8 and $73,692) ...................................                23             82,098
Mortgage loans .......................................................................           145,770          1,449,242
Investment in real estate, at cost, less accumulated depreciation of $3,621 and $2,008            40,354             39,903
Real estate owned ....................................................................             3,021             11,483
Policy loans and other notes receivable ..............................................            32,091             75,186
Short-term investments ...............................................................           196,218              6,371
                                                                                             -----------        -----------
     Total invested assets ...........................................................         1,016,346          5,962,932
Cash and cash equivalents ............................................................            31,663            167,511
Accrued investment income ............................................................            15,525             65,727
Deferred policy acquisition costs ....................................................            32,161            239,622
Property and equipment, at cost, less accumulated depreciation of $15,316 and $23,976             70,962             69,856
Reinsurance receivables ..............................................................           169,588            204,379
Investment deposits recoverable ......................................................            17,537            766,286
Other assets .........................................................................           126,150            194,936
                                                                                             -----------        -----------
       Total assets ..................................................................       $ 1,479,932        $ 7,671,249
                                                                                             ===========        ===========

        LIABILITIES, REDEEMABLE SECURITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Contract holder liabilities:
      Contract holder deposit funds ..................................................       $   341,954        $ 6,271,779
      Other benefit and claim reserves ...............................................           397,486            458,929
      Unearned premium reserves ......................................................            29,065            156,924
  Short-term debt ....................................................................            41,500             25,000
  Accounts payable and other liabilities .............................................           102,906            120,888
  Funds payable under reinsurance treaties ...........................................            44,787             77,331
  Long-term debt .....................................................................            35,000             76,500
  Deferred gain on sale of discontinued operations ...................................            21,038                  -
                                                                                             -----------        -----------
        Total liabilities ............................................................         1,013,736          7,187,351
                                                                                             -----------        -----------
Redeemable securities:
  Series A 9% cumulative preferred stock, $.01 par value; 150,000 shares
     authorized, issued and outstanding; mandatory redemption value of $100 per
     share; including accrued dividends of $286;  $101.91 per share .................             15,286             15,286
  Common stock, $.01 par value; -- and 667,430 shares
     authorized, issued and outstanding ..............................................                 -              3,401
                                                                                             -----------        -----------
        Total redeemable securities ..................................................            15,286             18,687
                                                                                             -----------        -----------
Stockholders' equity:

  Common stock, $.01 par value; 75,000,000 and 74,332,570 shares authorized;
      25,953,525 and 25,055,843 shares issued; 24,655,856
      and 24,668,108 shares outstanding ..............................................               259                250
  Paid-in capital ....................................................................           187,422            181,863
  Net unrealized gain on investments, net of income taxes ............................            17,706             26,977
  Retained earnings ..................................................................           276,552            268,109
  Redemption value of common stock in excess of cost .................................                 -             (2,669)
  Unearned compensation ..............................................................              (357)              (643)
  Treasury stock, at cost; 1,297,669 and 387,735 shares ..............................           (30,672)            (8,676)
                                                                                             -----------        -----------
       Total stockholders' equity ....................................................           450,910            465,211
                                                                                             -----------        -----------
       Total liabilities, redeemable securities and stockholders' equity .............       $ 1,479,932        $ 7,671,249
                                                                                             ===========        ===========
</TABLE>




                 See Notes to Consolidated Financial Statements.

                                      F-3
<PAGE>   46
          JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF INCOME
            (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>

                                                                                                 YEAR ENDED DECEMBER 31,
                                                                                  -------------------------------------------------
                                                                                     1997                1996               1995
                                                                                  -----------        -----------        -----------
<S>                                                                               <C>                <C>                <C>
Revenues:                                                                       
   Gross insurance premiums and contract charges earned .......................   $ 1,531,663        $ 1,838,254        $ 1,936,262
   Ceded insurance premiums and contract charges earned .......................      (602,762)          (813,680)          (883,227)
                                                                                  -----------        -----------        ----------- 
        Net insurance premiums and contract charges earned ....................       928,901          1,024,574          1,053,035
   Net investment income ......................................................        69,293             45,460             50,388
   Other income, including experience refunds and expense allowances            
       on reinsurance ceded of $37,401, $32,172 and $46,204 ...................        47,050             41,596             55,434
   Net realized investment gains (losses) .....................................         4,805              3,052             (2,393)
                                                                                  -----------        -----------        ----------- 
               Total revenues .................................................     1,050,049          1,114,682          1,156,464
                                                                                  -----------        -----------        -----------
Benefits and expenses:                                                          
    Gross claims incurred on insurance products ...............................     1,141,307          1,396,695          1,458,365
    Ceded claims incurred on insurance products ...............................      (471,115)          (647,644)          (695,266)
                                                                                  -----------        -----------        ----------- 
        Net claims incurred on insurance products .............................       670,192            749,051            763,099
    Universal life and investment-type contract benefits:                       
        Interest credited to account balances .................................        13,753             13,562             12,959
        Benefit claims incurred in excess of account balances .................         4,735              4,895              3,962
    Increase (decrease) in life insurance reserves ............................        30,775                132             (1,717)
                                                                                  -----------        -----------        ----------- 
                Total benefits ................................................       719,455            767,640            778,303
                                                                                  -----------        -----------        -----------
    Commissions, net of commissions ceded of $52,257, $73,537 and $75,643 .....        63,347             77,318             83,362
    General expenses, net of expenses ceded of $51,615, $78,927 and $78,518 ...       251,637            246,140            298,618
    Amortization of purchased intangibles .....................................         4,218              4,786              4,833
    Amortization of deferred policy acquisition costs .........................        14,810             13,854             13,455
    Interest expense ..........................................................         5,332              6,615              8,413
                                                                                  -----------        -----------        -----------
                Total expenses ................................................       339,344            348,713            408,681
                                                                                  -----------        -----------        -----------
                Total benefits and expenses ...................................     1,058,799          1,116,353          1,186,984
                                                                                  -----------        -----------        -----------
Loss from continuing operations before benefit for income taxes and             
    minority interest in joint venture's (income) loss ........................        (8,750)            (1,671)           (30,520)
Benefit for income taxes ......................................................        (1,915)            (2,096)            (9,637)
Minority interest in joint venture's (income) loss ............................          (956)            (2,136)             1,983
                                                                                  -----------        -----------        -----------
Net loss from continuing operations ...........................................        (7,791)            (1,711)           (18,900)
Net income from discontinued operations:                                        
   Income from Annuity Operations and Western Diversified Group (net of income  
       taxes of $3,541, $18,840 and $15,451) ..................................         5,693             32,647             25,308
   Gain on disposal of Annuity Operations and Western Diversified Group (net of 
       income taxes of $28,828, $--, and $--) .................................        23,986                  -                  -
                                                                                  -----------        -----------        -----------
Net income ....................................................................   $    21,888        $    30,936        $     6,408
                                                                                  ===========        ===========        ===========
                                                                                
Net income applicable to common stock .........................................   $    20,538        $    29,586        $     5,058
                                                                                  ===========        ===========        ===========
Net income per common share (see Note 3):                                       
      Net loss from continuing operations .....................................        ($0.36)            ($0.12)            ($0.80)
      Net income from discontinued operations .................................          1.17               1.29               1.00
                                                                                  -----------        -----------        -----------
      Net income ..............................................................   $      0.81        $      1.17        $      0.20
                                                                                  ===========        ===========        ===========
                                                                                
Net income per common share - assuming dilution (see Note 3):                   
      Net loss from continuing operations .....................................        ($0.35)            ($0.12)            ($0.78)
      Net income from discontinued operations .................................          1.15               1.27               0.98
                                                                                  -----------        -----------        -----------
      Net income ..............................................................   $      0.80        $      1.15        $      0.20
                                                                                  ===========        ===========        ===========
</TABLE>



                See Notes to Consolidated Financial Statements.


                                      F-4
<PAGE>   47


              JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>
                                                                 
                                                                                                                                    
                                                                                                     NET                          
                                                      NUMBER OF                                  UNREALIZED                         
                                                       SHARES        COMMON         PAID-IN      GAIN (LOSS) ON    RETAINED         
                                                     OUTSTANDING     STOCK          CAPITAL      INVESTMENTS       EARNINGS         
                                                    -------------  -----------   -----------   -------------- --------------      
<S>                                                 <C>            <C>             <C>           <C>             <C>
Balance, December 31, 1994.......................      24,246,161  $      245      $ 180,401     $ (20,348)      $  256,252         
Net income.......................................                                                                     6,408         
Change in net unrealized gain (loss).............                                                   78,389                          
Redeemable preferred stock                                                                                                          
   dividends ($9.00 per share)...................                                                                    (1,350)        
Change in redemption value of                                                                                                       
   common stock..................................                                                                                   
Common stock dividends ($0.44 per share).........                                                                   (11,143)        
Exercise of stock options .......................          91,340             1            329                                      
Treasury stock acquired..........................        (165,000)                                                                  
Stock option compensation expense................                                          256                                      
Adjustment of put holder shares to market value..                                                                                   
Transfer from redeemable common stock............         225,638             2            168                                      
                                                    -------------  ------------   ------------   -------------- --------------      
Balance, December 31, 1995.......................      24,398,139           248        181,154      58,041          250,167         
Net income.......................................                                                                    30,936         
Change in net unrealized gain (loss).............                                                  (31,064)                       
Redeemable preferred stock                                                                                                          
   dividends ($9.00 per share)...................                                                                    (1,350)        
Change in redemption value of                                                                                                       
   common stock..................................                                                                                   
Common stock dividends ($0.46 per share).........                                                                   (11,644)        
Exercise of stock options .......................          50,425             1            268                                      
Unearned compensation - treasury stock grant.....          36,000                           95                                      
Compensation expense recognized..................                                                                                 
Adjustment of put holder shares to market value..                                                    
Transfer from redeemable common stock............         183,544             1            346                                    
                                                    -------------  -------------   -----------   -------------- --------------      
Balance, December 31, 1996.......................      24,668,108           250        181,863      26,977          268,109         
Net income.......................................                                                                    21,888         
Change in net unrealized gain (loss).............                                                   (9,271)                         
Redeemable preferred stock                                                                                                          
   dividends ($9.00 per share)...................                                                                    (1,350)        
Change in redemption value of                                                                                                       
   common stock..................................                                                                                   
Common stock dividends ($0.48 per share).........                                                                   (12,095)        
Exercise of stock options .......................         262,018               2        4,834                                      
Treasury stock acquired..........................        (941,700)                                                                  
Compensation expense recognized..................                                                                                   
Adjustment of put holder shares to market value..                                                                                   
Transfer from redeemable common stock............         667,430               7          725                                      
                                                     -------------    -----------   -----------   -----------   --------------
Balance, December 31, 1997.......................      24,655,856      $      259   $  187,422    $ 17,706       $  276,552         
                                                     =============    ===========   ===========   ===========   ==============      
<CAPTION>
                                                         
                                                           VALUE OF
                                                            COMMON 
                                                           STOCK IN
                                                           EXCESS OF           UNEARNED             TREASURY       STOCKHOLDERS'
                                                             COST            COMPENSATION            STOCK           EQUITY
                                                       --------------      --------------         -----------     -------------- 
<S>                                                     <C>                  <C>                    <C>            <C>
Balance, December 31, 1994.......................        $    (3,645)        $        -             $ (6,181)      $   406,724
Net income.......................................                                                                        6,408
Change in net unrealized gain (loss).............                                                                       78,389
Redeemable preferred stock                         
   dividends ($9.00 per share)...................                                                                      (1,350)
Change in redemption value of                      
   common stock..................................                922                                                      922
Common stock dividends ($0.44 per share).........                                                                     (11,143)
Exercise of stock options .......................                                                          55             385
Treasury stock acquired..........................                                                      (3,203)         (3,203)
Stock option compensation expense................                                                                         256
Adjustment of put holder shares to market value..             (1,489)                                                  (1,489)
Transfer from redeemable common stock............              1,162                                                    1,332
                                                       --------------      --------------         ------------     -------------- 
Balance, December 31, 1995.......................             (3,050)                --                (9,329)        477,231
Net income.......................................                                                                      30,936
Change in net unrealized gain (loss).............                                                                     (31,064)
Redeemable preferred stock                         
   dividends ($9.00 per share)...................                                                                      (1,350)
Change in redemption value of                      
   common stock..................................                401                                                      401
Common stock dividends ($0.46 per share).........                                                                     (11,644)
Exercise of stock options .......................                                                          10             279
Unearned compensation - treasury stock grant.....                                  (738)                  643              --
Compensation expense recognized..................                                    95                                    95
Adjustment of put holder shares to market value..                (24)                                                     (24)
Transfer from redeemable common stock............                  4                                                      351
                                                       --------------      --------------         ------------     -------------- 
Balance, December 31, 1996.......................             (2,669)              (643)               (8,676)        465,211
Net income.......................................                                                                      21,888 
Change in net unrealized gain (loss).............                                                                      (9,271)
Redeemable preferred stock                                                                                                    
   dividends ($9.00 per share)...................                                                                      (1,350)
Change in redemption value of                      
   common stock..................................             (2,941)                                                  (2,941)
Common stock dividends ($0.48 per share).........                                                                     (12,095)
Exercise of stock options .......................                                                         707           5,543
Treasury stock acquired..........................                                                     (22,703)        (22,703)
Compensation expense recognized..................                                   286                                   286
Adjustment of put holder shares to market value..             (3,181)                                                  (3,181)
Transfer from redeemable common stock............              8,791                                                    9,523
                                                         -----------         -----------            ----------     -----------
Balance, December 31, 1997.......................        $         -         $     (357)            $ (30,672)     $  450,910
                                                         ===========         ===========            ==========     ===========
</TABLE>


               See Notes to Consolidated Financial Statements.



                                     F-5
                        
<PAGE>   48
                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (DOLLARS IN THOUSANDS)



<TABLE>
<CAPTION>
                                                                                                      YEAR ENDED DECEMBER 31,
                                                                                             -------------------------------------
                                                                                               1997         1996          1995
                                                                                             ---------    ----------   -----------
<S>                                                                                          <C>          <C>          <C>      
Cash flows from operating activities:                                                                                
   Net income .............................................................................  $  21,888    $  30,936    $   6,408
   Adjustments to reconcile net income to net cash provided by                                                       
     operating activities:                                                                                           
      Net realized investment (gains) losses ..............................................     (1,322)       5,000       (1,476)
      Depreciation and amortization .......................................................      3,319       (7,123)       7,455
      Policy acquisition costs deferred, net of amortization ..............................      9,686        7,789      (30,975)
      Amortization of purchased intangibles ...............................................      7,035       12,451       17,380
      Inflows from net sales, maturities, calls and purchases of trading account securities         --        1,000        6,570
      Interest credited on universal life and investment type contracts ...................     81,139      302,756      324,071
      Surrender and other contract charges ................................................    (19,521)     (28,548)     (27,563)
      Recognition of net deferred gain on sale of discontinued operations .................    (23,986)          --           --
      (Decrease) increase in contract holder liabilities ..................................    (29,496)         904      119,106
      Increase in accrued investment income ...............................................     (1,837)      (1,284)      (4,175)
      Decrease (increase) in reinsurance receivables and investment deposits recoverable ..      7,249      (18,163)     (39,935)
      Increase in other assets ............................................................     (9,570)      (1,253)     (10,402)
      Minority interest in joint venture's income .........................................        956        2,136       (1,983)
      (Decrease) increase in accounts payable and other liabilities .......................    (28,886)      (1,991)       8,863
      (Decrease) increase in federal income taxes payable .................................    (29,646)       8,816        1,263
      Increase (decrease) in funds payable under reinsurance treaties .....................     18,016      (11,693)       8,430
                                                                                             ---------    ---------    ---------
   Net cash provided by operating activities ..............................................      5,024      301,733      383,037
                                                                                             ---------    ---------    ---------
Cash flows from investing activities:                                                                                
   Proceeds from investments sold:                
            Available-for-sale ............................................................    281,756      527,346      512,997
            Equity securities .............................................................        120        1,383       72,883
            Real estate owned .............................................................     12,672       11,327       10,514
      Maturities, calls and scheduled loan payments:                                                                 
            Held-to-maturity ..............................................................      1,396       88,693       74,515
            Available-for-sale ............................................................     91,304      159,574      105,458
            Mortgage loans and other notes receivable .....................................    178,485      365,869      189,036
       Investments purchased:                                                                                        
            Held-to-maturity ..............................................................         --     (121,418)    (128,138)
            Available-for-sale ............................................................    (57,599)    (634,821)    (576,858)
            Equity securities .............................................................        (50)        (346)     (27,179)
            Mortgage loans and other notes receivable .....................................   (131,779)    (319,155)    (420,355)
            Investment in real estate .....................................................     (2,066)     (19,904)      (1,117)
     (Outflows) inflows from net sales and purchases of short-term investments ............   (192,478)        (266)       9,134
     Sales of property, equipment and capitalized software projects .......................         --           --       28,429
     Sale of Annuity Operations ...........................................................   (177,616)          --           --
     Sale of Western Diversified Group ....................................................     23,289           --           --
     Purchases of property, equipment and other ...........................................     (6,482)     (21,701)     (35,794)
                                                                                             ---------    ---------    ---------
   Net cash provided by (used in) investing activities ....................................     20,952       36,581     (186,475)
                                                                                             ---------    ---------    ---------
Cash flows from financing activities:                                                                                
     Proceeds from borrowings of short-term and long-term debt ............................         --       26,000       27,000
     Repayments of borrowings of short-term and long-term debt ............................    (25,000)     (31,563)     (45,015)
     Receipts from universal life and investment-type contracts ...........................     81,716      453,185      886,270
     Payments on universal life and investment-type contracts .............................   (184,718)    (705,579)    (666,663)
     Purchase of  treasury stock ..........................................................    (22,703)          --       (3,203)
     Payment of dividends .................................................................    (13,527)     (12,731)     (12,248)
     Exercises of stock options ...........................................................      4,488          279          385
     Payments made under reinsurance agreement ............................................     (2,080)          --     (341,956)
                                                                                             ---------    ---------    ---------
   Net cash used in financing activities ..................................................   (161,824)    (270,409)    (155,430)
                                                                                             ---------    ---------    ---------
Net (decrease) increase in cash and cash equivalents ......................................   (135,848)      67,905       41,132
Cash and cash equivalents, beginning of period ............................................    167,511       99,606       58,474
                                                                                             ---------    ---------    ---------
Cash and cash equivalents, end of period ..................................................  $  31,663    $ 167,511    $  99,606
                                                                                             =========    =========    =========
</TABLE>



                See Notes to Consolidated Financial Statements.



