<PAGE>

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

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934


                  For the quarterly period ended: June 30, 1999


                        Commission file number: 001-12294

                            ARM FINANCIAL GROUP, INC.
             (Exact name of registrant as specified in its charter)

                 DELAWARE                                      61-1244251
      (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)

           515 WEST MARKET STREET
            LOUISVILLE, KENTUCKY                                 40202
  (Address of principal executive offices)                     (Zip Code)


Registrant's telephone number, including area code:  (502) 582-7900


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. /X/ Yes / / No

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<TABLE>
<CAPTION>
       Date                        Class                      Shares Outstanding
--------------------------------------------------------------------------------
<S>                                <C>                        <C>
  August 12, 1999                    A                            23,829,596
</TABLE>


<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                              Carrying Amount                     Fair Value
                                                       ------------------------------    ----------------------------
                                                          June 30,     December 31,         June 30,     December 31,
(IN THOUSANDS)                                              1999           1998               1999           1998
-----------------------------------------------------------------------------------------------------------------------
                                                        (Unaudited)                       (Unaudited)
<S>                                                       <C>              <C>              <C>            <C>
ASSETS
Cash and investments:
    Fixed maturities, available-for-sale, at fair
    value
       (amortized cost: June 30, 1999-$6,407,349;
       December 31, 1998-$6,036,275)                      $6,264,509       $5,812,330       $6,264,509     $5,812,330
    Equity securities, at fair value (cost: June 30,
       1999 - $33,680; December 31, 1998 - $33,559)           37,213           31,745           37,213         31,745
    Mortgage loans on real estate                             13,395           14,554           13,395         14,554
    Policy loans                                             131,353          129,163          131,353        129,163
    Cash and cash equivalents                                393,786          525,316          393,786        525,316
                                                       ------------------------------    ----------------------------
Total cash and investments                                 6,840,256        6,513,108        6,840,256      6,513,108

Assets held in separate accounts:
    Guaranteed                                             1,246,786        1,255,198        1,246,786      1,255,198
    Nonguaranteed                                          1,897,367        1,641,005        1,897,367      1,641,005
Accrued investment income                                     68,281           59,099           68,281         59,099
Deferred policy acquisition costs                            158,089          125,589                -              -
Value of insurance in force                                   66,471           49,651                -              -
Deferred federal income taxes                                 43,142          115,199           21,726         99,459
Receivable for investment securities sold                     15,653            3,885           15,653          3,885
Goodwill                                                      11,540            5,348           11,540          5,348
Other assets                                                  23,491           18,182           23,491         18,182
                                                       --------------------------------------------------------------

Total assets                                            $ 10,371,076       $9,786,264     $ 10,125,100     $9,595,284
                                                       --------------------------------------------------------------
                                                       --------------------------------------------------------------
</TABLE>


                                       2
<PAGE>

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
                CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)


<TABLE>
<CAPTION>
                                                                   Carrying Amount                     Fair Value
                                                            -------------------------------  -------------------------------
                                                               June 30,     December 31,        June 30,      December 31,
(IN THOUSANDS)                                                   1999           1998              1999            1998
-----------------------------------------------------------------------------------------------------------------------------
                                                             (Unaudited)                       (Unaudited)
<S>                                                          <C>              <C>               <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
    Customer deposits                                         $7,032,054      $6,600,498        $6,861,417      $6,463,082
    Customer deposits in separate accounts:
        Guaranteed                                             1,242,454       1,240,348         1,203,544       1,193,429
        Nonguaranteed                                          1,897,367       1,641,005         1,810,455       1,565,080
    Long-term debt                                                38,000          38,000            38,000          38,000
    Accounts payable and accrued expenses                         14,377          20,117            14,377          20,117
    Payable to reinsurer                                           6,009           6,935             6,009           6,935
    Other liabilities                                             32,799          28,928            32,799          28,928
                                                            -------------------------------  --------------------------------
Total liabilities                                             10,263,060       9,575,831         9,966,601       9,315,571

Contingencies

Shareholders' equity:
    Preferred stock: Series A fixed/adjustable
        rate cumulative (5.575%)                                  75,000          75,000
    Common stock: Class A; 23,829,596 and
    23,704,411 shares issued and outstanding, respectively           238             237
    Additional paid-in capital                                   219,790         218,268
    Retained earnings (deficit)                                 (108,222)         55,253
    Accumulated other comprehensive income from net
      unrealized losses on available-for-sale securities         (78,790)       (138,325)
                                                            -------------------------------  --------------------------------
Total shareholders' equity                                       108,016         210,433           158,499         279,713
                                                            -------------------------------  --------------------------------

Total liabilities and shareholders' equity                  $ 10,371,076      $9,786,264       $10,125,100      $9,595,284
                                                            -------------------------------  --------------------------------
                                                            -------------------------------  --------------------------------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       3
<PAGE>

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                            Three Months Ended            Six Months Ended
                                                                 June 30,                     June 30,
                                                       -----------------------------  --------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                    1999           1998            1999         1998
----------------------------------------------------------------------------------------------------------------
<S>                                                        <C>         <C>               <C>          <C>
Investment income                                          $ 141,694     $  115,163      $ 278,162    $  219,569
Interest credited on customer deposits                      (109,027)       (92,657)      (216,116)     (174,337)
                                                       -----------------------------  ---------------------------
     Net investment spread                                    32,667         22,506         62,046        45,232

Fee income:
   Variable annuity fees                                       6,717          5,029         12,838         9,455
   Other fee income                                              611            385          1,142           617
                                                       -----------------------------  ---------------------------
     Total fee income                                          7,328          5,414         13,980        10,072

Other income and expenses:
   Surrender charges                                           1,652          1,816          3,012         3,150
   Operating expenses                                         (9,797)        (7,984)       (20,341)      (15,534)
   Commissions, net of deferrals                                (356)          (424)          (774)       (1,022)
   Interest expense on debt                                     (657)          (661)        (1,369)       (1,278)
   Amortization:
     Deferred policy acquisition costs                        (4,816)        (3,185)        (9,180)       (5,909)
     Value of insurance in force                              (1,475)        (1,401)        (2,888)       (2,932)
     Acquisition-related deferred charges and
        goodwill                                                (224)          (204)          (376)         (424)
   Non-recurring charges:
     Stock-based compensation                                      -            -                -        (2,036)
     Other                                                         -         (1,105)             -        (2,639)
   Other, net                                                   (553)          (455)        (2,042)       (1,048)
                                                       -----------------------------  ---------------------------
     Total other income and expenses                         (16,226)       (13,603)       (33,958)      (29,672)
Realized investment gains (losses):
    Termination of a reinsurance agreement                   (90,000)           -          (90,000)           -
    Other-than-temporary impairments                         (73,947)           -          (73,947)           -
    Other (primarily permanent impairments in 1999)          (16,850)         1,786        (17,201)        6,951
                                                       -----------------------------  ---------------------------

Income (loss) before income taxes                           (157,028)        16,103       (139,080)       32,583
Income tax expense                                           (15,856)        (4,208)       (20,399)       (9,707)
                                                       -----------------------------  ---------------------------

Net income (loss)                                           (172,884)        11,895       (159,479)       22,876

Dividends on preferred stock                                  (1,045)        (1,188)        (2,090)       (2,376)
                                                       -----------------------------  ---------------------------
Net income (loss) applicable to common
  shareholders                                             $(173,929)   $    10,707     $ (161,569)     $ 20,500
                                                       -----------------------------  ---------------------------
                                                       -----------------------------  ---------------------------

Net income (loss) per common share (basic)                 $   (7.30)   $      0.46     $    (6.78)     $   0.88
                                                       -----------------------------  ---------------------------
                                                       -----------------------------  ---------------------------
 Net income (loss) per common and common
  equivalent share (diluted)                               $   (7.30)   $      0.44     $    (6.78)     $   0.84
                                                       -----------------------------  ---------------------------
                                                       -----------------------------  ---------------------------

Cash dividends paid per common share                       $    0.04    $      0.04     $     0.08      $   0.06
                                                       -----------------------------  ---------------------------
                                                       -----------------------------  ---------------------------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       4
<PAGE>

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                 FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998


<TABLE>
<CAPTION>
 (IN THOUSANDS)                                                                       1999              1998
 -------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>            <C>
 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES                                      $  173,235     $      132,379

