<PAGE>

FORTIS BENEFITS INSURANCE COMPANY
MAILING ADDRESS:          STREET ADDRESS:                 PHONE: 1-800-800-2638
P.O. BOX 64272            500 BIELENBERG DRIVE                   EXTENSION 3057
ST. PAUL                  WOODBURY
MINNESOTA 55164           MINNESOTA 55125

This  Prospectus describes interests under flexible premium deferred combination
variable and  fixed annuity  contracts issued  either  on a  group basis  or  as
individual  contracts by Fortis Benefits  Insurance Company ("Fortis Benefits").
Participation in a group  contract will be  accounted for by  the issuance of  a
certificate  showing your interest under the group contract. Participation in an
individual contract is shown by the issuance of an individual annuity  contract.
The  certificate and the  individual contract are hereafter  both referred to as
the "Certificate". The minimum under a  Certificate is generally $5,000 for  the
initial and $1,000 for each subsequent purchase payment.

A  Certificate allows you to  accumulate funds on a  tax-deferred basis. You may
elect a guaranteed interest accumulation  option through Fortis Benefits'  Fixed
Account or a variable return accumulation option through Variable Account D (the
"Variable  Account") of Fortis Benefits, or  a combination of these two options.
Under the variable rate accumulation option, you can choose among one or more of
the following investment  portfolios of  Fortis Series Fund,  Inc. (the  "Series
Fund"):  Money  Market Series,  U.S.  Government Securities  Series, Diversified
Income Series, Global Bond Series,  High Yield Series, Asset Allocation  Series,
Global  Asset Allocation Series,  Value Series, Growth &  Income Series, S&P 500
Index Series, Blue Chip Stock Series, Global Growth Series, Growth Stock Series,
International Stock  Series,  and  Aggressive Growth  Series.  The  accompanying
Prospectus  for Fortis Series Fund describes the investment objectives, policies
and risks of each of the Portfolios. Under the guaranteed interest  accumulation
option,  you can choose among ten different guarantee periods, each of which has
its own interest rate.

The Certificate  provides  several  different  types  of  retirement  and  death
benefits,  including fixed and  variable annuity income  options. Within limits,
you may  make  partial  surrenders  of the  Certificate  Value  or  may  totally
surrender the Certificate for its Cash Surrender Value.

You  have the  right to  examine a Certificate  for ten  days from  the time you
receive the Certificate and return it for a refund of all purchase payments that
have been made, without  interest or appreciation  or depreciation. However,  in
certain  states where permitted by state law the refund will be in the amount of
the then current Certificate Value.

This Prospectus gives prospective  investors information about the  Certificates
that they should know before investing. This Prospectus must be accompanied by a
current  Prospectus of Fortis Series Fund, Inc. Both Prospectuses should be read
carefully and kept for future reference.

A Statement of Additional Information, dated May 1, 1997, about certain  aspects
of  the Certificates has been filed  with the Securities and Exchange Commission
and is available without charge, from  Fortis Benefits at the address and  phone
number  printed above.  The Table  of Contents  for the  Statement of Additional
Information appears on page 22 of this Prospectus.

THESE POLICIES ARE NOT OBLIGATIONS OF,  OR GUARANTEED OR ENDORSED BY, ANY  BANK,
CREDIT  UNION,  BROKER-DEALER  OR  OTHER  FINANCIAL  INSTITUTION.  THEY  ARE NOT
FEDERALLY INSURED  BY THE  FEDERAL DEPOSIT  INSURANCE CORPORATION,  THE  FEDERAL
RESERVE  BOARD, OR ANY OTHER AGENCY; AND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE  NOT BEEN APPROVED  OR DISAPPROVED BY  THE SECURITIES  AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
FORTIS
MASTERS
VARIABLE
ANNUITY

Certificates Under Flexible
Premium Deferred

Combination Variable and
Fixed Annuity Contracts
<PAGE>
PROSPECTUS DATED
May 1, 1997

[FORTIS LOGO]

95961 (Ed. 5/97)
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                             PAGE
<S>                                                                                                        <C>
Special Terms Used in this Prospectus....................................................................          3
Information Concerning Fees and Charges..................................................................          4
Summary of Certificate Features..........................................................................          7
    - Fortis Benefits/Fortis Financial Group Member......................................................          9
The Variable Account.....................................................................................          9
Series Fund..............................................................................................          9
The Fixed Account........................................................................................          9
    - Guaranteed Interest Rates/Guarantee Periods........................................................          9
    - Market Value Adjustment............................................................................         10
    - Investments by Fortis Benefits.....................................................................         10
Accumulation Period......................................................................................         11
    - Issuance of a Certificate and Purchase Payments....................................................         11
    - Certificate Value..................................................................................         11
    - Allocation of Purchase Payments and Certificate Value..............................................         11
    - Total and Partial Surrenders.......................................................................         12
    - Benefit Payable on Death of Annuitant or Participant...............................................         12
The Annuity Period.......................................................................................         13
    - Annuity Commencement Date..........................................................................         13
    - Commencement of Annuity Payments...................................................................         13
    - Relationship Between Subaccount Investment Performance and Amount of Variable Annuity Payments.....         14
    - Annuity Forms......................................................................................         14
    - Death of Annuitant or Other Payee..................................................................         14
Charges and Deductions...................................................................................         14
    - Premium Taxes......................................................................................         14
    - Charges Against the Variable Account...............................................................         14
    - Tax Charge.........................................................................................         15
    - Surrender Charge...................................................................................         15
    - Miscellaneous......................................................................................         16
    - Reduction of Charges...............................................................................         16
General Provisions.......................................................................................         16
    - The Certificates...................................................................................         16
    - Postponement of Payment............................................................................         16
    - Misstatement of Age or Sex and Other Errors........................................................         16
    - Assignment.........................................................................................         16
    - Beneficiary........................................................................................         16
    - Reports............................................................................................         16
Rights Reserved By Fortis Benefits.......................................................................         16
Distribution.............................................................................................         17
Federal Tax Matters......................................................................................         17
Further Information about Fortis Benefits................................................................         19
    - General............................................................................................         19
    - Selected Financial Data............................................................................         19
    - Management's Discussion and Analysis of Financial Condition and Results of Operations..............         19
    - Directors and Executive Officers...................................................................         22
    - Executive Compensation.............................................................................         22
    - Ownership of Securities............................................................................         23
Voting Privileges........................................................................................         23
Legal Matters............................................................................................         24
Other Information........................................................................................         24
Contents of Statement of Additional Information..........................................................         24
Fortis Benefits Financial Statements.....................................................................         25
Appendix A--Sample Market Value Adjustment Calculations..................................................        A-1
Appendix B--Sample Death Benefit Calculations............................................................        B-1
Appendix C--Explanation of Expense Calculations..........................................................        C-1
</TABLE>

THE  CERTIFICATES  ARE NOT  AVAILABLE IN  ALL STATES.  THIS PROSPECTUS  DOES NOT
CONSTITUTE AN  OFFERING IN  ANY  JURISDICTION IN  WHICH  SUCH OFFERING  MAY  NOT
LAWFULLY  BE  MADE.  FORTIS  BENEFITS  DOES  NOT  AUTHORIZE  ANY  INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS  NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY  SUPPLEMENTS THERETO  OR IN  ANY SUPPLEMENTAL  SALES MATERIAL  AUTHORIZED BY
FORTIS BENEFITS.
<PAGE>
SPECIAL TERMS USED IN THIS PROSPECTUS

<TABLE>
<S>              <C>
ACCUMULATION     The  time  period under  a  Certificate between  the Certificate  Issue  Date and  the Annuity
PERIOD           Commencement Date.
ACCUMULATION     A unit of measure used to calculate the Participants' interest in the Variable Account  during
UNIT             the Accumulation Period.
ANNUITANT        A  person during  whose life  annuity payments  are to  be made  by Fortis  Benefits under the
                 Certificate.
ANNUITY          The date on which the Annuity Period commences.
COMMENCEMENT
DATE
ANNUITY PERIOD   The time period following the Accumulation Period,  during which annuity payments are made  by
                 Fortis Benefits.
ANNUITY UNIT     A unit of measurement used to calculate variable annuity payments.
BENEFICIARY      The person entitled to receive benefits under the terms of the Certificate.
CASH SURRENDER   The  amount payable to  the Participant on  surrender of the  Certificate after all applicable
VALUE            adjustments and deduction of all applicable charges.
CERTIFICATE      The date on which the Certificate becomes effective as shown on the Certificate Data Page.
ISSUE DATE
CERTIFICATE      The sum of the Fixed Account Value and the Variable Account Value.
VALUE
FIXED ACCOUNT    The name of the  alternative under which  purchase payments are  allocated to Fortis  Benefits
                 General Account.
FIXED ACCOUNT    The amount of your Certificate Value which is in the Fixed Account.
VALUE
FIXED ANNUITY    An annuity option under which Fortis Benefits promises to pay the Annuitant or any other payee
OPTION           that you designate one or more fixed payments.
GENERAL ACCOUNT  All  assets of Fortis Benefits other than those  in the Variable Account, and other than those
                 in any other legally segregated separate account established by Fortis Benefits.
GUARANTEED       The rate of interest we credit during any Guarantee Period, on an effective annual basis.
INTEREST RATE
GUARANTEE        The period for which a Guaranteed Interest Rate is credited.
PERIOD
HOME OFFICE      Our office at 500 Bielenberg Drive, Woodbury, Minnesota 55125; 1-800-800-2638, extension 3057;
                 Mailing address: P.O. Box 64272, St. Paul, MN 55164.
MARKET VALUE     Positive or negative adjustment in Fixed Account Value that we make if such value is paid  out
ADJUSTMENT       more  than fifteen days before  or after the end  of a Guarantee Period  in which it was being
                 held.
NET PURCHASE     The gross  amount  of  a  purchase  payment less  any  applicable  premium  taxes  or  similar
PAYMENT          governmental assessments.
NON-QUALIFIED    Certificates  that do not qualify  for the special federal  income tax treatment applicable in
CERTIFICATES     connection with certain retirement plans.
PARTICIPANT      The person or company named in the application for a Certificate, who is entitled to  exercise
                 all rights and privileges of ownership under the Certificate during the Accumulation Period.
PORTFOLIO        Each  separate investment  portfolio of  Series Fund eligible  for investment  by the Variable
                 Account.
QUALIFIED        Certificates that are  qualified for the  special federal income  tax treatment applicable  in
CERTIFICATES     connection with certain retirement plans.
SERIES FUND      Fortis  Series Fund, Inc., a diversified, open-end  management investment company in which the
                 Variable Account invests.
SEVEN YEAR       The seventh anniversary of a Certificate  Issue Date, and each subsequent seventh  anniversary
ANNIVERSARY      of that date.
SUBACCOUNTS      The  several  Subaccounts of  the Variable  Account, each  of  which invests  its assets  in a
                 different Portfolio.
VALUATION DATE   All business days except, with respect to any Subaccount, days on which the related  Portfolio
                 does  not value its shares. Generally,  the Portfolios value their shares  on each day the New
                 York Stock Exchange is open.
VALUATION        The period that starts at  the close of regular  trading on the New  York Stock Exchange on  a
PERIOD           Valuation Date and ends at the close of regular trading on the exchange on the next succeeding
                 Valuation Date.
VARIABLE         The  segregated asset account referred  to as Variable Account  D of Fortis Benefits Insurance
ACCOUNT          Company established to receive and invest purchase payments under Certificates.
VARIABLE         The amount of your Certificate Value in the Subaccounts of the Variable Account.
ACCOUNT VALUE
</TABLE>

                                       3
<PAGE>
<TABLE>
<S>              <C>
VARIABLE         An annuity option under which Fortis Benefits promises to pay the Annuitant or any other payee
ANNUITY OPTION   chosen by you one or more payments which vary in amount in accordance with the net  investment
                 experience of the Subaccounts selected by the Annuitant.
WRITTEN REQUEST  A written, signed and dated request, in form and substance satisfactory to Fortis Benefits and
                 received at our Home Office.
</TABLE>

 INFORMATION CONCERNING FEES AND CHARGES

 PARTICIPANT TRANSACTION CHARGES

<TABLE>
<S>                                                                        <C>
Front-End Sales Charge Imposed on Purchases..............................   0%
Maximum Surrender Charge for Sales Expenses..............................   7%(1)
</TABLE>

<TABLE>
<CAPTION>
                                    SURRENDER CHARGE AS A
    NUMBER OF YEARS SINCE           PERCENTAGE OF PURCHASE
PURCHASE PAYMENT WAS CREDITED              PAYMENT
------------------------------      ----------------------
<S>                                 <C>
                   Less than 1                 7%
    At least 1 but less than 2                 6%
    At least 2 but less than 3                 5%
    At least 3 but less than 4                 4%
    At least 4 but less than 5                 3%
    At least 5 but less than 6                 2%
    At least 6 but less than 7                 1%
                     7 or more                 0%
</TABLE>

<TABLE>
<S>                                                                     <C>
       Other Surrender Fees...........................................     0%
       Exchange Fee...................................................     0%
ANNUAL CERTIFICATE ADMINISTRATION CHARGE..............................  $  0
VARIABLE ACCOUNT ANNUAL EXPENSES
 (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
        Mortality and Expense Risk Charge.............................  1.25%
        Variable Account Administrative Charge........................   .10%
                                                                         ---
          Total Variable Account Annual Expenses......................  1.35%
OPTIONAL VARIABLE ACCOUNT ANNUAL EXPENSES
 (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
        Enhanced Death Benefit Current Charge.........................   .15%
There  is  an  Enhanced Death  Benefit  which can  be  selected at  the  time of
application. The current charge  is a mortality risk  charge as set forth  above
and  this change can be increased to a  maximum of .30% of the average daily net
assets  of   the  Variable   Account.  (See   "Charges  Against   the   Variable
Account--Enhanced  Death Benefit Charge.") There are two sets of examples below.
One set has been calculated with  the current Enhanced Death Benefit Charge  and
the other set has been calculated without it.
</TABLE>

 ---------------------------------
 (1) This  charge does not  apply in certain cases  such as partial surrenders
     each year of up to  10% of "new purchase  payments" as defined under  the
     heading "surrender charge," or payment of a death benefit.

 MARKET VALUE ADJUSTMENT WITH RESPECT TO FIXED ACCOUNT
 Surrenders and other withdrawals from the Fixed Account more than fifteen days
 from  the end of a Guarantee Period  are subject to a Market Value Adjustment.
 The Market Value Adjustment may increase or reduce the Fixed Account Value. It
 is computed  pursuant to  a formula  that is  described in  more detail  under
 "Market Value Adjustment."

 SERIES FUND ANNUAL EXPENSES (A)
<TABLE>
<CAPTION>
                                  U.S.                                                     GLOBAL
                      MONEY    GOVERNMENT   DIVERSIFIED   GLOBAL    HIGH      ASSET        ASSET               GROWTH &
                      MARKET   SECURITIES     INCOME       BOND    YIELD    ALLOCATION   ALLOCATION   VALUE     INCOME
                      SERIES     SERIES       SERIES      SERIES   SERIES     SERIES       SERIES     SERIES    SERIES
                      ------   ----------   -----------   ------   ------   ----------   ----------   ------   --------
<S>                   <C>      <C>          <C>           <C>      <C>      <C>          <C>          <C>      <C>
Investment Advisory
 and Management
 Fee................
Other Expenses......
Total Series Fund
 Operating
 Expenses...........

<CAPTION>
                                 BLUE
                      S&P 500    CHIP    GLOBAL   GROWTH                   AGGRESSIVE
                       INDEX    STOCK    GROWTH   STOCK    INTERNATIONAL     GROWTH
                      SERIES    SERIES   SERIES   SERIES   STOCK SERIES      SERIES
                      -------   ------   ------   ------   -------------   ----------
<S>                   <C>       <C>      <C>      <C>      <C>             <C>
Investment Advisory
 and Management
 Fee................
Other Expenses......
Total Series Fund
 Operating
 Expenses...........
</TABLE>

 ---------------------------------
 (a) As  a percentage  of Series average  net assets based  on 1996 historical
     data.

                                       4
<PAGE>

 EXAMPLES*
 CALCULATED WITHOUT CURRENT ENHANCED DEATH BENEFIT CHARGE (See Charges  Against
 the Variable Account--Deduction for Enhanced Death Benefit Charge)

 If  you SURRENDER  your Certificate  in full  at the  end of  any of  the time
 periods shown below,  you would  pay the  following cumulative  expenses on  a
 $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE
PORTFOLIO:                                                           1 YEAR       3 YEARS      5 YEARS     10 YEARS
                                                                   -----------  -----------  -----------  -----------
<S>                                                                <C>          <C>          <C>          <C>
Money Market Series..............................................
U.S. Government Securities Series................................
Diversified Income Series........................................
Global Bond Series...............................................
High Yield Series................................................
Asset Allocation Series..........................................
Global Asset Allocation Series...................................
Growth & Income Series...........................................
Growth Stock Series..............................................
Global Growth Series.............................................
Aggressive Growth Series.........................................
International Stock Series.......................................
S&P 500 Index Series.............................................
Blue Chip Stock Series...........................................
Value Series.....................................................
</TABLE>

 If  you  COMMENCE  AN  ANNUITY  payment  option,  or  do  NOT  surrender  your
 Certificate or commence an annuity payment option, you would pay the following
 cumulative expenses on  a $1,000 investment,  assuming a 5%  annual return  on
 assets:

<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE
PORTFOLIO:                                                           1 YEAR       3 YEARS      5 YEARS     10 YEARS
                                                                   -----------  -----------  -----------  -----------
<S>                                                                <C>          <C>          <C>          <C>
Money Market Series..............................................
U.S. Government Securities Series................................
Diversified Income Series........................................
Global Bond Series...............................................
High Yield Series................................................
Asset Allocation Series..........................................
Global Asset Allocation Series...................................
Growth & Income Series...........................................
Growth Stock Series..............................................
Global Growth Series.............................................
Aggressive Growth Series.........................................
International Stock Series.......................................
S&P 500 Index Series.............................................
Blue Chip Stock Series...........................................
Value Series.....................................................
</TABLE>

                                       5
<PAGE>
 CALCULATED WITH CURRENT ENHANCED DEATH BENEFIT CHARGE (See Charges Against the
 Variable Account--Deduction for Enhanced Death Benefit Charge)

 If  you SURRENDER  your Certificate  in full  at the  end of  any of  the time
 periods shown below,  you would  pay the  following cumulative  expenses on  a
 $1,000 investment, assuming a 5% annual return on assets:

<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE
PORTFOLIO:                                                           1 YEAR       3 YEARS      5 YEARS     10 YEARS
                                                                   -----------  -----------  -----------  -----------
<S>                                                                <C>          <C>          <C>          <C>
Money Market Series..............................................
U.S. Government Securities Series................................
Diversified Income Series........................................
Global Bond Series...............................................
High Yield Series................................................
Asset Allocation Series..........................................
Global Asset Allocation Series...................................
Growth & Income Series...........................................
Growth Stock Series..............................................
Global Growth Series.............................................
Aggressive Growth Series.........................................
International Stock Series.......................................
S&P 500 Index Series.............................................
Blue Chip Stock Series...........................................
Value Series.....................................................
</TABLE>

 If  you  COMMENCE  AN  ANNUITY  payment  option,  or  do  NOT  surrender  your
 Certificate or commence an annuity payment option, you would pay the following
 cumulative expenses on  a $1,000 investment,  assuming a 5%  annual return  on
 assets:

<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE
PORTFOLIO:                                                           1 YEAR       3 YEARS      5 YEARS     10 YEARS
                                                                   -----------  -----------  -----------  -----------
<S>                                                                <C>          <C>          <C>          <C>
Money Market Series..............................................
U.S. Government Securities Series................................
Diversified Income Series........................................
Global Bond Series...............................................
High Yield Series................................................
Asset Allocation Series..........................................
Global Asset Allocation Series...................................
Growth & Income Series...........................................
Growth Stock Series..............................................
Global Growth Series.............................................
Aggressive Growth Series.........................................
International Stock Series.......................................
S&P 500 Index Series.............................................
Blue Chip Stock Series...........................................
Value Series.....................................................
</TABLE>

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

 * Does not include the effect of any Market Value Adjustment.

 THE  EXAMPLES  SHOULD NOT  BE CONSIDERED  A REPRESENTATION  OF PAST  OR FUTURE
 EXPENSES, AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

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

 The foregoing tables and examples are included to assist you in  understanding
 the  transaction and operating  expenses imposed directly  or indirectly under
 the Certificates and Series Fund. Amounts  for state premium taxes or  similar
 assessments will also be deducted, where applicable.

 See  Appendix C for an explanation of the calculation of the amounts set forth
 above.

                                       6
<PAGE>
SUMMARY OF CERTIFICATE FEATURES

The   following  summary  should  be  read  in  conjunction  with  the  detailed
information in this  Prospectus. Variations  from the  information appearing  in
this  Prospectus due to  requirements particular to your  state are described in
supplements which are  attached to this  Prospectus, or in  endorsements to  the
Certificate as appropriate.

The  Certificates are designed  to provide individuals  with retirement benefits
through the accumulation of Net Purchase Payments on a fixed or variable  basis,
and  by  the application  of  such accumulations  to  provide fixed  or variable
annuity payments.

"We," "our," and "us" mean Fortis  Benefits Insurance Company. "You" and  "your"
mean  a reader of this Prospectus  who is contemplating making purchase payments
or taking any other action in connection with a Certificate.

PURCHASE PAYMENTS
The initial purchase payment under a Certificate must be at least $5,000 ($2,000
for a  Certificate  pursuant  to  a  qualified  contract).  Additional  purchase
payments  under  a Certificate  must  be at  least  $1,000. See  "Issuance  of a
Certificate and Purchase Payments."

On the Certificate  Issue Date, the  initial purchase payment  is allocated,  as
specified  by the Participant in the  Certificate application, among one or more
of the Subaccounts of the Variable Account,  or to one or more of the  Guarantee
Periods  in the Fixed Account, or  to a combination thereof. Subsequent purchase
payments are allocated  in the  same way,  or pursuant  to different  allocation
percentages that the Participant may subsequently request In Writing.

VARIABLE ACCOUNT INVESTMENT OPTIONS
Each  of  the  Subaccounts  of  the Variable  Account  invests  in  shares  of a
corresponding Portfolio  of  Series  Fund.  Certificate Value  in  each  of  the
Subaccounts  of  the  Variable  Account  will  vary  to  reflect  the investment
experience of each of  the corresponding Portfolios, as  well as deductions  for
certain charges.

Each  Portfolio has a separate and  distinct investment objective and is managed
by Fortis  Advisers,  Inc. or  a  subadviser of  Fortis  Advisers, Inc.  A  full
description  of the Portfolios and  their investment objectives, policies, risks
and expenses  can be  found in  the current  Prospectus for  Series Fund,  which
accompanies this Prospectus, and Series Fund Statement of Additional Information
which is available upon request.

FIXED ACCOUNT INVESTMENT OPTIONS
Any  amount allocated by the Participant to the Fixed Account earns a Guaranteed
Interest Rate. The level of the  Guaranteed Interest Rate depends on the  length
of the Guarantee Period selected by the Participant. We currently make available
ten different Guarantee Periods, ranging from one to ten years.