                                      F-6
<PAGE>   49
               JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -- DESCRIPTION OF BUSINESS AND HISTORY OF THE COMPANY

         The consolidated financial statements include the accounts of John
Alden Financial Corporation ("JAFCO"), a holding company established in 1987
for the purpose of acquiring John Alden Life Insurance Company ("JALIC") and
certain of its affiliates and its consolidated subsidiaries (collectively "John
Alden" or the "Company").  Prior to 1996, John Alden operated in three
segments: Healthcare, Asset Accumulation and Credit and Other.  In addition, a
Corporate Segment included certain activities that were not directly related to
any operating division.  On March 27, 1996, the Board of Directors of the
Company authorized the sale of its Asset Accumulation Segment, which includes
the annuity business, (the "Annuity Operations"), and the Western Diversified
Group, the principal businesses included in the Credit and Other Segment and
which market credit life and disability and retail service warranty coverage
(see Note 5).  As a result of this action, beginning in 1996, the Company
reported the results of operations of the Annuity Operations and Western
Diversified Group as discontinued operations.  In addition, the Company
discontinued the reporting of segment information of its remaining continuing
operations which are primarily related to healthcare product lines and other
continuing operations.  The current healthcare operations primarily include
indemnity and managed indemnity products, Health Maintenance Organization
("HMO") and HMO-like products and healthcare stop-loss reinsurance products.
The Company also has certain product lines which are no longer being actively
marketed (run-off operations).

NOTE 2 -- ANTICIPATED SALE OF THE COMPANY

         On March 9, 1998, the Company entered into an agreement to merge with a
wholly-owned subsidiary of Fortis, Inc. ("Fortis"), a wholly-owned subsidiary
of Fortis Amev, Netherlands, and Fortis AG, Belgium, as a result of which,
among other things, the Company will become a wholly-owned subsidiary of Fortis
and each outstanding share of the Company's common stock will be converted into
the right to receive $22.50 in cash.  Consummation of the merger is subject to
regulatory and stockholder approvals, as well as other customary terms and
conditions.  It is anticipated that the merger will be consummated during 1998. 
In connection with and as a condition to Fortis entering into the agreement to
merge, the Company granted an option to Fortis to acquire, under certain
circumstances, common stock of the Company representing up to 19.9% of the
Company's outstanding common stock at an exercise price of $22.50 per share. 
Under certain circumstances and subject to certain limitations, John Alden may
be required to repurchase the option granted to Fortis and any of the shares
acquired by Fortis pursuant to the exercise of the option at an aggregate price
equal to the amount paid by Fortis for any shares acquired pursuant to any
exercise of the option plus $20.0 million and an additional amount up to $2.5 
million for expenses.  If the anticipated sale of the Company is consummated, 
the Company may be required to make payments to certain officers under
change in control employment agreements costing the Company approximately $20.8
million after-tax.  Further, all non-vested common stock options and restricted
performance award shares currently outstanding would become fully vested.

NOTE 3 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles ("GAAP") and
include management estimates and assumptions that affect the recorded amounts.
All significant intercompany balances and transactions have been eliminated.
The following accounting policies describe the accounting principles used in
the preparation of the consolidated financial statements:

Investments

         Investments in debt securities are classified into one of three
categories: held-to-maturity, available-for-sale or trading.  Investments in
debt securities which the Company has the positive intent and ability to hold
to maturity are classified as held-to-maturity and carried at amortized cost,
with premiums amortized to call dates and discounts amortized to maturity
dates.  In certain limited circumstances, such as individual issuer credit
deterioration or requirements of insurance regulators, the Company may dispose
of such investments prior to their scheduled maturities. Investments in debt
securities which are held principally for the purpose of resale in the near
term are classified as trading securities and carried at market value with
unrealized gains and losses included in earnings.  Investments in debt
securities not classified as held-to-maturity or trading are classified as
available-for-sale and carried at market value, with resulting unrealized gains
and losses, net of applicable income taxes and deferred policy acquisition
costs, credited or charged to stockholders' equity.





                                      F-7
<PAGE>   50
         Equity securities are reported at market value, with the resulting
unrealized gains and losses, net of applicable income taxes and deferred policy
acquisition costs, credited or charged to stockholders' equity. Investments in
common stocks of entities in which the Company maintains control are
consolidated.  Gain or loss on the sale of securities is computed on the
specific identification method.  Policy loans are carried at the unpaid
principal balance.  Mortgage loans are carried at the unpaid principal balance
less unamortized discounts, write-downs and a valuation reserve.  The valuation
reserve is determined by both a historical analysis and specific loan analysis.
Mortgage discounts are deferred and amortized to call dates.  The Company's
policy of placing mortgage loans on non-accrual status (i.e., no longer
accruing investment income) is at the earlier of 90 days past due or at the
commencement of foreclosure.  Investment in real estate represents land and
buildings and is carried at cost, less accumulated depreciation.  Real estate
owned represents foreclosed mortgage loan collateral and is held for sale and
carried at cost less allowances for selling costs and impairments in value.
Short-term investments, comprised primarily of U.S. Treasury notes, are carried
at amortized cost, which approximates market value.  The investment portfolio is
continuously reviewed for investments that may have experienced a decline in
value considered to be other than temporary. Provisions for impairments that are
considered other than temporary are included in net realized investment gains
(losses).

Cash Equivalents

         The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.

Premium and Other Contract-Related Revenues, Contract Holder Liabilities and
Deferred Policy Acquisition Costs

         Single Payment Deferred Annuities and Flexible Payment Annuities.
Contract charges earned for investment-type contracts consist of service
charges and surrender charges assessed against account balances.  Expenses
related to these products include interest credited to account balances.
Contract holder liabilities are recorded at accumulated value without reduction
for surrender charges.  Policy acquisition costs (principally excess first year
commissions) are deferred and amortized over an initial policy period,
generally ten years, in relation to expected profits.  This amortization is
reviewed annually and adjusted retrospectively when the Company revises its
estimate of current or future gross profits to be realized from a group of
products, including realized and unrealized gains and losses from investments.

         Universal Life Insurance.  Contract charges earned consist of cost of
insurance assessments, service charges and surrender charges assessed against
account balances.  Expenses consist of interest credited to account balances
and benefit claims incurred in excess of policyholder account balances.
Contract holder liabilities are recorded at accumulated value without reduction
for surrender charges.  Policy acquisition costs (principally excess first year
commissions) are deferred and amortized over a period of 20 or 25 years in
proportion to an expected profit stream emerging from the assumed margins
implicit in the product.  This amortization is reviewed annually and adjusted
retrospectively when the Company revises its estimate of current or future
gross profits to be realized from a group of products, including realized and
unrealized gains and losses from investments.

         Group Life and Health.  Premiums are recorded as revenue when due.
Unearned premiums are earned pro rata over the applicable premium period.
Policy acquisition costs are generally expensed as incurred.  Policy
acquisition costs (excess first year commissions and other incremental issue
costs) on certain group products are deferred and amortized generally over
seven years relative to the expected revenue stream.  Aggregate deferred policy
acquisition costs of the group life and health business are monitored for
purposes of assessing recoverability.  The liability for policy claims
represents management's estimate of the ultimate liability associated with
reported claims.  Liabilities for incurred-but-not-reported claims are
estimated based on Company experience.  Changes in the estimated cost to settle
unpaid claims are charged or credited to operations periodically as the
estimates are revised.

         Reinsurance and Risk Management Services.  Premiums are earned pro rata
over the term of the policy.  Reinsurance fees and third-party administration
fees are recorded as revenue when due.  The liability for policy claims
represents management's estimate of the ultimate liability associated with
reported claims.  Liabilities for





                                      F-8
<PAGE>   51
incurred-but-not-reported claims are estimated based on Company experience.
Changes in the estimated cost to settle unpaid claims are charged or credited
to operations periodically as the estimates are revised.

         Other Annuities and Ordinary Life Insurance.  Premiums are recorded as
revenue when due.  Policy and contract benefit reserves generally are
calculated using the same assumptions as to interest, mortality, lapses and
expenses used in pricing, plus additional margins for adverse deviation.
Policy acquisition costs (principally excess first year commissions) are
deferred and amortized over the premium-paying period using the same
assumptions as to interest, mortality and lapses used in calculating benefit
reserves.

         Credit Life, Credit Accident and Health and Extended Service Contracts.
Insurance premiums on credit life policies are deferred and amortized to income
over the term of the policy (on the pro rata method for level coverage and
principally on the Rule of 78's method for decreasing coverage).  Accident and
health insurance premiums are deferred and amortized to income principally on
the mean of the pro rata and Rule of 78's methods.  Premiums on extended service
contracts are deferred and amortized into income in relation to historical
claims experience.  Policy acquisition costs (principally commissions) are
deferred and amortized over the term of the contracts in relation to premiums
earned.

Property and Equipment

         Property and equipment consists primarily of the headquarters
buildings, land, office furniture and equipment, leasehold improvements,
microcomputers and other data processing equipment and is stated at cost, less
accumulated depreciation.  Expenditures for new property are capitalized, while
maintenance and repairs are charged to income as incurred.  Depreciation is
computed on the straight-line method over the estimated useful lives of the
depreciable assets ranging from four to 39 years.

Other Assets

         The excess of cost over the fair values of net assets of companies
acquired is amortized on a straight-line basis over lives ranging from 15 to 25
years.  At December 31, 1997, the balances of such net goodwill and accumulated
amortization were approximately $38.0 million and $24.8 million, respectively.
The corresponding amounts at December 31, 1996 were $86.3 million and $48.1
million, respectively. The Company periodically reviews the recoverability of
goodwill from future cash flows, and adjusts the carrying value as required.  At
December 31, 1997 and 1996, the Company determined that goodwill, net of
accumulated amortization, was not impaired.  At December 31, 1997 and 1996,
value of insurance in force was approximately $5.7 million and $9.2 million,
respectively.

         The Company capitalizes certain software development costs related to
major systems conversions and enhancements.  The unamortized amounts of
capitalized software costs were approximately $10.7 million and $7.5 million as
of December 31, 1997 and 1996, respectively.  Such costs are being amortized on
the straight-line method over a three to five-year period.

Stock-based Compensation Plans

         The Company periodically grants stock options and restricted stock
awards as compensation to certain key executives and employees.  Under the
provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), the
Company determines stock-based compensation expense by the intrinsic value
method.

Income Taxes

         Tax expense is the amount of income taxes expected to be payable for
the current year plus (or minus) the change from the beginning of the year in
deferred tax liabilities or assets.  Deferred income taxes are provided in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes". The tax effect of future taxable temporary
differences (liabilities) and future deductible temporary differences (assets)





                                      F-9
<PAGE>   52
are separately calculated and recorded.  A valuation allowance reducing the
asset recognized must be recorded if it is determined that it is more likely
than not that the asset will not be realized.

         The Company has elected to file a Life/Non-Life consolidated federal
income tax return which includes all subsidiaries.  Income tax expense is
generally calculated on a consolidated basis, although there are limitations on
the utilization of losses of one group against the other group's income.

Changes in Accounting Principles

         The Company adopted SFAS No. 128, "Earnings Per Share" ("SFAS 128")
effective January 1, 1997. SFAS 128 addresses the standards for computing and
presenting earnings per share and replaces the presentation of primary and
fully diluted earnings per share required under APB 15 with a presentation of
basic and diluted earnings per share.  Basic earnings per share excludes
dilution and is computed by dividing income available to common shareholders by
the weighted-average number of common shares outstanding for the period. 
Diluted earnings per share is computed similarly to fully diluted earnings per
share.  There was no effect on the Company's results of operations or financial
position upon adoption of this statement.

         The Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", effective
January 1, 1996.  SFAS No. 121 addresses the recognition and measurement of
impairments of long-lived assets, certain identifiable intangible assets and
goodwill related to those assets to be held as well as impairments of
long-lived assets and certain identifiable intangibles to be disposed of. There
was no effect on the Company's results of operations or financial position upon
adoption of this statement.

         The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation", for the year ended December 31, 1996.  SFAS No.  123 establishes
a fair value based accounting method of accounting for stock-based compensation
plans.  As permitted under the statement, the Company has elected to continue
to apply the provisions of APB 25 and to comply with the disclosure
requirements of SFAS No. 123.  There was no effect on the Company's results of
operations or financial position upon adoption of the statement.  SFAS No. 123
disclosures of the pro forma effects of stock options and awards granted in
1995, 1996 and 1997 are provided in Note 17.

         The Company adopted SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment
of a Loan-Income Recognition and Disclosures" effective January 1, 1995.  SFAS
No. 114 addresses the accounting by creditors for the measurement and
recognition of loan impairments.  SFAS No. 118 amends certain provisions of
SFAS No.  114.  There was no effect on the Company's results of operations or
financial position upon adoption of these statements. It is the Company's
policy to discontinue accrual of interest income on loans at the earlier of 90
days past due or at the commencement of foreclosure. Cash receipts on such
loans are recognized as interest income, including recognition of amounts
previously not accrued.  Receipts in excess of all past due interest are
recognized as reductions of principal.  Loan impairments are generally
considered to be other than temporary declines in value and therefore are
reported as realized investment losses.  As of December 31, 1997, investments
in impaired mortgage loans totaled $19.0 million, and impairment reserves due
to other than temporary declines in value of $13.9 million have been recognized
as realized investment losses in relation to such loans.





                                      F-10
<PAGE>   53
Net Income Per Common Share

         Net income per common share is determined by dividing net income, as
adjusted below, by applicable average common shares outstanding (in thousands):

<TABLE>
<CAPTION>
                                                                           YEAR ENDED DECEMBER 31,
                                                                 ------------------------------------------
                                                                    1997            1996             1995
                                                                 --------         --------         --------
 <S>                                                             <C>              <C>              <C>
 Net income  . . . . . . . . . . . . . . . . . . . . .           $ 21,888         $ 30,936         $  6,408
 Preferred stock dividends . . . . . . . . . . . . . .             (1,350)          (1,350)          (1,350)
                                                                 --------         --------         --------
 Net income applicable to common stock . . . . . . . .           $ 20,538         $ 29,586         $  5,058
                                                                 ========         ========         ========
 Average common shares outstanding . . . . . . . . . .             25,400           25,295           25,328
 Potentially dilutive securities . . . . . . . . . . .                359              356              393
                                                                 --------         --------         --------
 Average common and potentially dilutive
    shares outstanding . . . . . . . . . . . . . . . .             25,759           25,651           25,721
                                                                 ========         ========         ========
</TABLE>

Reclassifications

         Certain reclassifications have been made to the prior year
consolidated financial statements to conform with the current year
presentation.

NOTE 4 -- EFFECTS OF ACCOUNTING PRONOUNCEMENTS TO BE ADOPTED IN THE FUTURE

         In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
Income" ("SFAS 130") and SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information," ("SFAS 131").  SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income is defined as the change in equity during the financial reporting period
of a business enterprise resulting from non-owner sources.  SFAS 131
establishes standards for the reporting of operating segment information in
both annual financial reports and interim financial reports issued to
shareholders.  Operating segments are components of an entity for which
separate financial information is available and is evaluated regularly by the
entity's chief operating management.  Both statements are effective for fiscal
years beginning after December 15, 1997 and are not expected to have a material
impact on the Company.

NOTE 5 -- DISCONTINUED OPERATIONS

         On March 31, 1997, the Company sold substantially all of its annuity
business (the "Annuity Operations") to SunAmerica Life Insurance Company
("SunAmerica").  The transaction included the sale of all of the common stock
of JANY and the coinsurance of substantially all of the annuity business of
JALIC.  This coinsurance was initially on an indemnity basis and the parties
agreed to transition the business to an assumption basis as soon as practical.
In certain states, the transition to an assumption basis is subject to
policyholder approval.  To the extent that such transition does not take place
with respect to any particular policy, the policy will remain reinsured on an
indemnity basis.  As of December 31, 1997, approximately 70% of the ceded
annuity reserves have either transitioned to an assumption basis or lapsed.
The majority of the remaining policies are expected to be assumed by
December 31, 1998.