 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 Fixed maturity investments:
    Purchases                                                                     (1,766,950)        (4,501,093)
    Maturities and redemptions                                                       484,381            360,266
    Sales                                                                            731,663          2,788,703
 Other investments:
    Purchases                                                                           (121)            (9,950)
    Maturities, redemptions and sales                                                  1,391              8,315
 Policy loans, net                                                                    (2,190)               472
 Transfers (to) from the separate accounts:
    Purchase of assets held in separate accounts                                    (199,980)          (245,506)
    Proceeds from sale of assets held in separate accounts                           137,125            100,442
                                                                                  -----------------------------
 Cash flows used in investing activities                                            (614,681)        (1,498,351)

 CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
 Amounts received from customers                                                     942,720          1,533,766
 Amounts paid to customers                                                          (629,459)          (338,387)
 Net proceeds from issuance of common stock                                            1,577                927
 Change in payable to reinsurer                                                         (926)              (931)
 Change in repurchase agreement liability                                                  -            150,910
 Dividends on preferred stock                                                         (2,090)            (2,376)
 Dividends on common stock                                                            (1,906)            (1,404)
                                                                                  -----------------------------
 Cash flows provided by financing activities                                         309,916          1,342,505
                                                                                  -----------------------------

 Net decrease in cash and cash equivalents                                          (131,530)           (23,467)

 Cash and cash equivalents at beginning of period                                    525,316            228,206
                                                                                  -----------------------------

 Cash and cash equivalents at end of period                                       $  393,786     $      204,739
                                                                                  -----------------------------
                                                                                  -----------------------------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       5
<PAGE>

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 1999


1.   BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
("GAAP") for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six months ended June 30, 1999 are
not necessarily indicative of those to be expected for the year ending December
31, 1999 (see Notes 3 and 4 below). For further information, refer to the
consolidated financial statements and footnotes thereto included in the annual
report on Form 10-K of ARM Financial Group, Inc. (the "Company") for the year
ended December 31, 1998.

2.   FAIR VALUE BALANCE SHEETS

     The consolidated balance sheets include a dual presentation of carrying
amount and fair value balances. In accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," fixed maturities classified as available-for-sale
are reported at fair value in the carrying amount balance sheets; however,
corresponding customer deposits are reported at historical values. In contrast,
in the fair value balance sheets, both assets and liabilities are reported at
fair value. As permitted by SFAS No. 107, "Disclosures About Fair Value of
Financial Instruments," the fair value balance sheets are presented as a
supplemental disclosure to provide additional information on the Company's
financial position.

     SFAS No. 107 requires disclosure of fair value information about all
financial instruments, including insurance liabilities classified as investment
contracts, unless specifically exempted. The accompanying fair value balance
sheets reflect fair values for those financial instruments specifically covered
by SFAS No. 107, along with fair value amounts for other assets and liabilities
for which disclosure is permitted but not required.

     The fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced or liquidation sale. In cases where quoted market prices
are not available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly affected by the
assumptions used, including the discount rate and estimates of future cash
flows. Accordingly, the aggregate fair value amounts presented do not
necessarily represent the underlying value of the Company. The methods and
assumptions used in estimating fair value were consistently applied.

     The Company's management of interest rate risk aims to reduce its exposure
to changing interest rates by managing the duration, convexity and cash flow
characteristics of both assets


                                       6
<PAGE>

and liabilities while attempting to maintain liquidity redundancies (i.e.,
sources of liquidity in excess of projected liquidity needs). Pursuant to this
methodology, fair values of assets and liabilities should tend to respond
similarly to changes in interest rates.

3.   SUBSEQUENT EVENTS

     On July 29, 1999, the Company announced that it is restructuring its
institutional business and positioning its retail business and technology
operations for the sale of the Company. The Company's efforts to find a buyer
have been unsuccessful. As a result, the Company has sought protection with
respect to its insurance subsidiary, Integrity Life Insurance Company
("Integrity"), from the Ohio Department of Insurance. Integrity is domiciled in
Ohio. On August 20, 1999, Integrity consented to a Supervision Order issued by
the Ohio Department of Insurance. The Supervision Order will remain in effect
for 60 days. Unless the Ohio Department of Insurance begins proceedings for the
appointment of a rehabilitator or liquidator, the Supervision Order may
automatically be extended for successive 60-day periods until written notice is
given to Integrity ending the supervision.

     This regulatory action is intended to ensure an orderly process for
addressing the financial obligations of Integrity and to protect the interests
of its individual policyholders. The Company believes that Integrity has
adequate assets to meet its obligations to individual retail policyholders.
Integrity will continue payments of death benefits, previously scheduled
systematic withdrawals, previously scheduled immediate annuity payments, and
agent commissions, but must receive written consent from the Ohio Department of
Insurance for other payments including dividends to the company. In
particular, the Supervision Order also suspends the processing of surrenders
of policies except in cases of approved hardship.

     The possibility exists that National Integrity Life Insurance Company
("National Integrity") could be placed under rehabilitation by the New York
Department of Insurance if the New York Department believes that such action is
necessary or appropriate to protect the interests of policyholders. New York is
the domiciliary state of National Integrity.

     The Board of Directors of the Company is continuing to explore all
strategic alternatives, including the sale of the Company's subsidiaries or its
businesses. There can be no assurance that a transaction for the sale of the
Company's insurance subsidiaries or its businesses will be developed or
consummated or as to the price or value that might be obtained.

     If the Company is unable to find a suitable buyer for its subsidiaries or
its businesses or receive a significant infusion of capital from an investor or
investors, then the Company's ability to continue as a going concern is in
substantial doubt. Without the financial strength of a buyer or investor, the
Company will likely not have adequate levels of capital to service its
obligations, including the $38 million debt referred to below and $75 million
of preferred stock. There can be no assurance that the Company will be able
to obtain sufficient capital to meet its liquidity needs. Accordingly, the
Company is considering all of the options available to it, including a
possible bankruptcy filing at the holding company level.

     As part of the institutional restructuring, on August 3, 1999, the Company
and General American Life Insurance Company ("General American") completed a
transaction whereby General American recaptured approximately $3.4 billion of
assets and related liabilities


                                       7
<PAGE>

previously ceded through a reinsurance agreement to one of the Company's
insurance subsidiaries, Integrity (the "Transaction"). The Transaction, which
terminated the reinsurance and related agreements, including a marketing
partnership agreement, was effective as of July 26, 1999. These assets and
related liabilities were part of a joint product development, marketing and
reinsurance relationship with General American involving funding agreements and
guaranteed investment contracts. As a result of the Transaction, the Company
recorded a charge of $90 million during the second quarter of 1999 primarily due
to interest rate related decreases in the fair value of investment securities
recaptured by General American. The Company does not intend to pursue additional
institutional spread or institutional fee business.

     Assuming the Transaction occurred on June 30, 1999, total assets and total
liabilities would have been $6.9 billion and $6.8 billion, respectively.
Shareholders' equity would have remained as stated because the $90 million
charge is already reflected on the June 30, 1999 balance sheet.

     Following the reinsurance recapture by General American, the Company had
approximately $1.8 billion of institutional customer deposits remaining related
to institutional funding agreements and certificates. In anticipation of further
actions to reduce the risk profile of this remaining institutional business, the
Company recorded a second quarter charge of $73.9 million. This charge was a
result of writing down the book value of the Company's remaining institutional
invested assets, due to interest rate related other-than-temporary declines in
asset fair values.

     The decision to restructure the Company's institutional business was driven
by the need to improve the Company's statutory capitalization ratios and due to
the interest rate related decline in the fair value of investment securities in
the Company's institutional spread products segment. In addition, management
believes that the restructuring was necessary in order to position the Company
for sale. Statutory capitalization ratios reflect the Company's surplus, or
assets held in excess of customer deposits and other liabilities, as a
percentage of the Company's assets. The declining fair values were, and continue
to be, substantially affected by the effect of credit spread widening on market
interest rates and bond market illiquidity, following a period of rapid growth
in institutional deposits.

     Following the Company's July 29, 1999 announcement, the Company's and its
insurance subsidiaries' ratings were lowered by four significant rating
agencies. Following the publication of the lower ratings, the Company complied
with withdrawal requests of $160.3 million during August 1999 from institutional
customers, which lowered institutional customer deposits to $1.6 billion.