If  amounts are transferred, surrendered or otherwise paid out more than fifteen
days before or after the end of the applicable Guarantee Period, a Market  Value
Adjustment  will be applied to increase or  decrease the amount of Fixed Account
Value that is paid out. Accordingly,  the Market Value Adjustment can result  in
gains or losses to you.

THE  FIXED ACCOUNT INVESTMENT OPTION IS NOT AVAILABLE FOR CERTIFICATES ISSUED IN
THE STATES OF PENNSYLVANIA AND NEVADA.

For a more complete discussion of  the Fixed Account investment options and  the
Market Value Adjustment, see "The Fixed Account."

TRANSFERS
During the Accumulation Period, you can transfer all or part of your Certificate
Value  from one Subaccount to another or  into the Fixed Account and, subject to
any Market Value  Adjustment, from  one Guarantee Period  to another  or into  a
Subaccount.  There is  currently no charge  for these transfers.  We reserve the
right to restrict the frequency of or otherwise condition, terminate, or  impose
charges upon, transfers from a Subaccount during the Accumulation Period. During
the  Annuity Period the  person receiving annuity  payments may make  up to four
transfers (but not from a Fixed Annuity Option) during each year of the  Annuity
Period.  For  a  description  of certain  limitations  on  transfer  rights, see
"Allocations of Purchase Payments and Certificate Value--Transfers."

TOTAL OR PARTIAL SURRENDERS
Subject to  certain conditions,  all or  part of  the Certificate  Value may  be
surrendered  by the Participant  before the earlier of  the Annuitant's death or
the Annuity Commencement Date. Amounts surrendered may be subject to a surrender
charge and,  in addition,  amounts surrendered  from the  Fixed Account  may  be
subject  to  a  Market Value  Adjustment.  See "Total  and  Partial Surrenders,"
"Surrender Charge" and "Market Value Adjustment." Particular attention should be
paid to the tax implications of any surrender, including possible penalties  for
premature distributions. See "Federal Tax Matters."

ANNUITY PAYMENTS
The Contract provides several types of annuity benefits to Participants or other
persons  they properly designate  to receive such  payments, including Fixed and
Variable Annuity  Options.  The  Participant  has  considerable  flexibility  in
choosing  the Annuity  Commencement Date.  However, the  tax implications  of an
Annuity  Commencement  Date   must  be  carefully   considered,  including   the
possibility  of penalties for  commencing benefits either too  soon or too late.
See "Annuity Commencement Date,"  "Annuity Forms" and  "Federal Tax Matters"  in
this  Prospectus and "Taxation Under Certain  Retirement Plans" in the Statement
of Additional Information.

DEATH BENEFIT
In the  event  that the  Annuitant  or Participant  dies  prior to  the  Annuity
Commencement  Date, a death benefit is  payable to the Beneficiary. See "Benefit
Payable on Death of Annuitant or Participant."

RIGHT TO EXAMINE THE CONTRACT
The Participant can cancel a Certificate  by delivering or mailing it,  together
with  a  Written  Request, to  Fortis  Benefits'  Home Office  or  to  the sales
representative through whom it  was purchased, before the  close of business  on
the tenth day after receipt of the Certificate. If these items are sent by mail,
properly  addressed and postage prepaid,  they will be deemed  to be received by
Fortis Benefits on the date postmarked.  Fortis Benefits will refund to you  all
purchase  payments  that have  been made,  without  interest or  appreciation or
depreciation. However, in certain states where permitted by state law the refund
will be in the amount of the then current Certificate Value.

LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS
Certain rights you would  otherwise have under a  Certificate may be limited  by
the  terms  of  any  applicable employee  benefit  plan.  These  limitations may
restrict such things as  total and partial surrenders,  the amount or timing  of
purchase  payments that may  be made, when  annuity payments must  start and the
type  of  annuity  options  that  may  be  selected.  Accordingly,  you   should
familiarize  yourself with these and all other aspects of any retirement plan in
connection with which a Certificate is issued.

The record  owner of  the  group variable  annuity  contract pursuant  to  which
Certificates  will be issued  will be a  bank trustee whose  sole function is to
hold record  ownership  of  the  contract or  an  employer  (or  the  employer's
designee)  in connection  with an  employee benefit  plan. In  the latter cases,
certain rights that a Participant otherwise  would have under a Certificate  may
be reserved instead by the employer.

TAX IMPLICATIONS
The  tax  implications for  Participants or  any other  persons who  may receive
payments under a Certificate, and those of any related employee benefit plan can
be quite important. A brief discussion of

                                       7
<PAGE>
some of these  is set out  under "Federal  Tax Matters" in  this Prospectus  and
"Taxation  Under  Certain  Retirement  Plans"  in  the  Statement  of Additional
Information, but such  discussion is  not comprehensive.  Therefore, you  should
consider  these matters  carefully and  consult a  qualified tax  adviser before
making purchase  payments  or taking  any  other  action in  connection  with  a
Certificate  or any related employee benefit plan. Failure to do so could result
in serious adverse tax consequences which might otherwise have been avoided.

QUESTIONS AND OTHER COMMUNICATIONS
Any question about  procedures of  the Certificate  should be  directed to  your
sales representative, or Fortis Benefits' Home Office: P.O. Box 64272, St. Paul,
Minnesota,  55164: 1-800-800-2638, extension 3057. Purchase payments and Written
Requests should be  mailed or  delivered to the  same Home  Office address.  All
communications  should include  the Certificate  number, the  Participant's name
and, if different, the Annuitant's name.  The number for telephone transfers  is
1-800-800-2638 (extension 3057).

Any  purchase  payment  or  other communication,  except  a  10-day cancellation
notice, is deemed received at Fortis Benefit's Home Office on the actual date of
receipt there in  proper form  unless received (1)  after the  close of  regular
trading on The New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.

FINANCIAL AND PERFORMANCE INFORMATION
The  information presented below reflects  the Accumulation Unit information for
subaccounts of the Separate Account through December 31, 1996.
<TABLE>
<CAPTION>
                                                U.S. GOV'T    DIVERSIFIED                                      ASSET
                                MONEY MARKET    SECURITIES       INCOME      GLOBAL BOND     HIGH YIELD     ALLOCATION
                                ------------   ------------   ------------   ------------   ------------   -------------
<S>                             <C>            <C>            <C>            <C>            <C>            <C>
DECEMBER 31, 1996
Accumulation Units in Force...
Accumulation Unit Values......
JANUARY 1, 1996*
Accumulation Unit Values......
DECEMBER 31, 1995
Accumulation Units in Force...    26,915,975     10,989,914     59,213,865        574,142      2,321,419     148,700,081
Accumulation Unit Value.......        $1.367        $15.805         $1.753        $11.743        $10.941          $2.134
JANUARY 2, 1995*
Accumulation Unit Value.......       --             --             --             $10.000        --             --
DECEMBER 31, 1994
Accumulation Units in Force...    30,697,754     12,271,738     62,744,615        --           1,216,957     137,642,102
Accumulation Unit Value.......        $1.311        $13.483         $1.515        --              $9.834          $1.773
MAY 1, 1994*
Accumulation Unit Value.......       --             --             --             --            $10.0000        --
DECEMBER 31, 1993
Accumulation Units in Force...    21,315,022     15,601,818     56,005,709        --             --          106,834,367
Accumulation Unit Value.......        $1.278        $14.609         $1.621        --             --               $1.797
DECEMBER 31, 1992
Accumulation Units in Force...    20,674,556      9,505,984     19,353,521        --             --           49,688,937
Accumulation Unit Value.......        $1.261        $13.529         $1.457        --             --               $1.664
MAY 1, 1992*
Accumulation Unit Value.......       --             --             --             --             --             --
DECEMBER 31, 1991
Accumulation Units in Force...  7,235,168.03   3,595,759.23   6,056,976.03        --             --        17,772,322.83
Accumulation Unit Value.......        $1.237        $12.921         $1.379        --             --               $1.577
DECEMBER 31, 1990
Accumulation Units in Force...  5,632,146.27     747,992.12   2,352,517.74        --             --         8,249,373.75
Accumulation Unit Value.......        $1.183        $11.450         $1.219        --             --               $1.252
DECEMBER 31, 1989
Accumulation Units in Force...    754,306.35      70,701.23   1,306,717.80        --             --         2,760,936.67
Accumulation Unit Value.......        $1.112        $10.756         $1.135        --             --               $1.245
MAY 1, 1989*
Accumulation Unit Value.......       --             10.0000        --             --             --             --
DECEMBER 31, 1988
Accumulation Units in Force...     92,261.56        --          493,007.87        --             --           703,763.76
Accumulation Unit Value.......        $1.030        --              $1.024        --             --               $1.019
MAY 2, 1988*
Accumulation Unit Value.......        $1.000        --              $1.000        --             --               $1.000

<CAPTION>
                                GLOBAL ASSET                    GROWTH &         S&P            BLUE          GLOBAL
                                 ALLOCATION       VALUE          INCOME          500            CHIP          GROWTH
                                ------------   ------------   ------------   ------------   ------------   ------------
<S>                             <C>            <C>            <C>
DECEMBER 31, 1996
Accumulation Units in Force...                      --                            --             --
Accumulation Unit Values......                      --                            --             --
JANUARY 1, 1996*
Accumulation Unit Values......                       10.000                        10.000         10.000
DECEMBER 31, 1995
Accumulation Units in Force...     1,117,596                     4,204,164                                   10,769,830
Accumulation Unit Value.......       $11.590                       $12.904                                      $15.754
JANUARY 2, 1995*
Accumulation Unit Value.......       $10.000                       --                                           --
DECEMBER 31, 1994
Accumulation Units in Force...       --                          1,489,517                                   10,055,959
Accumulation Unit Value.......       --                            $10.083                                      $12.236
MAY 1, 1994*
Accumulation Unit Value.......       --                           $10.0000                                      --
DECEMBER 31, 1993
Accumulation Units in Force...       --                            --                                         5,108,957
Accumulation Unit Value.......       --                            --                                           $12.784
DECEMBER 31, 1992
Accumulation Units in Force...       --                            --                                           698,720
Accumulation Unit Value.......       --                            --                                           $10.988
MAY 1, 1992*
Accumulation Unit Value.......       --                            --                                           10.0000
DECEMBER 31, 1991
Accumulation Units in Force...       --                            --                                           --
Accumulation Unit Value.......       --                            --                                           --
DECEMBER 31, 1990
Accumulation Units in Force...       --                            --                                           --
Accumulation Unit Value.......       --                            --                                           --
DECEMBER 31, 1989
Accumulation Units in Force...       --                            --                                           --
Accumulation Unit Value.......       --                            --                                           --
MAY 1, 1989*
Accumulation Unit Value.......       --                            --                                           --
DECEMBER 31, 1988
Accumulation Units in Force...       --                            --                                           --
Accumulation Unit Value.......       --                            --                                           --
MAY 2, 1988*
Accumulation Unit Value.......       --                            --                                           --

<CAPTION>
                                               INTERNATIONAL   AGGRESSIVE
                                GROWTH STOCK      STOCK          GROWTH
                                -------------  ------------   ------------
DECEMBER 31, 1996
Accumulation Units in Force...
Accumulation Unit Values......
JANUARY 1, 1996*
Accumulation Unit Values......
DECEMBER 31, 1995
Accumulation Units in Force...    160,247,280    1,157,064      3,033,587
Accumulation Unit Value.......         $2.587      $11.271        $12.461
JANUARY 2, 1995*
Accumulation Unit Value.......       --            $10.000        --
DECEMBER 31, 1994
Accumulation Units in Force...    148,657,108      --           1,115,647
Accumulation Unit Value.......         $2.054      --              $9.723
MAY 1, 1994*
Accumulation Unit Value.......       --            --            $10.0000
DECEMBER 31, 1993
Accumulation Units in Force...    118,720,649      --             --
Accumulation Unit Value.......         $2.142      --             --
DECEMBER 31, 1992
Accumulation Units in Force...     79,582,321      --             --
Accumulation Unit Value.......         $1.996      --             --
MAY 1, 1992*
Accumulation Unit Value.......       --            --             --
DECEMBER 31, 1991
Accumulation Units in Force...  42,946,178.33      --             --
Accumulation Unit Value.......         $1.965      --             --
DECEMBER 31, 1990
Accumulation Units in Force...  14,690,313.64      --             --
Accumulation Unit Value.......         $1.298      --             --
DECEMBER 31, 1989
Accumulation Units in Force...   3,507,971.91      --             --
Accumulation Unit Value.......         $1.357      --             --
MAY 1, 1989*
Accumulation Unit Value.......       --            --             --
DECEMBER 31, 1988
Accumulation Units in Force...     684,667.95      --             --
Accumulation Unit Value.......         $1.008      --             --
MAY 2, 1988*
Accumulation Unit Value.......         $1.000      --             --
</TABLE>

----------------------------------------
*  Accumulation  Unit   Value  at   Date  of   initial  registration   statement
effectiveness

Audited  financial  statements  of  the Variable  Account  are  included  in the
Statement of Additional Information.

Advertising and other sales materials may include yield and total return figures
for the  Subaccounts  of  the  Variable Account.  These  figures  are  based  on
historical  results and are not intended to indicate future performance. "Yield"
is the income generated by an investment in the Subaccount over a period of time
specified in the advertisement. This rate of return is assumed to be earned over
a full year and is  shown as a percentage of  the investment. "Total return"  is
the  total change in value  of an investment in the  Subaccount over a period of
time specified in the advertisement. The rate of return shown would produce that
change in value over the specified period, if compounded annually. Yield figures
do not reflect the surrender  charge and yield and  total return figures do  not
reflect premium tax charges. This makes the performance shown more favorable.

Financial  information concerning Fortis Benefits is included in this Prospectus
under "Additional  Information  About  Fortis  Benefits"  and  "Fortis  Benefits
Financial Statements."

                                       8
<PAGE>
FORTIS BENEFITS/FORTIS FINANCIAL GROUP MEMBER
Fortis  Benefits Insurance Company, the issuer  of the Certificates, was founded
in 1910. At the end  of 1996, Fortis Benefits  had approximately $91 billion  of
total life insurance in force. Fortis Benefits is a Minnesota corporation and is
qualified  to  sell life  insurance  and annuity  contracts  in the  District of
Columbia and in  all states except  New York. Fortis  Benefits is an  indirectly
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis  AMEV  and 50%  by  Fortis AG.  Fortis,  Inc. manages  the  United States
operations for these two companies.

Fortis Benefits is a  member of the  Fortis Financial Group,  a joint effort  by
Fortis  Benefits,  Fortis  Advisers,  Inc.,  Fortis  Investors,  Inc.,  and Time
Insurance Company, offering financial products through the management, marketing
and servicing of mutual funds, annuities and life insurance.

Fortis AMEV  is  a  diversified  financial  services  company  headquartered  in
Utrecht,  The Netherlands, where its insurance  operations began in 1847. Fortis
AG is  a  diversified  financial services  company  headquartered  in  Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis AG
have merged their operating companies under the trade name of Fortis. The Fortis
group  of companies is active in  insurance, banking and financial services, and
real estate development in The Netherlands, Belgium, the United States,  Western
Europe,  and the  Pacific Rim. The  Fortis group of  companies had approximately
$160 billion in assets as of year-end 1996.

All of  the  guarantees  and  commitments under  the  Certificates  are  general
obligations  of Fortis Benefits, regardless of whether the Certificate Value has
been allocated to the Separate Account or  to the Fixed Account. None of  Fortis
Benefits' affiliated companies has any legal obligation to back Fortis Benefits'
obligations under the Certificates.

THE VARIABLE ACCOUNT

The  Variable  Account,  which  is a  segregated  investment  account  of Fortis
Benefits, was established as Variable Account  D by Fortis Benefits pursuant  to
the  insurance laws of Minnesota  as of October 14,  1987. Although the Variable
Account is  an  integral  part  of Fortis  Benefits,  the  Variable  Account  is
registered  with the  Securities and  Exchange Commission  as a  unit investment
trust under the Investment Company Act  of 1940. Assets in the Variable  Account
representing  reserves  and liabilities  under  Certificates and  other variable
annuity contracts  issued  by  Fortis  Benefits  will  not  be  chargeable  with
liabilities arising out of any other business of Fortis Benefits.

There  are   Subaccounts in the  Variable Account. The assets in each Subaccount
are invested exclusively  in a  distinct class (or  series) of  stock issued  by
Series  Fund, each  of which represents  a separate  investment Portfolio within
Series Fund. Income and  both realized and unrealized  gains or losses from  the
assets  of each Subaccount  of the Variable  Account are credited  to or charged
against that Subaccount without regard to income, gains or losses from any other
Subaccount of the Variable Account or arising  out of any other business we  may
conduct. New Subaccounts may be added as new Portfolios are added to Series Fund
and  made  available. Correspondingly,  if  any Portfolios  are  eliminated from
Series Fund, Subaccounts may be eliminated from the Variable Account.

SERIES FUND

Series Fund is  a "series"  type of  mutual fund  which is  registered with  the
Securities  and Exchange  Commission under the  Investment Company  Act of 1940.
Series Fund has served as the  investment medium for the Variable Account  since
the  Variable Account commenced  operations. Series Fund  is also the investment
medium for Variable Account  C of Fortis Benefits,  through which variable  life
insurance  policies are issued. Although we  do not foresee any conflict between
the interests of  Participants and  life insurance policy  owners, Series  Fund'
Board  of  Directors  will  monitor  to  identify  any  material  irreconcilable
conflicts which may  develop and  to determine what  action, if  any, should  be
taken  in response. If it becomes necessary  for any separate account to replace
shares of  any Portfolio  with another  investment, the  Portfolio may  have  to
liquidate securities on a disadvantageous basis.

Fortis  Benefits  purchases  and redeems  Series  Fund shares  for  the Variable
Account at  their  net  asset value  without  the  imposition of  any  sales  or
redemption  charges. Such shares  represent interests in  the nine Portfolios of
Series Fund available  for investment  by the Variable  Account. Each  Portfolio
corresponds  to one of  the Subaccounts of  the Variable Account.  The assets of
each Portfolio are  separate from the  others and each  Portfolio operates as  a
separate  investment portfolio whose performance has no effect on the investment
performance of any other Portfolio.

Any dividend  or capital  gain distributions  attributable to  Certificates  are
automatically reinvested in shares of the Portfolio from which they are received
at  the  Portfolio's  net asset  value  on  the date  paid.  Such  dividends and
distributions will have the effect of reducing the net asset value of each share
of the  corresponding Portfolio  and  increasing, by  an equivalent  value,  the
number  of  shares outstanding  of  the Portfolio.  However,  the value  of your
interest in the corresponding Subaccount will not change as a result of any such
dividends and distributions.

The Portfolios of Series Fund available  for investment by the Variable  Account
are  Money Market Series, U.S.  Government Securities Series, Diversified Income
Series, Global Bond Series, High  Yield Series, Asset Allocation Series,  Global
Asset  Allocation Series,  Value Series, Growth  & Income Series,  S&P 500 Index
Series, Blue  Chip Stock  Series,  Growth Stock  Series, Global  Growth  Series,
International  Stock Series, and Aggressive Growth Series. A full description of
the Portfolios, their  investment policies  and restrictions,  the charges,  the
risks  attendant to investing in them, and  other aspects of their operations is
contained in the Prospectus for Series Fund accompanying this Prospectus and  in
the  Statement of  Additional Information for  Series Fund  referred to therein.
Additional  copies  of  these  documents   may  be  obtained  from  your   sales
representative  or from  our Home  Office. The  complete risk  disclosure in the
Prospectus  for  the  Diversified  Income  Series,  High  Yield  Series,   Asset
Allocation  Series, and  Global Asset  Allocation Series  should be  read before
selection of them for investment.

THE FIXED ACCOUNT

GUARANTEED INTEREST RATES/GUARANTEE PERIODS
Any amount allocated by the Participant to the Fixed Account earns a  Guaranteed
Interest  Rate  commencing with  the date  of  such allocation.  This Guaranteed
Interest Rate continues for a  number of years (not  to exceed ten) selected  by
the  Participant.  At  the  end  of  this  Guarantee  Period,  the Participant's
Certificate Value in that Guarantee Period, including interest accrued  thereon,
will  be allocated to  a new Guarantee  Period of the  same length unless Fortis
Benefits has received a  Written Request from the  Participant to allocate  this
amount  to a  different Guarantee  Period or periods  or to  one or  more of the
Subaccounts. We must receive this Written  Request at least three business  days
prior  to the end  of the Guarantee Period.  The first day  of the new Guarantee
Period (or  other reallocation)  will be  the day  after the  end of  the  prior
Guarantee  Period. We will notify the Participant  at least 45 days and not more
than 75 days prior to the end of any Guarantee Period.

We currently make available ten different Guarantee Periods, ranging from one to
ten years. Each Guarantee Period has its own Guaranteed

                                       9
<PAGE>
Interest Rate, which  may differ from  those for other  Guarantee Periods.  From
time to time we will, at our discretion, change the Guaranteed Interest Rate for
future  Guarantee Periods of various lengths.  These changes will not affect the
Guaranteed Interest  Rates being  paid on  Guarantee Periods  that have  already
commenced.  Each  allocation or  transfer  of an  amount  to a  Guarantee Period
commences the running  of a new  Guarantee Period with  respect to that  amount,
which  will earn a  Guaranteed Interest Rate that  will continue unchanged until
the end of that period. The Guaranteed Interest Rate will never be less than  an
effective annual rate of 4%.

Fortis  Benefits declares  the Guaranteed  Interest Rates  from time  to time as
market  conditions  dictate.  Fortis  Benefits  advises  a  Participant  of  the
Guaranteed  Interest Rate for a  chosen Guarantee Period at  the time a purchase
payment is received, a transfer is effectuated or a Guarantee Period is renewed.

Fortis Benefits has no specific formula for establishing the Guaranteed Interest
Rates for  the  Guarantee  Periods. The  rate  may  be influenced  by,  but  not
necessarily  correspond to, interest  rates generally available  on the types of
investments acquired  with  amounts  allocated  to  the  Guarantee  Period.  See
"Investments  by  Fortis Benefits."  Fortis  Benefits in  determining Guaranteed
Interest Rates,  may also  consider,  among other  factors,  the duration  of  a
Guarantee  Period,  regulatory and  tax  requirements, sales  and administrative
expenses borne  by Fortis  Benefits, risks  assumed by  Fortis Benefits,  Fortis
Benefits' profitability objectives, and general economic trends.

FORTIS  BENEFITS'  MANAGEMENT MAKES  THE FINAL  DETERMINATION OF  THE GUARANTEED
INTEREST RATES TO  BE DECLARED.  FORTIS BENEFITS  CANNOT PREDICT  OR ASSURE  THE
LEVEL  OF ANY FUTURE GUARANTEED INTEREST RATES  IN EXCESS OF AN EFFECTIVE ANNUAL
RATE OF 4%.

THE FIXED ACCOUNT INVESTMENT OPTION IS NOT AVAILABLE FOR CERTIFICATES ISSUED  IN
THE STATES OF PENNSYLVANIA AND NEVADA.

Information  concerning the Guaranteed Interest  Rates applicable to the various
Guarantee Periods at any time may be obtained from our Home Office or from  your
sales representative.