         As consideration for the Annuity Operations, SunAmerica paid the
Company approximately $238.2 million. The consideration represented 
approximately $162.3 million of premium paid to acquire the business and
approximately $75.9 million of adjusted capital and surplus of JANY.  It did
not include any capital and surplus used to support the annuity business in
JALIC, which remained in JALIC.





                                      F-11
<PAGE>   54
         On September 30, 1997, the Company sold all of the common stock of
substantially all of the subsidiaries which comprise the Western Diversified
Group to Protective Life Insurance Company. 

         As a result of the sales of the Annuity Operations and Western
Diversified Group, the Company recorded a net deferred gain of approximately
$45.0 million.  This amount was net of estimated transaction expenses, taxes,
goodwill and other adjustments relating to these transactions.  During the
year ended December 31, 1997, the Company recognized approximately $24.0 million
of the net deferred gain in income as a result of the assumption of policy
reserves by SunAmerica.  The Company expects to recognize the majority of the
remainder of the net deferred gain by December 31, 1998.

         In addition to the $238.2 million purchase price for the Annuity
Operations, SunAmerica paid $33.1 million to the Company for accrued interest
and related items. In turn, the Company paid SunAmerica $360.4 million of cash
and cash equivalents because policy reserves transferred exceeded invested
assets transferred. Additionally, the Company's cash and cash equivalent
position was decreased by JANY's cash and cash equivalent balance at the time of
the sale of $88.5 million, which was retained by JANY. Therefore, the Company
incurred a net outflow of cash and cash equivalents due to the sale of the
Annuity Operations of $177.6 million, as reflected in the accompanying
consolidated statement of cash flows. Additionally, the Company increased its
cash position by $23.3 million as a result of the sale of the Western
Diversified Group.
         
         The Company's available capital was enhanced by both the after-tax
gain generated from the transactions and by the release of the net capital
previously allocated to support these businesses.  The Company continues to
evaluate the best uses of its capital, including the approximately $200 million
of excess capital generated from the sale of the Company's annuity and credit
businesses.  In the event that the sale of the Company does not occur, this
capital may be used to repurchase common stock, pay dividends, reduce debt,
acquire blocks of business or for general corporate purposes, or for a
combination of two or more of such uses.  During December 1997 and January
1998, the Company repurchased approximately 1.1 million shares of common stock
for a total purchase price of approximately $25.9 million.

         Total revenues for the discontinued operations for the years ended
December 31, 1997, 1996 and 1995 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                           ------------------------------------------
                                                              1997            1996             1995
                                                           --------         --------         --------
<S>                                                        <C>              <C>              <C>
Annuity Operations  . . . . . . . . . . . . . .            $102,909         $432,615         $459,894
Western Diversified Group . . . . . . . . . . .              52,935           62,240           54,595
</TABLE>


         Included in other assets at December 31, 1997 in the accompanying
consolidated balance sheet was approximately $1.4 billion of investment
contract deposits recoverable on the JALIC coinsurance, net of a similar amount
of contract holder liabilities related to the discontinued operations.





                                      F-12
<PAGE>   55
NOTE 6 -- INVESTMENTS

         The amortized cost and estimated market value of investments in
held-to-maturity and available-for-sale securities as of December 31, 1997 and
1996 are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              DECEMBER 31, 1997               
                                                       -------------------------------------------------------------
                                                                           GROSS             GROSS         ESTIMATED
                                                       AMORTIZED        UNREALIZED        UNREALIZED         MARKET
                                                         COST              GAINS            LOSSES           VALUE  
                                                       ---------        ----------        ----------       ---------
HELD-TO-MATURITY
----------------

<S>                                                      <C>                <C>            <C>               <C>    
U.S. Treasury securities and obligations                                                                            
  of U.S. government corporations and agencies           $ 4,513            $   42         $      --         $ 4,555
Corporate securities  . . . . . . . . . . . . .           20,940               948                --          21,888
Mortgage-backed securities  . . . . . . . . . .           19,327               694                --          20,021
                                                         -------            ------         ---------         -------
     Total  . . . . . . . . . . . . . . . . . .          $44,780            $1,684         $      --         $46,464
                                                         =======            ======         =========         =======
</TABLE>

<TABLE>
<CAPTION>
                                                                              DECEMBER 31, 1996
                                                       -------------------------------------------------------------
                                                                           GROSS            GROSS          ESTIMATED 
                                                       AMORTIZED        UNREALIZED        UNREALIZED         MARKET  
                                                          COST             GAINS            LOSSES           VALUE   
                                                       ---------        ----------        ----------       ---------
HELD-TO-MATURITY                                                                                                 
----------------                                                                                                 

<S>                                                      <C>                <C>            <C>               <C>
U.S. Treasury securities and obligations                                                                         
  of U.S. government corporations and agencies           $ 5,090            $   63         $     --          $ 5,153
Corporate securities  . . . . . . . . . . . . .           21,049             1,026               --           22,075
Mortgage-backed securities  . . . . . . . . . .           19,218               547             (109)          19,656
                                                         -------            ------         --------          -------
     Total  . . . . . . . . . . . . . . . . . .          $45,357            $1,636         $   (109)         $46,884
                                                         =======            ======         ========          =======
</TABLE>

<TABLE>
<CAPTION>
                                                                              DECEMBER 31, 1997                    
                                                       -------------------------------------------------------------
                                                                           GROSS             GROSS         ESTIMATED   
                                                       AMORTIZED        UNREALIZED        UNREALIZED         MARKET    
                                                          COST             GAINS            LOSSES           VALUE     
                                                       ---------        ----------        ----------       ---------
AVAILABLE-FOR-SALE
------------------

<S>                                                      <C>                <C>               <C>           <C>      
U.S. Treasury securities and obligations                                                                             
  of U.S. government corporations and agencies           $ 39,478           $ 1,060           $ (49)        $ 40,489 
Debt securities issued by foreign governments .             1,073               155              (1)           1,227 
Corporate securities  . . . . . . . . . . . . .           329,026            24,516             (16)         353,526 
Mortgage-backed securities  . . . . . . . . . .           132,161             6,773             (24)         138,910 
Asset-backed securities . . . . . . . . . . . .            16,280               212             (59)          16,433 
                                                         --------           -------           -----         -------- 
     Total  . . . . . . . . . . . . . . . . . .          $518,018           $32,716           $(149)        $550,585 
                                                         ========           =======           =====         ======== 
</TABLE>





                                      F-13
<PAGE>   56
<TABLE>
<CAPTION>
                                                                       DECEMBER 31, 1996
                                                   -----------------------------------------------------------
                                                                     GROSS           GROSS          ESTIMATED
                                                   AMORTIZED       UNREALIZED      UNREALIZED        MARKET
                                                      COST           GAINS           LOSSES           VALUE
                                                   ----------      ----------      ----------       ----------
AVAILABLE-FOR-SALE
------------------

<S>                                                <C>               <C>             <C>            <C>
U.S. Treasury securities and obligations
  of U.S. government corporations and agencies     $1,037,987        $ 16,703        $(11,806)      $1,042,884
Obligations of state and local governments  . .        25,854           1,705             (63)          27,496
Debt securities issued by foreign governments .        15,625             663             (22)          16,266
Corporate securities  . . . . . . . . . . . . .     1,443,202          49,490          (4,541)       1,488,151
Mortgage-backed securities  . . . . . . . . . .     1,207,351          19,879         (13,058)       1,214,172
Asset-backed securities . . . . . . . . . . . .       455,244           6,765          (2,204)         459,805
                                                   ----------        --------        --------       ----------
     Total  . . . . . . . . . . . . . . . . . .    $4,185,263        $ 95,205        $(31,694)      $4,248,774
                                                   ==========        ========        ========       ==========
</TABLE>


         The amortized cost and estimated market value of investments in
held-to-maturity and available-for-sale securities at December 31, 1997, by
contractual maturity, are shown below (dollars in thousands).  Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.  Securities which will be collected over multiple periods have been
allocated based upon the ultimate maturities of the securities.

<TABLE>
<CAPTION>
                                                                          DECEMBER 31, 1997             
                                                   ----------------------------------------------------------- 
                                                         HELD-TO-MATURITY               AVAILABLE-FOR-SALE    
                                                   ----------------------------     --------------------------  
                                                     AMORTIZED       ESTIMATED      AMORTIZED       ESTIMATED
                                                       COST        MARKET VALUE        COST       MARKET VALUE
                                                   -------------   ------------     -----------   ------------
<S>                                                    <C>          <C>              <C>           <C>
Due in one year or less . . . . . . . . . . . .        $      --    $     --         $  30,326     $  30,680
Due after one year through five years . . . . .           17,829      18,395           125,200       133,132
Due after five years through ten years  . . . .            9,557      10,006           244,094       262,412
Due after ten years . . . . . . . . . . . . . .           17,394      18,063           118,398       124,361
                                                       ---------    --------         ---------     ---------
     Total  . . . . . . . . . . . . . . . . . .        $  44,780    $ 46,464         $ 518,018     $ 550,585
                                                       =========    ========         =========     =========
</TABLE>

         At December 31, 1997, the Company held no unrated or less than
investment grade (i.e., with a Standard & Poor's Corporation rating below BBB)
debt securities.





                                      F-14
<PAGE>   57
         The Company's mortgage loan investments are diversified by property
type, location and loan size.  Generally, loans do not exceed 75% of the
property's value at the time the loan is made.  At December 31, 1997, mortgage
loan investments were concentrated in the following property types (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                               PERCENTAGE
                                                                                                OF TOTAL
PROPERTY TYPE:                                                        CARRYING VALUE            MORTGAGES
                                                                      --------------            ---------

<S>                                                                      <C>                      <C>
Residential . . . . . . . . . . . . . . . . . . . . . . . . . .          $  22,697                 15.5%
Commercial:                                                                                      
   Retail space . . . . . . . . . . . . . . . . . . . . . . . .             69,784                 47.9
   Office buildings . . . . . . . . . . . . . . . . . . . . . .             33,022                 22.7
   Multi-family apartments  . . . . . . . . . . . . . . . . . .              5,981                  4.1
   Warehouses . . . . . . . . . . . . . . . . . . . . . . . . .             14,223                  9.8
   Other  . . . . . . . . . . . . . . . . . . . . . . . . . . .                 63                   --
                                                                         ---------                -----
      Total . . . . . . . . . . . . . . . . . . . . . . . . . .          $ 145,770                100.0%
                                                                         =========                =====

</TABLE>                                                                    
         At December 31, 1997, contractual commitments to extend credit under
mortgage loan agreements amounted to approximately $1.3 million.  These
commitments generally expire within one year and are diversified by property
type and geographic region.

         The following is a summary of activity relating to the mortgage loan
impairment reserves as of and for the years ended December 31, 1997, 1996 and
1995 (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,     
                                                                     --------------------------------------
                                                                        1997          1996           1995  
                                                                     ---------     ---------     ----------

 <S>                                                                 <C>            <C>           <C>      
 Impairment reserves balance, beginning of year  . . . . . . . .     $ 17,682       $14,274       $ 13,161 
 Additions to impairment reserves  . . . . . . . . . . . . . . .        2,575         9,681         15,046 
 Amounts charged off or transferred to real estate owned . . . .       (6,406)       (6,273)       (13,933)
                                                                     --------       --------      -------- 
 Impairment reserves balance, end of year  . . . . . . . . . . .     $ 13,851       $17,682       $ 14,274 
                                                                     ========       =======       ======== 
</TABLE>

         As of December 31, 1997 and 1996, the Company held no investments in
debt securities or preferred stock which were non-income producing for the
previous twelve months.  Non-income producing mortgage loans aggregating
approximately $0.6 million and $3.2 million were held as of December 31, 1997
and 1996, respectively. The Company held no investments in a single entity
(other than United States government agencies and authorities) which exceeded
10% of stockholders' equity as of December 31, 1997.

         At December 31, 1997, the Company held assets in trust for the benefit
of reinsurers aggregating $112.8 million.  At December 31, 1997, securities
with a carrying value of approximately $8.6 million were on deposit with
governmental agencies, as required by law in various states in which the
insurance subsidiaries of JAFCO conduct business.  These amounts are included
in total invested assets in the Company's consolidated balance sheets.

         See Note 15 for fair value of investment disclosures.





                                      F-15
<PAGE>   58
NOTE 7 -- NET INVESTMENT INCOME AND NET REALIZED INVESTMENT GAINS (LOSSES)

         Major categories of investment income for continuing operations for
the years ended December 31, 1997, 1996 and 1995 are summarized below (dollars
in thousands):

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,     
                                                                        --------------------------------------
                                                                           1997         1996            1995
                                                                        ---------     ---------      ---------

<S>                                                                      <C>          <C>            <C>
Debt securities and short-term investments  . . . . . . . . . . .        $  61,350    $  49,487      $  51,756
Equity securities . . . . . . . . . . . . . . . . . . . . . . . .                2           --          1,915
Mortgage loans  . . . . . . . . . . . . . . . . . . . . . . . . .           10,813        5,536          6,950
Trading account securities  . . . . . . . . . . . . . . . . . . .              253          257            714
Investment income ceded to reinsurers . . . . . . . . . . . . . .           (9,310)     (12,141)       (12,098)
Policy loans, other notes receivable and other invested assets  .           11,071        4,876          2,804
                                                                         ---------    ---------      ---------
   Total gross investment income  . . . . . . . . . . . . . . . .           74,179       48,015         52,041
Less investment expenses  . . . . . . . . . . . . . . . . . . . .           (4,886)      (2,555)        (1,653)
                                                                         --------     ---------      --------- 
   Net investment income  . . . . . . . . . . . . . . . . . . . .        $  69,293    $  45,460      $  50,388
                                                                         =========    =========      =========
</TABLE>

         Net investment income from discontinued operations was $106.3 million,
$412.4 million and $410.5 million for the years ended December 31, 1997, 1996
and 1995, respectively.

         Proceeds from sales and calls of investments in debt securities for
the years ended December 31, 1997, 1996 and 1995 were $2,439.4 million, $568.5
million and $604.0 million, respectively.  Proceeds from sales and calls of
available-for-sale securities for the years ended December 31, 1997, 1996 and
1995 were $2,439.4 million, $567.3 million and $583.4 million, respectively.
These proceeds for the year ended December 31, 1997 include $2,143.1 million
from securities liquidated in connection with the sale of the Annuity
Operations.  Such proceeds are included in the net cash outflow due to the sale
of Annuity Operations in the accompanying consolidated statement of cash flows.
Gross unrealized investment gains (losses) related to available-for-sale
securities (decreased) increased stockholders' equity by $(30.9) million,
$(95.9) million and $198.7 million for the years ended December 31, 1997, 1996
and 1995, respectively.

         The components of net realized investment gains (losses) for
continuing operations for the years ended December 31, 1997, 1996 and 1995 are
as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                 YEAR ENDED DECEMBER 31,      
                                                                       ---------------------------------------
                                                                          1997           1996          1995   
                                                                       -----------    ----------    ----------

<S>                                                                       <C>         <C>            <C>
Realized gains (losses) from sales, calls and prepayments:
  Gross realized investment gains from sales and calls  . . . . . .       $  8,606    $  5,113       $  6,815
  Gross realized investment losses from sales and calls . . . . . .         (1,947)     (1,433)        (5,806)
  Prepayments of mortgage loans and other . . . . . . . . . . . . .            133         502            (19)
                                                                          --------    --------       -------- 
      Realized gains (losses) from sales, calls and prepayments . .          6,792       4,182            990
Impairments in value  . . . . . . . . . . . . . . . . . . . . . . .         (2,080)       (910)        (3,627)
Change in net unrealized gains and losses on trading account                                                 
  securities. . . . . . . . . . . . . . . . . . . . . . . . . . . .             93        (220)           244
                                                                          --------    --------       --------
  Net realized investment gains (losses)  . . . . . . . . . . . . .       $  4,805    $  3,052       $ (2,393)
                                                                          ========    ========      ========= 
</TABLE>

         Net realized investment (losses) gains from discontinued operations
were $(3.5) million, $(8.1) million and $3.9 million for the years ended
December 31, 1997, 1996 and 1995, respectively.  Additionally, the Company
recognized $24.0 million of its net deferred gain on the sale of its
discontinued operations during 1997.