     The Company is engaged in discussions with its three remaining
institutional clients that have, or may have, the right to withdraw their
deposits due to the Company's lower ratings and/or the Supervision Order from
the Ohio Department of Insurance. Two of these clients bought institutional
certificate products issued by two special purpose vehicles ("SPVs"), through
the Company's subsidiaries, 312 Certificate Company and 212 Certificate Company
("312 CC" and "212 CC", respectively). The Company has approached these clients
to attempt to negotiate an orderly process for managing the associated
investment portfolios. In addition, the Company has had general discussions with
the third client regarding a possible orderly unwinding of an Integrity separate
account funding agreement that the client holds. The Company


                                       8
<PAGE>

continues to negotiate with its three institutional clients and is evaluating
opportunities to reduce outstanding liabilities under these structures on an
orderly basis. The Company can give no assurance that agreements will be reached
with its institutional clients, what the terms of such agreements might be, or
the effect such terms could have on the Company or its subsidiaries (see Note 4
below).

     Integrity is the counterparty in total yield swaps with 312 CC and 212 CC.
The swaps generally provide that Integrity guarantees certain levels of book
yield and asset fair values in 312 CC and 212 CC, and if those levels are not
maintained, Integrity would be required to make payments under the swaps to 312
CC and 212 CC. As a result of the Supervision Order from the Ohio Department of
Insurance to Integrity, 312 CC and 212 CC are in default. The Ohio Department of
Insurance has instructed the Company that Integrity is not to provide funds to
312 CC or 212 CC without its prior approval.

     The Company was subject to a covenant in its bank credit agreement (a
restriction on transferring more than 15% of the Company's assets) that required
the Company to pay off, renegotiate or obtain a waiver with respect to its $38
million long-term debt prior to completing the General American transaction. On
August 3, 1999, the Company secured new debt financing of $38 million from
General American, paid in full its outstanding long-term bank debt, and
terminated its revolving line of credit associated with the bank credit
agreement.

     The agreement for the new debt financing provides that the debt will
mature on the later November 2, 1999, or if a definitive agreement to
transfer control of the stock or substantially all of the assets of the
Company. Integrity or National Integrity is executed on or prior to such
date, upon the closing date of such transaction. Maturity of the debt may be
accelerated by General American in the event of a default by the Company in
connection with insolvency or certain other events, involving the company or
its subsidiaries upon written notice. At maturity the unpaid principal and
all accrued interest is payable, unless the parties agree to extend the date.

     The Company does not intend to pursue additional institutional spread or
institutional fee business. The Company believes that its capability to
market retail products and the persistency of existing retail business have
been or are likely to be materially and adversely impacted by the lower
ratings. Accordingly, management believes that the Company's ability to
generate earnings has been substantially impaired.

     No quarterly cash dividend will be paid on the Company's common stock or
preferred stock during the third quarter of 1999. The declaration and payment of
dividends is subject to the discretion of the Company's Board of Directors based
on the Company's results of operations, financial condition, capital
requirements, and investment opportunities, but subject to legal and regulatory
restrictions on the payment of dividends to the Company by its insurance
subsidiaries.

     By correspondence dated August 5, 1999, Fidelity's Variable Insurance
Products Fund and Variable Insurance Products Fund II (the "VIP Funds"), managed
by Fidelity Management and Research Company, advised the Company's insurance
subsidiaries of their intent to terminate,


                                       9
<PAGE>

effective October 4, 1999, the various participation agreements between the VIP
Funds and the insurance subsidiaries. Contractholders of variable annuities in
effect on October 4, 1999 will continue to be permitted to reallocate
investments in the VIP Funds, redeem investments in the VIP Funds and/or invest
in the VIP Funds. Shares of the VIP Funds will not be made available to variable
annuity contractholders who purchase variable annuities offered by the
Company's insurance subsidiaries after October 4, 1999.

      The VIP Funds indicated that the decision to terminate the various
participation agreements resulted from the determination that a material
adverse change in the business or financial condition of the Company's
insurance subsidiaries had occurred. The VIP Funds further stated that if
they determined that sufficient improvement in the financial condition of the
Company's insurance subsidiaries occurred, the notice would be withdrawn.

4.   EFFECTS OF RATING AGENCY DOWNGRADES AND SUPERVISION ORDER ON ESTIMATES AND
     ASSUMPTIONS

     The preparation of financial statements in conformity with GAAP requires
management of the Company to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. The lowering of the Company's insurance subsidiaries' ratings, any future
downgrades, and the Supervision Order could cause actual results to be
significantly adversely different from those estimates. These estimates are
outlined below.

     Investments related to the three remaining institutional structures were
 written down to fair value as of June 30, 1999. If these structures were
 unwound in the near term and the related investment portfolios were immediately
 liquidated, the amount of losses that the Company would ultimately realize
 could differ materially from the amounts already realized during the second
 quarter (see Note 3 above). Realized losses incurred during a liquidation sale
 could be substantially higher than if the investment portfolios were sold over
 a longer period.

     Customers and distributors of an insurer's annuity products tend to focus
 on the ratings of the insurer to determine whether to buy or market such
 products. The ability of the Company to distribute its products and the
 persistency of its existing business are likely to be materially adversely
 affected by the lower ratings and the Supervision Order. Each of the rating
 agencies continues to assess the Company, and there can be no assurance that
 the Company's current ratings will be maintained in the future. Accelerated
 withdrawals of retail customer deposits could materially adversely affect
 management estimates currently used for certain intangible assets including
 value of insurance in force and deferred policy acquisition costs.

     The Company's insurance subsidiaries held an intangible asset of $66.5
million for value of insurance in force and $158.1 million for deferred policy
acquisition costs as of June 30, 1999. Value of insurance in force and deferred
policy acquisition costs are amortized in proportion to the emergence of gross
profits, including realized investment gains and losses, over the estimated term
of the underlying policies. As noted above, the lowering of the Company's
insurance subsidiaries' ratings and the Supervision Order could have a
significant adverse impact on the persistency of its existing business. A
significant increase in surrenders will cause these intangible assets to be
amortized more quickly than current estimates because gross


                                       10
<PAGE>

margin estimates used to actuarially determine the amortization of the assets,
could be adversely affected by the acceleration of retail withdrawals.

5.   SEGMENT INFORMATION

     Through June 30, 1999, the Company had four reportable segments: retail
spread products and options (fixed and indexed annuities and face-amount
certificates); institutional spread products (funding agreements, guaranteed
investment contracts ("GICs") and certificates); retail variable fund options
(fee-based variable annuity mutual fund options); and corporate and other. The
Company's corporate and other segment includes earnings on surplus assets of the
Company's subsidiaries and holding company cash and investments, fee income from
marketing partnerships and broker-dealer operations, unallocated amortization
expenses, and various corporate expenditures that are not allocated to retail
and institutional products. Income tax expense and preferred stock dividends are
not allocated to any segment.

     The Company's reportable segments are based on the earnings characteristics
of the product or service and the markets through which the product or service
was sold. The reportable segments are each managed separately because the impact
of fluctuating interest rates and changes in the equity market environment
affects each segment's products and services differently. The Company evaluates
performance based on operating earnings. Operating earnings represents net
income or loss applicable to common shareholders excluding realized investment
gains and losses, net of tax, and a tax charge related to prior year unrealized
losses for 1999 and non-recurring charges for 1998.