MARKET VALUE ADJUSTMENT
If  any Fixed  Account Value is  surrendered, transferred or  otherwise paid out
before the end of the Guarantee Period in which it is being held, a Market Value
Adjustment will  be applied,  EXCEPT that  NO Market  Value Adjustment  will  be
applied  to amounts that are  paid out during the  period beginning fifteen days
before and ending fifteen days after the  end of a Guarantee Period in which  it
was  being held. This  generally includes amounts  that are paid  out as a death
benefit pursuant to the Certificate, amounts  applied to an annuity option,  and
amounts paid as a single sum in lieu of an annuity.

The Market Value Adjustment may increase or decrease the amount of Fixed Account
Value  being withdrawn or transferred. The comparison of two Guaranteed Interest
Rates determines whether the Market Value  Adjustment produces an increase or  a
decrease.  The first  rate to  compare is the  Guaranteed Interest  Rate for the
amount being  transferred  or  withdrawn.  The second  rate  is  the  Guaranteed
Interest  Rate then being offered for new Guarantee Periods of the same duration
as that  remaining  in the  Guarantee  Period from  which  the funds  are  being
withdrawn  or transferred.  If the  first rate exceeds  the second  by more than
1/2%, the Market Value Adjustment produces  an increase. If the first rate  does
not  exceed the second by at least  1/2%, the Market Value Adjustment produces a
decrease. Sample calculations are shown in Appendix A.

The Market Value Adjustment will be  determined by multiplying the amount  being
withdrawn  or transferred  from the  Guarantee Period  (before deduction  of any
applicable surrender charge) by the following factor:

<TABLE>
<C>  <C>         <C>  <C>   <S>
        1 + I         n / 12
      ----------            - 1
 (   1 + J + .005  )
</TABLE>

where,

    - I  is the  Guaranteed Interest  Rate being  credited to  the amount  being
      withdrawn from the existing Guarantee Period,

    -  J is the  Guaranteed Interest Rate  then being offered  for new Guarantee
      Periods with  durations equal  to the  number of  years remaining  in  the
      existing Guarantee Period (rounded up to the next higher number of years),
      and

    -  N is  the number  of months  remaining in  the existing  Guarantee Period
      (rounded up to the next higher number of months).

INVESTMENTS BY FORTIS BENEFITS
Our obligations  with respect  to the  Fixed Account  are legal  obligations  of
Fortis  Benefits and  are supported  by our  General Account  assets, which also
support obligations incurred by us under other insurance and annuity  contracts.
Investments  purchased  with  amounts allocated  to  the Fixed  Account  are the
property of  Fortis Benefits  and  Participants have  no  legal rights  in  such
investments.  Subject  to  applicable  law, we  have  sole  discretion  over the
investment of  assets in  our General  Account  and in  the Fixed  Account,  and
neither of such accounts is subject to registration under the Investment Company
Act of 1940.

Amounts  in the Fortis Benefits'  General Account and the  Fixed Account will be
invested in  compliance with  applicable state  insurance laws  and  regulations
concerning the nature and quality of investments for the General Account. Within
specified  limits and subject  to certain standards  and limitations, these laws
generally  permit  investment  in  federal,  state  and  municipal  obligations,
preferred and common stocks, corporate bonds, real estate mortgages, real estate
and  certain other investments.  See Fortis Benefits'  Financial Statements" for
information on Fortis Benefits'  investments. Investment management for  amounts
in  the General Account and in the  Fixed Account is provided to Fortis Benefits
by Fortis, Inc.

Fortis Benefits intends to consider the  return available on the instruments  in
which  it  intends to  invest amounts  allocated  to the  Fixed Account  when it
establishes Guaranteed Interest Rates. Such return  is only one of many  factors
considered  in  establishing  the  Guaranteed  Interest  Rates.  See "Guaranteed
Interest Rates/Guarantee Periods."

Fortis Benefits expects that  amounts allocated to  the Fixed Account  generally
will  be invested in debt instruments  that approximately match Fortis Benefits'
liabilities with regard to the  Guarantee Periods. Fortis Benefits expects  that
these  will  include  primarily the  following  types of  debt  instruments: (1)
securities  issued  by  the  United   States  Government  or  its  agencies   or
instrumentalities,  which securities may or may  not be guaranteed by the United
States Government; (2) debt  securities which have an  investment grade, at  the
time  of purchase, within the four  highest grades assigned by Moody's Investors
Services, Inc. ("Moody's") (Aaa,  Aa, A or Baa),  Standard & Poor's  Corporation
("Standard  & Poor's") (AAA, AA,  A or BBB), or  any other nationally recognized
rating service; (3) other debt instruments including, but not limited to, issues
of or guaranteed  by banks  or bank  holding companies  and corporations,  which
obligations  although not rated by  Moody's or Standard &  Poor's, are deemed by
Fortis Benefits to have an investment quality comparable to securities which may
be purchased as stated above; and (4) other evidences of indebtedness secured by
mortgages or deeds of trust representing liens upon real estate. Notwithstanding
the foregoing, Fortis Benefits is not obligated

                                       10
<PAGE>
to invest amounts  allocated to the  Fixed Account according  to any  particular
strategy,  except  as may  be required  by applicable  state insurance  laws and
regulations. See "Regulation and Reserves."

ACCUMULATION PERIOD

ISSUANCE OF A CERTIFICATE AND PURCHASE PAYMENTS
Fortis Benefits reserves the right to  reject any application for a  Certificate
or  any purchase  payment for  any reason.  If the  issuing instructions  can be
accepted in the  form received, the  initial purchase payment  will be  credited
within   two  Valuation  Dates  after  the  later  of  receipt  of  the  issuing
instructions or receipt of the initial purchase payment at Fortis Benefits' Home
Office. If the initial purchase payment cannot be credited within five Valuation
Dates after receipt because the issuing instructions are incomplete, the initial
purchase payment will be returned unless the applicant consents to our retaining
the initial purchase payment  and crediting it  as of the  end of the  Valuation
Period  in which the necessary requirements  are fulfilled. The initial purchase
payment must be at least $5,000 ($2,000  for a Certificate issued pursuant to  a
qualified plan).

The  date that the  initial purchase payment  is applied to  the purchase of the
Certificate is also the  Certificate Issue Date. The  Certificate Issue Date  is
the date used to determine Certificate years, regardless of when the Certificate
is delivered. The crediting of investment experience in the Variable Account, or
a  fixed rate of return in the Fixed Account, begins as of the Certificate Issue
Date.

The Participant may  make additional  purchase payments  at any  time after  the
Certificate  Issue Date and prior  to the Annuity Commencement  Date, as long as
the  Annuitant  is  living.  Purchase  payments  (together  with  any   required
information  identifying the proper Certificates and account to be credited with
purchase payments) must be transmitted  to our Home Office. Additional  purchase
payments  are credited to the Certificate and  added to the Certificate Value as
of the end of the Valuation Period in which they are received in good order.

Each additional purchase payment  under a Certificate must  be at least  $1,000.
The  total of all purchase payments for all Fortis Benefits annuities having the
same owner or  participant, or annuitant,  may not exceed  $1 million (not  more
than  $500,000 allocated  to the Fixed  Account) without  Fortis Benefits' prior
approval, and we reserve the right to modify this limitation at any time.

Purchase payments in excess of the initial minimum may be made by monthly  draft
against the bank account of any Participant who has completed and returned to us
a  special "Thrift-O-Matic"  authorization form that  may be  obtained from your
sales representative or from our Home Office. Arrangements can also be made  for
purchase  payments  by  wire transfer,  payroll  deduction,  military allotment,
direct deposit and billing. Purchase payments by check should be made payable to
Fortis Benefits Insurance Company.

If the Certificate Value is less than  $1,000, we may cancel the Certificate  on
any  Valuation Date. We will notify the  Participant at least 90 days in advance
of  our  intention  to  cancel  the  Certificate.  Such  cancellation  would  be
considered a full surrender of the Certificate.

CERTIFICATE VALUE
Certificate  Value  is  the total  of  any  Variable Account  Value  in  all the
Subaccounts of the Variable Account pursuant to the Certificate, plus any  Fixed
Account Value in all the Guarantee Periods.

There is no guaranteed minimum Variable Account Value. To the extent Certificate
Value is allocated to the Variable Account, you bear the entire investment risk.

DETERMINATION  OF VARIABLE ACCOUNT VALUE. A Certificate's Variable Account Value
is based on  Accumulation Unit values,  which are determined  on each  Valuation
Date.  The value of an Accumulation Unit  for a Subaccount on any Valuation Date
is equal to the previous value of that Subaccount's Accumulation Unit multiplied
by that Subaccount's net  investment factor (discussed  directly below) for  the
Valuation  Period ending  on that  Valuation Date. At  the end  of any Valuation
Period, a Certificate's Variable Account Value  in a Subaccount is equal to  the
number  of  Accumulation  Units  in  the  Subaccount  times  the  value  of  one
Accumulation Unit for that Subaccount.

The number of Accumulation Units in each Subaccount is equal to:

    - Accumulation Units purchased at the time that any Net Purchase Payments or
      transferred amounts are allocated to the Subaccount; less

    - Accumulation Units redeemed to pay  for the portion of any transfers  from
      or partial surrenders allocated to the Subaccount; less

    - Accumulation Units redeemed to pay charges under the Contract.

NET  INVESTMENT FACTOR. If a Subaccount's  net investment factor is greater than
one, the  Subaccount's  Accumulation  Unit  value  has  increased.  If  the  net
investment factor is less than one, the Subaccount's Accumulation Unit value has
decreased.  The net investment factor for a Subaccount is determined by dividing
(1) the  net  asset  value  per  share of  the  Portfolio  shares  held  by  the
Subaccount,  determined at the end of the current Valuation Period, plus the per
share amount of any dividend or capital gains distribution made with respect  to
the Portfolio shares held by the Subaccount during the current Valuation Period,
minus  a per  share charge  for the increase,  plus a  per share  credit for the
decrease, in any income taxes assessed which we determine to have resulted  from
the  investment  operation  of  the  subaccount or  any  other  taxes  which are
attributable to this Certificate, by  (2) the net asset  value per share of  the
Portfolio shares held in the Subaccount as determined at the end of the previous
Valuation  Period, and  subtracting from that  result a  factor representing the
mortality risk, expense risk and administrative expense charge.

DETERMINATION OF FIXED  ACCOUNT VALUE.  A Certificate's Fixed  Account Value  is
guaranteed  by Fortis Benefits. Therefore,  Fortis Benefits bears the investment
risk with  respect to  amounts allocated  to the  Fixed Account,  except to  the
extent that (a) Fortis Benefits may vary the Guaranteed Interest Rate for future
Guarantee  Periods  (subject to  the 4%  effective annual  minimum) and  (b) the
Market Value Adjustment imposes investment risks on the Participant.

The Certificate's Fixed Account Value  on any Valuation Date  is the sum of  its
Fixed  Account Values in each  Guarantee Period on that  date. The Fixed Account
Value in a  Guarantee Period is  equal to  the following amounts,  in each  case
increased by accrued interest at the applicable Guaranteed Interest Rate:

    -  The amount of  Net Purchase Payments or  transferred amounts allocated to
      the Guarantee Period; less

    - The amount of any transfers or surrenders out of the Guarantee Period.

ALLOCATION OF PURCHASE PAYMENTS AND CERTIFICATE VALUE
ALLOCATION OF  PURCHASE PAYMENTS.  In  the application  for a  Certificate,  the
Participant  can allocate  Net Purchase  Payments, or  portions thereof,  to the
available Subaccounts of the Variable Account or to the Guarantee Periods in the
Fixed Account, or a  combination thereof. Percentages must  be in whole  numbers
and  the total allocation must equal 100%. The percentage allocations for future
Net Purchase Payments may be changed, without  charge, at any time by sending  a
Written  Request to Fortis  Benefits' Home Office. Changes  in the allocation of
future Net  Purchase Payments  will be  effective  on the  date we  receive  the
Participant's Written Request.

                                       11
<PAGE>
TRANSFERS.  Transfers  of Certificate  Value  from one  available  Subaccount to
another or into the Fixed Account, or from one Guarantee Period to another or to
the Subaccount, can  be made  by the Participant  in Written  Request to  Fortis
Benefits'  Home Office,  or by telephone  transfer as described  below. There is
currently no charge for any transfer, although transfers from a Guarantee Period
that are more than 15 days before or after the expiration thereof are subject to
a Market Value Adjustment. See  "Market Value Adjustment." The minimum  transfer
from  a Subaccount  or Guarantee Period  is the lesser  of $1,000 or  all of the
Certificate Value in  the Subaccount  or Guarantee Period.  Irrespective of  the
above  we  may permit  a continuing  request for  transfers of  lesser specified
amounts automatically on  a periodic  basis. However,  we reserve  the right  to
restrict  the frequency of  or otherwise condition,  terminate or impose charges
(not to exceed  $25 per transfer)  upon transfers. We  will count all  transfers
between  and among the Subaccounts of the Variable Account and the Fixed Account
as one transfer, if all the transfer requests are made at the same time as  part
of  one  request. We  will execute  the  transfers and  determine all  values in
connection with transfers  as of the  end of  the Valuation Period  in which  we
receive  the transfer  request. The  amount of  any positive  or negative Market
Value  Adjustment,  respectively,  will  be  added  to  or  deducted  from   the
transferred amount.

If  you complete and  return the telephone transfer  section of the application,
transfers may  be  made  pursuant  to  telephone  instructions.  We  will  honor
telephone  transfer  instructions  from  any  person  who  provides  the correct
identifying information. Fortis Benefits  will not be  responsible for, and  you
will  bear  the  risk  of loss  from,  oral  instructions,  including fraudulent
instructions, which  are  reasonably believed  to  be genuine.  We  will  employ
reasonable procedures to confirm that telephone instructions are genuine, but if
such  procedures are not deemed reasonable, we  may be liable for any losses due
to unauthorized or fraudulent instructions. Our procedures are to verify address
and social security number, tape record the telephone call, and provide  written
confirmation  of  the  transaction. We  may  modify or  terminate  our telephone
transfer  procedures  at  any  time.  The  number  for  telephone  transfers  is
1-800-800-2638.

Certain  restrictions on very substantial investments  in any one Subaccount are
set forth  under "Limitations  on Allocations"  in the  Statement of  Additional
Information.

TOTAL AND PARTIAL SURRENDERS
TOTAL  SURRENDERS. The Participant may surrender all of the Cash Surrender Value
at any  time  during  the  life  of the  Annuitant  and  prior  to  the  Annuity
Commencement  Date by a Written Request sent to Fortis Benefits' Home Office. We
reserve the right to  require that the  Certificate be returned  to us prior  to
making payment, although this will not affect our determination of the amount of
the  Cash Surrender Value. Cash Surrender Value  is the Certificate Value at the
end of  the Valuation  Period during  which the  Written Request  for the  total
surrender is received by Fortis Benefits at its Home Office, less any applicable
surrender  charge and after any Market  Value Adjustment. See "Surrender Charge"
and "Market Value Adjustment."

The written consent  of all collateral  assignees and irrevocable  beneficiaries
must  be obtained  prior to  any total  surrender. Surrenders  from the Variable
Account will generally  be paid  within seven  days of  the date  of receipt  by
Fortis  Benefits' Home Office  of the Written  Request. Postponement of payments
may occur, however, in certain circumstances. See "Postponement of Payment."

The amount paid upon  total surrender of the  Cash Surrender Value (taking  into
account  any prior partial  surrenders) may be  more or less  than the total Net
Purchase Payments made. After a surrender of the Cash Surrender Value or at  any
time the Certificate Value is zero, all rights of the Participant, Annuitant, or
any other person will terminate.

PARTIAL  SURRENDERS.  At any  time prior  to the  Annuity Commencement  Date and
during the lifetime of the Annuitant, the Participant may surrender a portion of
the Fixed Account Value and/or the  Variable Account Value by sending to  Fortis
Benefits'  Home Office a Written Request. We will not accept a partial surrender
request unless the net proceeds payable to you as a result of the request are at
least $1,000. If the  total Certificate Value in  both the Variable Account  and
Fixed  Account would  be less  than $1,000  after the  partial surrender, Fortis
Benefits will surrender the entire Cash Surrender Value under the Certificate.

In order for a request to be processed, the Participant must specify from  which
Subaccounts  of the Variable Account or Guarantee Periods of the Fixed Account a
partial surrender should be made.

We will surrender Accumulation  Units from the Variable  Account and/ or  dollar
amounts from the Fixed Account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request. The amount payable to
the  Participant  will be  reduced by  any applicable  surrender charge  and any
negative Market  Value Adjustment,  or increased  by any  positive Market  Value
Adjustment.  The partial surrender will be effective at the end of the Valuation
Period in  which  Fortis  Benefits  receives the  Written  Request  for  partial
surrender  at its Home Office. Payments will generally be made within seven days
of the effective date  of such request, although  certain delays are  permitted.
See "Postponement of Payment."

The Internal Revenue Code provides that a penalty tax will be imposed on certain
premature  surrenders. For  a discussion of  this and other  tax implications of
total and partial surrenders,  including withholding requirements, see  "Federal
Tax  Matters." Also, under tax deferred annuity Certificates pursuant to Section
403(b) of  the  Internal Revenue  Code,  no distributions  of  voluntary  salary
reduction  amounts  will be  permitted  prior to  one  of the  following events:
attainment of  age 59  1/2 by  the employee  or the  employee's separation  from
service,  death, disability or hardship. (Hardship distributions will be limited
to the lesser of the  amount of the hardship or  the amount of salary  reduction
contributions, exclusive of earnings thereon.)

BENEFIT PAYABLE ON DEATH OF ANNUITANT OR PARTICIPANT
If  the Annuitant or Participant dies prior  to the Annuity Commencement Date, a
death benefit will be paid  to the Beneficiary. If  more than one Annuitant  has
been  named, the death benefit payable upon  the death of an Annuitant will only
be paid upon the death of the last  survivor of the persons so named. The  death
benefit will equal the greater of:

    (1) the sum of all Net Purchase Payments made (less all prior surrenders and
        previously-imposed  surrender  charges and  prior negative  Market Value
        Adjustments),

    (2) the Certificate Value adjusted by any Market Value Adjustment, as of the
        date used for valuing the death benefit, or

    (3) the Certificate Value adjusted by any Market Value Adjustment (less  the
        amount  of any subsequent surrenders  and surrender charges and negative
        Market  Value   Adjustments  in   connection  therewith),   as  of   the
        Certificate's  Seven Year Anniversary  immediately preceding the earlier
        of a) the date of death of either the Participant or Annuitant or b) the
        date either first reaches his or her 75th birthday. (See Appendix B  for
        Sample Death Benefit Calculations).

                                       12
<PAGE>
ENHANCED  DEATH BENEFIT. If  the Participant selects  the Enhanced Death Benefit
and the Annuitant or a Participant dies prior to the Annuity Commencement  Date,
the death benefit will equal the greater of (1), (2) and (3) as follows:

 (1)(a) If  a Participant or the Annuitant  dies before the date any Participant
        or Annuitant  first reaches  age 75,  the accumulation  of Net  Purchase
        Payments  made less all  prior surrenders and  less any applicable prior
        negative Market  Value  Adjustments less  previously  imposed  surrender
        charges  at an effective annual rate of 3.0%. This amount may not exceed
        a maximum of two  times the following: Net  Purchase Payments made  less
        all prior surrenders and less any applicable prior negative Market Value
        Adjustments  less previously  imposed surrender charges.  This amount is
        referred to as the "roll-up amount."

                                       or

 (1)(b) If the  Annuitant  or  a Participant  dies  on  or after  the  date  any
        Participant  or Annuitant first reaches age 75, the roll-up amount as of
        the date  that a  Participant or  Annuitant first  reaches age  75  plus
        subsequent  Net Purchase  Payments made, less  subsequent surrenders and
        any subsequent  negative  Market  Value  Adjustments  less  subsequently
        imposed surrender charges.

                                      and

   (2) The  Certificate Value adjusted by any applicable Market Value Adjustment
       as of the date used for valuing the death benefit.

                                      and

   (3) The Certificate Value adjusted by  any Market Value Adjustment (less  the
       amount  of any subsequent  surrenders and surrender  charges and negative
       Market  Value   Adjustments  in   connection   therewith),  as   of   the
       Certificate's Seven Year Anniversary immediately preceding the earlier of
       a)  the date of death  of either the Participant  or Annuitant, or b) the
       date either first reaches his or  her 75th birthday. (See Appendix B  for
       Sample Death Benefit Calculations).

The  value of  the death benefit  is determined as  of the end  of the Valuation
Period in which we receive, at our  Home Office, proof of death and the  written
request  as to  the manner of  payment. Upon  receipt of these  items, the death
benefit generally will be paid  within seven days. Under certain  circumstances,
payment of the death benefit may be postponed. See "Postponement of Payment." If
we  do not receive  a Written Request for  a settlement method,  we will pay the
death benefit in a single sum, based on values determined at that time.

The Beneficiary  may (a)  receive a  single sum  payment, which  terminates  the
Certificate,  or (b)  select an  annuity option.  If the  Beneficiary selects an
annuity option, he or  she will have  all the rights and  privileges of a  payee
under  the  Certificate.  If  the Beneficiary  desires  an  Annuity  option, the
election should be made  within 60 days  of the date  the death benefit  becomes
payable.  Failure  to  make a  timely  election  can result  in  unfavorable tax
consequences. For further information, see "Federal Tax Matters."

We accept any of the  following as proof of death:  a copy of a certified  death
certificate;  a copy of a certified decree  of a court of competent jurisdiction
as to the  finding of  death; or  a written statement  by a  medical doctor  who
attended the deceased at the time of death.

If the Participant dies before the Annuitant and before the Annuity Commencement
Date with respect to a Non-Qualified Certificate certain additional requirements
are  mandated  by the  Internal Revenue  Code, which  are discussed  below under
"Federal Tax Matters-- Required  Distributions for Non-Qualified  Certificates."
It is imperative that Written Notice of the death of the Participant be promptly
transmitted  to Fortis Benefits at its Home  Office, so that arrangements can be
made for  distribution  of  the  entire  interest  in  the  Certificate  to  the
Beneficiary  in a manner that satisfies  the Internal Revenue Code requirements.
Failure to satisfy these  requirements may result in  the Certificate not  being
treated as an annuity contract for federal income tax purposes, which could have
adverse tax consequences.

THE ANNUITY PERIOD

ANNUITY COMMENCEMENT DATE
The Participant may specify an Annuity Commencement Date in the application. The
Annuity  Commencement Date  marks the  beginning of  the period  during which an
Annuitant or other payee designated by the Participant receives annuity payments
under the Certificate. We may not  permit an Annuity Commencement Date which  is
on  or after the  Annuitant's 75th birthday,  and you should  consult your sales
representative in this regard.  The Annuity Commencement Date  must be at  least
two years after the Certificate Issue Date.

Depending  on  the type  of retirement  arrangement  involved, amounts  that are
distributed either too soon or  too late may be  subject to penalty taxes  under
the  Internal Revenue Code. See "Federal  Tax Matters." You should consider this
carefully in selecting or changing an Annuity Commencement Date.

In order to advance or defer the Annuity Commencement Date, the Participant must
submit a Written Request  during the Annuitant's lifetime.  The request must  be
received  at our Home Office at least  30 days before the then-scheduled Annuity
Commencement Date. The new  Annuity Commencement Date must  also be at least  30
days  after the Written Request is received. There is no right to make any total
or partial surrender during the Annuity Period.