                                      F-16
<PAGE>   59
NOTE 8 -- DEFERRED POLICY ACQUISITION COSTS

         The balances of and changes in deferred policy acquisition costs as of
and for the years ended December 31, 1997, 1996 and 1995 are summarized as
follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,       
                                                                  --------------------------------------------

                                                                      1997            1996            1995  
                                                                   ----------      -----------     ---------

<S>                                                                 <C>            <C>              <C>
Balance, beginning of year  . . . . . . . . . . . . . . . .          $239,622       $197,667         $295,716
Capitalization of commissions, sales and issue expenses . .            22,672         56,003           83,961
Amortization  . . . . . . . . . . . . . . . . . . . . . . .           (32,359)      (63,419)          (52,986)
Commission allowance on reinsurance ceded (see Note 11) . .                --            --           (40,188)
Effect of change in unrealized gains (losses) on
  available-for-sale securities . . . . . . . . . . . . . .            25,475        49,371           (57,787)
Effect of implementation of subsequent SFAS No. 115
  guidance  . . . . . . . . . . . . . . . . . . . . . . . .                --            --           (31,049)
Sale of discontinued operations . . . . . . . . . . . . . .          (221,001)           --                --
Amounts reclassified to net asset held for sale . . . . . .            (2,248)           --                --
                                                                     --------      --------          --------
Balance, end of year  . . . . . . . . . . . . . . . . . . .           $32,161      $239,622          $197,667
                                                                     ========      ========          ========
</TABLE>

NOTE 9 -- CONTRACT HOLDER LIABILITIES

         The composition of contract holder liabilities at December 31, 1997
and 1996 and the more significant assumptions as to future investment yield,
mortality and withdrawals, are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                       BASIS  OF  ASSUMPTION        
                                                      DECEMBER 31,            ---------------------------------------
                                                ------------------------          INTEREST               MORTALITY/  
                                                   1997         1996               RATES                 MORBIDITY  
                                                ----------   -----------        -----------            -------------

 <S>                                             <C>          <C>                  <C>          <C>
Contract holder deposit funds:
  Deferred and immediate annuities
    and guaranteed investment contracts   .      $122,047     $6,025,769           3.5-10.0%    1971 IAM and 1983 IAM
  Universal life insurance  . . . . . . . .       219,907        246,010           4.5- 7.0%    1980 CSO Table
Other benefit reserves, including individual 
  life insurance and credit insurance   . .       92,361         58,239            2.0-6.0%    1941,  1958 and  1980 CSO
                                                                                                and   1941  SI   and  SSI
                                                                                                Tables;  1985  CIDA   and
                                                                                                1985 Nursing Home Study
Claim reserves  . . . . . . . . . . . . . .       305,125        400,690
Unearned premium reserves . . . . . . . . .        29,065        156,924
                                                 --------     ---------- 
  Total contract holder liabilities   . . .      $768,505     $6,887,632
                                                 ========     ==========
</TABLE>

         Contract holder deposit funds for deferred annuities and universal
life contracts are recorded at their accumulated values using the retrospective
deposit approach.  Interest rates shown for these contracts are current
credited rates.  Mortality rates are contractual guarantees for monthly term
charges (universal life insurance) or settlement rates (deferred annuities).





                                      F-17
<PAGE>   60
NOTE 10 -- LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSES

         The following table provides a reconciliation of the beginning and
ending reserve balances for unpaid claims and claims adjustment expenses, on a
gross-of-reinsurance basis for the years ended December 31, 1997, 1996 and 1995
(dollars in thousands):

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                    --------------------------------------------
                                                                        1997            1996             1995
                                                                    -----------      ----------       ----------
 <S>                                                                  <C>             <C>             <C>
Balance at January 1 before acquisition of insurance                   $400,690        $428,342        $332,741
 subsidiary  . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at January 1 of acquired insurance subsidiary . . . .                --              --           1,453
Less reinsurance recoverables . . . . . . . . . . . . . . . .           193,263         214,998         154,811
                                                                       --------        --------        --------
Net balance at January 1  . . . . . . . . . . . . . . . . . .           207,427         213,344         179,383
                                                                       --------        --------        --------

Incurred claims related to:
Current year  . . . . . . . . . . . . . . . . . . . . . . . .           884,390         816,630         776,054
Prior years . . . . . . . . . . . . . . . . . . . . . . . . .           (12,894)        (17,353)          8,594
                                                                       --------        --------        --------
Total incurred  . . . . . . . . . . . . . . . . . . . . . . .           871,496         799,277         784,648
                                                                       --------        --------        --------

Paid claims related to:
Current year  . . . . . . . . . . . . . . . . . . . . . . . .           699,435         608,150         570,213
Prior years . . . . . . . . . . . . . . . . . . . . . . . . .           197,613         197,044         180,474
                                                                       --------        --------        --------
Total paid  . . . . . . . . . . . . . . . . . . . . . . . . .           897,048         805,194         750,687
                                                                       --------        --------        --------

Reserve reduction due to sale of discontinued operations  . .            16,231              --              --  
                                                                       --------        --------        --------

Net balance at December 31  . . . . . . . . . . . . . . . . .           165,644         207,427         213,344
Plus reinsurance recoverables . . . . . . . . . . . . . . . .           139,481         193,263         214,998
                                                                       --------        --------        --------
Balance at December 31  . . . . . . . . . . . . . . . . . . .          $305,125        $400,690        $428,342
                                                                       ========        ========        ========
</TABLE>

         The total incurred claims above include claims adjustment expenses net
of reinsurance, which are included in general expenses in the accompanying
consolidated statements of income for the years ended December 31, 1997, 1996
and 1995.

NOTE 11 -- REINSURANCE

         In the ordinary course of business, the Company assumes and cedes
business with other insurance companies.  Ceding reinsurance is used by the
Company to limit its risk on new and unproven products, to meet certain
regulatory, rating agency or debt covenant leverage ratios or to limit its risk
up to its retention limits.  The Company is not relieved of its primary
obligation to the policyholder as a result of these reinsurance transactions.
The maximum amount of life insurance retained on any one life is generally
$150,000 or $500,000, depending upon the plan of insurance.  At December 31,
1997, life insurance in force aggregated approximately $7.8 billion, after a
reduction of approximately $1.7 billion for reinsurance ceded.

         Substantially all of the group accident and health insurance business
has been reinsured under a Group Reinsurance Agreement with London Life
Insurance Company and Transamerica Occidental Life Insurance Company (the
"Group Reinsurance Agreement").  The Group Reinsurance Agreement provides for
the Company and the reinsurers to share on a 50-50 basis all premiums and
claims expense.  Annually, the Company receives profit sharing payments from
the reinsurers equal to the excess of reinsurers' profits over contractual
floor amounts.  For years where such profits fall short of floor amounts, the
shortfalls are carried forward with interest to be applied as reductions
against future profit sharing payments.  In addition, under the Group
Reinsurance Agreement, to the extent the combined ratio of the group accident
and health insurance business for a rolling 12-month period exceeds contractual
amounts, the Company receives a reduced profit sharing payment.





                                      F-18
<PAGE>   61
         As discussed above, in conjunction with the sale of the Annuity
Operations, the Company entered into a coinsurance agreement with SunAmerica
relating to substantially all of the JALIC annuity business.  This coinsurance
was initially on an indemnity basis and the parties agreed to transition the
business to an assumption basis as soon as practical. In certain states, the
transition to an assumption basis is subject to policyholder approval.  To the
extent that such transition does not take place with respect to any particular
policy, the policy will remain reinsured on an indemnity basis.  As of December
31, 1997, approximately 70% of the contracts have either transitioned to an
assumption basis or lapsed.  The majority of the remaining policies are 
expected to be assumed by December 31, 1998.  At December 31, 1997, there
are assets held in trusts directly or indirectly available for payments to
policyholders.  SunAmerica is rated "A+ (Superior)" by A.M. Best and Company.

         The effects of reinsurance on short duration contracts for insurance
premiums and for long duration contracts for insurance premiums and contract
charges earned, the majority of which relates to continuing operations, are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                        -------------------------------------------------------------------------------------
                                  1997                             1996                          1995
Premiums from short     ----------------------           ----------------------         ---------------------
 duration contracts     WRITTEN         EARNED           WRITTEN         EARNED         WRITTEN        EARNED
 -------------------    -------        -------           -------         ------         -------        ------


<S>                     <C>                                          <C>            <C>            <C>
Direct business . . .    $1,479,602   $1,465,840      $1,847,828     $1,834,634     $1,882,188     $1,916,807
Reinsurance assumed .        50,576       48,511          50,451         45,726         67,280         65,505
Reinsurance ceded . .      (613,227)    (606,531)       (862,456)      (831,451)      (892,436)      (911,312)   
                         ----------   ----------      ----------     ----------     ----------     ---------- 
  Net  . . . . . . .     $  916,951   $  907,820      $1,035,823     $1,048,909     $1,057,032     $1,071,000
                         ==========   ==========      ==========     ==========     ==========     ==========

Insurance premiums    
  and contract charges             YEAR ENDED DECEMBER 31,
  earned from long       --------------------------------------
  duration contracts       1997           1996           1995
 --------------------    --------       --------       --------
  
Direct business ......    $45,263        $55,393        $55,168
Reinsurance assumed ..     40,665         11,995         12,383
Reinsurance ceded ....    (23,071)       (11,804)            --   
                          -------        -------        ------- 
  Net ................    $62,857        $55,584        $67,551
                          =======        =======        =======
</TABLE>

         The Company evaluates the financial condition of its reinsurers and
monitors concentrations of credit risk arising from similar geographic regions
or economic characteristics of the reinsurers.  The Company generally requires
that its reinsurers be rated "A (Excellent)" or better by A.M. Best and
Company.  At December 31, 1997, significant reinsurance recoverables on paid
and unpaid losses are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                          PAID                  UNPAID
                                                                         LOSSES                 LOSSES
                                                                         ------                 ------
<S>                                                                   <C>                     <C>
London Life Insurance Company . . . . . . . . . . . . . . . .           $     --              $  58,056
Swiss Re Life & Health Limited  . . . . . . . . . . . . . . .              5,008                 11,710
Transamerica Occidental Life Insurance Company  . . . . . . .                 88                 38,934
                                                                        --------              ---------
                                                                        $  5,096               $108,700
                                                                        ========              =========
</TABLE>

         Effective October 1, 1995, the Company entered into a reinsurance
agreement with Lincoln National Reinsurance Company Limited ("Lincoln") to cede
90% of certain annuity contracts.  Under the agreement, the Company ceded
approximately $403.5 million of annuity contracts.  Associated with the ceded
policies was unamortized deferred policy acquisition costs and value of
insurance in force aggregating approximately $43.0 million.  The Company
received approximately $40.2 million for these assets and, accordingly,
recorded accelerated amortization of $2.8 million.  Under the terms of the
agreement, the policy loans outstanding on the ceded annuity contracts were
retained by the Company.  Accordingly, a funds payable under reinsurance
treaties liability of





                                      F-19
<PAGE>   62
approximately $21.3 million was established.  The Company liquidated
available-for-sale securities to fund the $342.0 million payment made to
Lincoln.  This liquidation generated $13.8 million of net realized investment
gains in 1995, which resulted in $1.6 million of additional accelerated
amortization of deferred policy acquisition costs.

         As of December 31, 1997, receivables from reinsurers and investment
deposits recoverable were approximately $187.1 million.

NOTE 12 -- INDEBTEDNESS

         Indebtedness of the Company as of December 31, 1997 and 1996 is as
follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                      DECEMBER 31,
                                                                            ----------------------------
                                                                                1997             1996
                                                                            -----------      -----------
<S>                                                                          <C>              <C>
Credit Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 76,500         $101,500
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . .     (41,500)         (25,000)
                                                                             --------         -------- 
  Total long-term debt  . . . . . . . . . . . . . . . . . . . . . . . . .    $ 35,000         $ 76,500
                                                                             ========         ========
</TABLE>

         In July 1994, the Company amended its credit agreement (the "Credit
Agreement") to increase the commitment amount of the term loan to $110.0
million and to establish a revolving credit loan with a commitment amount of
$40.0 million and an expiration of July 1998.  As of December 31, 1997, the
Company has $23.5 million available under the revolving credit loan.  The
Credit Agreement is collateralized by the capital stock and the surplus
debentures of Houston National Life Insurance Company ("HNLIC"), as well as the
stock of all of the Company's other direct and indirect non-insurance
subsidiaries, other than those owned through an insurance subsidiary.  The
Credit Agreement contains restrictive covenants which, among other things,
limit additional indebtedness, payment of dividends, sale of assets and
reinsurance arrangements.  It also requires the Company to satisfy certain
financial covenants.  The Credit Agreement's interest rate per annum, at the
Company's option, is based on certain economic indices. Future required
principal payments are $41.5 million in 1998 and $35.0 million in 1999.

         Interest payments for the years ended December 31, 1997, 1996 and 1995
on the total indebtedness aggregated approximately $5.3 million, $6.1 million
and $9.3 million, respectively.

NOTE 13 -- STOCKHOLDER SECURITIES

         The holders of Cumulative Preferred Stock are entitled to receive
cumulative accrued dividends, payable semi-annually on April 15th and October
15th.  The Cumulative Preferred Stock ranks prior to the common stock upon
liquidation, dissolution or winding up of the Company and is not convertible.
The Cumulative Preferred Stock is required to be redeemed for $100 per share
plus accrued and unpaid dividends in three equal annual installments in each of
2000, 2001 and 2002.  The Company, at its option, may elect to redeem the
Cumulative Preferred Stock at any time.  If the proposed sale is consummated,
the Cumulative Preferred Stock will be redeemed at closing.

         Pursuant to the terms of a stockholder agreement, the Company had an
option to purchase and/or each of the management stockholders had an option to
sell his or her common stock subject to this agreement to the Company in
certain circumstances (death, complete disability, termination of employment
without cause or retirement at or beyond the early retirement date).  Shares
held by management stockholders which were estimated to be exercisable by the
expiration date were carried at the closing fair market value of the Company's
common stock as of December 31 of the respective years.  Shares held by other
management stockholders were carried at cost.  Such options expired on October
30, 1997.  Accordingly, the remaining shares were reclassified to common
stockholders' equity at the cost value.  As of December 31, 1997 and 1996, the
redeemable common stock carrying values were zero and $3.4 million,
respectively.





                                      F-20
<PAGE>   63
         During the fourth quarter of 1996, the Company adopted a shareholder
rights plan (the "Shareholder Rights Plan").  Under the Shareholder Rights
Plan, each shareholder received a dividend distribution of one preferred share
purchase right for each outstanding share of common stock.  The purchase rights
distributed to the shareholders entitled them to buy one one-hundredth of a
share of a new series of junior participating preferred stock at an exercise
price of $75.  The rights are exercisable only if a person or group acquires
10% or more of the Company's common stock or announces a tender offer, the
consummation of which would result in ownership of 10% or more of the Company's
common stock.  If the Company is acquired in a merger or other business
combination or after a person has acquired 10% or more of the Company's common
stock, each right will entitle the holder to purchase a number of the acquiring
company's common shares or the Company's common shares having a market value of
twice the purchase price.  In conjunction with the anticipated sale of the
Company as discussed in Note 2, the Shareholder Rights Plan was amended to
exempt the proposed merger with Fortis from causing such rights to become
exercisable and to provide for the termination of the Shareholder Rights Plan
upon completion of the merger.

NOTE 14 -- INCOME TAXES

         The components of the (benefit) provision for income taxes for the
years ended December 31, 1997, 1996 and 1995 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                     ---------------------------------------- 
                                                                        1997           1996           1995
                                                                     ----------     ----------     ----------
<S>                                                                   <C>             <C>           <C>
Current tax provision (benefit) . . . . . . . . . . . . . . . . .     $ 37,219         $ 13,708     $ (1,270)
Deferred tax (benefit) provision  . . . . . . . . . . . . . . . .       (6,765)           3,036        7,084
                                                                      --------         --------      -------
    Total provision for income taxes  . . . . . . . . . . . . . .       30,454           16,744        5,814
Less provision for income taxes from discontinued operations  . .       32,369           18,840       15,451
                                                                      --------         --------      -------
Benefit for income taxes from continuing operations . . . . . . .     $ (1,915)       $ (2,096)      $(9,637)
                                                                      ========        ========       ======= 
</TABLE>

         A reclassification of approximately $3.8 million was made during 1997,
reducing current tax expense and increasing deferred tax expense, to reflect
the actual 1996 tax liability.  Current tax expense was reduced by $1.3 million
and $3.7 million from the utilization of net operating loss carryovers in 1997
and 1996, respectively.  Current tax benefits of $1.1 million relating to the 
exercise of nonqualifying stock options were credited to paid-in capital during
1997.

         The income tax provisions differ from the amounts determined by
multiplying total income before income taxes by the statutory federal income
tax rate of 35%.  Reconciliations between the actual tax provisions and
expected tax provisions for the years ended December 31, 1997, 1996 and 1995
are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                                      ---------------------------------------
                                                                        1997            1996           1995
                                                                      --------        --------       --------
<S>                                                                   <C>            <C>             <C>
Income taxes at statutory rate  . . . . . . . . . . . . . . . . .      $ 18,654       $ 17,437        $ 3,583
  Amortization and writedown of goodwill  . . . . . . . . . . . .        10,306          1,945          1,877
  Basis difference in subsidiaries sold   . . . . . . . . . . . .         1,807             --             --
  Non-deductible travel and entertainment   . . . . . . . . . . .           331            564            607
  Non-taxable dividends and interest  . . . . . . . . . . . . . .           (40)          (129)          (563)
  Net (decrease) increase in valuation allowance  . . . . . . . .            --         (3,359)         1,492
  Decrease in tax reserves  . . . . . . . . . . . . . . . . . . .          (360)          (600)        (1,164)
  Other, net  . . . . . . . . . . . . . . . . . . . . . . . . . .          (244)           886            (18)
                                                                       --------        -------        -------
Provision for income taxes  . . . . . . . . . . . . . . . . . . .      $ 30,454        $16,744        $ 5,814
                                                                       ========        =======        =======
</TABLE>

         The income tax provisions from discontinued operations for the years
ended December 31, 1997, 1996 and 1995 differ from the amounts determined by
multiplying total income before income taxes by the statutory rate primarily
due to non-deductibility of goodwill writedowns and amortization, the
difference between the book basis and tax basis in subsidiaries sold, and other
expenses and the reduction in the valuation allowance, as discussed below.