                                       11
<PAGE>

     Revenues and earnings by segment for the three and six months ended June
30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                   Three Months Ended June 30,
                                                                                   ---------------------------
(IN THOUSANDS)                                                                         1999           1998
--------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>           <C>
REVENUES
Retail spread products and options                                                  $  58,839     $   54,180
Institutional spread products                                                          79,315         58,829
Retail variable fund options                                                            6,717          5,029
Corporate and other                                                                     4,151          2,539
                                                                                    ------------------------
   Total revenues (investment income and fee income)                                $ 149,022     $  120,577
                                                                                    ------------------------
                                                                                    ------------------------

EARNINGS
Retail spread products and options                                                  $  10,786     $    9,502
Institutional spread products                                                          10,362          4,336
Retail variable fund options                                                            2,365          2,094
Corporate and other                                                                       256           (510)
                                                                                    ------------------------
    Pretax operating earnings (before preferred stock dividends)                       23,769         15,422
Income taxes on operations                                                             (6,712)        (3,583)
Preferred stock dividends                                                              (1,045)        (1,188)
                                                                                    ------------------------
    Operating earnings                                                                 16,012         10,651
Realized investment gains (losses), net of tax                                       (178,667)         1,161
Tax charge related to prior year unrealized losses                                    (11,274)             -
Non-recurring charges                                                                        -        (1,105)
                                                                                    ------------------------
    Net income (loss) applicable to common shareholders                             $(173,929)    $   10,707
                                                                                    ------------------------
                                                                                    ------------------------
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                                    Six Months Ended June 30,
                                                                                    -------------------------
(IN THOUSANDS)                                                                         1999           1998
-------------------------------------------------------------------------------------------------------------
<S>                                                                                 <C>           <C>
REVENUES
Retail spread products and options                                                  $ 113,185     $  109,688
Institutional spread products                                                         159,286        105,795
Retail variable fund options                                                           12,838          9,455
Corporate and other                                                                     6,833          4,703
                                                                                    ------------------------
    Total revenues (investment income and fee income)                               $ 292,142     $  229,641
                                                                                    ------------------------
                                                                                    ------------------------

EARNINGS
Retail spread products and options                                                  $  19,118     $   20,019
Institutional spread products                                                          20,874          8,518
Retail variable fund options                                                            4,390          3,695
Corporate and other                                                                    (2,314)        (1,925)
                                                                                    ------------------------
    Pretax operating earnings (before preferred stock dividends)                       42,068         30,307
Income taxes on operations                                                            (11,378)       (7,274)
Preferred stock dividends                                                              (2,090)       (2,376)
                                                                                    ------------------------
    Operating earnings                                                                 28,600         20,657
Realized investment gains (losses), net of tax                                       (178,895)         4,518
Tax charge related to prior year unrealized losses                                    (11,274)             -
Non-recurring charges                                                                       -         (4,675)
                                                                                    ------------------------
    Net income (loss) applicable to common shareholders                             $(161,569)    $   20,500
                                                                                    ------------------------
                                                                                    ------------------------
</TABLE>


6.   INCOME TAXES

     Income tax expense differs from that computed using the expected federal
income tax rate of 35%. The difference is primarily attributable to (1) net
increases in valuation allowances relating to existing deferred tax assets as of
December 31, 1998 and (2) the Company not recording a tax benefit for realized
capital losses, partially offset by (3) the Company's utilization of net
operating loss carry forwards for which a valuation allowance was previously
provided.

     The following table progresses the Company's valuation allowance on
deferred tax assets from December 31, 1998 through June 30, 1999 (in thousands):

<TABLE>
<S>                                                                <C>
        Balance at December 31, 1998                               $  28,033
        Realized investment losses                                    85,821
        Unrealized investment losses                                  25,845
        Utilization of net operating loss carry forward              (18,025)
        Other                                                         (2,389)
                                                                   ---------

        Balance at June 30, 1999                                   $ 119,285
                                                                   ---------
                                                                   ---------
</TABLE>

     For 1999, due to limited capital loss carry back potential, a full
valuation allowance was provided against capital loss carry forwards generated
in excess of amounts available for


                                       13
<PAGE>

capital loss carry back. In addition, a valuation allowance of $25.8 million was
established on deferred tax assets related to SFAS No. 115 unrealized losses on
available-for-sale securities. Finally, the Company utilized net operating loss
carry forwards for which a valuation allowance was previously provided.

     The portion of the SFAS No. 115 related valuation allowance related to
unrealized losses existing at December 31, 1998 was recorded as a charge to
income tax expense pursuant to the requirements of SFAS No. 109, "Accounting for
Income Taxes". This charge increased income tax expense by $11.3 million for the
second quarter of 1999. The portion of this valuation allowance related to
unrealized losses that have emerged subsequent to December 31, 1998 was recorded
as a component of other comprehensive income in shareholders' equity.

     At June 30, 1999, the Company had a deferred tax asset, net of deferred tax
liabilities, of $162.4 million. The net deferred tax asset consisted of $49.2
million of operating items (ordinary gains and losses) and $113.2 million of
capital items (capital gains and losses). The valuation allowance of $119.3
million has been recorded against the deferred tax asset. Substantially all of
the valuation allowance was provided against deferred tax assets related to
the capital items. Management's estimate that a valuation allowance is not
needed against net deferred tax assets related to operating items may be
materially and adversely affected by the rating agency downgrades and
Supervsion Order (see note 4).. Management's judgment related to operating
items is based upon a history of operating profits, carry back potential in
the event of net operating losses, and projections of future operating income.

     It is also management's best estimate that as of June 30, 1999, a valuation
allowance of approximately 50% is necessary on the Company's SFAS No. 115
unrealized investment losses, which relate to its retail and capital and surplus
investment portfolios. Depending upon changes in interest rates and the outcome
of efforts to restructure and sell the Company or its subsidiaries or
businesses, there is some possibility that the entire deferred tax asset
related to these unrealized investment losses should be offset with a full
valuation allowance. As of December 31, 1998 and March 31, 1999, it was
management's estimate that no valuation allowance was necessary on unrealized
investment losses. This estimate changed during the second quarter of 1999,
as reflected by realized investment losses on the termination of a
reinsurance agreement and realized investment losses on investment securities
associated with the Company's remaining institutional line of business.

7.   EARNINGS PER SHARE

     SFAS No. 128, "Earnings Per Share," requires companies to present basic
and, if applicable, diluted earnings per share ("EPS"), instead of primary and
fully diluted EPS. Basic EPS excludes dilution and is computed by dividing net
income applicable to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if options to issue common stock were exercised into
common stock.


                                       14
<PAGE>

     The following is a reconciliation of the number of shares used in the basic
and diluted EPS computations:

<TABLE>
<CAPTION>
                                                                 Three Months Ended June 30,
                                             --------------------------------------------------------------------
                                                           1999                               1998
                                             ---------------------------------  ---------------------------------
                                             Weighted Average   Per Share         Weighted Average     Per Share
(SHARES IN THOUSANDS)                             Shares          Amount                Shares           Amount
------------------------------------------------------------------------------  ---------------------------------
<S>                                          <C>                <C>               <C>                  <C>
Basic EPS                                        23,828          $ (7.30)           23,408            $ 0.46
Effect of dilutive stock options                      -                -               929             (0.02)
                                             ---------------------------------  ---------------------------------
Diluted EPS                                      23,828          $ (7.30)           24,337            $ 0.44
                                             ---------------------------------  ---------------------------------
                                             ---------------------------------  ---------------------------------

<CAPTION>

                                                                  Six Months Ended June 30,
                                             --------------------------------------------------------------------
                                                           1999                               1998
                                             ---------------------------------  ---------------------------------
                                             Weighted Average   Per Share         Weighted Average     Per Share
(SHARES IN THOUSANDS)                             Shares          Amount                Shares           Amount
------------------------------------------------------------------------------  ---------------------------------
<S>                                          <C>                <C>               <C>                  <C>
Basic EPS                                          23,820        $ (6.78)             23,365          $ 0.88
Effect of dilutive stock options                       -               -                 981           (0.04)
                                             ---------------------------------  ---------------------------------
Diluted EPS                                        23,820        $ (6.78)             24,346          $ 0.84
                                             ---------------------------------  ---------------------------------
                                             ---------------------------------  ---------------------------------
</TABLE>


8.   COMPREHENSIVE INCOME

     The components of comprehensive income (loss), net of related tax, for the
three and six months ended June 30, 1999 and 1998 are as follows:

<TABLE>
<CAPTION>
                                                                                    Three Months Ended June 30,
                                                                                 -----------------------------------
(IN THOUSANDS)                                                                         1999             1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>
Net income (loss)                                                                  $ (172,884)        $  11,895
Change in net unrealized gains and losses on available-for-sale securities            104,250            (7,774)
                                                                                 -----------------------------------
Comprehensive income (loss)                                                         $ (68,634)        $   4,121
                                                                                 -----------------------------------
                                                                                 -----------------------------------
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                                     Six Months Ended June 30,
                                                                                 -----------------------------------
(IN THOUSANDS)                                                                         1999             1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                <C>
Net income (loss)                                                                  $ (159,479)        $  22,876
Change in net unrealized gains and losses on available-for-sale securities             59,535           (27,248)
                                                                                 -----------------------------------
Comprehensive income (loss)                                                         $ (99,944)        $  (4,372)
                                                                                 -----------------------------------
                                                                                 -----------------------------------
</TABLE>


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

RECENT DEVELOPMENTS

     On July 29, 1999, the Company announced that it is restructuring its
institutional business and positioning its retail business and technology
operations for the sale of the Company. The Company's efforts to find a buyer
have been unsuccessful. As a result, the Company has sought protection with
respect to its insurance subsidiary, Integrity Life Insurance Company
("Integrity"), from the Ohio Department of Insurance. Integrity is domiciled in
Ohio. On August 20, 1999, Integrity consented to a Supervision Order issued by
the Ohio Department of Insurance. The Supervision Order will remain in effect
for 60 days. Unless the Ohio Department of Insurance begins proceedings for the
appointment of a rehabilitator or liquidator, the Supervision Order may
automatically be extended for successive 60-day periods until written notice is
given to Integrity ending the supervision.