COMMENCEMENT OF ANNUITY PAYMENTS
If the Certificate Value at the end  of the Valuation Period which contains  the
Annuity Commencement Date is less than $1,000, we may pay the entire Certificate
Value,  without the imposition of any charges other than the premium tax charge,
if applicable, in a single sum payment to the Annuitant or other payee chosen by
the Participant and cancel the Certificate.

Otherwise, Fortis Benefits will apply (1)  the Fixed Account Value to provide  a
Fixed  Annuity Option and  (2) the Variable  Account Value in  any Subaccount to
provide a  Variable  Annuity  Option  using  the  same  Subaccount,  unless  the
Participant  has notified us by Written Request to apply the Fixed Account Value
and Variable Account Value  in different proportions.  Any such Written  Request
must  be received by us at  our Home Office at least  30 days before the Annuity
Commencement Date.

Annuity payments under  a Fixed or  Variable Annuity  Option will be  made on  a
monthly  basis to  the Annuitant or  other properly-designated  payee, unless we
agree to a different payment  schedule. If more than one  person is named as  an
Annuitant,  the Contract Owner may  elect to name one of  such persons to be the
sole Annuitant as  of the  Annuity Commencement Date.  We reserve  the right  to
change  the frequency  of any annuity  payment so  that each payment  will be at
least $50  ($20 in  Texas). There  is  no right  to make  any total  or  partial
surrender during the Annuity Period.

The  amount of  each annuity  payment will depend  on the  amount of Certificate
Value applied to an annuity option, the form of annuity selected and the age  of
the  Annuitant. Information concerning the  relationship between the Annuitant's
sex and  the  amount of  annuity  payments, including  special  requirements  in
connection  with employee  benefits plans, is  set forth  under "Calculations of
Annuity Payments" in the Statement  of Additional Information. The Statement  of
Additional  Information also contains detailed  information about how the amount
of each annuity payment is computed.

                                       13
<PAGE>
The dollar amount of any fixed  annuity payments is specified during the  entire
period  of  annuity payments  according to  the provisions  of the  annuity form
selected. The  dollar amount  of  variable annuity  payments varies  during  the
annuity  period based on changes in Annuity Unit Values for the Subaccounts that
you choose to use in connection with your payments.

RELATIONSHIP BETWEEN SUBACCOUNT  INVESTMENT PERFORMANCE AND  AMOUNT OF  VARIABLE
ANNUITY PAYMENTS
If  a Subaccount  on which a  variable annuity  payment is based  has an average
effective net  investment return  higher than  4% per  annum during  the  period
between two such annuity payments, the Annuity Unit Value will increase, and the
second  payment will be  higher than the first.  Conversely, if the Subaccount's
average effective  net investment  return over  the period  between the  annuity
payments  is less than 4%  per annum, the Annuity  Unit Value will decrease, and
the second payment will  be lower than the  first. "Net investment return,"  for
this  purpose, refers to the Subaccount's overall investment performance, net of
the mortality and  expense risk  and administrative expense  charges, which  are
assessed  at a  nominal aggregate  annual rate of  1.35%. We  guarantee that the
amount of each  variable annuity  payment after the  first payment  will not  be
affected by variations in our mortality experience or our expenses.

TRANSFERS.  During the Annuity Period, the person receiving annuity payments may
make up to four transfers a  year among Subaccounts. The current procedures  for
and  conditions  on  these  transfers  are the  same  as  described  above under
"Allocation of Purchase  Payments and  Certificate Value--Transfers."  Transfers
from a Fixed Annuity Option are not permitted during the Annuity Period.

ANNUITY FORMS
The  Participant may select  an annuity form  or change a  previous selection by
Written Request,  which must  be received  by us  at least  30 days  before  the
Annuity  Commencement  Date.  One  annuity form  may  be  selected,  although as
discussed above, payments under that form may be received on a combination fixed
and variable basis. If  no annuity form  selection is in  effect on the  Annuity
Commencement  Date, in  most cases  we automatically  apply Option  B (described
below), with payments  guaranteed for  10 years.  If the  Certificate is  issued
under  certain retirement plans,  however, federal pension  law may require that
any default payments be made pursuant to plan provisions and/or federal law. Tax
laws and regulations may impose further restrictions to assure that the  primary
purpose of the plan is distribution of the accumulated funds to the employee.

The  following options are available for fixed annuity payments and for variable
annuity payments.

OPTION A, LIFE ANNUITY. Payments are made as of the first Valuation Date of each
monthly  period  during  the  Annuitant's   life,  starting  with  the   Annuity
Commencement  Date. No  payments will  be made after  the Annuitant  dies. It is
possible for the payee  to receive only  one payment under  this option, if  the
Annuitant dies before the second payment is due.

OPTION   B,  LIFE  ANNUITY   WITH  PAYMENTS  GUARANTEED  FOR   10  YEARS  TO  20
YEARS. Payments are made as of the  first Valuation Date of each monthly  period
starting on the Annuity Commencement Date. Payments will continue as long as the
Annuitant  lives. If  the Annuitant dies  before all of  the guaranteed payments
have been made, we will continue installments of the guaranteed payments to  the
Beneficiary.

OPTION  C, JOINT AND  FULL SURVIVOR ANNUITY.  Payments are made  as of the first
Valuation Date of  each monthly  period starting with  the Annuity  Commencement
Date.  Payments  will continue  as long  as  either the  Annuitant or  the joint
Annuitant is alive.  Payments will stop  when both the  Annuitant and the  joint
Annuitant have died. It is possible for the payee or payees under this option to
receive  only one payment, if  both Annuitants die before  the second payment is
due.

OPTION D, JOINT AND ONE-HALF CONTINGENT  SURVIVOR ANNUITY. Payments are made  as
of  the first Valuation  Date of each  monthly period starting  with the Annuity
Commencement Date. Payments will continue as long as either the Annuitant or the
joint Annuitant is alive. If the Annuitant dies first, payments will continue to
the joint Annuitant at one-half the original amount. If the joint Annuitant dies
first, payments will  continue to  the Annuitant  at the  original full  amount.
Payments will stop when both the Annuitant and the joint Annuitant have died. It
is  possible  for the  payee or  payees under  this option  to receive  only one
payment if both Annuitants die before the second payment is due.

We also have  other annuity forms  available and information  about them can  be
obtained  from your sales  representative or by  calling or writing  to our Home
Office.

DEATH OF ANNUITANT OR OTHER PAYEE
Under most  annuity forms  offered  by Fortis  Benefits,  the amounts,  if  any,
payable  on  the  death of  the  Annuitant  during the  Annuity  Period  are the
continuation of annuity payments for any  remaining guarantee period or for  the
life  of any joint Annuitant. In all  such cases, the person entitled to receive
payments also  receives any  rights and  privileges under  the annuity  form  in
effect.

Additional   rules   applicable  to   such  distributions   under  Non-Qualified
Certificates are described  under "Federal  Tax Matters--Required  Distributions
for  Non-Qualified Certificates." Though the rules  there described do not apply
to Certificates issued in connection  with qualified plans, similar rules  apply
to the plans themselves.

CHARGES AND DEDUCTIONS

PREMIUM TAXES
The  states of South Dakota and Wyoming impose a premium tax upon the receipt of
a purchase payment.  In these  states, and in  any other  state or  jurisdiction
where  premium  taxes or  similar assessments  are imposed  upon the  receipt of
purchase payments,  Fortis  Benefits  will  pay such  taxes  on  behalf  of  the
Participant  and then  deduct a  charge for  these amounts  from the Certificate
Value upon the surrender, death of annuitant or Participant, or annuitization of
the Certificate. In jurisdictions where premium taxes or similar assessments are
imposed at the time annuity payments begin, Fortis Benefits will deduct a charge
for such amounts from the Certificate Value at that time. In such jurisdictions,
the charge will  be deducted  on a pro-rata  basis from  the then-current  Fixed
Account  Value  and,  by  redemption  of  Accumulation  Units,  the then-current
Variable Account Value in each Subaccount. Similarly, Fortis Benefits may deduct
premium taxes from Certificate  Value when no deduction  was made from  purchase
payments,  but is subsequently determined to be due. Conversely, Fortis Benefits
will credit to the  Certificate Value the amount  of any deductions for  premium
taxes or similar assessments that are subsequently determined not to be owed.

Applicable premium tax rates depend upon the Participant's then-current place of
residence. Applicable rates are subject to change by legislation, administrative
interpretations or judicial acts.

CHARGES AGAINST THE VARIABLE ACCOUNT
MORTALITY  AND  EXPENSE  RISK CHARGE.  We  will  assess each  Subaccount  of the
Variable Account with a daily charge for mortality and expense risk at a nominal
annual rate of 1.25%  of the average  daily net assets  of the Variable  Account
(consisting  of approximately .8% for mortality  risk and approximately .45% for
expense risk). This charge is assessed  during both the Accumulation Period  and
the Annuity Period. We guarantee not to increase this charge for the duration of
the Certificate.

The  mortality risk borne by Fortis Benefits  arises from its obligation to make
annuity payments (determined  in accordance  with the annuity  tables and  other
provisions    contained    in    the   Certificate)    for    the    full   life

                                       14
<PAGE>
of all  Annuitants regardless  of  how long  all  Annuitants or  any  individual
Annuitant  might live.  In addition, Fortis  Benefits bears a  mortality risk in
that it guarantees  to pay a  death benefit upon  the death of  an Annuitant  or
Participant  prior  to the  Annuity Commencement  Date.  No surrender  charge is
imposed upon the  payment of a  death benefit which  places a further  mortality
risk on the Company.

The  expense risk  assumed is that  actual expenses incurred  in connection with
issuing  and  administering   the  Certificate   will  exceed   the  limits   on
administrative charges set in the Certificate.

If  the administrative  charges and  the mortality  and expense  risk charge are
insufficient to cover the expenses and costs assumed, the loss will be borne  by
the Company. Conversely, if the amount deducted proves more than sufficient, the
excess will be profit to the Company.

ADMINISTRATIVE  EXPENSE CHARGE. We  will assess each  Subaccount of the Variable
Account with a daily charge at an annual  rate of .10% of the average daily  net
assets  of the Subaccount.  This charge is imposed  during both the Accumulation
Period and the Annuity Period. This charge is to help cover administrative costs
such as those incurred in issuing Certificates, establishing and maintaining the
records relating  to  Certificates,  making regulatory  filings  and  furnishing
confirmation  notices,  voting  materials  and  other  communications, providing
computer,  actuarial  and  accounting   services,  and  processing   Certificate
transactions.   There  is  no  necessary  relationship  between  the  amount  of
administrative charges imposed on a given Certificate and the amount of expenses
actually attributable to that Certificate.

ENHANCED DEATH BENEFIT CHARGE. If the Enhanced Death Benefit is elected, we will
assess the Subaccounts  of the  Variable Account  in which  the Certificate  has
allocations to with an additional daily charge for the mortality risk associated
with  the Enhanced Death Benefit at a nominal annual current rate of .15% of the
average daily  net asssets  of the  Subaccounts. This  charge is  assessed  only
during  the Accumulation Period and not during the Annuity Period. The amount of
the current charge  is based upon  Fortis Benefits' expectations  of its  future
experience  of  its  future costs  in  providing this  benefit.  Fortis Benefits
reserves the right  to increase the  amount of the  charge to an  amount not  in
excess of .30% of the average daily net assets of the Subaccounts. (See "Benefit
Payable on Death of Annuitant or Participant-Enhanced Death Benefit.")

TAX CHARGE
We  currently impose no  charge for taxes  payable by us  in connection with the
Certificate,  other  than  for  premium  taxes  and  similar  assessments   when
applicable. We reserve the right to impose a charge for any other taxes that may
become  payable by us in  the future in connection  with the Certificates or the
Separate Account.

The annual  administrative  charge  and charges  against  the  Variable  Account
described above are for the purposes described and Fortis Benefits may receive a
profit as a result of these charges.

SURRENDER CHARGE
No  sales charge is collected or deducted  at the time Net Purchase Payments are
applied under a  Certificate. A  surrender charge  will be  assessed on  certain
total or partial surrenders. The amounts obtained from the surrender charge will
be  used to partially defray expenses incurred  in the sale of the Certificates,
including commissions and other promotional or distribution expenses  associated
with  the marketing of the Certificates,  and costs associated with the printing
and distribution of prospectuses and sales material.

FREE SURRENDERS. The  following amounts  can be withdrawn  from the  Certificate
without a surrender charge:

    -  Any purchase payments received  by us more than  seven years prior to the
      surrender date and that have not been previously surrendered;

    - Any earnings that have not been previously surrendered;

    - In any certificate year, up to 10% of the purchase payments received by us
      less than seven  years prior  to the surrender  date (whether  or not  the
      purchase payments have been previously surrendered).

Earnings  are  deemed  to  be  withdrawn first.  After  all  earnings  have been
withdrawn, all purchase payments not subject to a surrender charge are deemed to
be withdrawn prior to purchase payments  which are still subject to a  surrender
charge.

No  surrender charge  is imposed  on annuitization (or  payment of  a single sum
because less than the minimum required Certificate Value is available to provide
an annuity  at the  Annuity  Commencement Date).  Nor  is the  surrender  charge
deducted  from the  payment of  any benefit  upon the  death of  an Annuitant or
Participant.

In addition, we  have an administrative  policy to waive  surrender charges  for
full  surrenders of Certificates that have been  in force for at least ten years
provided that the amount then subject to  the surrender charge is less than  25%
of  the Certificate Value.  Since the Certificates have  only been offered since
1991, no such  waivers have yet  been made. We  reserve the right  to change  or
terminate  this practice  at any  time, both for  new and  for previously issued
Certificates.

AMOUNT OF SURRENDER  CHARGE. Surrender charges  apply only if  the amount  being
withdrawn  exceeds the  sum of  the amounts  listed above  under Free Surrenders
(that is, if  the amount being  withdrawn includes purchase  payments made  less
than seven years prior to the surrender date). The surrender charges are:

<TABLE>
<CAPTION>
       NUMBER OF YEARS                 SURRENDER CHARGE
        SINCE PURCHASE                AS A PERCENTAGE OF
     PAYMENT WAS CREDITED              PURCHASE PAYMENT
------------------------------      ----------------------
<S>                                 <C>
         Less than 1                          7%
  At least 1 but less than 2                  6%
  At least 2 but less than 3                  5%
  At least 3 but less than 4                  4%
  At least 4 but less than 5                  3%
  At least 5 but less than 6                  2%
  At least 6 but less than 7                  1%
          7 or more                           0%
</TABLE>

We  anticipate  the  surrender  charge  will  not  be  sufficient  to  cover our
distribution expenses. To the extent  that the surrender charge is  insufficient
to  cover the  actual costs of  distribution, such  costs will be  paid from the
Company's General Account  assets, which  will include profit,  if any,  derived
from the mortality and expense risk charge.

NURSING CARE/HOSPITALIZATION WAIVER OF SURRENDER CHARGES. Surrender charges will
not  be assessed when  a total or  partial withdrawal is  requested: (1) after a
covered person has been confined in  a hospital or skilled health care  facility
for at least 60 consecutive days and the covered person continues to be confined
in the hospital or skilled care facility when the request is made; or (2) within
60 days following a covered person's discharge from a hospital or skilled health
care  facility after  confinement of at  least 60  consecutive days. Confinement
must begin after the effective date of this provision.

Covered persons  are the  Certificate owner  or  owners and  the spouse  of  any
Contract  owner if such spouse  is the Annuitant. Surrender  Charges will not be
waived when  a confinement  is due  to substance  abuse, mental  or  personality
disorders  without a demonstrable organic  disease. A degenerative brain disease
such as Alzheimer's Disease is considered an organic disease.

This nursing care/hospitalization  waiver of  surrender charges  is provided  by
means  of a rider to the Certificate, which has not been approved in all states.
Individuals applying for a Certificate  should check with their Fortis  Benefits
representative to determine if this rider is available in their state.

                                       15
<PAGE>
MISCELLANEOUS
Because the Variable Account invests in shares of the Portfolios of Series Fund,
the net assets of the Variable Account will reflect the investment advisory fees
and  certain other expenses incurred by the Portfolios that are described in the
prospectus for Series Fund.

REDUCTION OF CHARGES
No surrender charge will be imposed under any Certificate owned by: (A)  Fortis,
Inc.  or  its  subsidiaries,  and the  following  persons  associated  with such
companies, if  at  the  Certificate  Issue  date  they  are:  (1)  officers  and
directors;  (2) employees;  or (3) spouses  of any  such persons or  any of such
persons' children, grandchildren, parents, grandparents, or siblings--or spouses
of any of these persons; (B)  Series Fund directors, officers, or their  spouses
(or  such persons' children, grandchildren, parents, or grandparents--or spouses
of any such persons); and (C) representatives or employees (or their spouses) of
Fortis Investors (including agencies) or of other broker-dealers having a  sales
agreement  with  Fortis  Investors (or  such  persons'  children, grandchildren,
parents, or grandparents--or spouses of any such persons).

GENERAL PROVISIONS

THE CERTIFICATES
The Certificate, copies of any applications, amendments, riders, or endorsements
attached to  the  Certificate  and  copies  of  any  supplemental  applications,
amendments,  endorsements, or revised Certificate pages  which are mailed to you
are the entire  Certificate. Only  an officer of  Fortis Benefits  can agree  to
change or waive any provisions of a Certificate. Any change or waiver must be in
writing  and  signed by  an  officer of  Fortis  Benefits. The  Certificates are
non-participating and do not share in dividends or earnings of Fortis Benefits.

POSTPONEMENT OF PAYMENT
Fortis Benefits  may  defer  for  up  to 15  days  the  payment  of  any  amount
attributable  to a purchase payment made by  check to allow the check reasonable
time to clear. For a description of other circumstances in which amounts payable
out of Variable Account assets could be deferred, see "Postponement of Payments"
in the  Statement of  Additional  Information. Fortis  Benefits may  also  defer
payment  of surrender proceeds payable out of  the Fixed Account for a period of
up to 6 months.

MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS
If the age or sex of the  Annuitant has been misstated, any amount payable  will
be that which the purchase payments paid would have purchased at the correct age
and sex. If we have made any overpayments because of incorrect information about
age  or  sex,  or any  other  miscalculation,  Fortis Benefits  will  deduct the
overpayment from the next payment or  payments due. We add underpayments to  the
next  payment. The  amount of  any adjustment will  be credited  or charged with
interest at the effective annual rate of 4% per year.

ASSIGNMENT
Rights and  interests under  a Qualified  Certificate may  be assigned  only  in
certain  narrow circumstances referred  to in the  Certificate. Participants and
other  payees  may  assign  their  rights  and  interests  under   Non-Qualified
Certificates, including their ownership rights.

We  take  no responsibility  for the  validity  of any  assignment. A  change in
ownership rights must  be made  in writing  and a copy  must be  sent to  Fortis
Benefits'  Home Office. The  change will be  effective on the  date it was made,
although we are not bound by a change until the date we record it.

The rights under a Certificate  are subject to any  assignment of record at  the
Home  Office of Fortis  Benefits. An assignment  or pledge of  a Certificate may
have adverse tax consequences. See below under "Federal Tax Matters."

BENEFICIARY
Before the Annuity  Commencement Date  and while  the Annuitant  is living,  the
Participant  may name  or change  a beneficiary  or a  contingent beneficiary by
sending a  Written Request  of  the change  to  Fortis Benefits.  Under  certain
retirement  programs, however, spousal consent may be required to name or change
a beneficiary, and the right to name a beneficiary other than the spouse may  be
subject  to applicable tax laws and regulations.  We are not responsible for the
validity of any change. A  change will take effect as  of the date it is  signed
but  will not affect any payments we make or action we take before receiving the
Written Request. We also need the consent of any irrevocably named person before
making a requested change.

In the event of  the death of  a Participant or Annuitant  prior to the  Annuity
Commencement date the Beneficiary will be determined as follows:

    - If  there is any surviving Participant,  the surviving Participant will be
      the Beneficiary (this overrides any other beneficiary designation).

    - If there  is  no  surviving  Participant,  the  Beneficiary  will  be  the
      beneficiary designated by the Participant.

    - If  there is no surviving Participant and no surviving beneficiary who has
      been designated by the Participant, then the estate of the last  surviving
      Participant will be the Beneficiary.

REPORTS
We  will mail to the Participant (or to the person receiving payments during the
annuity  period),  at  the  last  known  address  of  record,  any  reports  and
communications  required  by  any  applicable  law  or  regulation.  You  should
therefore give us prompt written notice of any address change. This will include
annual audited financial statements of the  Series Fund, but not necessarily  of
the Variable Account or Fortis Benefits.

RIGHTS RESERVED BY FORTIS BENEFITS

Fortis  Benefits reserves the right to make certain changes if, in its judgment,
they would best serve the interests  of Participants and Annuitants or would  be
appropriate  in carrying out the purposes  of the Certificates. Any changes will
be made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, Fortis Benefits  will obtain your approval of the  changes
and approval from any appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the changes Fortis Benefits may make
include:

    - To operate the Variable Account in any form permitted under the Investment
      Company Act of 1940 or in any other form permitted by law.

    -  To transfer any assets in any Subaccount to another Subaccount, or to one
      or more separate accounts, or to the Fixed Account; or to add, combine  or
      remove Subaccounts in the Variable Account.

    - To substitute, for the Portfolio shares held in any Subaccount, the shares
      of  another Portfolio of  Series Fund or the  shares of another investment
      company or any other investment permitted by law.

    - To make any changes required by the Internal Revenue Code or by any  other
      applicable  law in  order to continue  treatment of the  Certificate as an
      annuity.

    - To change the time or time of  day at which a Valuation Date is deemed  to
      have ended.

    -  To make any other necessary technical changes in the Certificate in order
      to conform with any action the above provisions

                                       16
<PAGE>
      permit Fortis  Benefits  to  take,  including to  change  the  way  Fortis
      Benefits   assesses  charges,  but  without  increasing  as  to  any  then
      outstanding Certificate the aggregate amount of the types of charges which
      Fortis Benefits has guaranteed.

DISTRIBUTION

The Certificates will be sold by individuals who, in addition to being  licensed
by  state insurance authorities to sell the Certificates of Fortis Benefits, are
also registered representatives of Fortis Investors, Inc. ("Fortis  Investors"),
the  principal underwriter of the  Certificates or registered representatives of
other broker-dealer firms or representatives of other firms that are exempt from
broker dealer  regulation. Fortis  Investors and  any such  other  broker-dealer
firms  are  registered with  the Securities  and  Exchange Commission  under the
Securities Exchange  Act  of 1934  as  broker-dealers  and are  members  of  the
National Association of Securities Dealers, Inc.

As  compensation for distributing the  Certificates, Fortis Benefits pays Fortis
Investors 7.30%  of  all purchase  payments.  Fortis Investors  pays  a  selling
allowance  not in  excess of  5.0% of  purchase payments  to other broker-dealer
firms or exempt firms who sell the Certificates. In addition, from time to  time
Fortis Investors may pay to these firms an additional selling allowance of 1% of
purchase  payments. Also, Fortis Investors pays  servicing fees in the amount of
1/4 of 1% annually, based on the amount above a certain minimum attributable  to
these firms.