                                      F-21
<PAGE>   64
         The significant temporary differences included in the net deferred
income tax asset as of December 31, 1997 and 1996 are as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                          DECEMBER 31,
                                                                                   --------------------------
                                                                                      1997            1996
                                                                                   ----------      ----------
<S>                                                                                 <C>             <C>
Deferred income tax assets:
  Policy reserves and other insurance items   . . . . . . . . . . . . . . . . .      $ 20,028        $108,680
  Bad debt reserves and non-deductible liabilities  . . . . . . . . . . . . . .        10,811           8,019
  Unearned income   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            65           1,567
  Fixed assets  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         2,435           2,884
  Net operating loss carryforward   . . . . . . . . . . . . . . . . . . . . . .         3,370           4,756
  Capital loss carryover  . . . . . . . . . . . . . . . . . . . . . . . . . . .         3,081              --
  Employee benefits and severance   . . . . . . . . . . . . . . . . . . . . . .         3,517           2,863
  Tax deductible intangible assets  . . . . . . . . . . . . . . . . . . . . . .         1,477             959
  Other deductible temporary differences  . . . . . . . . . . . . . . . . . . .         4,194           2,420
                                                                                     --------        --------
    Deferred income tax assets  . . . . . . . . . . . . . . . . . . . . . . . .        48,978         132,148
                                                                                     --------        --------
Deferred income tax liabilities:
  Deferred policy acquisition costs and value of insurance in force   . . . . .       (15,739)        (85,269)
  Net unrealized gain on trading account securities   . . . . . . . . . . . . .           (33)            (29)
  Market discount on bonds and other investment items   . . . . . . . . . . . .        (6,166)         (9,450)
  Other taxable temporary differences   . . . . . . . . . . . . . . . . . . . .        (2,882)           (397)
                                                                                     --------        -------- 
    Deferred income tax liabilities   . . . . . . . . . . . . . . . . . . . . .       (24,820)        (95,145)
                                                                                     --------        -------- 
Net unrealized gains and related deferred acquisition costs allocated to equity        (9,534)        (14,576)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        (1,092)         (1,092)
                                                                                     --------        -------- 
  Net deferred income tax asset   . . . . . . . . . . . . . . . . . . . . . . .      $ 13,532        $ 21,335
                                                                                     ========        ========
</TABLE>

         These amounts are included in other assets in the accompanying
consolidated balance sheets.

         Approximately $9.6 million of net operating loss carryforwards
("NOL's") remain as of December 31, 1997 which expire through the year 2010.
Of this amount, the utilization of $0.1 million of NOL's  is limited to the
taxable earnings of the non-life insurance group and the utilization of $2.2
million is limited to the taxable earnings of NHP Holding Company, Inc.
("NHP"), a 50% owned joint venture.  Of these NOL's, $0.7 million were
generated by the non-life insurance group and are available, with certain
statutory limitations, to offset the taxable earnings of the life insurance
group.  The utilization of the remaining NOL's of $6.6 million, which were
acquired in connection with the purchase of a life insurance company domiciled
in New York, is limited to the taxable earnings of JALIC and is further subject
to an annual limitation of $0.6 million.

         During 1997, in connection with the disposition of the discontinued
operations of the Company, a non-life insurance subsidiary generated a capital
loss carryover of $8.8 million which will expire in the year 2002.  Capital
loss carryovers can only be utilized against capital gains generated during the
carryover period.

         Management believes that the Company will have sufficient taxable
income of the appropriate character in future years to realize the net deferred
income tax asset.  In evaluating the expectation of sufficient future taxable
income, management considered the future reversal of temporary differences and
available tax planning strategies that could be implemented, if required.
Except as noted below, a valuation allowance was not required as of December
31, 1997 and 1996 as it was management's assessment that, based on available
information, it is not more likely than not that any or all of the deferred tax
asset will not be realized.  A valuation allowance will be established if there
is a change in management's assessment of the amount of the net deferred income
tax asset that is expected to be realized.  However, a valuation allowance of
$1.6 million was established in 1995 in order to reflect uncertainties
associated with the utilization of certain tax benefits acquired in connection
with the





                                      F-22
<PAGE>   65
purchase of the life insurance company discussed above.  During 1996, the
valuation allowance was reduced by $0.5 million as a result of management's
reevaluation of the uncertainties associated with the utilization of certain
tax benefits acquired in connection with the purchase of the life insurance
company.  The reduction in the valuation allowance for this item was applied to
reduce the provision for income taxes from discontinued operations.
             
         In addition, a valuation allowance of $3.7 million was established in
1995 for that portion of the net deferred tax asset which is attributed to the
operations of NHP.  During 1996, the valuation allowance was reduced by $1.0
million for temporary differences that reversed during the year.  In addition,
the valuation allowance at December 31, 1996 was reduced by $2.7 million to
reflect management's reevaluation of its ability to realize the portion of the
deferred tax asset which is attributed to NHP.  Of this amount, $0.9 million
was applied to reduce goodwill and $1.8 million was applied to reduce the
provision for income taxes from continuing operations.

         Prior to 1984, JALIC was permitted to exclude from taxable income
those amounts determined under a formula established by provisions of the
Internal Revenue Code of 1954, as amended.  At December 31, 1997, JALIC had
accumulated untaxed income of approximately $57.2 million (tax effect of $20.0
million).  Although such amount is taxable under certain circumstances,
management does not intend to take, or fail to take, any action that would
cause all or part of this amount to be included in taxable income; accordingly,
deferred income taxes have not been provided on this amount.  At December 31,
1997, JALIC had approximately $232.8 million in its "shareholder's surplus" tax
account from which dividend distributions can be made without incurring federal
income taxes.

         The Company made federal income tax payments of approximately $30.7
million, $7.9 million and $4.5 million for the years ended December 31, 1997,
1996 and 1995, respectively.





                                      F-23
<PAGE>   66
NOTE 15 -- FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value and estimated fair value of the Company's financial
assets and financial liabilities at December 31, 1997 and 1996 are as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                               DECEMBER 31, 1997             DECEMBER 31, 1996
                                           ------------------------      ------------------------
                                             CARRYING        FAIR          CARRYING        FAIR        VALUATION
                                              VALUE          VALUE          VALUE          VALUE         METHOD
                                           ----------     ---------      ----------     ---------      ---------
<S>                                         <C>           <C>            <C>            <C>            <C>
Financial assets:
  Held-to-maturity securities:
    Publicly traded   . . . . . . . . .     $  29,131     $  30,169      $   29,908     $  30,744         (1)
    Private placements  . . . . . . . .        15,649        16,295          15,449        16,140         (2)
  Available-for-sale securities:
    Publicly traded   . . . . . . . . .       539,349       539,349       3,913,833     3,913,833         (1)
    Private placements  . . . . . . . .        11,236        11,236         325,628       325,628         (2)
    Non-investment grade  . . . . . . .            --            --           9,313         9,313         (2)
  Trading account securities  . . . . .         3,504         3,504           4,518         4,518         (1)
  Equity securities   . . . . . . . . .            23            23          82,098        82,098         (1)
  Mortgage loans:
    Performing  . . . . . . . . . . . .       126,703       130,683       1,409,252     1,482,976         (3)
    Non-performing  . . . . . . . . . .         4,248         4,248           8,366         8,366         (4)
    Restructured on other than market                                                                 
      terms   . . . . . . . . . . . . .        14,819        14,819          31,624        31,624         (4)
  Policy loans and other notes                                                                                    
   receivable  . . . . . . . . . . . . . .     32,091        32,091          75,186        75,186         (5)  
  Short-term investments  . . . . . . .       196,218       196,218           6,371         6,371         (5)
  Cash and cash equivalents   . . . . .        31,663        31,663         167,511       167,511         (5)
  Accrued investment income   . . . . .        15,525        15,525          65,727        65,727         (5)
Financial liabilities:
  Investment contracts with defined
    maturities  . . . . . . . . . . . .           119           120         294,605       294,762         (6)
  Investment contracts with no defined                                                                
    maturities  . . . . . . . . . . . .        19,219        18,428       5,606,694     5,285,370         (7)
  Short-term debt   . . . . . . . . . .        41,500        41,500          25,000        25,000         (5)
  Long-term debt  . . . . . . . . . . .        35,000        35,000          76,500        76,500         (5)

</TABLE>
-----------------
(1)      Fair value is based on publicly quoted market prices.
(2)      Fair value is estimated using publicly quoted market prices for
         similar securities and adjusting by a spread which is reevaluated
         monthly, and approximates the spread on similar securities which the
         Company has purchased.
(3)      Fair value is estimated using the discounted cash flow method, using
         interest rates currently offered for similar loans to borrowers with
         similar credit ratings.
(4)      Fair value is based on external and internal appraisals less an
         allowance for estimated sales costs.
(5)      Carrying value approximates fair value.
(6)      Fair value is estimated based upon the discounted cash flow method,
         using interest rates currently offered for similar contracts.
(7)      Fair value is defined as the amount payable on demand.





                                      F-24
<PAGE>   67
NOTE 16 -- STOCKHOLDERS' EQUITY

         Each of the life insurance companies is limited by various state
insurance department regulations as to the amount of dividends and other
payments that may be paid to its parent or affiliates.  Dividends in excess of
prescribed amounts require regulatory approval.  Loans and advances are limited
to certain prescribed maximums in various jurisdictions and, in any event,
require "arms-length" terms.  Dividends may generally be paid without prior
regulatory approval if their fair market value, together with that of other
dividends or distributions made within the preceding 12 months, does not exceed
the greater of: (i) 10% of the insurer's surplus as regards policyholders as of
the 31st day of December next preceding; or (ii) the net gain from operations
of the insurer, not including realized investment gains, for the 12-month
period ending the 31st day of December next preceding.  In addition, payments
of dividends are limited to statutory unassigned surplus less 25% of unassigned
surplus attributable to unrealized capital gains as determined in accordance
with accounting practices prescribed or permitted by state insurance regulatory
authorities.  With the approval of state regulators, JALIC made an
extraordinary dividend distribution of approximately $200 million to HNLIC
during 1997, who in turn distributed approximately $188 million to JAFCO.
Because of these dividend distributions, any dividends paid by JALIC or HNLIC
before June 21, 1998 would be considered extraordinary and would require prior
approval.  On or after that date, approximately $76.7 million is available for
dividend distribution without prior approval.

         Accounting practices used to prepare statutory financial statements
for regulatory filings of stock life insurance companies differ from GAAP.
Material differences in these accounting practices include: value of insurance
in force, deferred policy acquisition costs, goodwill, statutory non-admitted
assets and deferred federal income taxes are recognized under GAAP accounting,
while asset valuation and interest maintenance reserves are not; surplus
debentures are reported as surplus up to statutory limits for statutory
purposes and as debt under GAAP; certain reinsurance agreements are accounted
for as reinsurance for statutory purposes and as financing transactions under
GAAP; premiums for universal life and investment-type products are recognized
as revenues for statutory purposes and as deposits to policyholders' accounts
under GAAP; investments in the Company's trading and available-for-sale
accounts are carried at market value under GAAP and amortized cost under
statutory reporting; and different assumptions are used in calculating future
policyholders' benefits for statutory and GAAP purposes.





                                      F-25
<PAGE>   68
         The following reconciles capital and surplus and net income determined
in accordance with accounting practices prescribed or permitted by the state
insurance departments (statutory accounting practices) with stockholders'
equity and net income on a GAAP basis (dollars in thousands).  Included in the
amounts stated in accordance with statutory accounting practices are amounts
recorded in accordance with GAAP for the non-insurance subsidiaries.

Stockholders' Equity

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31,
                                                                                      ---------------------------
                                                                                        1997              1996
                                                                                      ---------        ----------
<S>                                                                                     <C>             <C>
Capital and surplus, on basis of statutory accounting practices, as filed with
  insurance regulatory authorities  . . . . . . . . . . . . . . . . . . . . . .         $423,295         $339,040
  Value of insurance in force   . . . . . . . . . . . . . . . . . . . . . . . .            5,687            9,230
  Deferred policy acquisition costs   . . . . . . . . . . . . . . . . . . . . .           37,503          269,988
  Goodwill  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           34,037           80,379
  Net unrealized gain on investments  . . . . . . . . . . . . . . . . . . . . .           17,706           26,542
  Adjustment in policy and claim liabilities  . . . . . . . . . . . . . . . . .          (34,203)        (257,149)
  Net deferred income tax assets  . . . . . . . . . . . . . . . . . . . . . . .           14,157           28,185
  Statutory investment reserves   . . . . . . . . . . . . . . . . . . . . . . .           22,607           50,797
  Surplus debentures  . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (41,358)         (78,071)
  Deferred gain on sale of discontinued operations  . . . . . . . . . . . . . .          (21,038)              --
  Other, net  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           (7,483)          (3,730)
                                                                                        --------         -------- 
Stockholders' equity, on basis of generally accepted accounting principles.....         $450,910         $465,211
                                                                                        ========         ========
</TABLE>

Net Income
<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                       ------------------------------------------
                                                                            1997          1996           1995     
                                                                       ------------   -----------     -----------
<S>                                                                     <C>             <C>            <C>
Net income (loss), on basis of statutory accounting practices,
 as filed with insurance regulatory authorities .......................  $116,566       $ 36,579        $ (5,796)
 Amortization of purchased intangibles ................................    (4,840)       (10,137)        (15,829)
 Capitalization and amortization of deferred policy acquisition costs..    (9,686)        (7,416)         (9,213)
 Adjustment of policy and claim liabilities ...........................     6,158         29,198          32,170
 Effect of statutory investment reserves ..............................     8,668         (8,175)          5,367
 Deferred income taxes ................................................     6,215         (3,392)           (379)
 Change in mortgage delinquency reserves ..............................    (1,783)        (2,657)            702
 Gain on sale of discontinued operations ..............................   (98,163)            --              --
 Other, net ...........................................................    (1,247)        (3,064)           (614)
                                                                        ---------       --------        -------- 
Net income, on basis of generally accepted accounting principles .....  $  21,888       $ 30,936        $  6,408
                                                                        =========       ========        ========
</TABLE>





                                      F-26
<PAGE>   69
Treasury Stock

         The Company has acquired treasury shares of stock as a result of the
exercise of put or call options on the redeemable common stock (see Note 13).
The Company has also acquired treasury stock in consideration for the cost of
stock option exercises.  During 1997, the Company also acquired treasury shares
pursuant to a common stock repurchase program.  During 1996, restricted
treasury shares were granted to an employee (see Note 17).  The following is a
summary of treasury stock activity, accounted for under the cost method, for
the years ended December 31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------------------
                                                                 1997                           1996
                                                       ------------------------        -----------------------
                                                         SHARES          COST           SHARES         COST
                                                       ---------      ---------        ---------     ---------
<S>                                                    <C>             <C>            <C>              <C>
Balance, beginning of year  . . . . . . . . . . . .      387,735       $ 8,676         424,183         $9,329
  Stock repurchase program  . . . . . . . . . . . .      941,700        22,703              --             --
  Treasury stock option exercises (see Note 17)   .      (31,766)         (707)           (448)           (10)
  Restricted stock granted  . . . . . . . . . . . .           --            --         (36,000)          (643)
                                                       ---------       -------         -------         ------ 
Balance, end of year  . . . . . . . . . . . . . . .    1,297,669       $30,672         387,735         $8,676
                                                       =========       =======         =======         ======
</TABLE>

NOTE 17 -- STOCK PLANS

         The Company maintains various stock-based compensation plans, which
are described below, and applies APB 25 and related interpretations in
accounting for such plans.  As permitted under SFAS No. 123, no compensation
cost has been recognized for these plans.  Had compensation expense been
determined using the alternative principles provided under SFAS No. 123, the
Company's net income and net income per common and common equivalent share
would have been reduced to the pro forma amounts indicated below (dollars in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                                  ---------------------------------------
                                                                       1997                     1996
                                                                  -------------            --------------
<S>                                                                <C>                        <C>
Net income:
  As reported   . . . . . . . . . . . . . . . . . . . . . .        $ 21,888                   $ 30,936
  Pro forma   . . . . . . . . . . . . . . . . . . . . . . .          19,022                     28,720
Net income per common share:
  As reported   . . . . . . . . . . . . . . . . . . . . . .            0.81                       1.17
  Pro forma   . . . . . . . . . . . . . . . . . . . . . . .            0.70                       1.09
</TABLE>

Long-Term Incentive Plan

         The Company has reserved a maximum of 2,618,428 shares of common stock
to be available for options or grants during the term of the John Alden
Financial Corporation Long-Term Incentive Plan.  The Company is also authorized
to grant up to 500,000 options under this plan from available treasury
shares.  The exercise price of options granted under this plan equals the
market value of the Company's common stock at the date of grant.  Such options
generally vest ratably over a three-year period and have a maximum term of ten
years.

North Star Incentive Plan

         The Company maintains a compensation plan for certain employees of its
captive marketing organization, North Star Marketing Corporation.  A portion of
the shares granted under this plan were issued with an option price of $1.00
and vest ratably over three years.  The remaining shares were issued with an
option price equal to the market value of the Company's common stock at the
date of grant and were fully vested on that date.  The shares granted under
this plan have a maximum term of ten years.





                                      F-27
<PAGE>   70
Treasury Stock Options

         The common stock acquired by the Company pursuant to a stockholder
agreement (see Note 16) is reserved for sale or transfer to certain designated
full-time employees of the Company or to management stockholders at a price not
less than the price paid by the Company to acquire the shares.  The exercise
price of options granted under this plan equals the market value of the
Company's common stock at the date of grant.  Such options are fully vested at
the date of grant and have a maximum term of ten years.