     This regulatory action is intended to ensure an orderly process for
addressing the financial obligations of Integrity and to protect the interests
of its individual policyholders. The Company believes that Integrity has
adequate assets to meet its obligations to individual retail policyholders.
Integrity will continue payments of death benefits, previously scheduled
systematic withdrawals, previously scheduled immediate annuity payments, and
agent commissions, but must receive written consent from the Ohio Department
of Insurance for other payments including dividends to the company. The
Supervision Order also suspends the processing of surrenders of policies
except in cases of approved hardship.

     The possibility exists that National Integrity Life Insurance Company
("National Integrity") could be placed under rehabilitation by the New York
Department of Insurance if the New York Department believes that such action is
necessary or appropriate to protect the interests of policyholders. New York is
the domiciliary state of National Integrity.

     The Board of Directors of the Company is continuing to explore all
strategic alternatives, including the sale of the Company's subsidiaries or its
businesses. There can be no assurance that a transaction for the sale of the
Company's insurance subsidiaries or its businesses will be developed or
consummated or as to the price or value that might be obtained.

     If the Company is unable to find a suitable buyer for its subsidiaries or
its businesses or receive a significant infusion of capital from an investor or
investors, then the Company's


                                       16
<PAGE>

ability to continue as a going concern is in substantial doubt (see "Insurance
Regulation"). Without the financial strength of a buyer or investor, the Company
will likely not have adequate levels of capital to service its obligations,
including its $38 million debt to General American and $75 million of
preferred stock. There can be no assurance that the Company will be able to
obtain sufficient capital to meet its liquidity needs. Accordingly, the
Company is considering all of the options available to it, including a
possible bankruptcy filing at the holding company level.

     As part of the institutional restructuring, on August 3, 1999, the Company
and General American completed a transaction whereby General American recaptured
approximately $3.4 billion of assets and related liabilities previously ceded
through a reinsurance agreement to one of the Company's insurance subsidiaries,
Integrity (the "Transaction"). The Transaction, which terminated the reinsurance
and related agreements, including a marketing partnership agreement, was
effective as of July 26, 1999. These assets and related liabilities were part of
a joint product development, marketing and reinsurance relationship with General
American involving funding agreements and guaranteed investment contracts. As a
result of the Transaction, the Company recorded a charge of $90 million during
the second quarter of 1999 primarily due to interest rate related decreases in
the fair value of investment securities recaptured by General American. The
Company does not intend to pursue additional institutional spread or
institutional fee business.

     Following the reinsurance recapture by General American, the Company had
approximately $1.8 billion of institutional customer deposits remaining related
to institutional funding agreements and certificates. In anticipation of further
actions to reduce the risk profile of this remaining institutional business, the
Company recorded a second quarter charge of $73.9 million. This charge was a
result of writing down the book value of the Company's remaining institutional
invested assets, due to interest rate related other-than-temporary declines in
asset fair values.

     The decision to restructure the Company's institutional business was driven
by the need to improve the Company's statutory capitalization ratios and due to
the interest rate related decline in the fair value of investment securities in
the Company's institutional spread products segment. In addition, management
believes that the restructuring was necessary in order to position the Company
for sale. Statutory capitalization ratios reflect the Company's surplus, or
assets held in excess of customer deposits and other liabilities, as a
percentage of the Company's assets. The declining fair values were, and continue
to be, substantially affected by the effect of credit spread widening on market
interest rates and bond market illiquidity, following a period of rapid growth
in institutional deposits.


                                       17
<PAGE>

     Following the Company's July 29, 1999 announcement, the Company's and its
insurance subsidiaries' ratings were lowered. The ratings of the Company's
insurance subsidiaries before and after the downgrades are as follows:

<TABLE>
<CAPTION>
                                                                                     Rating
                                                                ----------------------------------------------------------
    Rating Agency                                                        From                            To
    ---------------------------                                 ----------------------------------------------------------
<S>                                                             <C>                     <C>
    Financial Strength and Claims-Paying Ability:
        A.M. Best Company                                       A (Excellent)           E- (Under Regulatory Supervision)
        Duff & Phelps                                           A+ (High)               DD (Under Regulatory Intervention)
        Moody's Investors Service                               Baa1 (Adequate)         B3 (Poor)
        Standard & Poor's Corp. (Integrity)                     A (Strong)              R (Regulatory Action)
        Standard & Poor's Corp. (National Integrity)            A (Strong)              B (Weak)

    Short-Term Claims-Paying Ability:
        Duff & Phelps                                           D-1                     D-5
        Standard & Poor's Corp.                                 A-1                     C
</TABLE>

     Customers and distributors of an insurer's annuity products tend to focus
on the ratings of the insurer to determine whether to buy or market such
products. The ability of the Company to distribute its products and the
persistency of its existing business are likely to be materially adversely
affected by the lower ratings and Supervision Order. Each of the rating agencies
listed above continues to assess the Company, and there can be no assurance that
the Company's current ratings will be maintained in the future.

     Following publication of the lower ratings, the Company complied with
withdrawal requests of $160.3 million during August 1999 from institutional
customers, which lowered institutional customer deposits to $1.6 billion.

     The Company is engaged in discussions with its three remaining
institutional clients that have, or may have, the right to withdraw their
deposits due to the Company's lower ratings and/or the Supervision Order from
the Ohio Department of Insurance. Two of these clients bought institutional
certificate products issued by two special purpose vehicles ("SPVs"), through
the Company's subsidiaries, 312 Certificate Company and 212 Certificate Company
("312 CC" and "212 CC", respectively). The Company has approached these clients
to attempt to negotiate an orderly process for managing the associated
investment portfolios. In addition, the Company has had general discussions with
the third client regarding a possible orderly unwinding of an Integrity separate
account funding agreement that the client holds. The Company continues to
negotiate with its three institutional clients and is evaluating
opportunities to reduce outstanding liabilities under these structures on an
orderly basis. The Company can give no assurance that agreements will be
reached with its institutional clients, what the terms of such agreements
might be, or the effect such terms could have on the Company or its
subsidiaries (see Note 4 of Notes to Condensed Consolidated Financial
Statements).


                                       18
<PAGE>

     Integrity is the counterparty in total yield swaps with 312 CC and 212 CC.
The swaps generally provide that Integrity guarantees certain levels of book
yield and asset fair values in 312 CC and 212 CC, and if those levels are not
maintained, Integrity would be required to make payments under the swaps to 312
CC and 212 CC. As a result of the Supervision Order from the Ohio Department of
Insurance to Integrity, 312 CC and 212 CC are in default. The Ohio Department of
Insurance has instructed the Company that Integrity is not to provide funds to
312 CC or 212 CC without its prior approval.

     The Company was subject to a covenant in its bank credit agreement (a
restriction on transferring more than 15% of the Company's assets) that required
the Company to pay off, renegotiate or obtain a waiver with respect to its $38
million long-term debt prior to completing the General American transaction. On
August 3, 1999, the Company secured new debt financing of $38 million from
General American, paid in full its outstanding long-term bank debt, and
terminated its revolving line of credit associated with the bank credit
agreement.

     The agreement for the new debt financing provides that the debt will mature
on the later of November 2, 1999, or if a definitive agreement to transfer
control of the stock or substantialy all of the assets of the Company,
Integrity or National Integrity is executed on or prior to such date, upon
the closing date of such transaction. Maturity of the debt may be accelerated
by General American in the event of a default by the Company in connection
with insolvency or certain other events involving the Company or its
subsidiaries upon written notice. At maturity the unpaid principal and all
accrued interest is payable, unless the parties agree to extend the date.