Fortis  Benefits  may,  under certain  flexible  compensation  arrangements, pay
Fortis Investors a  lesser or  a greater  selling allowance  and a  larger or  a
smaller  service fee than as  set forth above, and  Fortis investors may in turn
pay lesser or greater selling allowances  and larger or smaller service fees  to
its  registered representatives and other broker  dealer firms than as set forth
above. However, in such case, such flexible compensation arrangements will  have
actuarially  equivalent present values to the  amounts of the selling allowances
and service  fees set  forth  above. Additionally,  registered  representatives,
broker-dealer   firms,  and  exempt   firms  may  be   eligible  for  additional
compensation based upon meeting  certain production standards. Fortis  Investors
may  charge back commissions  paid to others  if the Certificate  upon which the
commission was paid is  surrendered or cancelled  within certain specified  time
periods.  Fortis Benefits paid a total of $31,643,856, $29,918,620 and $      to
Fortis Investors for  annuity contract distribution  services during 1994,  1995
and  1996, respectively,  $4,065,075 of  which in  1994, $3,925,959  in 1995 and
$      in 1996 was not reallowed to other broker-dealers or exempt firms. In the
distribution agreement, Fortis Benefits has agreed to indemnify Fortis Investors
(and its agents,  employees, and  controlling persons) for  certain damages  and
expenses, including those arising under federal securities laws.

Fortis   or  Fortis  Investors  may   also  provide  additional  compenstion  to
broker-dealers in  connection  with  sales  of  Certificates.  Compensation  may
include  financial assistance to broker-dealers  in connection with conferences,
sales or  training  programs  for  their employees,  seminars  for  the  public,
advertising,  sales  campaigns regarding  Certificates, and  other broker-dealer
sponsored programs  or  events.  Compensation may  include  payment  for  travel
expenses   incurred   in  connection   with   trips  taken   by   invited  sales
representatives and members of their families to locations within or outside  of
the United States for meetings or seminars of a business nature.

See  Note 13 to the Notes to Fortis Benefits' Financial Statements as to amounts
it has paid to Fortis, Inc. for various services.

Fortis Investors is an indirect subsidiary of  Fortis AMEV and Fortis AG and  is
therefore under common control with Fortis Benefits. Fortis Investors' principal
business address is the same as that of our Home Office. Fortis Investors is not
obligated  to  sell any  specific amount  of  interests under  the Certificates.
$110,000,000 of  interests in  the Fixed  Account and  an indefinite  amount  of
interests  in the Variable Account have  been registered with the Securities and
Exchange Commission.

FEDERAL TAX MATTERS

The following  description is  a general  summary of  the tax  rules,  primarily
related  to federal income  taxes, which in  the opinion of  Fortis Benefits are
currently  in  effect.  These   rules  are  based   on  laws,  regulations   and
interpretations  which are subject  to change at  any time. This  summary is not
comprehensive and is  not intended as  tax advice. Federal  estate and gift  tax
considerations,  as well  as state  and local taxes,  may also  be material. You
should consult a qualified tax adviser as to the tax implications of taking  any
action under a Certificate or related retirement plan.

NON-QUALIFIED CERTIFICATES
Section  72  of  the Internal  Revenue  Code  ("Code") governs  the  taxation of
annuities in general.  Purchase payments made  under Non-Qualified  Certificates
are not excludible or deductible from the gross income of the Participant or any
other  person. However, any increase in the accumulated value of a Non-Qualified
Certificate resulting from the investment performance of the Variable Account or
interest credited  to  the  Fixed  Account  is  generally  not  taxable  to  the
Participant  or other payee until received by him or her, as surrender proceeds,
death benefit  proceeds, or  otherwise.  The exception  to  this rule  is  that,
generally,  Participants who are  not natural persons ARE  taxed annually on any
increase in the Certificate Value. However, this exception does not apply in all
cases, and you may wish to discuss this with your tax adviser.

The following  discussion applies  generally to  Certificates owned  by  natural
persons.

In  general, surrenders or  partial withdrawals under  Certificates are taxed as
ordinary income  to the  extent of  the  accumulated income  or gain  under  the
Certificate.  If a  Participant assigns or  pledges any  part of the  value of a
Certificate, the value  so pledged or  assigned is taxed  to the Participant  as
ordinary income to the same extent as a partial withdrawal.

With  respect to annuity payment options, although the tax consequences may vary
depending on the option elected under  the Certificate, until the investment  in
the  Certificate is recovered, generally only the portion of the annuity payment
that  represents  the  amount  by  which  the  Certificate  Value  exceeds   the
"investment   in  the  Certificate"  will  be  taxed.  In  general,  a  person's
"investment in the  Certificate" is  the aggregate amount  of purchase  payments
made  by him or  her. After an  Annuitant's or other  payee's "investment in the
Certificate" is recovered, the full amount of any additional annuity payments is
taxable. For variable annuity payments, in general, the taxable portion of  each
annuity  payment (prior to  recovery of the "investment  in the Certificate") is
determined by a  formula which establishes  the specific dollar  amount of  each
annuity  payment that is not taxed. This dollar amount is determined by dividing
the "investment in  the Certificate"  by the  total number  of expected  annuity
payments.  For  fixed annuity  payments, in  general, prior  to recovery  of the
"investment in the Certificate," there is no  tax on the amount of each  payment
which  bears  the  same  ratio  to  that  payment  as  the  "investment  in  the
Certificate" bears to the total expected  value of the annuity payments for  the
term of the payments. However, the remainder of each annuity payment is taxable.
The taxable portion of a distribution (in the form of an annuity or a single sum
payment) is taxed as ordinary income.

For  purposes  of  determining  the  amount  of  taxable  income  resulting from
distributions, all Certificates and other annuity contracts issued by us or  our
affiliates  to the Participant within the same  calendar year will be treated as
if they were a single Certificate.

                                       17
<PAGE>
There is a 10%  penalty under the  Code on the taxable  portion of a  "premature
distribution."  Generally, an  amount is  a "premature  distribution" unless the
distribution is (1) made on or after the Participant or other payee reaches  age
59 1/2, (2) made to a Beneficiary on or after death of the Participant, (3) made
upon  the disability of the Participant or other  payee, or (4) part of a series
of substantially equal annuity payments for  the life or life expectancy of  the
Participant  or  the Participant  and  Beneficiary. Premature  distributions may
result,  for  example,  from  an  early  Annuity  Commencement  Date,  an  early
surrender,  partial surrender or assignment of  a Certificate or the early death
of an  Annuitant who  is not  also  the Participant  or other  person  receiving
annuity payments under the Certificate.

A  transfer of  ownership of  a Certificate, or  designation of  an Annuitant or
other payee who is  not also the  Participant, may result  in certain income  or
gift  tax consequences  to the  Participant that  are beyond  the scope  of this
discussion.  A  Participant  contemplating  any  transfer  or  assignment  of  a
Certificate should contact a competent tax adviser with respect to the potential
tax effects of such transaction.

REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CERTIFICATES
In  order that a Non-Qualified Certificate be treated as an annuity contract for
federal income  tax purposes,  Section 72(s)  of the  Code requires  (a) if  any
person receiving annuity payments dies on or after the Annuity Commencement Date
but  prior  to  the  time  the  entire  interest  in  the  Certificate  has been
distributed, the remaining portion of such interest will be distributed at least
as rapidly as under the method of distribution being used as of the date of  the
person's   death;  and  (b)  if  any  Participant  dies  prior  to  the  Annuity
Commencement Date, the entire  interest in the  Certificate will be  distributed
(1)  within five years after  the date of that person's  death or (2) as annuity
payments which will begin within one year of that Participant's death and  which
will be made over the life of the Participant's designated Beneficiary or over a
period not extending beyond the life expectancy of that Beneficiary. However, if
the  Participant's  designated  Beneficiary  is  the  surviving  spouse  of  the
Participant, the Certificate may be  continued with the surviving spouse  deemed
to  be  the new  Participant. Where  the Participant  or other  person receiving
payments is not a natural person, the required distributions provided by Section
72(A) apply upon the death of the primary Annuitant.

No regulations  interpreting the  requirements of  Section 72(s)  have yet  been
issued  (although  proposed regulations  have  been issued  interpreting similar
requirements for qualified plans). Fortis Benefits intends to review and  modify
the Certificate if necessary to ensure that it complies with the requirements of
Section 72(s) when clarified by regulation or otherwise.

Generally,  unless the Beneficiary elects otherwise, the above requirements will
be satisfied where the  death occurs prior to  the Annuity Commencement Date  by
paying  the death benefit in a single sum, subject to proof of the Participant's
death. The Beneficiary,  however, may  elect by  Written Request  to receive  an
annuity  option instead of a  lump sum payment. However,  if the election is not
made within 60 days of the date  the single sum death benefit otherwise  becomes
payable,  particularly where  the annuitant  dies and  the annuitant  is not the
Participant, the IRS  may disregard the  election for tax  purposes and tax  the
Beneficiary as if a single sum payment had been made.

QUALIFIED CERTIFICATES
The  Certificates may be used with several types of tax-qualified plans. The tax
rules applicable to Participants, Annuitants and other payees vary according  to
the  type of plan and  the terms and conditions of  the plan itself. In general,
purchase payments made under a retirement  program recognized under the Code  on
behalf  of an individual  are excludable from the  individual's gross income for
tax purposes  during  the Accumulation  Period.  The  portion, if  any,  of  any
purchase  payment made by or on behalf of an individual under a Certificate that
is not excluded from the individual's  gross income for tax purposes during  the
Accumulation   Period   constitutes   the   individual's   "investment   in  the
Certificate." Aggregate deferrals under all  plans at the employee's option  may
be subject to limitations.

When  annuity  payments  begin, the  individual  will  receive back  his  or her
"investment in the  Certificate" if any,  as a tax-free  return of capital.  The
dollar  amount of annuity payments received in any year in excess of such return
is taxable as  ordinary income. When  payments are received  as an annuity,  the
tax-free  return of capital  is treated as  if received ratably  over the entire
period of the annuity until fully recovered (as described above with respect  to
Non-Qualified Certificates).

The  Certificates  are  available  in connection  with  the  following  types of
retirement  plans:  Section  403(b)  annuity  plans  for  employees  of  certain
tax-exempt  organizations and  public educational  institutions; Section  401 or
403(a) qualified pension, profit-sharing or annuity plans; individual retirement
annuities ("IRAs")  under  Section  408(b); simplified  employee  pension  plans
("SEPs")  under Section 408(k);  SIMPLE IRA Plans  under Section 408(p); Section
457 unfunded  deferred compensation  plans of  public employers  and  tax-exempt
organizations'  and private  employer unfunded deferred  compensation plans. The
tax implications  of these  plans  are further  discussed  in the  Statement  of
Additional  Information  under the  heading  "Taxation Under  Certain Retirement
Plans."

WITHHOLDING
Annuity payments and other  amounts received under  Certificates are subject  to
income  tax withholding unless the recipient  elects not to have taxes withheld.
The amounts withheld will vary among  recipients depending on the tax status  of
the individual and the type of payments from which taxes are withheld.

Notwithstanding  the  recipient's  election, withholding  may  be  required with
respect to certain payments to be  delivered outside the United States and  with
respect  to  certain distributions  from certain  types of  qualified retirement
plans, unless the proceeds are transferred  directly from the qualified plan  to
another  qualified retirement plan. Moreover, special "backup withholding" rules
may require  Fortis  Benefits  to  disregard the  recipient's  election  if  the
recipient   fails  to   supply  Fortis  Benefits   with  a   "TIN"  or  taxpayer
identification number  (social  security  number for  individuals),  or  if  the
Internal  Revenue Service notifies Fortis Benefits  that the TIN provided by the
recipient is incorrect.

PORTFOLIO DIVERSIFICATION
The United  States Treasury  Department has  adopted regulations  under  Section
817(h)  of the Code  which set standards of  diversification for the investments
underlying the Certificates,  in order  for the  Certificates to  be treated  as
annuities. Fortis Benefits believes that these diversification standards will be
satisfied.  Failure to do so would  result in immediate taxation to Participants
or persons receiving annuity payments  of all returns credited to  Certificates,
except  in the case of certain Qualified Certificates. Also, current regulations
do not provide guidance as to any circumstances in which control over allocation
of values  among different  investment alternatives  may cause  Participants  or
persons  receiving  annuity payments  to be  treated as  the owners  of Variable
Account assets for tax purposes. Fortis Benefits reserves the right to amend the
Certificates in  any  way necessary  to  avoid  any such  result.  The  Treasury
Department  may  establish  standards  in  this  regard  through  regulations or
rulings. Such  standards  may  apply only  prospectively,  although  retroactive
application  is possible if such  standards were considered not  to embody a new
position.

CERTAIN EXCHANGES
Section 1035  of the  Code  provides generally  that no  gain  or loss  will  be
recognized  under the exchange  of a life  insurance or annuity  contract for an
annuity contract. Thus, a properly completed exchange from

                                       18
<PAGE>
one of  these types  of products  into  a Certificate  pursuant to  the  special
annuity  contract exchange form we  provide for this purpose  is not generally a
taxable event under the Code, and your investment in the Certificate will be the
same as your investment in the product you exchanged out of.

Because of the complexity of these and  other tax aspects in connection with  an
exchange, you should consult a tax adviser before making any exchange.

TAX LAW RESTRICTIONS AFFECTING SECTION 403(B) PLANS
Section 403(b)(12) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:
    (1) elective contributions made for years beginning after December 31, 1988;
    (2) earnings on those contributions; and
    (3) earnings on amounts held as of December 31, 1988.

Distribution  of  these  amounts may  only  occur  upon death  of  the employee,
attainment of  age 59  1/2, separation  from service,  disability, or  financial
hardship.  In addition, income attributable to elective contributions made after
December 31, 1988 may not be distributed in the case of hardship.
FURTHER INFORMATION ABOUT FORTIS BENEFITS

GENERAL
Fortis Benefits  is  engaged  in  the offer  and  sale  of  insurance  products,
including fixed and variable life insurance policies, fixed and variable annuity
contracts,  and group life, accident and  health insurance policies. The Company
markets its  products  to small  business  and individuals  through  a  national
network of independent agents, brokers, and financial institutions.

SELECTED FINANCIAL DATA
The  following is a summary  of certain financial data  of Fortis Benefits. This
summary has been derived in part from,  and should be read in conjunction  with,
the   financial  statements  of  Fortis  Benefits  included  elsewhere  in  this
Prospectus.

<TABLE>
<CAPTION>
                                                                              YEAR ENDED DECEMBER 31,
                                                             ----------------------------------------------------------
                      (IN THOUSANDS)                            1996        1995        1994        1993        1992
                                                             ----------  ----------  ----------  ----------  ----------
<S>                                                          <C>         <C>         <C>         <C>         <C>
INCOME STATEMENT DATA
  Premiums and policy charges..............................  $1,295,878  $1,232,329  $1,022,446  $  955,053  $  967,111
  Net investment income....................................     206,023     203,537     162,514     153,657     156,431
  Realized gains (losses) on investment....................      25,731      55,080     (28,815)     73,623      37,928
  Other income.............................................      31,725      33,085      35,958      27,100      26,176
                                                             ----------  ----------  ----------  ----------  ----------
    TOTAL REVENUES.........................................  $1,559,357  $1,524,031  $1,192,103  $1,209,433  $1,187,646
                                                             ----------  ----------  ----------  ----------  ----------
                                                             ----------  ----------  ----------  ----------  ----------
  Total benefits and expenses..............................  $1,470,066  $1,442,270  $1,157,651  $1,100,199  $1,111,530
  Federal Income taxes.....................................      31,099      27,891      11,595      31,090      25,660
  Income before cumulative effect of accounting changes*...      89,291      53,870      22,857      78,144      50,456
  Net income...............................................      58,192      53,870      22,857      81,707      50,456

BALANCE SHEET DATA
  Total assets**...........................................  $5,951,876  $5,143,012  $4,043,914  $3,584,139  $2,867,999
  Total liabilities........................................   5,171,203   4,431,914   3,569,717   3,052,231   2,460,445
  Total shareholder's equity**.............................     780,673     711,098     474,197     531,908     407,554
</TABLE>

------------------------
 * Prior-year data has not been restated for the adoption of Statements 109  and
   106 in 1993 (See Note 2 of the financial statements).

** The  years ended December 31, 1995, 1994  and 1993, reflect the impact of the
   adoption of Statement 115 (See Note 1 of the financial statements).

MANAGEMENT'S DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION AND  RESULTS  OF
OPERATIONS

1996 COMPARED TO 1995

REVENUES
Traditional  life  insurance premiums  of  Fortis Benefits  (the  "Company") are
principally composed of group life coverages. Total life premiums increased over
1995 due  primarily  to  group  life  sales  in  1996.  Interest  sensitive  and
investment  product policy charges, which consist primarily of cost of insurance
charges, increased 37% from 1995 to 1996. Continued sales of interest  sensitive
and  investment products has  steadily increased the policy  base on which these
charges are assessed.

Total accident and health premiums increased in 1996 compared to 1995 due to  an
increase in the group disability product sales and strong persistency. Partially
offsetting  this increase was a 3% decrease in the group medical products driven
by a decision to roll the fully  insured medical business into a common  medical
plan  and the  decision to cease  new sales  of large group  self funded medical
plans, effective January 1,  1996. Beginning April 1,  1996 and continuing  into
1997, the groups will gradually be rolled to a third party administrator.

The  Company continues  to match  investment portfolio  composition to liquidity
needs and capital requirements. Changes in interest rates during 1996, 1995  and
1994 resulted in recognition of realized gains and losses.

BENEFITS
The  Company's group  life benefits which  are included in  the traditional life
benefits were  higher  in  1996  compared  to 1995  as  a  result  of  increased
mortality.  Interest sensitive  and investment  product benefits  for the period
ended December 31, 1996 increased 23% from 1995. This increase was the result of
higher interest crediting on  the Company's steadily  increasing policy base  in
1996 compared to 1995.

The  accident and health claims to premium  ratio improved from 1995 to 1996 due
primarily to the improved claim closure rates in the group disability lines.

EXPENSES
The commission rates have  declined from the levels  in 1995. This is  primarily
due  to change in the mix of business by  product lines as well as the change in
the first  year  versus  renewal premiums.  Interest  sensitive  and  investment
products  commission increased from 1996 compared  to 1995; however, the Company
deferred $62.4 million of these commissions  in 1996, compared to $52.7  million
in 1995. The

                                       19
<PAGE>
additional  commission and deferral is the result of an increase in sales of the
company's variable life and variable annuity products. This increase in deferred
commissions more than offset  the increase in paid  commissions and lowered  the
net commission expense for 1996.

In  1996,  the Company  consolidated the  fully  insured group  medical business
administration processing. This has resulted in expense savings as  demonstrated
by  the reduction in the general  and administrative expenses. Also contributing
to the expense  reduction was the  decision to discontinue  issuing large  group
self funded medical business.

1995 COMPARED TO 1994

FINANCIAL CONDITION
Total  assets rose to  $5,143 million from  $4,044 million in  1994. Half of the
increase was due to the assets held in separate accounts which grew from  $1,213
million  in 1994 to $1,781 million  in 1995. Invested assets, excluding Separate
Accounts, increased from $2,372 million at  December 31, 1994 to $2,936  million
at  December 31,  1995 due  to cash inflows  and the  appreciation of securities
available for sale. Fortis  Benefits invests primarily  in government and  other
high-quality  marketable fixed income securities with the objective of providing
reasonable returns while limiting liquidity and credit risk.

During 1995, the Company's mortgage loans on real estate increased $110  million
to  $563 million. The Company has a high quality portfolio which has experienced
delinquency rates lower  than the  industry average. Similar  to 1994,  mortgage
loans represent 19% of the Company's invested assets.

Policy  reserves and liabilities  increased from $3,570  million at December 31,
1994 to $4,432 million at December 31, 1995. Aggregate reserves for  traditional
life  insurance and  interest sensitive  and investment  products increased $222
million from $1,288 million at December  31, 1994 to $1,510 million at  December
31,  1995. This increase  in traditional life  reserves is the  result of strong
sales of  the  Company's  group  insurance  and  growth  in  the  policyholder's
accumulations associated with interest sensitive products.

Policy reserves and claim liabilities for accident and health policies increased
by  $35  million to  nearly $833  million  at December  31, 1995.  This increase
reflects increased volume of business and increased liability costs for existing
disabilitants  as  reflected  in  the  Company's  disability  reserves.  Medical
reserves grew somewhat faster than premiums.

Liabilities  related  to  separate  accounts increased  from  $1,208  million at
December 31,  1994 to  $1,757 million  at December  31, 1995.  This increase  is
primarily  the result of the increased sales  of the Company's variable life and
annuity products and market appreciation during 1995.

RESULTS OF OPERATIONS
Total revenues were $1,524 million in  1995 compared to $1,192 million in  1994.
Increased  premiums and policy charges in the last two years and higher-yielding
mortgage loans,  offset by  lower interest  rates, increased  the Company's  net
investment  income $41 million to $204  million. The favorable market conditions
generated realized gains on securities sold of $55 million in 1995 compared with
realized losses on investments of $29 million in 1994.

Traditional life premiums and  policy charges increased by  $52 million to  $297
million  in 1995.  Traditional life insurance  premiums increased  by 21% during
1995 to $251  million. The Company  has experienced strong  sales of group  life
products  due to competitive pricing  and marketing emphasis. Interest sensitive
and investment  product  policy charges,  which  consist primarily  of  cost  of
insurance   and  expense  charges  on  interest  sensitive  insurance  policies,
increased 22% to $46 million in 1995 due to continued growth in these products.

Accident and health premiums increased $158 million in 1995 to $935 million from
$777 million in 1994 primarily as  a result of increased medical and  disability
sales.  Disability  insurance  accounted  for approximately  one  fourth  of the
Company's group accident and  health insurance revenues. The  Company is one  of
the  leading writers  of group disability  coverages in the  United States. This
market has  been  intensely competitive.  The  Company's strategy  has  been  to
emphasize  its  claim management  activities and  refine  its pricing  to better
reflect the risks of various industries and occupations.

New regulations in  several states  have adversely affected  current and  future
profitability  of  certain  medical  lines. On  October  24,  1995,  the Company
announced that it will  cease selling certain  group medical products  effective
January 1, 1996. The Company will continue to renew and service existing medical
business.  In  the  long-term,  the  Company expects  this  decision  to  have a
favorable impact on its capital position. In the short-term, management believes
this product  line change  will not  have  a material  impact on  the  Company's
operating results.

Total  benefits to  policyholders increased  by $209  million in  1995 to $1,046
million. Traditional life,  interest sensitive and  investment products'  claims
and  benefits  increased  by $59  million  to  $276 million  in  1995 reflecting
increased in-force  group coverages  and  a larger  in-force block  of  interest
sensitive and investment products.

Accident and health benefits increased to $770 million in 1995 from $620 million
in 1994. The increase is due primarily to increased disability business.

Amortization  of deferred policy  acquisition costs increased  to $41 million in
1995 from $35  million in  1994. The increase  in the  amortization of  interest
sensitive  and investment products of $7 million to $17 million in 1995 from $10
million in 1994 is  primarily due to amortization  of costs related to  products
sold in recent years.

Insurance  commissions,  net of  deferrals, increased  to  $96 million  from $86
million in  1994.  These  additional  commissions  resulted  primarily  from  an
increase  in  sales  of  group coverages.  General  and  administrative expenses
increased 29% to $255 million in  1995 from $197 million in 1994,  approximately
in  line with the increase in  revenue. The increased expenses related primarily
to additional staffing and systems integration required to service the increased
amount of group insurance business written in 1995.