Other Stock Plans

         On January 1, 1997, January 1, 1996 and January 1, 1995, the Company
granted 45,875, 61,390 and 46,400 restricted shares of common stock to certain
management employees.  These shares vest over a three-year period from the date
of grant. As of December 31, 1997, 117,460 restricted shares were outstanding.

         During 1996, the Company granted an employee 36,000 shares of its
common stock held in treasury subject to certain restrictions, principally
stating that the individual remain employed by the Company.  These shares vest
in three equal installments in April 1997, 1998 and 1999.  Unearned
compensation of $0.7 million was recognized as a separate component of
stockholders' equity at the date of grant.  The unearned compensation is being
amortized over the three-year vesting period.

         The Company has established an Employee Stock Purchase Plan and
Employee Savings Incentive Plan ("ESIP") for employees who have met certain
eligibility requirements.  Employees may designate a portion of their
contributions to the ESIP to be invested in the common stock of the Company.

         The fair value of each option and stock grant during 1997, 1996 and
1995 is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted-average assumptions used for grants in 1997,
1996 and 1995, respectively: dividend yield of 2.1%, 2.1% and 2.0%, expected
volatility of 43.2%, 45.8% and 49.0%, risk-free interest rates of 6.4%, 6.6%
and 6.2%, and expected lives of six years.

         A summary of the Company's option plans as of and for the years ended
December 31, 1997, 1996 and 1995 is as follows (shares in thousands):

<TABLE>
<CAPTION>
                                                1997                     1996                     1995
                                    --------------------------------------------------------------------------
                                                WEIGHTED                WEIGHTED                     WEIGHTED
                                                AVERAGE                 AVERAGE                      AVERAGE
                                                EXERCISE                EXERCISE                     EXERCISE
                                    SHARES       PRICE       SHARES       PRICE        SHARES         PRICE   
                                   --------     ---------   --------   ----------     --------      ---------- 
<S>                                 <C>          <C>         <C>          <C>          <C>          <C>
Outstanding at beginning of         2,582        $19.71      2,305        $19.36       1,739        $17.87
year  . . . . . . . . . . . . .
  Granted   . . . . . . . . . .       361         27.51        390         20.50         725         21.50
  Exercised   . . . . . . . . .      (262)        17.13        (50)         5.51         (91)         4.21
  Forfeited   . . . . . . . . .      (152)        21.91        (63)        22.91         (68)        24.57
                                    -----                    -----                     -----               
Outstanding at end of year  . .     2,529         20.96      2,582         19.71       2,305         19.36
                                    =====                    =====                     =====              

Options exercisable at
 year-end .....................     1,798                    1,652                     1,370
Weighted-average fair value of
 options granted during
 the year .....................     $9.68                    $9.05                     $9.38
Weighted-average fair value of
 restricted stock granted
 during the year ..............     17.23                    18.20                     23.34
</TABLE>





                                      F-28
<PAGE>   71
         The following table summarizes information about stock options
outstanding at December 31, 1997 (options in thousands):

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE        
                      --------------------------------------------------   ----------------------------------
                                      WEIGHTED-AVG.
 RANGE OF EXERCISE                     CONTRACTUAL       WEIGHTED-AVG.                      WEIGHTED-AVG.
      PRICES             NUMBER       REMAINING LIFE     EXERCISE PRICE       NUMBER        EXERCISE PRICE  
      ------             ------       --------------     --------------       ------      ------------------
 <S>                    <C>           <C>                 <C>                 <C>               <C>
  $1 - $20                880         5.2 years           $15.48                847             $15.32
  20 -  22                788         8.1 years            21.21                421              21.40
  22 -  36                861         7.9 years            26.35                530              25.30
                        -----                                                 -----                     
   1 -  36              2,529         7.0 years            20.96              1,798              19.68
                        =====                                                 =====                      
</TABLE>

NOTE 18 -- LEASES

         The Company leases office space, principally for regional
administration and sales, office equipment and computer equipment under various
operating leases with terms ranging up to 20 years.  The Company has no
material capital leases.  Under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year, approximate aggregate annual
minimum rentals are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                   GROSS
                                                                  RENTALS
                                                                  -------

<S>                                                               <C>         
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . .        $18,528     
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . .         14,682     
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . .          8,634     
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . .          2,227     
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . .          1,705     
Later years  . . . . . . . . . . . . . . . . . . . . . . .         10,463     
                                                                  -------     
   Total minimum future rentals  . . . . . . . . . . . . .        $56,239     
                                                                  =======     
</TABLE>

         Rental expense, which includes operating expenses associated with
leased office space, for the years ended December 31, 1997, 1996, and 1995 is
summarized as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                         ------------------------------------------------ 
                                                             1997              1996               1995
                                                         -----------       -----------        -----------
<S>                                                          <C>               <C>                <C>
Office space  . . . . . . . . . . . . . . . . . . .          $ 8,023           $10,438            $11,903
Computer and related items  . . . . . . . . . . . .            8,126            11,871             19,909
Other (principally office equipment)  . . . . . . .            4,493            16,382              4,883
                                                             -------           -------            -------
    Total   . . . . . . . . . . . . . . . . . . . .          $20,642           $38,691            $36,695
                                                             =======           =======            =======
</TABLE>

NOTE 19 -- BENEFIT PLANS

Pension Plan

         The Company has a defined benefit pension plan (the "Plan") covering
substantially all of its employees.  The benefits are based on years of service
and compensation levels near retirement.  The Company's policy is to fund the
Plan's current statutory requirements.  Net pension cost for the years ended
December 31, 1997, 1996 and 1995 was $2.0 million, $3.0 million and $2.7
million, respectively.





                                      F-29
<PAGE>   72
         The following sets forth the funded status of the Plan at December 31,
1997 and 1996 and the amount of prepaid pension cost included in the Company's
consolidated balance sheets at December 31, 1997 and 1996 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                      1997              1996
                                                                                  --------------    -------------
<S>                                                                               <C>               <C>
Actuarial present value of benefit obligations:                                                  
A.Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . .           $23,951           $ 22,880
                                                                                      =======           ========
B.Accumulated benefit obligation  . . . . . . . . . . . . . . . . . . . . .           $26,259           $ 24,984
                                                                                      =======           ========
C.Projected benefit obligation  . . . . . . . . . . . . . . . . . . . . . .           $30,596           $ 30,692
Plan assets at fair value, primarily listed stocks and bonds  . . . . . . .            35,291             30,892
                                                                                       ------           --------
Plan assets greater than projected benefit obligation . . . . . . . . . . .             4,695                200
Unrecognized prior service costs  . . . . . . . . . . . . . . . . . . . . .              (713)              (794)
Unrecognized net loss from past experience different from that assumed  . .             1,739              5,082
Unrecognized net asset at January 1, 1987 being recognized over 15 years  .              (307)              (384)
                                                                                     --------           -------- 
Prepaid pension cost  . . . . . . . . . . . . . . . . . . . . . . . . . . .          $  5,414           $  4,104
                                                                                     ========           ========
Assumptions used were:                                                                           
Discount rate for actuarial present value of benefit obligations  . . . . .              7.25%               7.5%
Rate of increase in compensation  . . . . . . . . . . . . . . . . . . . . .        3.25%-7.25%              4%-8%
Expected long-term rate of return on assets . . . . . . . . . . . . . . . .                 8%                 8%
</TABLE>                                                      

Other Benefit Plans

         The Company maintains an unfunded benefit plan to provide life
insurance and medical postretirement benefits to certain of its retired
employees.  The unfunded accumulated postretirement benefit obligation was $7.6
million and $6.6 million at December 31, 1997 and 1996, respectively.  The
Company also maintains certain unfunded defined benefit supplemental retirement
plans.  The accrued unfunded projected benefit obligations for the supplemental
plans as of December 31, 1997 and 1996 aggregated approximately $5.9 million
and $6.2 million, respectively.

         The Company provides certain benefits for former or inactive employees
and their dependents during the time period following employment but before
retirement.  As of December 31, 1997 and 1996, the Company has accrued $18.5 
million and $2.2 million, respectively, of benefits owed under this plan.

NOTE 20 -- COMMITMENTS AND CONTINGENCIES

         During the period of April 1995 through May 1995, the Company and
certain of its officers and directors were named as defendants in a series of
putative class actions alleging violations of the federal securities laws.
During March 1998, the Company and certain of its officers and directors were
named as defendants in putative class actions alleging that the Company is not
being sold for the highest price possible.  For relief, plaintiffs seek an
injunction against consummation of the proposed transaction with Fortis and an
award of damages.  While it is not possible to determine the ultimate
disposition of these proceedings, the Company believes that the ultimate
dispositions will not have a material adverse effect on the Company's financial
position, results of operations or cash flows.

         The Company is routinely involved in litigation incidental to its
businesses.  It is management's opinion that the aggregate liability arising
from the disposition of all such pending litigation will not have a material
adverse effect on the Company's financial position, results of operations or
cash flows.





                                      F-30
<PAGE>   73
NOTE 21 -- QUARTERLY FINANCIAL DATA (UNAUDITED)

         Quarterly financial data for the years ended December 31, 1997 and
1996 are as follows (in thousands, except for per share amounts):

<TABLE>
<CAPTION>
                      1997                                                         QUARTER
                      ----                               ----------------------------------------------------------
                                                           FIRST           SECOND           THIRD         FOURTH
                                                         ---------       ----------       ---------      ----------
<S>                                                      <C>              <C>             <C>             <C>
Net insurance premiums and contract charges earned        $271,620         $230,074        $217,557        $209,650
Revenues  . . . . . . . . . . . . . . . . . . . . .        312,487          275,589         244,107         217,866
Benefits and expenses . . . . . . . . . . . . . . .        303,495          244,910         238,832         271,562
Income (loss) from continuing operations before
 provision (benefit) for income taxes . . . . . . .          8,607           30,226           5,044         (53,583)
Operating income (loss) . . . . . . . . . . . . . .         10,495           17,364           2,790         (34,962)
Net income (loss) from continuing operations  . . .          4,703           19,246           3,104         (34,844)
Net income from discontinued operations . . . . . .          5,693               --              --          23,986
Net income (loss) . . . . . . . . . . . . . . . . .         10,396           19,246           3,104         (10,858)
Per common share:
  Net income (loss) from continuing operations  . .           0.17             0.75            0.11           (1.39)
  Net income from discontinued operations   . . . .           0.22               --              --            0.95
  Net income (loss)   . . . . . . . . . . . . . . .           0.39             0.75            0.11           (0.44)
Average shares outstanding  . . . . . . . . . . . .         25,336           25,353          25,392          25,516
</TABLE>


<TABLE>
<CAPTION>
                      1996                                                        QUARTER
                      ----                              ------------------------------------------------------------
                                                           FIRST           SECOND         THIRD           FOURTH    
                                                        ----------       ----------     ----------     -------------
<S>                                                     <C>             <C>            <C>            <C>        
Net  insurance  premiums  and   contract  charges       $267,628          $262,484       $249,227        $245,235   
earned  . . . . . . . . . . . . . . . . . . . .                                                                      
Revenues  . . . . . . . . . . . . . . . . . . .          300,012           289,543        272,304         252,823    
Benefits and expenses . . . . . . . . . . . . .          289,909           276,755        274,822         274,867    
Income (loss) from continuing operations before                                                                      
 provision (benefit) for income taxes . . . . .           10,270            11,846         (2,574)         (23,349)  
Operating income (loss) . . . . . . . . . . . .           13,808            14,503          7,817           (3,296)    
Net income (loss) from continuing operations  .            6,183             7,548         (2,498)         (12,944)   
Net income from discontinued operations . . . .            7,653             5,843          8,236           10,915     
Net income (loss) . . . . . . . . . . . . . . .           13,836            13,391          5,738           (2,029)    
Per common share:                                                                              
  Net income (loss) from continuing
   operations   . . . . . . . . . . . . . . . .             0.23              0.29          (0.11)           (0.53)     
  Net income from discontinued operations   . .             0.30              0.23           0.33             0.43       
  Net income (loss)   . . . . . . . . . . . . .             0.53              0.52           0.22            (0.10)     
Average shares outstanding  . . . . . . . . . .           25,258            25,289         25,303           25,332   
</TABLE>


        In conjunction with the disposition of the Annuity Operations
and Western Diversified Group as discussed in Note 5 and the reduced premium
volume in the group operations, the Company reduced its work force and
recognized impairments of certain intangible assets relating to operations to be
disposed of.  Accordingly, severance and other related charges of approximately
$23.0 million and $15.5 million were recognized in continuing operations during
the first and fourth quarters of 1997, respectively.



                                      F-31
<PAGE>   74
               JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                     INDEX TO FINANCIAL STATEMENT SCHEDULES


<TABLE>
<CAPTION>
                                                                                                           Page No.
                                                                                                           --------
                                                                                                        
<S>                                                                                                           <C>
Report of Independent Accountants on Financial Statement Schedules  . . . . . . . . . . . . . . . . . . . .   F-2
                                                                                                        
Schedule I - Summary of Investments Other than Investments in Related Parties . . . . . . . . . . . . . . .   S-2
                                                                                                        
Schedule II - Condensed Financial Information (Parent Company Only) . . . . . . . . . . . . . . . . . . . .   S-3
                                                                                                        
Schedule III - Supplementary Insurance Information  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   S-7
                                                                                                        
Schedule IV - Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   S-8
                                                                                                        
Schedule V - Valuation and Qualifying Accounts  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   S-9
</TABLE>





                                      S-1
<PAGE>   75
                                                                      SCHEDULE I

                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                        SUMMARY OF INVESTMENTS OTHER THAN
                         INVESTMENTS IN RELATED PARTIES

                                DECEMBER 31, 1997
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                       AMOUNT AT
                                                                                     WHICH CARRIED
            TYPE OF INVESTMENT                                        MARKET          ON BALANCE
                                                       COST            VALUE            SHEET
                                                    ----------     ---------------   -------------
Held-to-maturity securities:
<S>                                                 <C>              <C>              <C>
  U.S. Government and government agencies and
     authorities ............................       $    4,513       $    4,555       $    4,513
  Public utilities ..........................            3,354            3,476            3,354
  All other corporate bonds .................           36,913           38,433           36,913
                                                    ----------       ----------       ----------
     Total held-to-maturity securities ......           44,780           46,464           44,780
                                                    ----------       ----------       ----------

Available-for-sale securities:
  U.S. Government and government agencies and
     authorities ............................           39,478           40,489           40,489
  Foreign governments .......................            1,073            1,227            1,227
  Public utilities ..........................           10,990           11,787           11,787
  All other corporate bonds .................          466,477          497,082          497,082
                                                    ----------       ----------       ----------
     Total available-for-sale securities ....          518,018          550,585          550,585
                                                    ----------       ----------       ----------

Trading account securities ..................            3,411            3,504            3,504
Equity securities ...........................                8               23               23
Mortgage loans ..............................          145,770          149,750          145,770
Real estate owned ...........................            3,021            3,021            3,021
Investment in real estate ...................           40,354           40,354           40,354
Policy loans and other notes receivable .....           32,091           32,091           32,091
Short-term investments ......................          196,218          196,218          196,218
                                                    ----------       ----------       ----------
     Total investments ......................       $  983,671       $1,022,010       $1,016,346
                                                    ==========       ==========       ==========
</TABLE>




                                      S-2
<PAGE>   76
                                                                    SCHEDULE II


                        JOHN ALDEN FINANCIAL CORPORATION
                              (PARENT COMPANY ONLY)
                         CONDENSED FINANCIAL INFORMATION
                                 BALANCE SHEETS
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                    ASSETS                                                                  DECEMBER 31,
                                                                                                  -----------------------------
                                                                                                        1997           1996
                                                                                                  -------------    ------------

<S>                                                                                                 <C>              <C>
Cash and cash equivalents ......................................................................    $  10,574        $     554
Short-term investments .........................................................................      152,338                -
Investments in subsidiaries ....................................................................      334,793          511,583
Surplus debentures receivable from subsidiary ..................................................       43,000           76,600
Accrued investment income ......................................................................        6,419            2,472
Other assets ...................................................................................        2,520            4,497
                                                                                                    ---------        ---------
   Total assets ................................................................................    $ 549,644        $ 595,706
                                                                                                    =========        =========

                       LIABILITIES, REDEEMABLE SECURITIES
                            AND STOCKHOLDERS' EQUITY

Liabilities:
    Accounts payable and other liabilities .....................................................    $   3,408        $   5,192
    Amounts payable to subsidiaries ............................................................        3,540            5,116
    Short-term debt ............................................................................       41,500           25,000
    Long-term debt .............................................................................       35,000           76,500
                                                                                                    ---------        ---------
        Total liabilities ......................................................................       83,448          111,808
                                                                                                    ---------        ---------
Redeemable securities:
    Series A 9% cumulative preferred stock, $.01 par value; 150,000 shares
      authorized, issued and outstanding; mandatory redemption value of $100 per
      share; including accrued dividends of $286; $101.91 per share.............................       15,286           15,286
    Common stock, $.01 par value; -- and 667,430 shares authorized, issued and outstanding .....            -            3,401
                                                                                                    ---------        ---------
        Total redeemable securities ............................................................       15,286           18,687
                                                                                                    ---------        ---------
Stockholders' equity:
    Common stock, $.01 par value; 75,000,000 and 74,332,570 shares authorized;
       25,953,525 and 25,055,843 shares issued; 24,655,856
       and 24,668,108 shares outstanding .......................................................          259              250
    Paid-in capital ............................................................................      187,422          181,863
    Net unrealized gain on investments, net of income taxes ....................................       17,706           26,977
    Retained earnings ..........................................................................      276,552          268,109
    Redemption value of common stock in excess of cost .........................................            -           (2,669)
    Unearned compensation ......................................................................         (357)            (643)
    Treasury stock, at cost; 1,297,669 and 387,735 shares ......................................      (30,672)          (8,676)
                                                                                                    ---------        ---------
          Total stockholders' equity ...........................................................      450,910          465,211
                                                                                                    ---------        ---------
          Total liabilities, redeemable securities and stockholders' equity ....................    $ 549,644        $ 595,706
                                                                                                    =========        =========
</TABLE>



            See accompanying Note to Condensed Financial Information.