     The Company does not intend to pursue additional institutional spread or
institutional fee business. The Company believes that its capability to
market retail products and the persistency of existing retail business have
been materially and adversely impacted by the lower ratings. Accordingly,
management believes that the Company's ability to generate earnings has been
substantially impaired.

     No quarterly cash dividend will be paid on the Company's common stock or
preferred stock during the third quarter of 1999. The declaration and payment of
dividends is subject to the discretion of the Company's Board of Directors based
on the Company's results of operations, financial condition, capital
requirements, and investment opportunities, but subject to legal and regulatory
restrictions on the payment of dividends to the Company by its insurance
subsidiaries.

     By correspondence dated August 5, 1999, Fidelity's Variable Insurance
Products Fund and Variable Insurance Products Fund II (the "VIP Funds"), managed
by Fidelity Management and Research Company, advised the Company's insurance
subsidiaries of their intent to terminate, effective October 4, 1999, the
various participation agreements between the VIP Funds and the Company's
insurance subsidiaries. Contractholders of variable annuities in effect on
October 4, 1999 will continue to be permitted to reallocate investments in
the VIP Funds, redeem investments in the VIP Funds and/or invest in the VIP
Funds. Shares of the VIP Funds will not be made available


                                       19
<PAGE>

to variable annuity contractholders who purchase variable annuities offered by
the insurance subsidiaries after October 4, 1999.

     The VIP Funds indicated that the decision to terminate the various
participation agreements resulted from the determination that a material adverse
change in the business or financial condition of the Company's insurance
subsidiaries had occurred. The VIP Funds further stated that if they
determined that sufficient improvement in the financial condition of the
Company's insurance subsidiaries occurred, the notice would be withdrawn.

GENERAL

     The Company specializes in the growing asset accumulation business with
particular emphasis on retirement savings and investment products. The Company's
retail products and services are sold through a broad spectrum of distribution
channels. During July 1999, the Company made a decision to no longer pursue
additional institutional spread or institutional fee business. The Company
derives its earnings from the investment spread and fee income generated by the
assets it manages. The Company groups its operations into three operating
segments (retail spread products and options, institutional spread products and
retail variable fund options) and a corporate segment, based on the market
through which the products or services are sold and the earnings characteristics
of the products or services.

     The Company earns a spread between what is earned on invested assets and
what is credited to customer accounts with its retail spread products and
options segment (primarily fixed and indexed annuities) and institutional spread
products segment (funding agreements, GICs and certificates). The Company
receives a fee in exchange for managing customers' deposits, and the customers
accept the investment risk with its retail variable fund options segment
(variable annuity mutual fund options). Fee-based business is less capital
intensive than the spread businesses and provides the Company with diversified
sources of income. The Company believes that market forces and population
demographics are producing and will continue to generate strong consumer demand
for long-term savings and retirement products, including retail fixed, indexed
and variable annuity products.

     As discussed above in "Recent Developments," the Company and General
American completed a transaction, effective July 26, 1999, whereby General
American recaptured $3.4 billion of assets and related liabilities previously
ceded through a reinsurance agreement to Integrity. Accordingly, these assets
and liabilities and related earnings are included in the Company's financial
position and results of operations for all periods discussed below, but will not
be included in future periods. As a result of the General American transaction
and future uncertainties stemming from other matters discussed in "Recent
Developments" above, the Company's historical results of operations should not
be used as an indication of future operating results. (See Notes 3 and 4 of
Notes to Condensed Consolidated Financial Statements.)


                                       20
<PAGE>

RESULTS OF OPERATIONS

THREE AND SIX MONTHS ENDED JUNE 30, 1999 COMPARED WITH THREE AND SIX MONTHS
     ENDED JUNE 30, 1998.

     There was a net loss of $172.9 million during the second quarter of 1999
compared to net income of $11.9 million for the second quarter of 1998. For the
six months ended June 30, the net loss was $159.5 million in 1999, compared with
net income of $22.9 million in 1998. The net loss for the second quarter and
first six months of 1999 is due to $180.8 million of realized investment losses
incurred during the second quarter of 1999. Such realized investment losses
include a $90.0 million charge related to the termination of a reinsurance
agreement with General American and a $73.9 million charge as a result of
writing down the book value of the Company's remaining investment securities
relating to its institutional business. (See "--Recent Developments.")

     Operating earnings (net income or loss applicable to common shareholders
excluding realized investment gains and losses, net of tax, and a tax charge
related to prior year unrealized losses for 1999 and non-recurring charges for
1998) were $16.0 million and $10.7 million for the second quarters of 1999 and
1998, respectively. For the six months ended June 30, operating earnings were
$28.6 million in 1999, compared with $20.7 million in 1998. The increase in
operating earnings is primarily attributable to an increase in net investment
spread and variable annuity fees due to the growth of assets under management
which increased from $8.4 billion at June 30, 1998 to $10.4 billion at June 30,
1999, including $3.4 billion of assets under management which were recaptured by
General American in the third quarter of 1999.

     Annualized pretax operating earnings for the retail spread products and
options segment were 1.47% and 1.36% of average assets under management of $2.94
billion and $2.80 billion for that segment during the second quarter of 1999 and
1998, respectively. For the six months ended June 30, annualized pretax
operating earnings for that segment were 1.32% and 1.43% of average assets under
management of $2.89 billion and $2.81 billion in 1999 and 1998, respectively.
Annualized pretax operating earnings for the institutional spread products
segment were 0.81% and 0.49% of average assets under management of $5.14 billion
and $3.57 billion for that segment during the second quarter of 1999 and 1998,
respectively. For the six months ended June 30, annualized pretax operating
earnings for that segment were 0.82% and 0.53% of average assets under
management of $5.10 billion and $3.18 billion in 1999 and 1998, respectively.
Annualized pretax operating earnings for the retail variable fund options
segment (fee business) were 0.53% and 0.62% of average assets under management
of $1.78 billion and $1.35 billion for that segment during the second quarter of
1999 and 1998, respectively. For the six months, annualized pretax operating
earnings for that segment were 0.51% and 0.58% of average assets under
management of $1.72 billion and $1.27 billion in 1999 and 1998, respectively.


                                       21
<PAGE>

     Net investment spread for the three and six months ended June 30, 1999 and
1998 was as follows:

<TABLE>
<CAPTION>
                                                              Three Months Ended June 30,
                                                        -----------------------------------------
 (IN THOUSANDS)                                                 1999                 1998
-------------------------------------------------------------------------------------------------
<S>                                                     <C>                    <C>
 Investment income                                             $ 141,694            $115,163
 Interest credited on customer deposits                         (109,027)            (92,657)
                                                        --------------------   ------------------
         Net investment spread                                 $  32,667            $ 22,506
                                                        --------------------   ------------------
                                                        --------------------   ------------------

<CAPTION>

                                                               Six Months Ended June 30,
                                                        -----------------------------------------
 (IN THOUSANDS)                                                 1999                 1998
-------------------------------------------------------------------------------------------------
<S>                                                     <C>                    <C>
 Investment income                                             $ 278,162            $219,569
 Interest credited on customer deposits                         (216,116)           (174,337)
                                                        --------------------   ------------------
         Net investment spread                                 $  62,046            $ 45,232
                                                        --------------------   ------------------
                                                        --------------------   ------------------
</TABLE>

     The increases in net investment spread are primarily attributable to the
increase in average spread-based customer deposits, which were $8.1 billion
during the second quarter of 1999 compared to $6.4 billion during the second
quarter of 1998. For the six months, average spread-based customer deposits were
$8.0 billion in 1999, compared to $6.0 billion in 1998.