Income before federal income taxes  and cumulative effect of accounting  changes
totaled  $82 million  in 1995  compared to $34  million in  1994. Federal income
taxes were $28 million in  1995 compared to $12  million in 1994. The  Company's
effective tax rate was comparable between years.

LIQUIDITY AND CAPITAL RESOURCES
The  liquidity requirements of the Company have  been met by funds provided from
operations, including investment income and additional paid in capital from  the
Company's parent and sole shareholder. Funds are principally used to provide for
policy  benefits, operating expenses, commissions  and investment purchases. The
impact of  the  declining  inforce  medical  business  has  been  considered  in
evaluating  the  Company's  future  liquidity  needs.  The  Company  expects its
operating activities to continue to generate sufficient funds.

The NAIC has implemented risk-based  capital standards to determine the  capital
requirements  of a life insurance  company based upon the  risks inherent in its
operations. These  standards require  the computation  of a  risk-based  capital
amount  which is  then compared  to a  company's actual  total adjusted capital.
Based upon current calculation the  risk-based capital standards, the  Company's
percentage  of total adjusted capital is in excess of ratios which would require
regulatory attention.

                                       20
<PAGE>
The Company has no long or short term debt. Less than 3% of the Company's assets
consisted of non-investment grade bonds as of December 31, 1996 and the  Company
does not expect this percentage to change significantly in the future.

COMPETITION
Fortis  Benefits seeks  to compete primarily  on the basis  of customer service,
product design, and,  in the case  of products funded  through Series Fund,  the
investment  results  achieved  by  Fortis Advisers,  Inc.  Many  other insurance
companies compete with Fortis Benefits in each of its markets, including on  the
basis  of price. Many of these companies,  which include some of the largest and
best known insurance companies, have considerably greater resources than  Fortis
Benefits.

REGULATION AND RESERVES
The   Company  is  subject  to  regulation  and  supervision  by  the  insurance
departments of  the  states  in  which  it is  licensed  to  do  business.  This
regulation  covers a variety  of areas, including  benefit reserve requirements,
adequacy  of  insurance  company   capital  and  surplus,  various   operational
standards,  and accounting and financial  reporting procedures. Fortis Benefits'
operations and  accounts  are  subject  to  periodic  examination  by  insurance
regulatory authorities.

Under  insurance  guaranty fund  laws in  most  states, insurers  doing business
therein can be assessed up to  prescribed limits for insurance contract  losses,
if   covered,  incurred  by  insolvent  companies.  The  amount  of  any  future
assessments of Fortis Benefits under these laws cannot be reasonably  estimated.
Most  of these laws  do provide, however,  that an assessment  may be excused or
deferred if it would threaten an insurer's own financial strength.

Although the  federal  government  generally  does  not  directly  regulate  the
business  of insurance, federal initiatives often have an impact on the business
in a variety of ways. Federal  measures that may adversely affect the  insurance
business  include health care  reform, employee benefit  regulation, controls on
medicare costs and medical entitlement  programs, tax law changes affecting  the
taxation  of  insurance  companies  or of  insurance  products,  changes  in the
relative desirability of  various personal investment  vehicles, and removal  of
impediments on the entry of banking institutions into the business of insurance.

Pursuant  to state insurance laws and  regulations, Fortis Benefits is obligated
to carry on its  books, as liabilities, reserves  to meet its obligations  under
outstanding  insurance contracts. These reserves are based on assumptions about,
among other things, future claims experience and investment returns. Neither the
reserve requirements nor the other aspects of state insurance regulation provide
absolute  protection   to  holders   of  insurance   contracts,  including   the
Certificates,  if  Fortis Benefits  were to  incur claims  or expenses  at rates
significantly higher  than  expected  (due,  for  example,  to  acquired  immune
deficiency syndrome or other infectious diseases or catastrophes) or significant
unexpected losses on its investments.

EMPLOYEES AND FACILITIES
Fortis  Benefits has  approximately 2,000  employees and  considers its employee
relations to  be  excellent; Fortis  Benefits  owns its  Home  Office  building,
consisting   of  295,000  square  feet  in  Woodbury,  Minnesota.  It  also  has
administrative offices  in  Kansas  City, Missouri.  Fortis  Benefits  leases  a
portion  of that building consisting of  297,000 square feet. In addition Fortis
Benefits has several  regional claims  and sales offices  throughout the  United
States.  Fortis Benefits occupies approximately 100%  of its home office and 70%
of its  administration building,  which  it expects  will  be adequate  for  its
purposes for the foreseeable future.

                                       21
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS

Set  forth  is  information  concerning the  Company's  directors  and executive
officers, to  the  extent  responsible  for  its  variable  annuity  operations,
together  with their business experience and  principal occupations for the past
five years:

<TABLE>
<S>                         <C>
OFFICER-DIRECTORS
Dean C. Kopperud, 44        Senior Vice  President--Marketing  and  Sales;  also
Director since 1995         officer of affiliated companies.
Robert Brian Pollock, 42    President  and Chief Executive  Officer; before then
Director Since 1988         Senior Vice President--Life and Disability.
Thomas Michael Keller, 49   Executive Vice  President; before  then Senior  Vice
Director since 1990         President of Fortis, Inc.
OTHER DIRECTORS
Allen Royal Freedman, 57    Chairman and Chief Executive Officer of Fortis, Inc.
Chairman of the Board
since 1995
Henry Carroll Mackin, 55    Executive Vice President of Fortis, Inc.
Director Since 1990
Arie Aristide Fakkert, 53   Assistant  General  Manager of  Fortis International
Director Since 1987         N.V.
EXECUTIVE OFFICERS
Rhonda Schwartz, 38         Senior Vice President and General Counsel--Life  and
                            Investment   Products;  before  then  secretary  and
                            General Counsel of Fortis Inc.
Michael John Peninger, 42   Senior Vice President and Chief Financial Officer
Jon H. Nicholson, 47        Senior Vice President--Custom Solutions Group.
Peggy L. Ettestad, 39       Senior Vice President--Life Operations; before  that
                            Vice President of General Electric Company.
</TABLE>

Fortis  Benefits' officers serve at the pleasure  of the board of directors, and
members of  the  board  serve  without  compensation  (except  for  expenses  of
attending   board  meetings),  until  their  successors  are  duly  elected  and
qualified.

Mr. Freedman is a  director of Systems and  Computer Technology Corporation  and
Genesis  Health  Ventures. Mr.  Freedman  is also  a  director of  the following
registered investment companies: Fortis  Equity Portfolios, Inc.; Fortis  Growth
Fund,  Inc.; Fortis Fiduciary Fund, Inc., Fortis Income Portfolios, Inc.; Fortis
Securities, Inc.;  Fortis Tax-Free  Portfolios, Inc.;  Fortis Money  Portfolios,
Inc.;  Fortis Advantage  Portfolios, Inc.;  Fortis World  Wide Portfolios, Inc.;
Fortis Series Fund, Inc.; Special Portfolios, Inc.

EXECUTIVE COMPENSATION
Set forth  below  is certain  information  concerning the  compensation  of  the
executive officers of Fortis Benefits.

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

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                  ANNUAL COMPENSATION               LONG-TERM COMPENSATION
                                                        ---------------------------------------  ----------------------------
                                                                                OTHER ANNUAL        LTIP         ALL OTHER
        NAME AND PRINCIPAL POSITION            YEAR      SALARY      BONUS      COMPENSATION       PAYOUTS    COMPENSATION (1)
-------------------------------------------  ---------  ---------  ---------  -----------------  -----------  ---------------
<S>                                          <C>        <C>        <C>        <C>                <C>          <C>
Robert B. Pollock                                 1996  $ 215,000  $  69,660      $       0       $       0      $  15,318
 President and Chief Executive Officer            1995    215,000     84,000              0               0         14,851
                                                  1994    200,000     84,000              0               0         14,150
-----------------------------------------------------------------------------------------------------------------------------
Jon H. Nicholson                                  1996    160,615     45,760              0               0         12,173
 Sr. Vice President--                             1995    137,230     21,360              0               0          9,515
 Custom Solutions Group                           1994    120,461     33,318              0               0          9,000
-----------------------------------------------------------------------------------------------------------------------------
Anthony J. Rotondi                                1996    182,029     40,755              0               0          9,000
 Sr. Vice President--                             1995    156,750     54,375              0               0         12,667
 Manufacturing and Information Technology         1994    150,000     54,375              0               0         12,866
-----------------------------------------------------------------------------------------------------------------------------
William D. Greiter                                1996    178,500     48,195              0               0         12,829
 Senior Vice President                            1995    170,000     38,808              0               0         12,528
                                                  1994    144,000     36,750              0               0         10,834
-----------------------------------------------------------------------------------------------------------------------------
Michael John Peninger                             1996    165,000     51,975              0               0         13,018
 Senior Vice President and                        1995    165,000     39,150              0               0         12,249
 Chief Financial Officer                          1994    135,000     39,150              0               0         10,116
</TABLE>

------------------------
1   This  column includes contributions made by Fortis Benefits for the year for
    the benefit for the  named individual to  a defined contribution  retirement
    plan.

                                       22
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS TABLE
(LONG-TERM INCENTIVE PLAN(1) AWARDS IN LAST FISCAL YEAR)

<TABLE>
<CAPTION>
                                                                       PERFORMANCE OR
                                                                        OTHER PERIOD      ESTIMATED FUTURE PAYOUTS UNDER
                                                        NUMBER OF           UNTIL          NON-STOCK PRICE BASED PLANS
                                                     SHARES, UNITS OR   MATURATION OR   ----------------------------------
NAME                                                   OTHER RIGHTS        PAYOUT       THRESHOLD    TARGET      MAXIMUM
---------------------------------------------------  ----------------  ---------------  ---------  ----------  -----------
<S>                                                  <C>               <C>              <C>        <C>         <C>
Robert B. Pollock..................................       315 Units         3 years      0 Units    315 Units    945 Units
Jon H. Nicholson...................................       156 Units         3 years      0 Units    156 Units    468 Units
Anthony J. Rotondi.................................       199 Units         3 years      0 Units    199 Units    597 Units
William D. Greiter.................................       174 Units         3 years      0 Units    174 Units    483 Units
Michael John Peninger..............................       161 Units         3 years      0 Units    161 Units    483 Units
</TABLE>

------------------------
1   Units shown in this table represent performance units granted pursuant to an
    Executive  Incentive  Compensation Plan  in which  officers and  managers of
    Fortis Benefits participate. Awards are made pursuant to this plan based  on
    the employee's position with Fortis Benefits and salary level and the extent
    to   which  the  employee  and  Fortis  Benefits  meet  certain  performance
    objectives over 1- and 3-year periods.  Employees may elect to defer  awards
    payable to them under this plan.

As  additional  compensation to  its  employees and  executive  officers, Fortis
Benefits has an Employees' Uniform  Retirement Plan and an Executive  Retirement
Plan which generally provide an annual annuity benefit upon retirement at age 65
(or  a reduced benefit  upon early retirement)  equal to: .9%  of the employee's
Average Annual  compensation  up  to  the  employee's  social  security  covered
compensation,  plus  1.3%  of  compensation above  the  social  security covered
compensation, up  to  $255,300, as  adjusted  by  an index,  multiplied  by  the
employee's years of credited services.

In  addition,  Fortis  Benefits  provides  an  unfunded  Supplemental  Executive
Retirement Plan for certain  executives of Fortis Benefits.  Mr. Pollock is  the
only  named  executive currently  covered by  the  Plan. Under  the Supplemental
Executive Retirement Plan, the annual  benefit is calculated by subtracting  the
benefit  payable under the Employees' Uniform  Retirement Plan and the estimated
Social Security benefit from the "Target Benefit." The "Target Benefit" is equal
to 50% of  Final Average Salary  (average salary over  the final 36  consecutive
months  of employment) reduced for less than  20 years of service at retirement.
Upon retirement prior  to age 65  and after attaining  age 55 with  10 years  of
service,  special early retirement rules apply. The salary used to calculate the
Final Average  Salary consists  of regular  compensation and  the annual  target
incentive bonus of the participant. The estimated annual benefit of Mr. Pollock,
based on current compensation levels, under this plan is $50,135.

The  following  table illustrates  the COMBINED  estimated life  annuity benefit
payable from the  Employees' Uniform  Retirement Plan  and Executive  Retirement
Plan  to employees with the specified Final  Average Salary and years of service
upon retirement.

PENSION PLAN TABLE*

<TABLE>
<CAPTION>
                                                     YEARS OF SERVICE
                             ----------------------------------------------------------------
FINAL AVERAGE SALARY            10         15         20         25         30         35
---------------------------  ---------  ---------  ---------  ---------  ---------  ---------
<S>                          <C>        <C>        <C>        <C>        <C>        <C>
$125,000...................    $15,147  $  22,720  $  30,294  $  37,867  $  45,441  $  53,014
 150,000...................     18,397     27,595     36,794     45,992     55,191     64,389
 175,000...................     21,647     32,470     43,294     54,117     64,941     75,764
 200,000...................     24,897     37,345     49,794     62,242     74,691     87,139
 225,000...................     28,147     42,220     56,294     70,367     84,441     98,514
 250,000...................    +30,214     45,321     60,428     75,536     90,643    105,750
 275,000+..................     30,352     45,528     60,704     75,880     91,056    106,232
</TABLE>

------------------------
* The table excludes social security benefits.  In general, for the purposes  of
  these  plans, compensation includes salary and  bonuses. The credited years of
  service with  Fortis  Benefits for  these  individuals named  in  the  Summary
  Compensation Table above are as follows: 16, 8, 23, 12, and 11, respectively.

OWNERSHIP OF SECURITIES
All  of Fortis Benefits' outstanding shares are owned by Time Insurance Company,
515 West Wells, Milwaukee, Wisc. 53201, which is itself wholly owned by  Fortis,
Inc.,  One Chase Manhattan Plaza, New York, N.Y. 10005. Fortis, Inc., in turn is
wholly owned by Fortis  International, Inc., which is  wholly owned by  AMEV/VSB
1990  N.V., both of which share the same address with N.V. AMEV., Archimedeslaan
10, 3584 BA, Utrecht, The Netherlands. AMEV/VSB 1990 N.V. is 50% owned by Fortis
AMEV and 50% owned, through certain subsidiaries, by Fortis AG, Boulevard  Emile
Jacqmain 53, 1000 Brussels, Belgium.

VOTING PRIVILEGES

In accordance with its view of current applicable law, Fortis Benefits will vote
shares  of each  of the  Portfolios which are  attributable to  a Certificate at
regular and special meetings of the shareholders of Series Fund in proportion to
instructions received  from  the  persons  having the  voting  interest  in  the
Certificate as of the record date for the corresponding Series Fund shareholders
meeting.  Participants have the voting  interest during the Accumulation Period,
persons receiving annuity payments during the Annuity Period, and  Beneficiaries
after  the death  of the  Annuitant or  Participant. However,  if the Investment
Company Act of 1940 or any rules thereunder should be amended or if the  present
interpretation thereof should change, and as a result Fortis Benefits determines
that  it is permitted to vote shares of  the Portfolios in its own right, it may
elect to do so.

During the Accumulation Period, the number of shares of a Portfolio attributable
to a Certificate is  determined by dividing the  amount of Certificate Value  in
the  corresponding Subaccount pursuant to the  Certificate as of the record date
for the shareholders meeting by the net asset value of one Portfolio share as of
that date. During the  Annuity Period, or  after the death  of the Annuitant  or
Participant,   the  number  of  Portfolio  shares  deemed  attributable  to  the
Certificate will be computed in a comparable manner, based on the liability  for
future

                                       23
<PAGE>
variable  annuity payments allocable to that Subaccount under the Certificate as
of the record date. Such liability for future payments will be calculated on the
basis of  the  mortality assumptions  and  the  assumed interest  rate  used  in
determining  the number  of Annuity  Units credited  to the  Certificate and the
applicable Annuity Unit value on the record date. During the Annuity Period, the
number of  votes attributable  to a  Certificate will  generally decrease  since
funds set aside to make the annuity payments will decrease.

Fortis   Benefits  will  vote  shares  for  which  it  has  received  no  timely
instructions, and any shares attributable to excess amounts Fortis Benefits  has
accumulated  in the related Subaccount, in proportion to the voting instructions
which it receives with  respect to all Certificates  and other variable  annuity
contracts  participating in a  Portfolio. To the extent  that Fortis Benefits or
any affiliated company holds any  shares of a Portfolio,  they will be voted  in
the  same proportion as  instructions for that Portfolio  that are received from
persons holding the voting interest with respect to all Fortis Benefits separate
accounts participating in that Portfolio. Shares held by separate accounts other
than  the  Variable  Account  will  in  general  be  voted  in  accordance  with
instructions  of participants in  such other separate  accounts. This diminishes
the relative voting influence of the Certificates.

Each person having  a voting interest  in a Subaccount  of the Separate  Account
will  receive  proxy  material,  reports and  other  materials  relating  to the
appropriate Portfolio. Pursuant to the procedures described above, these persons
may give instructions regarding the election of the Board of Directors of Series
Fund, ratification of the selection of its independent auditors, the approval of
the investment  managers  of  a Portfolio,  changes  in  fundamental  investment
policies  of a Portfolio and all other matters  that are put to a vote by Series
Fund shareholders.

LEGAL MATTERS

The legality of the  Certificates described in this  Prospectus has been  passed
upon  by  Douglas  R. Lowe,  Esquire,  Associate  General Counsel  with  the law
department  of  Fortis  Benefits.  Messrs.  Freedman,  Levy,  Kroll  &  Simonds,
Washington, D.C., have advised Fortis Benefits on certain federal securities law
matters.

OTHER INFORMATION

Registration  Statements  have  been  filed  with  the  Securities  and Exchange
Commission under the  Securities Act  of 1933 as  amended, with  respect to  the
Certificates  discussed in this Prospectus. Not all of the information set forth
in the Registration Statement, amendments and exhibits thereto has been included
in this  Prospectus.  Statements contained  in  this Prospectus  concerning  the
content  of  the Certificates  and other  legal instruments  are intended  to be
summaries. For a complete statement of  the terms of these documents,  reference
should  be  made  to the  instruments  filed  with the  Securities  and Exchange
Commission.

A Statement of Additional  Information is available  upon request. Its  contents
are as follows:

CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                    PAGE
<S>                                              <C>
Fortis Benefits and the Variable Account.......           2
Calculation of Annuity Payments................           2
Postponement of Payments.......................           3
Services.......................................           4
  - Safekeeping of Variable Account Assets.....           4
  - Experts....................................           4
  - Principal Underwriter......................           4
Limitations on Allocations.....................           4
Change of Investment Adviser or Investment
 Policy........................................           4
Taxation Under Certain Retirement Plans........           5
Withholding....................................           9
Terms of Exemptive Relief in Connection With
 Mortality and Expense Risk Charge.............           9
Variable Account Financial Statements..........          10
APPENDIX A--Performance Information............         A-1
</TABLE>

FORTIS BENEFITS FINANCIAL STATEMENTS
The financial statements of Fortis Benefits that are included in this Prospectus
should  be considered primarily as bearing on  the ability of Fortis Benefits to
meet its obligations under the  Certificates. The Certificates are not  entitled
to participate in earnings, dividends or surplus of Fortis Benefits.

                                       24
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Fortis Benefits Insurance Company

We  have audited  the accompanying balance  sheets of  Fortis Benefits Insurance
Company, an indirect wholly-owned subsidiary of Fortis AMEV and Fortis AG, as of
December 31, 1996  and 1995, and  the related statements  of income, changes  in
shareholder's  equity and cash flows  for each of the  three years in the period
ended December 31, 1996.  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  in  accordance  with  generally  accepted   auditing
standards.  Those standards 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. An audit also includes
assessing the  accounting  principles used  and  significant estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the  financial statements referred to  above present fairly,  in
all  material  respects, the  financial  position of  Fortis  Benefits Insurance
Company at December 31, 1996 and 1995, and the results of its operations and its
cash flows for each  of three years  in the period ended  December 31, 1996,  in
conformity with generally accepted accounting principles.

                                                    /s/ Ernst & Young LLP
Minneapolis, MN
February 12, 1997

                                       25
<PAGE>
BALANCE SHEETS
FORTIS BENEFITS INSURANCE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31
                                                                                         --------------------
                                                                                           1996       1995
                                                                                         ---------  ---------
<S>                                                                                      <C>        <C>
ASSETS
Investments (NOTE 3):
  Fixed maturities, at fair value (amortized cost 1996--$2,078,438;
   1995--$1,951,204)...................................................................  $2,115,499 $2,075,624
  Equity securities, at fair value (cost 1996--$84,144; 1995--$60,935).................    106,290     78,852
  Mortgage loans on real estate, less allowance for possible losses (1996--$9,697;
   1995--$8,353).......................................................................    582,869    562,697
  Policy loans.........................................................................     60,722     53,863
  Short-term investments...............................................................    182,817    153,499
  Real estate and other investments....................................................     29,628     11,918
                                                                                         ---------  ---------
                                                                                         3,077,825  2,936,453

Cash...................................................................................     20,474          1

Receivables:
  Uncollected premiums.................................................................     71,386     55,992
  Reinsurance recoverable on unpaid and paid losses....................................     12,939     11,812
  Due from affiliates..................................................................         --        388
  Other................................................................................      9,045     14,581
                                                                                         ---------  ---------
                                                                                            93,370     82,773
Accrued investment income..............................................................     39,519     41,209
Deferred policy acquisition costs (NOTE 4).............................................    268,075    237,509
Property and equipment at cost, less accumulated depreciation (NOTE 5).................     52,882     60,031
Deferred federal income taxes (NOTE 7).................................................     17,008         --
Other assets...........................................................................      8,005      3,551
Assets held in separate accounts (NOTE 8)..............................................  2,374,718  1,781,485
                                                                                         ---------  ---------
TOTAL ASSETS...........................................................................  $5,951,876 $5,143,012
                                                                                         ---------  ---------
                                                                                         ---------  ---------
</TABLE>

                            See accompanying notes.

                                       26
<PAGE>
BALANCE SHEETS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             DECEMBER 31
                                                                                         --------------------
                                                                                           1996       1995
                                                                                         ---------  ---------
<S>                                                                                      <C>        <C>
POLICY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY
POLICY RESERVES AND LIABILITIES:
  Future policy benefit reserves:
    Traditional life insurance.........................................................  $ 434,378  $ 407,706
    Interest sensitive and investment products.........................................  1,175,480  1,101,931
    Accident and health................................................................    834,119    832,925
                                                                                         ---------  ---------
                                                                                         2,443,977  2,342,562

  Unearned revenues....................................................................     12,622     13,044
  Other policy claims and benefits payable.............................................    191,940    196,403
  Policyholder dividends payable.......................................................      8,783      7,930
                                                                                         ---------  ---------
                                                                                         2,657,322  2,559,939

  Accrued expenses.....................................................................     42,223     68,441
  Current income taxes payable.........................................................     17,424      5,375
  Deferred federal income taxes (NOTE 7)...............................................         --      9,538
  Other liabilities....................................................................    104,834     31,145
  Due to affiliates....................................................................      4,926         --
  Liabilities related to separate accounts (NOTE 8)....................................  2,344,474  1,757,476
                                                                                         ---------  ---------
TOTAL POLICY RESERVES AND LIABILITIES..................................................  5,171,203  4,431,914

SHAREHOLDER'S EQUITY (NOTES 1, 9 AND 11):
  Common Stock, $5 par value:
  Authorized, issued and outstanding shares--1,000,000.................................      5,000      5,000
  Additional paid-in capital...........................................................    468,000    408,000
  Retained earnings....................................................................    265,613    207,421
  Unrealized gains on investments, net (NOTE 3)........................................     36,290     88,131
  Unrealized gains on assets held in separate accounts, net (NOTE 3)...................      5,770      2,546
                                                                                         ---------  ---------
TOTAL SHAREHOLDER'S EQUITY.............................................................    780,673    711,098
                                                                                         ---------  ---------
TOTAL POLICY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY............................  $5,951,876 $5,143,012
                                                                                         ---------  ---------
                                                                                         ---------  ---------
</TABLE>

                            See accompanying notes.