                                      S-3
<PAGE>   77
                                                                    SCHEDULE II


                        JOHN ALDEN FINANCIAL CORPORATION
                              (PARENT COMPANY ONLY)
                         CONDENSED FINANCIAL INFORMATION
                              STATEMENTS OF INCOME
                             (Dollars in thousands)






<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------
                                                            1997           1996            1995
                                                          ---------      --------        --------
Revenues:
<S>                                                       <C>            <C>             <C>
  Net investment income ...........................       $ 12,368       $ 12,097        $ 16,335
  Net realized investment gains ...................             --             --           1,945
                                                          --------       --------        --------
      Total revenues ..............................         12,368         12,097          18,280
                                                          --------       --------        --------

Expenses:
   Interest expense ...............................          5,332          6,615           6,614
   Other ..........................................          4,820          7,622           8,527
                                                          --------       --------        --------
     Total expenses ...............................         10,152         14,237          15,141
                                                          --------       --------        --------


Income (loss) before income taxes and equity in net
   earnings of subsidiaries .......................          2,216         (2,140)          3,139
Provision (benefit) for income taxes ..............            809           (734)            587
                                                          --------       --------        --------

Income (loss) before equity in net earnings of
   subsidiaries ...................................          1,407         (1,406)          2,552
Equity in net earnings of subsidiaries ............         20,481         32,342           3,856
                                                          --------       --------        --------

Net income ........................................       $ 21,888       $ 30,936        $  6,408
                                                          ========       ========        ========
</TABLE>



            See accompanying Note to Condensed Financial Information.


                                      S-4



<PAGE>   78
                                                                    SCHEDULE II





                        JOHN ALDEN FINANCIAL CORPORATION
                              (PARENT COMPANY ONLY)
                         CONDENSED FINANCIAL INFORMATION
                            STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                     YEAR ENDED DECEMBER 31,
                                                                          -------------------------------------------
                                                                            1997              1996            1995
                                                                          ---------        ---------        ---------
Cash flows from operating activities:
<S>                                                                       <C>              <C>              <C>
  Net income ......................................................       $  21,888        $  30,936        $   6,408
  Adjustments to reconcile net income to net cash provided by 
     operating activities:
     Equity in net earnings of subsidiaries .......................         (20,481)         (32,342)          (3,856)
     Net realized investment gains ................................              --               --           (1,945)
     Amortization of purchased intangibles ........................           1,025            1,320              959
     (Increase) decrease in accrued investment income .............          (3,947)             751              506
     Increase (decrease) in amounts payable to subsidiaries .......             742           (1,032)             612
     Decrease (increase) in other assets ..........................           2,051             (280)            (202)
     Stock option compensation expense ............................             286               --              256
     (Decrease) increase in accounts payable and other liabilities           (1,746)           1,167            3,401
                                                                          ---------        ---------        ---------
          Net cash (used in) provided by operating activities .....            (182)             520            6,139
                                                                          ---------        ---------        ---------

Cash flows from investing activities:
    Collections of surplus debentures receivable
        from subsidiary ...........................................          33,600           26,880           22,080
    Outflows from net sales and purchases of short-term investments        (152,338)              --               --
    Receipt of dividend from subsidiary ...........................         188,000               --               --
    Capital contributions to subsidiaries .........................              --          (22,200)         (46,302)
    Sales of equity securities ....................................              --               --           37,012
                                                                          ---------        ---------        ---------
        Net cash provided by investing activities .................          69,262            4,680           12,790
                                                                          ---------        ---------        ---------

Cash flows from financing activities:
    Proceeds from borrowings of short-term and long-term debt .....              --           26,000           27,000
    Repayments of borrowings of short-term and long-term debt .....         (25,000)         (31,500)         (15,000)
    (Payments) receipts of borrowings (to) from subsidiaries ......          (2,318)          11,455          (16,966)
    Purchase of treasury stock ....................................         (22,703)              --           (3,203)
    Exercises of stock options ....................................           4,488              279              385
    Payment of dividends ..........................................         (13,527)         (12,731)         (12,248)
                                                                          ---------        ---------        ---------
        Net cash used in financing activities .....................         (59,060)          (6,497)         (20,032)
                                                                          ---------        ---------        ---------
Net increase (decrease) in cash and cash equivalents ..............          10,020           (1,297)          (1,103)
Cash and cash equivalents, beginning of year ......................             554            1,851            2,954
                                                                          ---------        ---------        ---------
Cash and cash equivalents, end of year ............................       $  10,574        $     554        $   1,851
                                                                          =========        =========        =========
</TABLE>





            See accompanying Note to Condensed Financial Information.


                                      S-5


<PAGE>   79
                                                                     SCHEDULE II







                        JOHN ALDEN FINANCIAL CORPORATION
                              (PARENT COMPANY ONLY)
                         CONDENSED FINANCIAL INFORMATION

                     NOTE TO CONDENSED FINANCIAL INFORMATION





       The accompanying condensed financial statements should be read in
conjunction with the Consolidated Financial Statements and the accompanying
notes thereto in this Form 10-K.





                                      S-6

<PAGE>   80
                                                                    SCHEDULE III






                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                       SUPPLEMENTARY INSURANCE INFORMATION

                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                  AS OF OR FOR THE YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------------
                                                                   1997            1996            1995
                                                              --------------   -------------    ------------

<S>                                                            <C>              <C>              <C>
Deferred policy acquisition costs ......................       $   32,161       $  239,622       $  197,667
Future policy benefits, losses, claims and loss expenses          739,440        6,730,708        6,731,849
Unearned premiums ......................................           29,065          156,924          135,954
Net premium revenues and contract charges earned .......          928,901        1,024,574        1,053,035
Net investment income ..................................           69,293           45,460           50,388
Benefits, claims, losses and expenses ..................          719,455          767,640          778,303
Amortization of deferred policy acquisition costs ......           14,810           13,854           13,455
Other operating expenses ...............................          324,534          334,859          395,226
Net premiums written ...................................          916,951        1,035,823        1,057,032
</TABLE>




                                      S-7



<PAGE>   81
                                                                     SCHEDULE IV


                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                                   REINSURANCE

                             (Dollars in thousands)




<TABLE>
<CAPTION>
                                                                                                          PERCENTAGE
                                                      CEDED TO           ASSUMED                          OF AMOUNT
                                     DIRECT            OTHER            FROM OTHER           NET           ASSUMED
                                    BUSINESS          COMPANIES         COMPANIES          AMOUNT          TO NET
                                   -----------      --------------    -------------      -----------     -----------
<S>                                <C>               <C>               <C>               <C>                 <C>
Year Ended December 31, 1997
----------------------------
     Life insurance in force       $ 9,341,859       $ 1,673,464       $   167,318       $ 7,835,713         2.1%
     Premiums ..............         1,513,818           629,800            90,906           974,924         9.3%
                                                                                                             

Year Ended December 31, 1996
----------------------------
     Life insurance in force       $15,055,957       $ 2,967,777       $   653,840       $12,742,020         5.1%
     Premiums ..............         1,893,176           843,513            62,293         1,111,956         5.6%
                                                                                                             
Year Ended December 31, 1995
----------------------------
     Life insurance in force       $16,837,893       $ 3,158,977       $   720,168       $14,399,084         5.0%
     Premiums ..............         1,980,949           911,564            77,888         1,147,273         6.8%
                                                                                                             
</TABLE>





                                      S-8



<PAGE>   82
                                                                     SCHEDULE V


                JOHN ALDEN FINANCIAL CORPORATION AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

                             (Dollars in thousands)





<TABLE>
<CAPTION>
                                                                  ADDITIONS
                                                    BALANCE AT    CHARGED TO                    BALANCE 
                                                    BEGINNING     COSTS AND                     AT END  
                                                    OF PERIOD     EXPENSES     DEDUCTIONS      OF PERIOD
                                                   -----------  ------------  ------------    ----------
<S>                                                 <C>           <C>           <C>           <C>
Year ended December 31, 1997
----------------------------
Reserve for impairment of mortgage loans ....       $   17,682    $   2,575     $   6,406     $   13,851
Write-down for impairment of real estate ....               --          306           306             --
Allowance for agents balances ...............            1,366          126         1,363            129
Valuation allowance on deferred tax asset ...            1,092           --            --          1,092
                                                    ----------    ---------     ---------     ----------
         Total ..............................       $   20,140    $   3,007     $   8,075     $   15,072
                                                    ==========    =========     =========     ==========
                                                                                                        
                                                                                                        
                                                                                                        
Year ended December 31, 1996                                                                            
----------------------------                                                                            
Reserve for impairment of mortgage loans ....       $   14,274    $   9,681     $   6,273     $   17,682
Write-down for impairment of real estate ....               --          829           829             --
Allowance for agents balances ...............            1,248          118            --          1,366
Valuation allowance on deferred tax asset ...            5,313           --         4,221          1,092
                                                    ----------    ---------     ---------     ----------
         Total ..............................       $   20,835    $  10,628     $  11,323     $   20,140
                                                    ==========    =========     =========     ==========
                                                                                                        
Year ended December 31, 1995                                                                            
----------------------------                                                                            
Reserve for impairment of mortgage loans ....       $   13,161    $  15,046     $  13,933     $   14,274
Write-down for impairment of real estate ....               --        3,157         3,157             --
Allowance for agents balances ...............            2,505           --         1,257          1,248
Valuation allowance on deferred tax asset (1)               --        5,313            --          5,313
                                                    ----------    ---------     ---------     ----------
         Total ..............................       $   15,666    $  23,516     $  18,347     $   20,835
                                                    ==========    =========     =========     ==========
</TABLE>





(1)    Includes approximately $3.7 million which was established upon the
       consolidation of a joint venture previously accounted for under the
       equity method.



                                      S-9



<PAGE>   83
                                 Exhibit Index
                                 -------------

<TABLE>
<CAPTION>
       Exhibit
       Number         Exhibit
       -------        -------
<S>                   <C>
         3.1          Amended and Restated By-laws of the Registrant dated as
                      of May 17, 1995.  Filed as Exhibit 3.1 to the
                      Registrant's Quarterly Report on Form 10-Q for the
                      quarterly period ended September 30, 1995 (Commission
                      File No. 1-11396) and incorporated herein by reference.

         3.2          Amended and Restated Certificate of Incorporation of the
                      Registrant as filed with the Secretary of State of
                      Delaware on September 23, 1992.  Filed as Exhibit 3.4 to
                      the Registrant's Annual Report on Form 10-K for the
                      fiscal year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.

         3.3          Certificate of Amendment to Amended and Restated
                      Certificate of Incorporation of Registrant as filed with
                      the Secretary of State of Delaware on October 2, 1992.
                      Filed as Exhibit 3.5 to the Registrant's Annual Report on
                      Form 10-K for the fiscal year ended December 31, 1992
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.

         3.4          Amended and Restated By-laws of the Registrant dated as
                      of September 12, 1996, filed as Exhibit 3 to the
                      Registrant's Quarterly Report on Form 10-Q for the
                      quarterly period ended September 30, 1996 (Commission
                      File No. 1-11396) and incorporated herein by reference.

         4.1          Amended and Restated Certificate of Designation of
                      150,000 shares of 9% Cumulative Preferred Stock.  Filed
                      as Exhibit 4.3 to the Registrant's Annual Report on Form
                      10-K for the fiscal year ended December 31, 1992
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.

         4.2          Credit Agreement among the Registrant, Certain Commercial
                      Lending Institutions (named therein) and The Chase
                      Manhattan Bank (National Association) dated February 17,
                      1993.  Filed as Exhibit 4.8 to the Registrant's Annual
                      Report on Form 10-K for the fiscal year ended December
                      31, 1992 (Commission File No. 1-11396) and incorporated
                      herein by reference.

         4.3          Pledge Agreement among the Registrant, John Alden Systems
                      Company, JA Services, Inc.  and The Chase Manhattan Bank
                      (National Association) dated February 17, 1993.  Filed as
                      Exhibit 4.9 to the Registrant's Annual Report on Form
                      10-K for the fiscal year ended December 31, 1992
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.

         4.4          Sister Company Guarantee among John Alden Systems
                      Company, JAFCO, Western Diversified Services, Inc., JA
                      Services, Inc., John Alden Asset Management Company,
                      Anchor Benefit Consulting, Inc., LensCard Systems
                      Corporation and The Chase Manhattan Bank (National
                      Association) dated February 17, 1993.  Filed as Exhibit
                      4.10 to the Registrant's Annual Report on Form 10-K for
                      the fiscal year ended December 31, 1992 (Commission File
                      No. 1-11396) and incorporated herein by reference.

        10.1          Compensation Letter Agreement between the Registrant and
                      the Management Stockholders dated October 30, 1987.
                      Filed as Exhibit 10.5 to the Registrant's Registration
                      Statement (No. 33-47644) on Form S-1 and incorporated
                      herein by reference.

        10.2          Loan Agreement between the Registrant and General
                      Electric Capital Corporation dated October 30, 1987.
                      Filed as Exhibit 10.7 to the Registrant's Registration
                      Statement (No. 33-47644) on Form S-1 and incorporated
                      herein by reference.

        10.3          Term Note dated October 30, 1987 in the principal amount
                      of $87,000,000.  Filed as Exhibit 10.8 to the
                      Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.
</TABLE>





<PAGE>   84

<TABLE>
<CAPTION>
       Exhibit
       Number         Exhibit
       -------        -------
<S>                   <C>
        10.4          Intermediate Term Note dated October 30, 1987 in the
                      principal amount of $76,350,000.  Filed as Exhibit 10.9
                      to the Registrant's Registration Statement (No. 33-47644)
                      on Form S-1 and incorporated herein by reference.

        10.5          Bridge Note dated October 30, 1987 in the principal
                      amount of $75,000,000.  Filed as Exhibit 10.10 to the
                      Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.

        10.6          Revolving Credit Note dated October 30, 1987 in the
                      principal amount of $15,000,000.  Filed as Exhibit 10.11
                      to the Registrant's Registration Statement (No. 33-47644)
                      on Form S-1 and incorporated herein by reference.

        10.7          Surplus Debenture dated October 30, 1987 in the principal
                      amount of $155,000,000.  Filed as Exhibit 10.12 to the
                      Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.

        10.8          Subordinated Surplus Debenture dated October 30, 1987 in
                      the principal amount of $72,000,000.  Filed as Exhibit
                      10.13 to the Registrant's Registration Statement (No.
                      33-47644) on Form S-1 and incorporated herein by
                      reference.

        10.9          Pledge and Security Agreement dated October 30, 1987,
                      made by the Registrant to General Electric Capital
                      Corporation.  Filed as Exhibit 10.14 to the Registrant's
                      Registration Statement (No. 33-47644) on Form S-1 and
                      incorporated herein by reference.

        10.10         Employment Agreement dated December 13, 1988, between the
                      Registrant and Lloyd E.  Gearhart.  Filed as Exhibit
                      10.20 to the Registrant's Registration Statement (No.
                      33-47644) on Form S-1 and incorporated herein by
                      reference.

        10.11         John Alden Retirement Plan as Amended and Restated
                      effective January 1, 1989.  Filed as Exhibit 10.21 to the
                      Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.

        10.12         John Alden Senior Executive Supplemental Retirement Plan
                      effective January 1, 1990.  Filed as Exhibit 10.22 to the
                      Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.

        10.13         Supplemental Executive Retirement Plan effective December
                      1, 1984.  Filed as Exhibit 10.22 to the Registrant's
                      Registration Statement (No. 33-47644) on Form S-1 and
                      incorporated herein by reference.

        10.14         Indemnity Coinsurance Agreement between JALIC and Oxford
                      Life Insurance Company, dated January 1, 1989.  Filed as
                      Exhibit 10.24 to the Registrant's Registration Statement
                      (No. 33-47644) on Form S-1 and incorporated herein by
                      reference.

        10.15         Indemnity Coinsurance Agreement between JALIC and
                      Reliance Standard Life Insurance Company dated June 30,
                      1990.  Filed as Exhibit 10.25 to the Registrant's
                      Registration Statement (No. 33-47644) on Form S-1 and
                      incorporated herein by reference.