                                       22
<PAGE>

     Annualized investment spread rates for the Company's two spread-based
operating segments for the three and six months ended June 30, 1999 and 1998
were as follows:

<TABLE>
<CAPTION>
                                                                                 Three Months Ended June 30,
                                                                           -----------------------------------------
                                                                                   1999                 1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                    <C>
 Retail spread products and options segment:
     Investment yield                                                                8.04%                7.76%
     Average credited rate                                                          (5.84%)              (5.74%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      2.20%                2.02%
                                                                           ---------------------  ------------------
                                                                           ---------------------  ------------------


 Institutional spread products segment:
     Investment yield                                                                6.19%                6.62%
     Average credited rate                                                          (5.17%)              (5.92%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      1.02%                0.70%
                                                                           ---------------------  ------------------
                                                                           ---------------------  ------------------

<CAPTION>

                                                                                  Six Months Ended June 30,
                                                                           -----------------------------------------
                                                                                   1999                 1998
                                                                           -----------------------------------------
<S>                                                                        <C>                    <C>
 Retail spread products and options segment:
     Investment yield                                                                7.90%                7.88%
     Average credited rate                                                          (5.80%)              (5.77%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      2.10%                2.11%
                                                                           ---------------------  ------------------
                                                                           ---------------------  ------------------


 Institutional spread products segment:
     Investment yield                                                                6.30%                6.70%
     Average credited rate                                                          (5.26%)              (5.95%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      1.04%                0.75%
                                                                           ---------------------  ------------------
                                                                           ---------------------  ------------------
</TABLE>

     Investment income on cash and investments in excess of customer deposits
(i.e., consolidated surplus assets) was $3.5 million in the second quarter of
1999, compared to $2.2 million in the second quarter of 1998. For the six months
ended June 30, investment income on cash and investments in excess of customer
deposits was $5.7 million in 1999, compared to $4.1 million in 1998.

     Investment yields for the retail spread products and options segment
increased during 1999 due to the Company's investing in collateralized bond and
loan obligations having greater yields than the existing portfolio. This
increase was mostly offset by lower overall market interest rates during the
first half of 1999 compared to the first half of 1998, which also caused
investment yields for the institutional spread products segment to decline.
Investment yields for the institutional spread products segment are generally
lower than the retail spread products and options segment because the proceeds
from institutional spread product sales are invested in securities of shorter
duration (which generally have lower investment yields) than the Company's other
investment portfolios. Investments in securities of a relatively shorter
duration


                                       23
<PAGE>

for the institutional spread products segment more closely correspond, within a
targeted range, to the average duration of institutional spread product
deposits.

     The average credited rate pattern is dependent upon the general trend of
market interest rates, frequency of credited rate resets and business mix. For
institutional spread products, crediting rates are reset monthly or quarterly
based on London Interbank Offered Rates ("LIBOR"), plus a premium, and
semi-annually or annually for certain fixed annuities. The Federal Reserve's
easing of interest rates late in 1998, followed by a decline in LIBOR,
contributed to the decrease in the average credited rate for institutional
spread products.

     Variable annuity fees, which are based on the market value of the mutual
fund assets supporting variable annuity customer deposits in nonguaranteed
separate accounts, increased to $6.7 million in the second quarter of 1999 from
$5.0 million in the second quarter of 1998. For the six months ended June 30,
variable annuity fees increased to $12.8 million in 1999 from $9.5 million in
1998. This increase is primarily attributable to asset growth from a stock
market driven increase in the value of existing variable annuity deposits
invested in mutual funds and from the receipt of variable annuity deposits.

     Assets under management by business segment as of June 30, 1999 and 1998
were as follows:

<TABLE>
<CAPTION>
                                                                                June 30,
                                                        ----------------------------------------------------------
                                                                   1999                          1998
                                                        ----------------------------------------------------------
                                                                         Percent of                 Percent of
(DOLLARS IN MILLIONS)                                       Amount         Total        Amount         Total
-----------------------------------------------------------------------------------------------------------------
<S>                                                     <C>              <C>            <C>         <C>
Retail:
  Spread products and options (primarily fixed annuity
     deposits)                                            $ 3,050.3         29%         $2,782.8         33%
  Variable fund options (variable annuity deposits
     invested in mutual funds)                              1,861.1         17           1,404.7         17
                                                        ---------------------------   ---------------------------
Total retail                                                4,911.4*        46           4,187.5         50
Institutional products (funding agreement, GIC spread
   and certificate deposits)                                5,204.3**       50           3,811.4         45
Corporate and other:
  Off-balance sheet deposits under a marketing
    partnership arrangement with General American             271.6**        3             233.7          3
  Cash and investments in excess of customer deposits          59.2          1             201.9          2
                                                        ---------------------------   ---------------------------

Total assets under management                             $10,446.5**      100%         $8,434.5        100%
                                                        ---------------------------   ---------------------------
                                                        ---------------------------   ---------------------------
</TABLE>

* Persistency of existing retail business has been materially adversely affected
by the lower ratings of the Company's insurance subsidiaries and Supervision
Order.  (See Notes 3 and 4 of Notes to Condensed Consolidated Financial
Statements and "--Recent Developments.")

** Includes approximately $3.4 billion related to institutional business written
through a reinsurance agreement and $0.3 billion related to a marketing
partnership arrangement with General American. Assuming the termination of the
reinsurance agreement and marketing partnership agreement occurred on June 30,
1999, total assets under management would be $6.7 billion. Also includes $160.3
million of institutional customer deposits withdrawn during August 1999. The
Company is engaged in discussions with its remaining institutional customers.
(See Note 3 of Notes to Condensed Consolidated Financial Statements and
"--Recent Developments.")


                                       24
<PAGE>

     The increase in total retail assets under management was primarily
attributable to sales, net of surrenders of a variety of retail products, and
the investment performance of variable fund options due to strong stock market
returns.

     Sales represent premiums and deposits received for products offered through
the Company's insurance and certificate subsidiaries. Sales by market and type
of product for the three and six months ended June 30, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>
                                                     Three Months Ended June 30,
                                                  ----------------------------------
 (In millions)                                         1999              1998
------------------------------------------------------------------------------------
<S>                                               <C>                   <C>
 Retail:
   Spread products                                     $203.9           $  30.8
   Variable products:
     Spread options                                      42.8              19.5
     Fund options                                        72.6              92.9
                                                  ----------------------------------
   Total variable products                              115.4             112.4
                                                  ----------------------------------
 Total retail                                           319.3             143.2

 Institutional:
   Spread products                                      125.0             818.8
                                                  ----------------------------------

 Total sales                                           $444.3           $ 962.0
                                                  ----------------------------------
                                                  ----------------------------------

<CAPTION>

                                                      Six Months Ended June 30,
                                                  ----------------------------------
 (In millions)                                         1999              1998
------------------------------------------------------------------------------------
<S>                                               <C>                   <C>
 Retail:
   Spread products                                     $325.6           $  64.1
   Variable products:
     Spread options                                      76.8              36.0
     Fund options                                       124.5             164.6
                                                  ----------------------------------
   Total variable products                              201.3             200.6
                                                  ----------------------------------
 Total retail                                           526.9             264.7

 Institutional:
   Spread products                                      415.5           1,266.0
                                                  ----------------------------------

 Total sales                                           $942.4         $ 1,530.7
                                                  ----------------------------------
                                                  ----------------------------------
</TABLE>

     Future retail sales growth and persistency of existing retail business have
been materially adversely affected due to the lowering of the Company's
insurance subsidiaries' ratings during the third quarter of 1999 and are likely
to be further affected by the Supervision Order. In addition, during July 1999,
the Company announced that it does not intend to pursue additional institutional
spread or institutional fee business. Accordingly, management believes that the


                                       25
<PAGE>

Company's ability to generate earnings has been substantially impaired. (See
Note 3 of Notes to Condensed Consolidated Financial Statements and "-Recent
Developments").

     Total retail sales gained momentum during the first half and second quarter
of 1999 with an increase of approximately 99% and 55%, respectively, over the
corresponding prior periods. The growth was attributable to an increase in
marketing efforts to broaden and strengthen the Company's retail franchise. This
included efforts to expand and diversify the Company's retail market presence by
increasing the number of producers. Effective April 16, 1999, the Company
completed the acquisition of the assets and operations of Financial Marketing
Group, Inc., FMG Distributors, Inc. and FMG Advisors, Inc. (collectively,
"FMG"). FMG, one of the nation's largest independent marketers of variable and
fixed annuities, is a key distributor of the Company's products. The acquisition
was intended to expand the Company's in-house retail distribution capabilities.
Additionally, a modest increase in intermediate-term market interest rates in
1999, combined with higher credit spreads to U.S. Treasury securities, enhanced
the attractiveness of the Company's retail spread products relative to competing
products, such as money market funds and bank certificates.