                                       27
<PAGE>
FORTIS BENEFITS INSURANCE COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31
                                                                              ---------------------------------
                                                                                 1996        1995       1994
                                                                              ----------  ----------  ---------
<S>                                                                           <C>         <C>         <C>
REVENUES
  Insurance operations:
    Traditional life insurance premiums.....................................  $  258,496  $  251,353  $ 207,824
    Interest sensitive and investment product policy charges................      63,336      46,076     37,823
    Accident and health premiums............................................     974,046     934,900    776,799
                                                                              ----------  ----------  ---------
                                                                               1,295,878   1,232,329  1,022,446

  Net investment income (NOTE 3)............................................     206,023     203,537    162,514
  Net realized gains (losses) on investments (NOTE 3).......................      25,731      55,080    (28,815)
  Other income..............................................................      31,725      33,085     35,958
                                                                              ----------  ----------  ---------
      TOTAL REVENUES........................................................   1,559,357   1,524,031  1,192,103

BENEFITS AND EXPENSES
  Benefits to policyholders:
    Traditional life insurance..............................................     220,227     202,911    162,168
    Interest sensitive and investment products..............................      90,358      73,676     55,026
    Accident and health claims..............................................     778,439     769,588    620,367
                                                                              ----------  ----------  ---------
                                                                               1,089,024   1,046,175    837,561

  Policyholder dividends....................................................       4,169       4,305      1,986
  Amortization of deferred policy acquisition costs (NOTE 4)................      39,325      41,291     34,566
  Insurance commissions.....................................................      94,723      95,559     86,111
  General and administrative expenses.......................................     242,825     254,940    197,427
                                                                              ----------  ----------  ---------
      TOTAL BENEFITS AND EXPENSES...........................................   1,470,066   1,442,270  1,157,651
                                                                              ----------  ----------  ---------
  Income before federal income taxes and cumulative effect of accounting
   changes..................................................................      89,291      81,761     34,452
  Federal income taxes (NOTE 7).............................................      31,099      27,891     11,595
                                                                              ----------  ----------  ---------
  NET INCOME................................................................  $   58,192  $   53,870  $  22,857
                                                                              ----------  ----------  ---------
                                                                              ----------  ----------  ---------
</TABLE>

                            See accompanying notes.

                                       28
<PAGE>
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FORTIS BENEFITS INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                    UNREALIZED       UNREALIZED
                                                                                       GAINS       GAINS ON ASSETS
                                                        ADDITIONAL                  (LOSSES) ON        HELD IN
                                             COMMON       PAID-IN     RETAINED     INVESTMENTS,       SEPARATE
                                              STOCK       CAPITAL     EARNINGS          NET         ACCOUNTS, NET     TOTAL
                                           -----------  -----------  -----------  ---------------  ---------------  ---------
<S>                                        <C>          <C>          <C>          <C>              <C>              <C>
Balance, January 1, 1994                    $   5,000    $ 345,000    $ 130,694      $  50,144        $   1,070     $ 531,908
Net income...............................          --           --       22,857             --               --        22,857
Additional paid-in capital...............          --       13,000           --             --               --        13,000
Change in unrealized losses on
 investments, net........................          --           --           --        (93,052)              --       (93,052)
Change in unrealized gain on assets held
 in separate account, net................          --           --           --             --             (516)         (516)
                                           -----------  -----------  -----------       -------           ------     ---------
Balance, December 31, 1994...............       5,000      358,000      153,551        (42,908)             554       474,197
Net income...............................          --           --       53,870             --               --        53,870
Additional paid-in capital...............          --       50,000           --             --               --        50,000
Change in unrealized gains on
 investments, net........................          --           --           --        131,039               --       131,039
Change in unrealized gain on assets held
 in separate account, net................          --           --           --             --            1,992         1,992
                                           -----------  -----------  -----------       -------           ------     ---------
Balance, December 31, 1995...............       5,000      408,000      207,421         88,131            2,546       711,098
Net income...............................          --           --       58,192             --               --        58,192
Additional paid-in capital...............          --       60,000           --             --               --        60,000
Change in unrealized gains on
 investments, net........................          --           --           --        (51,841)              --       (51,841)
Change in unrealized gain on assets held
 in separate account, net................          --           --           --             --            3,224         3,224
                                           -----------  -----------  -----------       -------           ------     ---------
Balance, December 31, 1996...............   $   5,000    $ 468,000    $ 265,613      $  36,290        $   5,770     $ 780,673
                                           -----------  -----------  -----------       -------           ------     ---------
                                           -----------  -----------  -----------       -------           ------     ---------
</TABLE>

                            See accompanying notes.

                                       29
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31
                                                                           -------------------------------------
                                                                               1996         1995        1994
                                                                           ------------  ----------  -----------
<S>                                                                        <C>           <C>         <C>
OPERATING ACTIVITIES
  Net income.............................................................  $     58,192  $   53,870  $    22,857
  Adjustments to reconcile net income to net cash provided by operating
   activities:
    Increase in future policy benefit reserves for traditional, interest
     sensitive and accident and health policies..........................        26,193      80,478       79,014
    Increase in other policy claims and benefits and policyholder
     dividends payable...................................................        18,638      27,676       10,075
    Provision for deferred federal income taxes..........................        (1,094)    (13,584)      (2,356)
    Increase in income taxes payable.....................................        12,049       1,023        3,283
    Amortization of deferred policy acquisition costs....................        39,325      41,291       34,566
    Policy acquisition costs deferred....................................       (66,515)    (56,391)     (54,349)
    Provision for mortgage loan losses...................................         1,344         924        1,105
    Provision for depreciation...........................................        17,312      15,654       12,267
    Amortization of investment premiums (discount) net...................         1,821        (239)        (914)
    Change in receivables, accrued investment income, unearned premiums,
     accrued expenses and other liabilities..............................        38,614       3,427      (36,650)
    Net realized (gains) losses on investments...........................       (25,731)    (55,080)      28,815
    Other................................................................          (261)     (2,431)        (135)
                                                                           ------------  ----------  -----------
        NET CASH PROVIDED BY OPERATING ACTIVITIES........................       119,887      96,618       97,578

INVESTING ACTIVITIES
  Purchases of fixed maturity investments................................    (2,778,352) (2,151,133)  (1,943,697)
  Sales or maturities of fixed maturity investments......................     2,652,887   2,000,068    1,798,184
  Increase in short-term investments.....................................       (29,318)    (35,908)     (44,266)
  Purchases of other investments.........................................      (210,182)   (240,264)    (211,836)
  Sales of other investments.............................................       163,569     112,598      104,399
  Purchases of property and equipment....................................       (10,992)    (19,975)     (16,164)
  Purchase of group insurance business...................................            --          --       (6,644)
  Other..................................................................            --       1,229          500
                                                                           ------------  ----------  -----------
        NET CASH USED IN INVESTING ACTIVITIES............................      (212,388)   (333,385)    (319,524)

FINANCING ACTIVITIES
  Activities related to investment products:
    Considerations received..............................................       128,446     187,484      200,499
    Surrenders and death benefits........................................      (125,274)    (60,522)     (19,207)
    Interest credited to policyholders...................................        49,802      48,918       31,867
  Additional paid-in capital from shareholder............................        60,000      50,000       13,000
                                                                           ------------  ----------  -----------
        NET CASH PROVIDED BY FINANCING ACTIVITIES........................       112,974     225,880      226,159
                                                                           ------------  ----------  -----------
  Increase (decrease) in cash............................................        20,473     (10,887)       4,213
        CASH AT BEGINNING OF YEAR........................................             1      10,888        6,675
                                                                           ------------  ----------  -----------
        CASH AT END OF YEAR..............................................  $     20,474  $        1  $    10,888
                                                                           ------------  ----------  -----------
                                                                           ------------  ----------  -----------
</TABLE>

                            See accompanying notes.

                                       30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FORTIS BENEFITS INSURANCE COMPANY

DECEMBER 31, 1996

1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS

Fortis  Benefits  Insurance Company  (the Company)  is an  indirect wholly-owned
subsidiary of  Fortis  AMEV  and  Fortis AG.  The  Company  is  incorporated  in
Minnesota  and distributes its products in all  states except New York. To date,
the majority of  the Company's revenues  have been derived  from group  employee
benefits products and the remainder from individual life and annuity products.

RECOGNITION OF REVENUES AND POLICY RESERVES AND LIABILITIES

The  Company follows  generally accepted  accounting principles  which differ in
certain respects from statutory accounting practices prescribed or permitted  by
regulatory authorities. The more significant of these principles are:

    Premiums  for traditional life insurance are recognized as revenues when due
    over the  premium-paying period.  Reserves for  future policy  benefits  are
    computed using the net level method and include investment yield, mortality,
    withdrawal,  and  other  assumptions  based  on  the  Company's  experience,
    modified  as  necessary  to  reflect  anticipated  trends  and  to   include
    provisions for possible unfavorable deviations.

    Revenues  for interest sensitive and  investment products consist of charges
    assessed against policy account balances during  the period for the cost  of
    insurance,  policy  administration,  and  surrender  charges.  Future policy
    benefit reserves are  computed under  the retrospective  deposit method  and
    consist  of  policy account  balances  before applicable  surrender charges.
    Policy benefits charged to expense during the period include amounts paid in
    excess of policy account  balances and interest  credited to policy  account
    balances.  Interest credit rates for  universal life and investment products
    ranged from 6.2% to 7% and 4% to 7.8% in 1996 and 1995, respectively.

    Premiums for accident and health insurance products, including medical, long
    and short-term disability  and dental insurance  products are recognized  as
    revenues ratably over the contract period in proportion to the risk insured.
    Reserves  for future disability benefits are based on the 1964 Commissioners
    Disability Table at 6% interest.  Calculated reserves are modified based  on
    the  Company's actual experience.  Other policy claims  and benefits payable
    for reported  and  incurred  but  not reported  claims  and  related  claims
    adjustment  expenses  are  determined using  case-basis  estimates  and past
    experience. The  methods  of  making such  estimates  and  establishing  the
    related  liabilities are  continually reviewed and  updated. Any adjustments
    resulting therefrom are reflected in income currently.

DEFERRED POLICY ACQUISITION COSTS

The costs of acquiring new business, which vary with and are directly related to
the production  of new  business  are deferred  to  the extent  recoverable  and
amortized.  For traditional  life insurance  products, such  costs are amortized
over the premium paying period. For interest sensitive and investment  products,
such  costs  are amortized  in relation  to expected  future gross  profits. For
accident and health and group life insurance products, these costs represent the
present value at the acquisition of these lines in the October 1, 1991  purchase
(see  Note 2) of future profits which are amortized against the expected premium
revenues of the lines acquired.  These amortization periods require  significant
management  judgment and are reviewed continually. As excess amounts of deferred
costs over future premiums or gross profits are identified, such excess  amounts
are expensed.

INVESTMENTS

The  Company's investment strategy is developed  based on many factors including
insurance liability  matching,  rate  of  return,  maturity,  credit  risk,  tax
considerations and regulatory requirements.

All  fixed maturity investments are classified as available-for-sale and carried
at fair value.  That determination is  made at  the time of  each purchase  and,
prospectively, is reevaluated as of each balance sheet date.

Changes  in fair values of available-for-sale securities, after related deferred
income taxes and after adjustment for the changes in pattern of amortization  of
deferred  policy acquisition costs and participating policyholder dividends, are
reported directly  in  shareholder's  equity as  unrealized  gains  (losses)  on
investments  and, accordingly, have no effect on  net income. The offsets to the
unrealized appreciation or depreciation represent adjustments of deferred policy
acquisition cost amortization and policyholder dividends payable that would have
been required as a charge or credit  to income had such unrealized amounts  been
realized.

Mortgage loans constitute first liens on commercial real estate and other income
producing properties. The insurance statutes in Minnesota generally require that
the  initial  principal loaned  not exceed  80%  of the  appraised value  of the
property securing  the  loan. The  Company's  policy fully  complies  with  this
statute.  Mortgage loans on real estate are reported at unpaid balance, adjusted
for amortization of premium or discount, less allowance for possible losses. The
change in the allowance for possible losses is recorded with realized gains  and
losses on investments. Policy loans are reported at unpaid balance.

Realized  gains and losses on sales of investments, and declines in value judged
to be other-than-temporary, are recognized on the specific identification basis.
Investment income is recorded as earned.

PROPERTY AND EQUIPMENT

Property and equipment are recorded  at cost less accumulated depreciation.  The
Company  provides for depreciation principally  on the straight-line method over
the estimated useful lives of the related property.

                                       31
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INCOME TAXES

Income taxes have been  provided using the liability  method in accordance  with
Financial  Accounting  Standards Board  ("FASB")  Statement 109,  ACCOUNTING FOR
INCOME TAXES. Deferred tax  assets and liabilities are  determined based on  the
differences  between the financial reporting and  the tax bases and are measured
using the enacted tax rates.

SEPARATE ACCOUNTS

Assets and liabilities associated with  separate accounts relate to premium  and
annuity  considerations for  variable life  and annuity  products for  which the
contract holder, rather than  the Company, bears  the investment risk.  Separate
account assets are reported at fair value.

GUARANTY FUND ASSESSMENTS

The economy and other factors have caused an increase in the number of insurance
companies that are under regulatory supervision. This circumstance may result in
an  increase in  assessments by state  guaranty funds, or  voluntary payments by
solvent insurance companies, to  cover losses to  policyholders of insolvent  or
rehabilitated  companies.  Mandatory  assessments  can  be  partially  recovered
through a reduction in future premium taxes  in some states. The Company is  not
able  to reasonably estimate  the impact of future  assessments on its financial
position but does not believe that the impact will be material.

USE OF ESTIMATES

The preparation of  financial statements in  conformity with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts in the 1995 and 1994 financial statements have been reclassified
to conform to the 1996 presentation.

2.  ACQUIRED BUSINESS
    In  1991,  the  company  purchased   certain  assets  and  assumed   certain
liabilities  from The  Mutual Benefit  Life Insurance  Company in Rehabilitation
(MBL). The  seller  transferred  to  the Company,  the  assets  and  liabilities
relating to the group life, accident and health, disability and dental insurance
business  of MBL. The acquisition was accounted  for as a purchase. The original
purchase price  of  the  acquisition  was  $318,000,000.  Subsequent  additional
payments  of $20,850,000 were made ending in 1994. These additional payments, as
well as $126,515,000 of the original purchase price represent the present  value
of  future profits on the lines of  business acquired at the date of acquisition
and have been accounted for as deferred policy acquisition costs (see Note 4).

3.  INVESTMENTS
AVAILABLE FOR SALE SECURITIES

The following is a summary of the available for sale securities (in thousands):

<TABLE>
<CAPTION>
                                                               GROSS        GROSS
                                                 AMORTIZED  UNREALIZED   UNREALIZED     FAIR
                                                   COST        GAIN         LOSS        VALUE
                                                 ---------  -----------  -----------  ---------
<S>                                              <C>        <C>          <C>          <C>
December 31, 1996:
  Fixed income securities:
  Governments..................................  $ 321,574   $   3,418    $   1,323   $ 323,669
  Public utilities.............................     92,116       2,758          403      94,471
  Industrial and miscellaneous.................  1,656,420      38,413        6,527   1,688,306
  Other........................................      8,328         750           25       9,053
                                                 ---------  -----------  -----------  ---------
  Total fixed income securities................  2,078,438      45,339        8,278   2,115,499
  Equity securities............................     84,144      23,340        1,194     106,290
                                                 ---------  -----------  -----------  ---------
    Total......................................  $2,162,582  $  68,679    $   9,472   $2,221,789
                                                 ---------  -----------  -----------  ---------
                                                 ---------  -----------  -----------  ---------
December 31, 1995:
Fixed income securities:
  Governments..................................  $ 453,406   $  36,938    $     142   $ 490,202
  Public utilities.............................     55,793       4,617           --      60,410
  Industrial and miscellaneous.................  1,420,374      82,705        1,282   1,501,797
  Other........................................     21,631       1,586            2      23,215
                                                 ---------  -----------  -----------  ---------
  Total fixed income securities................  1,951,204     125,846        1,426   2,075,624
  Equity securities............................     60,935      20,321        2,404      78,852
                                                 ---------  -----------  -----------  ---------
    Total......................................  $2,012,139  $ 146,167    $   3,830   $2,154,476
                                                 ---------  -----------  -----------  ---------
                                                 ---------  -----------  -----------  ---------
</TABLE>

                                       32
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

3.  INVESTMENTS (CONTINUED)
The amortized cost  and fair  value of available-for-sale  investments in  fixed
maturities  at December 31,  1996, by contractual maturity,  are shown below (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.

<TABLE>
<CAPTION>
                                                                        AMORTIZED    FAIR
                                                                          COST       VALUE
                                                                        ---------  ---------
<S>                                                                     <C>        <C>
Due in one year or less...............................................  $  57,745  $  57,849
Due after one year through five years.................................    576,951    588,257
Due after five years through ten years................................    666,892    675,262
Due after ten years...................................................    776,850    794,131
                                                                        ---------  ---------
Total.................................................................  $2,078,438 $2,115,499
                                                                        ---------  ---------
                                                                        ---------  ---------
</TABLE>

MORTGAGE LOANS

The  Company  has  issued  commercial  mortgage  loans  on  properties   located
throughout  the  United States.  Approximately 36%  of outstanding  principal is
concentrated in the  states of California,  Texas and New  York at December  31,
1996  as compared to concentrated interests  in California, Florida and New York
of 35% at December 31, 1995. Loan commitments outstanding totaled $6,141,000  at
December 31, 1996.

In  May 1993, FASB issued Statement 114, ACCOUNTING FOR CREDITORS FOR IMPAIRMENT
OF A LOAN, which became effective for fiscal years beginning after December  15,
1994,  and  which  the Company  adopted  in  1995. Statement  114  requires that
impaired loans are to  be valued at  the present value  of expected future  cash
flows  discounted  at the  loan's effective  interest rate,  or, as  a practical
expedient, at the loan's  observable market price, or  the fair market value  of
the  collateral if the loan is collateral  dependent. The impact of adoption was
not material to the Company's financial position or operating results.

INVESTMENTS ON DEPOSIT

The Company  had  fixed  maturities  carried at  $2,537,000  and  $2,385,000  at
December  31, 1996 and 1995, respectively,  on deposit with various governmental
authorities as required by law.

NET UNREALIZED GAINS (LOSSES)

The adjusted net unrealized gains (losses) recorded in shareholder's equity  for
the year ended December 31 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       1996       1995       1994
                                                                     ---------  ---------  ---------
<S>                                                                  <C>        <C>        <C>
Change in unrealized gains before adjustments......................  $ (83,065) $ 214,452  $(155,923)
Adjustments:
Decrease (increase) in amortization of deferred policy acquisition
 costs.............................................................      3,376     (9,789)     9,288
Participating policyholders' share of earnings.....................         --         --      2,684
Deferred income taxes..............................................     31,072    (71,632)    50,383
                                                                     ---------  ---------  ---------
Change in net unrealized gains (losses)............................    (48,617)   133,031    (93,568)
Net unrealized gains (losses), beginning of year...................     90,677    (42,354)    51,214
                                                                     ---------  ---------  ---------
Net unrealized gains (losses), end of year.........................  $  42,060  $  90,677  $ (42,354)
                                                                     ---------  ---------  ---------
                                                                     ---------  ---------  ---------
</TABLE>

                                       33
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

3.  INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS

Major  categories  of  net  investment income  and  realized  gains  (losses) on
investments for each year were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                       1996       1995       1994
                                                                     ---------  ---------  ---------
<S>                                                                  <C>        <C>        <C>
NET INVESTMENT INCOME
Fixed maturities...................................................  $ 141,973  $ 139,062  $ 119,668
Equity securities..................................................      6,682      2,026      1,937
Mortgage loans on real estate......................................     52,949     49,227     36,816
Policy loans.......................................................      3,195      2,797      2,731
Short-term investments.............................................      5,175     11,863      4,671
Real estate and other investments..................................      5,358      4,750      2,138
                                                                     ---------  ---------  ---------
                                                                       215,332    209,725    167,961
Expenses...........................................................     (9,309)    (6,188)    (5,447)
                                                                     ---------  ---------  ---------
                                                                     $ 206,023  $ 203,537  $ 162,514
                                                                     ---------  ---------  ---------
                                                                     ---------  ---------  ---------
NET REALIZED GAINS (LOSSES) ON INVESTMENTS
Fixed maturities...................................................  $   3,334  $  50,393  $ (27,854)
Equity securities..................................................     18,281      2,830      1,352
Mortgage loans on real estate......................................       (144)      (242)    (2,992)
Policy loans.......................................................         --         --         --
Short-term investments.............................................         57         (3)       (60)
Real estate and other investments..................................      4,203      2,102        739
                                                                     ---------  ---------  ---------
                                                                     $  25,731  $  55,080  $ (28,815)
                                                                     ---------  ---------  ---------
                                                                     ---------  ---------  ---------
</TABLE>

Proceeds from  sales of  investments in  fixed maturities  were  $2,652,887,000,
$2,000,068,000  and $1,798,185,000 in  1996, 1995 and  1994, respectively. Gross
gains  of  $28,606,000,  $61,070,000  and   $16,618,000  and  gross  losses   of
$25,272,000,  $10,677,000 and  $44,472,000 were realized  on the  sales in 1996,
1995 and 1994, respectively.

4.    DEFERRED POLICY ACQUISITION COSTS
    The changes in deferred policy acquisition costs by product were as  follows
(in thousands):

<TABLE>
<CAPTION>
                                                                 INTEREST
                                                               SENSITIVE AND
                                                 TRADITIONAL    INVESTMENT      ACCIDENT
                                                    LIFE         PRODUCTS      AND HEALTH     TOTAL
                                                 -----------  ---------------  -----------  ---------
<S>                                              <C>          <C>              <C>          <C>
Balance January 1, 1995........................   $  49,910      $ 141,309      $  40,979   $ 232,198
Acquisition costs deferred.....................          --         56,391             --      56,391
Acquisition costs amortized....................     (11,378)       (17,071)       (12,842)    (41,291)
Additional amortization of deferred acquisition
 costs from unrealized gains on
 available-for-sale securities                           --         (9,789)            --      (9,789)
                                                 -----------  ---------------  -----------  ---------
Balance December 31, 1995......................      38,532        170,840         28,137     237,509
Acquisition costs deferred.....................          --         66,515             --      66,515
Acquisition costs amortized....................      (5,375)       (19,695)       (14,255)    (39,325)
Reduced amortization of deferred acquisition
 costs from unrealized gains on
 available-for-sale securities.................          --          3,376             --       3,376
                                                 -----------  ---------------  -----------  ---------
Balance December 31, 1996......................   $  33,157      $ 221,036      $  13,882   $ 268,075
                                                 -----------  ---------------  -----------  ---------
                                                 -----------  ---------------  -----------  ---------
</TABLE>

Included  within total deferred policy acquisition costs at December 31, 1996 is
$27,914,000 of present value of future profits (PVP) resulting from acquisitions
accounted for as a purchase. The estimated amount of PVP to be amortized  during
each   of  the   next  two  years   is  as  follows:   1997--  $17,478,000;  and
1998--$10,436,000.