        10.16         Indemnity Coinsurance Agreement between JALIC and
                      Reliance Standard Life Insurance Company dated October
                      31, 1990.  Filed as Exhibit 10.26 to the Registrant's
                      Registration Statement (No. 33-47644) on Form S-1 and
                      incorporated herein by reference.
</TABLE>





<PAGE>   85

<TABLE>
<CAPTION>
       Exhibit
       Number         Exhibit
       -------        -------
<S>                   <C>
        10.17         Indemnity Coinsurance Agreement between JANY and The
                      Franklin Life Insurance Company dated March 31, 1991.
                      Filed as Exhibit 10.27 to the Registrant's Registration
                      Statement (No. 33-47644) on Form S-1 and incorporated
                      herein by reference.

        10.18         Reinsurance Agreement among JALIC, London Life Insurance
                      Company and Transamerica Occidental Life Insurance
                      Company dated October 1, 1991.  Filed as Exhibit 10.28 to
                      the Registrant's Registration Statement (No. 33-47644) on
                      Form S-1 and incorporated herein by reference.

        10.19         Reinsurance Agreement between Western Diversified Life
                      Insurance Company and ITT Lyndon Property Insurance
                      Company dated December 1, 1991.  Filed as Exhibit 10.29
                      to the Registrant's Registration Statement (No. 33-47644)
                      on Form S-1 and incorporated herein by reference.

        10.20         Reinsurance Agreement between JALIC and Lincoln National
                      Reassurance Company dated December 31, 1991.  Filed as
                      Exhibit 10.30 to the Registrant's Registration Statement
                      (No. 33-47644) on Form S-1 and incorporated herein by
                      reference.

        10.21         Letter Agreement among Merrill Lynch Capital Partners,
                      Inc., GE Capital, ERC, the Management Stockholders and
                      the Registrant dated August 26, 1992.  Filed as Exhibit
                      10.31 to the Registrant's Annual Report on Form 10-K for
                      the fiscal year ended December 31, 1992 (Commission File
                      No. 1-11396) and incorporated herein by reference.

        10.22         Employment Agreement between the Registrant and Glendon
                      E. Johnson dated October 2, 1992.  Filed as Exhibit 10.32
                      to the Registrant's Annual Report on Form 10-K for the
                      fiscal year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.

        10.23         John Alden Financial Corporation Employee Stock Purchase
                      Plan.  Filed as Exhibit 4.3 to the Registrant's
                      Registration Statement (No. 33-55230) on Form S-8 and
                      incorporated herein by reference.

        10.24         John Alden Financial Corporation Long-Term Incentive
                      Plan.  Filed as Exhibit 4.5 to the Registrant's
                      Registration Statement (No. 33-56656) on Form S-8 and
                      incorporated herein by reference.

        10.25         Amended and Restated Registration Rights Agreement
                      between the Registrant and General Electric Capital
                      Corporation dated as of October 2, 1992.  Filed as
                      Exhibit 10.35 to the Registrant's Annual Report on Form
                      10-K for the fiscal year ended December 31, 1992
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.

        10.26         Amended and Restated Registration Rights Agreement
                      between the Registrant and Merrill Lynch Capital
                      Partners, Inc. dated as of October 2, 1992.  Filed as
                      Exhibit 10.36 to the Registrant's Annual Report on Form
                      10-K for the fiscal year ended December 31, 1992
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.

        10.27         Amended and Restated Registration Rights Agreement among
                      the Registrant and Management Stockholders dated as of
                      October 2, 1992.  Filed as Exhibit 10.37 to the
                      Registrant's Annual Report on Form 10-K for the fiscal
                      year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.
</TABLE>





<PAGE>   86

<TABLE>
<CAPTION>
       Exhibit
       Number         Exhibit
       -------        -------
<S>                   <C>
        10.28         Consent and Amendment to Loan Agreement between the
                      Registrant and General Electric Capital Corporation dated
                      September 22, 1992.  Filed as Exhibit 10.38 to the
                      Registrant's Annual Report on Form 10-K for the fiscal
                      year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.

        10.29         Agreement to Amend Warrant between the Registrant and
                      General Electric Capital Corporation dated September 22,
                      1992.  Filed as Exhibit 10.39 to the Registrant's Annual
                      Report on Form 10-K for the fiscal year ended December
                      31, 1992 (Commission File No. 1-11396) and incorporated
                      herein by reference.

        10.30         Agreement to Amend Warrant between the Registrant and
                      Employers Reinsurance Corporation dated September 22,
                      1992.  Filed as Exhibit 10.40 to the Registrant's Annual
                      Report on Form 10-K for the fiscal year ended December
                      31, 1992 (Commission File No. 1-11396) and incorporated
                      herein by reference.

        10.31         Amended and Restated Management Stockholders Agreement
                      among the Management Stockholders and the Registrant
                      dated February 17, 1993.  Filed as Exhibit 10.42 to the
                      Registrant's Annual Report on Form 10-K for the fiscal
                      year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.

        10.32         North Star Marketing Organization Long-Term Incentive
                      Plan.  Filed as Exhibit 4.3 to the Registrant's
                      Registration Statement (No. 33-56544) on Form S-8 and
                      incorporated herein by reference.

        10.33         John Alden Financial Corporation Employee Savings
                      Incentive Plan, as amended, together with Amendments 1
                      through 5 thereto.  Filed as Exhibit 4.3 to the
                      Registrant's Registration Statement (No. 33-56656) on
                      Form S-8 and incorporated herein by reference.

        10.34         Letter agreement among the Registrant and the Management
                      Stockholders dated October 2, 1992.  Filed as Exhibit
                      10.50 to the Registrant's Annual Report on Form 10-K for
                      the fiscal year ended December 31, 1992 (Commission File
                      No. 1-11396) and incorporated herein by reference.

        10.35         Stock and Warrant Purchase Agreement among Emperion
                      Corporation, Electronic Data Systems Corporation and JA
                      Services, Inc. dated December 17, 1991.  Filed as Exhibit
                      10.51 to the Registrant's Annual Report on Form 10-K for
                      the fiscal year ended December 31, 1992 (Commission File
                      No. 1-11396) and incorporated herein by reference.

        10.36         Amendment to Stock and Warrant Purchase Agreement dated
                      December 30, 1992.  Filed as Exhibit 10.52 to the
                      Registrant's Annual Report on Form 10-K for the fiscal
                      year ended December 31, 1992 (Commission File No.
                      1-11396) and incorporated herein by reference.

        10.37         Revolving Credit Agreement among John Alden Systems
                      Company and The Chase Manhattan Bank (National
                      Association), Barnett Bank of South Florida, N.A. and
                      Shawmut Bank Connecticut, N.A. dated December 31, 1993.
                      Filed as Exhibit 10.53 to the Registrant's Annual Report
                      on Form 10-K for the fiscal year ended December 31, 1993
                      (Commission File No. 1-11396) and incorporated herein by
                      reference.
</TABLE>





<PAGE>   87

<TABLE>
<CAPTION>
       Exhibit
       Number         Exhibit
       -------        -------
<S>                   <C>
        10.38         Amended and Restated Credit Agreement among the
                      Registrant, Certain Commercial Lending Institutions
                      (named therein) and the Chase Manhattan Bank (National
                      Association) dated as of July 27, 1994.  Filed as Exhibit
                      10.42 to the Registrant's Registration Statement (No.
                      33-78662) on Form S-3 and incorporated herein by
                      reference.

        10.39         Agreement dated July 27, 1994 to Amended and Restated
                      Management Stockholders Agreement among the Management
                      Stockholders and the Registrant dated February 17, 1993.
                      Filed as Exhibit 10.54 to the Registrant's Registration
                      Statement (No.  33-78662) on Form S-3 and incorporated
                      herein by reference.

        10.40         Plan of Complete Liquidation and Dissolution of Emperion
                      Corporation. Filed as Exhibit 10.56 to the Registrant's
                      Annual Report on Form 10-K for the fiscal year ended
                      December 31, 1994 (Commission File No. 1-11396) and
                      incorporated herein by reference.

        10.41         Articles of Dissolution of Emperion Corporation dated
                      December 29, 1994.  Filed as Exhibit 10.57 to the
                      Registrant's Annual Report on Form 10-K for the fiscal
                      year ended December 31, 1994 (Commission File No.
                      1-11396) and incorporated herein by reference.

        10.42         Reinsurance Agreement between JALIC and Lincoln National
                      Reinsurance Company Limited dated as of September 30,
                      1995.  Filed as Exhibit 10.1 to the Registrant's
                      Quarterly Report on Form 10-Q for the quarterly period
                      ended September 30, 1995 (Commission File No. 1-11396)
                      and incorporated herein by reference.

        10.43         Trust Agreement among JALIC, Lincoln National Reinsurance
                      Company Limited and The Chase Manhattan Bank, N.A. dated
                      as of October 9, 1995.  Filed as Exhibit 10.2 to the
                      Registrant's Quarterly Report on Form 10-Q for the
                      quarterly period ended September 30, 1995 (Commission
                      File No. 1-11396) and incorporated herein by reference.

        10.44         Amendment dated March 8, 1996 to Amended and Restated
                      Credit Agreement among the Registrant, Certain Commercial
                      Lending Institutions (named therein) and the Chase
                      Manhattan Bank (National Association) dated as of July
                      27, 1994.  Filed as Exhibit 10.44 to the Registrant's
                      Annual Report on Form 10-K for the year ended December
                      31, 1995 (Commission File No. 1-11396) and incorporated
                      herein by reference.

        10.45         Rights Agreement, dated as of December 13, 1996, between
                      John Alden Financial Corporation and Chase Mellon
                      Shareholder Services, L.L.C.  Filed as Exhibit 2 to the
                      Registrant's Form 8-K dated December 13, 1996 (Commission
                      File No. 1-11396) and incorporated herein by reference.

        10.46         Amendment dated November 1, 1996 to reinsurance agreement
                      among JALIC, London Life Insurance Company and
                      TransAmerica Occidental Life Insurance Company dated
                      October 1, 1991.

        10.47         Amendment dated February 28, 1997 to Employment Agreement
                      between the Registrant and Glendon E. Johnson dated
                      October 2, 1992.

        10.48         Stock Purchase and Sale Agreement by and between JALIC and
                      SunAmerica Life Insurance Company ("SunAmerica") dated
                      November 29, 1996.  Filed as Exhibit 10.1 to the
                      Registrant's Current Report on Form  8-K filed April 15,
                      1997 (Commission File No.  1-11396) and incorporated
                      herein by reference.
</TABLE>





<PAGE>   88
<TABLE>
<CAPTION>
        Exhibit
        Number       Exhibit
        -------      -------
<S>                  <C>
        10.49        Asset Purchase and Sale Agreement by and between JALIC and
                     SunAmerica dated November 29, 1996.  Filed as Exhibit 10.2
                     to the Registrant's Current Report on Form 8-K filed April
                     15, 1997 (Commission File No. 1-11396) and incorporated
                     herein by reference.

        10.50        Indemnity Reinsurance Agreement by and between JALIC and
                     SunAmerica dated as of March 31, 1997.  Filed as Exhibit
                     10.3 to the Registrant's Current Report on Form 8-K filed
                     April 15, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.
        10.51        Assumption Reinsurance Agreement dated as of March 31,
                     1997 by and between JALIC and SunAmerica.  Filed as
                     Exhibit 10.4 to the Registrant's Current Report on Form
                     8-K filed April 15, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.52        Trust Agreement by and among SunAmerica as Grantor and
                     JALIC as Beneficiary and Bankers Trust Company as Trustee
                     dated March 31, 1997.  Filed as Exhibit 10.5 to the
                     Registrant's Current Report on Form 8-K filed April 15,
                     1997 (Commission File No.  1-11396) and incorporated
                     herein by reference.

        10.53        Transition Services Agreement between JALIC and SunAmerica
                     dated March 31, 1997.  Filed as Exhibit 10.6 to the
                     Registrant's Current Report on Form 8-K filed April 15,
                     1997 (Commission File No. 1-11396) and incorporated herein
                     by reference.

        10.54        Transition Services Agreement between JALIC and JANY dated
                     March 31, 1997.  Filed as Exhibit 10.7 to the Registrant's
                     Current Report on Form 8-K filed April 15, 1997
                     (Commission File No. 1-11396) and incorporated herein by
                     reference.

        10.55        Administrative Services Agreement between JALIC and
                     SunAmerica dated March 31, 1997.  Filed as Exhibit 10.8 to
                     the Registrant's Current Report on Form 8-K filed April
                     15, 1997 (Commission File No. 1-11396) and incorporated
                     herein by reference.

        10.56        Interim Servicing Agreement between John Alden Asset
                     Management Company, SunAmerica and JANY dated as of March
                     31, 1997.  Filed as Exhibit 10.9 to the Registrant's
                     Current Report on Form 8-K filed April 15, 1997
                     (Commission File No. 1-11396) and incorporated herein by
                     reference.

        10.57        Asset Repurchase Agreement by and between JALIC and
                     SunAmerica dated March 31, 1997.  Filed as Exhibit 10.10
                     to the Registrant's Current Report on Form 8-K filed April
                     15, 1997 (Commission File No. 1-11396) and incorporated
                     herein by reference.

        10.58        Marketing Agreement dated March 28, 1997 by and between
                     SunAmerica and NSM Sales Corporation.  Filed as Exhibit
                     10.11 to the Registrant's Current Report on Form 8-K filed
                     April 15, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.59        Amendment No. 1 dated March 31, 1997 to the Stock Purchase
                     and Sale Agreement dated November 29, 1996 by and between
                     JALIC and SunAmerica.  Filed as Exhibit 10.12 to the
                     Registrant's Current Report on Form 8-K filed April 15,
                     1997 (Commission File No.  1-11396) and incorporated
                     herein by reference.
</TABLE>





<PAGE>   89

<TABLE>
<CAPTION>
        Exhibit
        Number       Exhibit
        -------      --------
<S>                  <C>
        10.60        Amendment No. 1 dated March 31, 1997 to the Asset Purchase
                     and Sale Agreement dated November 29, 1996 by and between
                     JALIC and SunAmerica.  Filed as Exhibit 10.13 to the
                     Registrant's Current Report on Form 8-K filed April 15,
                     1997 (Commission File No. 1-11396) and incorporated
                     herein by reference.

        10.61        Amendment No. 1 to Marketing Agreement between SunAmerica
                     and NSM Sales Corporation.  Filed as Exhibit 10.14 to the
                     Registrant's Current Report on Form 8-K filed April 15,
                     1997 (Commission File No. 1-11396) and incorporated herein
                     by reference.

        10.62        Deferred Compensation Agreement dated April 2, 1997, by
                     and between John Alden Financial Corporation and Glendon
                     E. Johnson.  Filed as Exhibit 10.62 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended March 31, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.63        Amended and Restated Employment Agreement dated November
                     5, 1997, by and between John Alden Financial Corporation
                     and Glendon E. Johnson.  Filed as Exhibit 10.63 to the
                     Registrant's Quarterly Report on Form 10-Q for the
                     quarterly period ended September 30, 1997 (Commission File
                     No. 1-11396) and incorporated herein by reference.

        10.64        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Marvin
                     H. Assofsky.  Filed as Exhibit 10.64 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.65        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Glen A.
                     Spence.  Filed as Exhibit 10.65 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.66        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Scott L.
                     Stanton.  Filed as Exhibit 10.66 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.67        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Michael
                     P. Andersen.  Filed as Exhibit 10.67 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.68        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Lonnie
                     R. Wright, Jr.  Filed as Exhibit 10.68 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.69        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Kerry D.
                     Clemmons.  Filed as Exhibit 10.69 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.
</TABLE>




<PAGE>   90
<TABLE>
<CAPTION>
        Exhibit
        Number       Exhibit
        -------      --------
<S>                  <C>
        10.70        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Mark A.
                     Schoder.  Filed as Exhibit 10.70 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.71        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Anne V.
                     Wardlow.  Filed as Exhibit 10.71 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.72        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and William
                     S. Wilkins.  Filed as Exhibit 10.72 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.73        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and William
                     H. Mauk, Jr.  Filed as Exhibit 10.73 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.74        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and James H.
                     Srite.  Filed as Exhibit 10.74 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.75        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Patsy
                     Campola.  Filed as Exhibit 10.75 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.

        10.76        Change of Control Employment Agreement dated November 5,
                     1997 between John Alden Financial Corporation and Gary F.
                     Kadlec.  Filed as Exhibit 10.76 to the Registrant's
                     Quarterly Report on Form 10-Q for the quarterly period
                     ended September 30, 1997 (Commission File No. 1-11396) and
                     incorporated herein by reference.
               
        10.77        Agreement and Plan of Merger, dated as of March 9, 1998, by
                     and among John Alden Financial Corporation, Fortis, Inc.
                     and JAFCO Acquisition Corp. Filed as Exhibit 2.1 to the 
                     Registrant's Current Report on Form 8-K filed
                     March 19, 1998 (Commission File No. 1-11396) and 
                     incorporated herein by reference.

        10.78        Stock Option Agreement, dated as of March 9, 1998, by and
                     between John Alden Financial Corporation, as issuer, and
                     Fortis, Inc., as grantee. Filed as Exhibit 2.2 to the
                     Registrant's Current Report on Form 8-K filed 
                     March 19, 1998 (Commission File No. 1-11396) and
                     incorporated herein by reference.
        
        *21.1        Subsidiaries of the Registrant.
                     
        *23.1        Consent of Independent Accountants.
                     
        *27.1        Financial Data Schedule.
                     
        *99.1        Financial Statements of the John Alden Financial
                     Corporation Employee Stock Purchase Plan for the year
                     ended December 31, 1997.
</TABLE>


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