During 1996,  1995  and  1994,  the Company  sold  portions  of  its  investment
portfolio  and  in accordance  with FASB  Statement 97,  the recognition  of the
realized capital (losses) gains resulted in (reduced) additional amortization of
acquisition  costs   deferred   of  $1,894,000,   $4,825,000   and   $(935,000),
respectively. In addition, the Company recorded (reduced) policyholder dividends
payable of $1,095,000 in 1995 and $(761,000) in 1994.

                                       34
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

5.  PROPERTY AND EQUIPMENT
    A summary of property and equipment at December 31 for each year follows (in
thousands):

<TABLE>
<CAPTION>
                                                                                1996       1995
                                                                              ---------  ---------
<S>                                                                           <C>        <C>
Land........................................................................  $   1,900  $   1,900
Building and improvements...................................................     25,133     23,319
Furniture and equipment.....................................................     95,370     85,592
                                                                              ---------  ---------
                                                                                122,403    110,811
Less accumulated depreciation...............................................    (69,521)   (50,780)
Net property and equipment..................................................  $  52,882  $  60,031
                                                                              ---------  ---------
                                                                              ---------  ---------
</TABLE>

6.  ACCIDENT AND HEALTH RESERVES
    Activity  for the liability for unpaid accident and health claims and claims
adjustment expenses is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                                                     -------------------------------
                                                                       1996       1995       1994
                                                                     ---------  ---------  ---------
<S>                                                                  <C>        <C>        <C>
Balance as of January 1, net of reinsurance recoverables...........  $ 928,832  $ 838,810  $ 806,538
Add: Incurred losses related to:
  Current year.....................................................    865,907    827,261    656,052
  Prior years......................................................    (64,094)   (28,520)   (58,218)
                                                                     ---------  ---------  ---------
    Total incurred losses..........................................    801,813    798,741    597,834
Deduct: Paid losses related to:
  Current year.....................................................    549,144    492,460    377,595
  Prior years......................................................    233,790    216,259    187,967
                                                                     ---------  ---------  ---------
    Total paid losses..............................................    782,934    708,719    565,562
                                                                     ---------  ---------  ---------
Balance as of December 31, net of reinsurance recoverables.........  $ 947,711  $ 928,832  $ 838,810
                                                                     ---------  ---------  ---------
                                                                     ---------  ---------  ---------
</TABLE>

The table above compares  to the amounts  reported on the  balance sheet in  the
following  respects: (1) the  table above is presented  net of ceded reinsurance
and the accident and health reserves reported on the balance sheet are gross  of
ceded  reinsurance;  (2)  the  table above  includes  claims  adjustment expense
liabilities that are included in accrued expenses on the balance sheet; and  (3)
the table above includes accident and health benefits payable which are included
with other policy claims and benefits payable reported on the balance sheet.

In  each of the years presented above, the accident and health insurance line of
business  experienced   overall  favorable   development  on   claims   reserves
established  as of the previous year end. The favorable development was a result
of lower  medical  costs due  to  less uncertainty  in  the health  business,  a
reduction  of  loss reserves  which  considered historically  high  inflation in
medical costs and, in 1994, a refinement in the claims reserve estimates.

7.  FEDERAL INCOME TAXES
    The Company reports its taxable income in a consolidated federal income  tax
return  along  with other  affiliated subsidiaries  of  Fortis, Inc.  Income tax
expense or credits are allocated  among the affiliated subsidiaries by  applying
corporate  income tax rates to  taxable income or loss  determined on a separate
return basis according to a Tax Allocation Agreement.

Deferred income  taxes reflect  the  net tax  effects of  temporary  differences
between the basis of assets and liabilities for financial statement purposes and
for income tax purposes.

                                       35
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

7.  FEDERAL INCOME TAXES (CONTINUED)
The  significant components of the Company's deferred tax liabilities and assets
as of December 31, 1996 and 1995 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                1996       1995
                                                                              ---------  ---------
<S>                                                                           <C>        <C>
Deferred tax assets:
  Reserves..................................................................  $  51,271  $  54,346
  Separate account assets/liabilities.......................................     40,989     34,386
  Unrealized losses.........................................................      2,648         --
  Accrued liabilities.......................................................      8,439     13,781
  Claims and benefits payable...............................................      7,764      2,626
  Other.....................................................................      1,549        123
                                                                              ---------  ---------
    Total deferred tax assets...............................................    112,660    105,262

Deferred tax liabilities:
  Other.....................................................................      2,348         --
  Unrealized gains..........................................................     20,402     48,826
  Deferred policy acquisition costs.........................................     67,850     60,930
  Investments...............................................................      1,942         --
  Fixed assets..............................................................      3,110      5,044
                                                                              ---------  ---------
    Total deferred tax liabilities..........................................     95,652    114,800
                                                                              ---------  ---------
    Net deferred tax asset (liability)......................................  $  17,008  $  (9,538)
                                                                              ---------  ---------
                                                                              ---------  ---------
</TABLE>

The Company is required  to establish a valuation  allowance for any portion  of
the  deferred tax asset  that management believes  will not be  realized. In the
opinion of management, it is more likely than not that the Company will  realize
the  benefit  of the  deferred  tax assets,  and,  therefore, no  such valuation
allowance has been established.

The Company's tax expense (credit)  for the year ended  December 31 is shown  as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                         1996       1995       1994
                                                                       ---------  ---------  ---------
<S>                                                                    <C>        <C>        <C>
Current..............................................................  $  32,193  $  39,660  $  15,046
Deferred.............................................................     (1,094)   (11,769)    (3,451)
                                                                       ---------  ---------  ---------
                                                                       $  31,099  $  27,891  $  11,595
                                                                       ---------  ---------  ---------
                                                                       ---------  ---------  ---------
</TABLE>

Federal Income tax payments and refunds resulted in net payments of $16,434,000,
$40,453,000 and $10,351,000 in 1996, 1995 and 1994, respectively.

The Company's effective income tax rate varied from the statutory federal income
tax rate as follows:

<TABLE>
<CAPTION>
                                                                         1996       1995       1994
                                                                       ---------  ---------  ---------
<S>                                                                    <C>        <C>        <C>
Statutory income tax rate............................................      35.0%      35.0%      35.0%
Tax audit provision..................................................         --         --        0.8
Other, net...........................................................        (.2)      (0.9)      (2.1)
                                                                       ---------  ---------  ---------
                                                                           34.8%      34.1%      33.7%
                                                                       ---------  ---------  ---------
                                                                       ---------  ---------  ---------
</TABLE>

8.  ASSETS HELD IN SEPARATE ACCOUNTS
    Separate account assets at December 31 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                              1996       1995
                                                                            ---------  ---------
<S>                                                                         <C>        <C>
Premium and annuity considerations for the variable annuity products and
 variable universal life product for which the contract holder, rather
 than the Company, bears the investment risk..............................  $2,344,474 $1,757,476
Assets of the separate accounts owned by the Company, at fair value.......     30,244     24,009
                                                                            ---------  ---------
                                                                            $2,374,718 $1,781,485
                                                                            ---------  ---------
                                                                            ---------  ---------
</TABLE>

                                       36
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

9.  STATUTORY ACCOUNTING PRACTICES
    Reconciliations  of  net income  and shareholder's  equity  on the  basis of
statutory accounting  to  the  related amounts  presented  in  the  accompanying
statements were as follows (in thousands):

<TABLE>
<CAPTION>
                                                            NET INCOME             SHAREHOLDER'S EQUITY
                                                  -------------------------------  --------------------
                                                    1996       1995       1994       1996       1995
                                                  ---------  ---------  ---------  ---------  ---------
<S>                                               <C>        <C>        <C>        <C>        <C>
Based on statutory accounting practices.........  $  55,046  $  30,576  $  49,759  $ 482,507  $ 377,040
Deferred policy acquisition costs...............     27,190     15,100     19,783    268,075    237,509
Investment valuation differences................     (1,600)       330        370     31,326    114,413
Policy reserves.................................    (19,505)   (29,238)   (25,213)  (131,159)  (114,259)
Current income taxes payable....................     (1,292)    (1,294)        --     (7,895)    (7,895)
Deferred income taxes...........................      1,094     11,769      2,356     17,008     (9,538)
Realized gains (losses) on investments..........        264      1,938     (1,052)        --         --
Realized gains (losses) transferred to the
 Interest Maintenance Reserve (IMR), net of
 tax............................................      2,335     31,711    (18,456)        --         --
Amortization of IMR, net of tax.................     (6,130)    (5,261)    (5,479)        --         --
Property and equipment..........................         --         --         --     20,481     27,172
Interest maintenance reserve....................         --         --         --     50,019     53,814
Asset valuation reserve.........................         --         --         --     62,961     48,507
Other, net......................................        790     (1,761)       789    (12,650)   (15,665)
                                                  ---------  ---------  ---------  ---------  ---------
As reported herein..............................  $  58,192  $  53,870  $  22,857  $ 780,673  $ 711,098
                                                  ---------  ---------  ---------  ---------  ---------
                                                  ---------  ---------  ---------  ---------  ---------
</TABLE>

10. REINSURANCE
    The  maximum amount that the Company retains  on any one life is $500,000 of
life insurance including  accidental death.  Amounts in excess  of $500,000  are
reinsured with other life insurance companies on a yearly renewable term basis.

Ceded  reinsurance premiums for the  year ended December 31  were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                           1996       1995       1994
                                                                         ---------  ---------  ---------
<S>                                                                      <C>        <C>        <C>
Life insurance.........................................................  $   8,680  $   4,661  $   5,571
Accident and health insurance..........................................      6,793      3,410     36,782
                                                                         ---------  ---------  ---------
                                                                         $  15,473  $   8,071  $  42,353
                                                                         ---------  ---------  ---------
                                                                         ---------  ---------  ---------
</TABLE>

Recoveries under reinsurance contracts  for the year ended  December 31 were  as
follows (in thousands):

<TABLE>
<CAPTION>
                                                                          1996       1995       1994
                                                                        ---------  ---------  ---------
<S>                                                                     <C>        <C>        <C>
Life insurance........................................................  $   7,225  $   2,489  $   1,650
Accident and health insurance.........................................      5,993      8,807     19,913
                                                                        ---------  ---------  ---------
                                                                        $  13,218  $  11,296  $  21,563
                                                                        ---------  ---------  ---------
                                                                        ---------  ---------  ---------
</TABLE>

Reinsurance  ceded would  become a  liability of  the Company  in the  event the
reinsurers are  unable to  meet the  obligations assumed  under the  reinsurance
agreements.  To  minimize its  exposure to  significant losses  from reinsurance
insolvencies, the Company  evaluates the financial  condition of its  reinsurers
and  monitors  concentrations of  credit  risk arising  from  similar geographic
regions, activities or economic characteristics of the reinsurers.

11. STATUTORY INFORMATION
    Dividend distributions  to  parent are  restricted  as to  amount  by  state
regulatory requirements. The Company had $47,728,000 free from such restrictions
at  December  31, 1996.  Distributions in  excess of  this amount  would require
regulatory approval.

Statutory-basis financial statements are prepared in accordance with  accounting
practices prescribed or permitted by Minnesota Insurance regulatory authorities.
Prescribed  statutory accounting practices include  a variety of publications of
the National Association of Insurance  Commissioners ("NAIC"), as well as  state
laws,   regulations  and  general   administrative  rules.  Permitted  statutory
accounting practices encompass all accounting practices not so prescribed;  such
practices  may differ form  state to state,  may differ from  company to company
within a state,  and may  change in  the future. The  NAIC is  currently in  the
process  of codifying statutory accounting practices. This project, which is not
expected to be completed  before 1998, may result  in changes to the  accounting
practices  that  insurance  enterprises  use  to  prepare  their statutory-basis
financial statements.

Insurance enterprises are required by  State Insurance Departments to adhere  to
minimum  risk-based capital ("RBC")  requirements developed by  the NAIC. All of
the Company's insurance subsidiaries exceed minimum RBC requirements.

                                       37
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FORTIS BENEFITS INSURANCE COMPANY

12. TRANSACTIONS WITH AFFILIATED COMPANIES
    The Company  receives  various services  from  Fortis, Inc.  These  services
include   assistance  in  benefit   plan  administration,  corporate  insurance,
accounting, tax, auditing,  investment and other  administrative functions.  The
fees  paid to Fortis, Inc.  for these services for  the years ended December 31,
1996, 1995 and 1994, were $13,319,000, $10,074,000 and $8,944,000, respectively.

In conjunction with the marketing of its variable annuity products, the  Company
paid  $68,616,000, $59,308,000 and $57,307,000, in commissions to its affiliate,
Fortis Investors, Inc.  for the years  ended December 31,  1996, 1995 and  1994,
respectively.

13. FAIR VALUE DISCLOSURES

VALUATION METHODS AND ASSUMPTIONS

Investments  are reported  in the accompanying  balance sheets  on the following
basis:

    The fair  values for  fixed maturity  securities and  equity securities  are
    based   on  quoted  market  prices,  where  available.  For  fixed  maturity
    securities not  actively  traded, fair  values  are estimated  using  values
    obtained  from  independent  pricing services  or,  in the  case  of private
    placements, are estimated by discounting expected future cash flows using  a
    current market rate applicable to the yield, credit quality, and maturity of
    the investments.

    Mortgage  loans are reported at unpaid principal balance less allowances for
    possible losses.  The fair  values  of mortgage  loans are  estimated  using
    discounted  cash flow analyses, using interest rates currently being offered
    for similar  loans to  borrowers  with similar  credit ratings.  Loans  with
    similar characteristics are aggregated for purposes of the calculations. The
    fair  values for the Company's policy reserves under the investment products
    are determined using cash surrender value.

    The fair values under all  insurance contracts are taken into  consideration
    in  the Company's  overall management of  interest rate risk,  such that the
    Company's exposure  to  changing interest  rates  is minimized  through  the
    matching   of  investment  maturities  with   amounts  due  under  insurance
    contracts.

<TABLE>
<CAPTION>
                                                                             DECEMBER 31
                                                              ------------------------------------------
                                                                      1996                  1995
                                                              --------------------  --------------------
                                                              CARRYING     FAIR     CARRYING     FAIR
                                                               AMOUNT      VALUE     AMOUNT      VALUE
                                                              ---------  ---------  ---------  ---------
<S>                                                           <C>        <C>        <C>        <C>
Assets:
  Investments:
    Securities available-for-sale:
      Fixed maturities......................................  $2,115,499 $2,115,499 $2,075,624 $2,075,624
      Equity securities.....................................    106,290    106,290     78,852     78,852
      Mortgage loans on real estate.........................    582,869    614,555    562,697    605,501
  Policy loans..............................................     60,722     60,722     53,863     53,863
  Short-term investments....................................    182,817    182,817    153,499    153,499
  Cash......................................................     20,474     20,474          1          1
  Assets held in separate accounts..........................  2,371,601  2,371,601  1,781,485  1,781,485
Liabilities:
  Individual and group annuities (subject to discretionary
   withdrawal)..............................................  $ 916,754  $ 886,110  $ 865,623  $ 834,621
</TABLE>

14. COMMITMENTS AND CONTINGENCIES
    The Company is named  as a defendant  in a number  of legal actions  arising
primarily  from claims  made under insurance  policies. These  actions have been
considered in establishing policy benefit and loss reserves. Management and  its
legal  counsel are of the opinion that  the settlement of these actions will not
have a material adverse effect on the Company's financial position or results of
operations.

15. RETIREMENT AND OTHER EMPLOYEE BENEFITS
    The Company participates in the Fortis, Inc. noncontributory defined benefit
pension plan covering substantially all of its employees. Benefits are based  on
years  of service and the employee's  compensation during such years of service.
Fortis, Inc. is not  able to segregate Company  specific benefit obligations  or
plan  assets. On an aggregate basis, the  fair value of plan assets exceeded the
accumulated benefit obligations as of December 31, 1996.

The Company has a profit sharing plan covering substantially all employees which
provides benefits payable  to participants  on retirement or  disability and  to
beneficiaries  of  participants in  event  of the  participant's  death. Amounts
contributed to the plan and expensed by the Company were $3,913,000,  $3,765,000
and $3,536,000 in 1996, 1995 and 1994, respectively.

                                       38
<PAGE>
APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS
The formula which will be used to determine the Market Value Adjustment is:

<TABLE>
<C>  <C>         <C>  <C>   <S>
        1 + I         n/12
      ----------            - 1
 (   1 + J + .005  )
</TABLE>

Sample Calculation 1: Positive Adjustment

<TABLE>
<S>                                       <C>
Amount withdrawn or transferred           $10,000
Existing Guarantee Period                 7 years
Time of withdrawal or transfer            beginning of 3rd year of Existing
                                          Guarantee Period
Guaranteed Interest Rate (I)              8%*
Guaranteed Interest Rate for
  new 5-year guarantee (J)                7%*
Remaining Guarantee Period (N)            60 months
Market Value Adjustment
</TABLE>

<TABLE>
<S>       <C> <C>            <C> <C>   <C>   <C>
                 1 + .08         60/12
$10,000 x      ------------            - 1]  = $234.73
          [(  1 + .07 + .005  )
</TABLE>

              Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $10,234.73

Sample Calculation 2: Negative Adjustment

<TABLE>
<S>                                       <C>
Amount withdrawn or transferred           $10,000
Existing Guarantee Period                 7 years
Time of withdrawal or transfer            beginning of 3rd year of Existing
                                          Guarantee Period
Guaranteed Interest Rate (I)              8%*
Guaranteed Interest Rate for
  new 5-year guarantee (J)                9%*
Remaining Guarantee Period (N)            60 months
Market Value Adjustment:
</TABLE>

<TABLE>
<S>       <C> <C>            <C> <C>   <C>   <C>
                 1 + .08         60/12
$10,000 x      ------------            - 1]  = - $666.42
          [(  1 + .09 + .005  )
</TABLE>

              Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $9,333.58

Sample Calculation 3: Negative Adjustment

<TABLE>
<S>                                       <C>
Amount withdrawn or transferred           $10,000
Guarantee Period                          7 years
Time of withdrawal or transfer            beginning of 3rd year of Existing
                                          Guarantee Period
Guaranteed Interest Rate (I)              8%*
Guaranteed Interest Rate for
  new 5-year guarantee (J)                7.75%*
Remaining Guarantee Period (N)            60 months
Market Value Adjustment:
</TABLE>

<TABLE>
<S>       <C> <C>              <C> <C>   <C>   <C>
                  1 + .08          60/12
$10,000 x      --------------            - 1]  = - $114.94
          [(  1 + .0775 + .005  )
</TABLE>

              Amount transferred or withdrawn (adjusted for Market Value
Adjustment): $9,885.06
------------------------
* Assumed for illustrative purposes only.

                                      A-1
<PAGE>
APPENDIX B--SAMPLE DEATH BENEFIT CALCULATIONS
(WITHOUT ENHANCED DEATH BENEFIT)

DATE OF DEATH IS THE 3RD CERTIFICATE ANNIVERSARY

<TABLE>
<CAPTION>
                                                                   EXAMPLE 1  EXAMPLE 2
                                                                   ---------  ---------
<S>  <C>                                                           <C>        <C>
a.   Net Purchase Payments Made Prior to Date of Death...........  $ 20,000   $ 20,000
b.   Certificate Value on Date of Death..........................  $ 17,000   $ 25,000
Death Benefit is larger of a, and b..............................  $ 20,000   $ 25,000
</TABLE>

DATE OF DEATH IS THE 8TH CERTIFICATE ANNIVERSARY

<TABLE>
<CAPTION>
                                                                   EXAMPLE 3  EXAMPLE 4  EXAMPLE 5
                                                                   ---------  ---------  ---------
<S>  <C>                                                           <C>        <C>        <C>
a.   Net Purchase Payments Made Prior to Date of Death...........  $ 20,000   $ 20,000   $ 20,000
b.   Certificate Value on 7th Certificate Anniversary............  $ 15,000   $ 30,000   $ 30,000
c.   Certificate Value on Date of Death..........................  $ 17,000   $ 25,000   $ 35,000
Death Benefit is larger of a, b, and c...........................  $ 20,000   $ 30,000   $ 35,000
</TABLE>

DATE OF DEATH IS THE 15TH CERTIFICATE ANNIVERSARY

<TABLE>
<CAPTION>
                                                                   EXAMPLE 6  EXAMPLE 7  EXAMPLE 8
                                                                   ---------  ---------  ---------
<S>  <C>                                                           <C>        <C>        <C>
a.   Net Purchase Payments Made Prior to Date of Death...........  $ 20,000   $ 20,000   $ 20,000
b.   Certificate Value on 14th Certificate Anniversary...........  $ 15,000   $ 40,000   $ 40,000
c.   Certificate Value on Date of Death..........................  $ 17,000   $ 30,000   $ 50,000
Death Benefit is larger of a, b, and c...........................  $ 20,000   $ 40,000   $ 50,000
</TABLE>

The  numbers  do  not  include  any  market  value  adjustments  which  might be
applicable to the death benefit amount.

                                      B-1
<PAGE>
APPENDIX C--EXPLANATION OF EXPENSE CALCULATIONS
The expense  for  a  given  year is  calculated  by  multiplying  the  projected
beginning  of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total Series  Fund
expense rate plus the annual administrative charge rate.

The  policy values are projected by assuming a single payment of $1,000 grows at
an annual rate equal to 5% reduced by the total expense rate described above.

For example, the 3 year expense for the Growth Stock Series, as a part of a
Certificate that has not elected the Enhanced Death Benefit, is calculated as
follows:

<TABLE>
<C>        <S>                                                                                                 <C>        <C>
          --------------------------------------------------------------------------------------------------------------
           Total Variable Account Annual Expenses                                                                  1.35%
          --------------------------------------------------------------------------------------------------------------
    +      Total Series Fund Operating Expenses
          --------------------------------------------------------------------------------------------------------------
    =      Total Expense Rate
          --------------------------------------------------------------------------------------------------------------
</TABLE>

Year 1 Beginning Policy Value = $1000.00
Year 1 Expense = 1000.00 X     = $

Year 2 Beginning Policy Value = $
Year 2 Expense =       X     = $

Year 3 Beginning Policy Value = $
Year 3 Expense =       X     = $

So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to     +     +     = $

If the contract is surrendered, the surrender charge is the surrender charge
percentage times the purchase payment minus the 10% free withdrawal amount:

<TABLE>
<S>                         <C> <C>              <C> <C>                  <C> <C>
Surrender Charge Percentage  X  (Initial Premium  -  10% Free Withdrawal)  =  Surrender Charge
           0.05              X    (   1000.00     -      100.00     )      =       45.00
</TABLE>

So the total expense if surrendered is     + 45.00 = $

                                      C-1