     Net surrenders of retail spread and variable annuity products and options
issued by the Company's insurance subsidiaries were $98.9 million for the second
quarter of 1999, compared to $104.3 million for the second quarter of 1998. For
the six months, such net surrenders were $195.4 million in 1999, compared to
$184.0 million in 1998. Surrender charge income decreased to $1.7 million in the
second quarter of 1999, from $1.8 million in the second quarter of 1998. For the
six months ended June 30, surrender charge income decreased to $3.0 million in
1999, from $3.2 million in 1998. Retail products issued by the Company's
insurance subsidiaries generally include lapse protection provisions that
provide a deterrent to surrenders. These provisions can include surrender
charges and market value adjustments on annuity withdrawals. During the period
that surrender charges are assessable (generally the first five to seven years
after a policy is issued) surrenders are traditionally relatively low. The
surrender and withdrawal activity during the first six months of 1998 and
1999 was generally expected by the Company due to the level of customer
deposits written several years ago that were subject to declining or expiring
surrender charges and the Company's strategy of maintaining investment
spreads. The Company attempts to reduce retail surrender activity and improve
persistency through various programs. However, future surrenders of retail
products are likely to be adversely affected due to the lowering of the
Company's insurance subsidiaries' ratings during the third quarter of 1999
and the Supervision Order.

     During 1999, through the filing date of this Form 10-Q, the Company's
institutional customer deposits have decreased $3.8 billion due to surrenders
and the General American transaction. Three institutional customer deposits
remain.  The Company is engaged in discussions with the three remaining
institutional clients to potentially return the deposits (see Notes 3 and 4
of Notes to Condensed Consolidated Financial Statements and "-Recent
Developments").

     Operating expenses were $9.8 million in the second quarter of 1999,
compared to $8.0 million in the second quarter of 1998. For the six months ended
June 30, operating expenses were $20.3 million in 1999, compared to $15.5
million in 1998. Operating expenses for the first


                                       26
<PAGE>

six months of 1999 included increased spending to strengthen the in-house
investment department and on technology infrastructure to enhance retail
franchise Internet applications. In addition, the six months of 1999 included a
first quarter charge consisting of a one-time transition cost of approximately
$1 million for the Company's change of investment managers to BlackRock
Financial Management, Inc. ("BlackRock").

     Amortization of deferred policy acquisition costs related to operations was
$4.8 million in the second quarter of 1999, compared to $3.2 million in the
second quarter of 1998. For the six months ended June 30, such amortization was
$9.2 million in 1999, compared to $5.9 million in 1998. This increase was
primarily the result of growth in the deferred policy acquisition cost asset due
to additional sales of fixed, indexed and variable annuity products. Variable
costs of selling and issuing the Company's insurance subsidiaries' products
(primarily commissions and certain policy issuance and marketing costs) are
deferred and then amortized over the expected life of the contracts.

     Amortization of value of insurance in force related to operations was $1.5
million in the second quarter of 1999 compared to $1.4 million in the second
quarter of 1998. For the six months ended June 30, such amortization was $2.9
million in both 1999 and 1998. The decrease in amortization related to
operations is attributable to the decrease in the value of insurance in force
asset, excluding the effects of SFAS No. 115.

     The Company recorded non-recurring charges of $4.7 million in the six
months ended June 30, 1998, of which $3.6 million was part of a retirement
package for John Franco, the Company's former Co-Chairman and Co-Chief Executive
Officer, and $1.1 million was related to registration expenses associated with
the Company's secondary offering of common stock.

     Other expenses, net, increased to $2.0 million in 1999, from $1.0 million
in 1998. The increase is primarily attributable to higher mortality related
costs in 1999.

     Realized investment losses from the termination of a reinsurance agreement
were $90.0 million during 1999. Realized investment losses due to
other-than-temporary impairments were $73.9 million during 1999. The $73.9
million charge resulted from writing down to fair value the June 30, 1999 book
value of the Company's institutional invested assets not recaptured by General
American. The write-down, due to other-than-temporary impairments, was recorded
as a result of the Company's decision to restructure its institutional business.
Other realized investment losses, which are reported net of related amortization
of deferred policy acquisition costs and value of insurance in force, were $16.9
million during the second quarter of 1999 compared to realized investment gains
of $1.8 million during the second quarter of 1998. For the six months ended June
30, realized investment losses were $17.2 million in 1999, compared to realized
investment gains of $7.0 million in 1998. Such other realized investment losses
during 1999 include an estimated loss of $17.9 million related to the write-down
to fair value of fixed income securities believed to be permanently impaired.

     The Company analyzes its investment portfolio, including below investment
grade securities, at least quarterly in order to determine if its ability to
realize the carrying value on any investment has been impaired. For fixed
maturity and equity securities, if impairment in value is determined to be other
than temporary (i.e., if it is probable that the Company will be unable to


                                       27
<PAGE>

collect all amounts due according to the contractual terms of the security), the
cost basis of the impaired security is written down to fair value, which becomes
the security's new cost basis. The amount of the write-down is included in
earnings as a realized loss. Future events may occur, or additional or updated
information may be received, which may necessitate future write-downs of
securities in the Company's portfolio. Significant write-downs in the carrying
value of investments could materially adversely affect the Company's net income
in future periods.

     The Company recorded income tax expense of $15.9 million for the second
quarter of 1999, compared to income tax expense of $4.2 million for the second
quarter of 1998. For the six months ended June 30, income tax expense was $20.4
million in 1999, compared to $9.7 million in 1998. The difference between the
35% statutory tax rate and the 1999 effective rates for both the three months
and six months ended June 30, 1999 primarily relates to increases in deferred
tax asset valuation allowances primarily attributable to (1) the Company
determining that it is now more likely than not that certain deferred tax assets
that existed as of December 31, 1998 will not be realized, and (2) the Company
not recording a tax benefit for capital and other losses incurred during 1999.
The increases in deferred tax asset valuation allowances were partially offset
as a result of the Company utilizing net operating loss carry forwards for which
a valuation allowance was previously provided.

ASSET PORTFOLIO REVIEW

     The Company primarily invests in securities with fixed maturities with the
objective of earning reasonable returns while limiting credit and liquidity
risks. At amortized cost, fixed maturities at June 30, 1999 totaled $6.4
billion, compared with $6.0 billion at December 31, 1998, representing
approximately 92% and 90% of total cash and investments, respectively.

     The Company's cash and investments as of June 30, 1999 are detailed as
follows. The table also reflects asset allocation as a percentage of total cash
and investments as reported and pro forma, assuming the General American
transaction occurred on June 30, 1999. Excluding assets recaptured by General
American, total cash and investments as of June 30, 1999 would have been $3.6
billion, on an amortized cost basis.


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                            Amortized Cost
                                                               ------------------------------------------
                                                                                  Percent of Total
                                                                            -----------------------------
                                                                                                          Estimated
 (DOLLARS IN MILLIONS)                                            Amount     As Reported    Pro Forma     Fair Value
--------------------------------------------------------------------------------------------------------------------
<S>                                                               <C>        <C>            <C>           <C>
 Fixed maturities:
   Corporate securities                                            $3,038.5      43.5%          44.7%     $  2,946.2
   Mortgage-backed securities:
     Collateralized mortgage obligations:
       Non-agency                                                   1,817.4      26.0           23.6         1,791.4
       Agency                                                         295.9       4.2            4.3           292.7
     Agency pass-throughs                                              25.8       0.4            0.7            25.5
   Asset-backed securities                                            780.4      11.2            7.3           766.6
   U.S. Treasury securities and obligations
     of U.S. government agencies                                      403.6       5.8            5.4           402.6
   Other government securities (primarily foreign)                     45.7       0.7            1.1            39.5
                                                               -------------------------------------------------------
 Total fixed maturities                                             6,407.3      91.8           87.1         6,264.5

 Equity securities (i.e., non-redeemable
   preferred stock)                                                    33.7       0.5            0.7            37.2
 Mortgage loans on real estate                                         13.4       0.2            0.4            13.4
 Policy loans                                                         131.4       1.9            3.6           131.4
 Cash and cash equivalents                                            393.8       5.6            8.2           393.8
                                                               -------------------------------------------------------

 Total cash and investments                                        $6,979.6     100.0%         100.0%     $  6,840.3
                                                               -------------------------------------------------------
                                                               -------------------------------------------------------
</TABLE>

     Pursuant to SFAS No. 115, the Company classifies its entire fixed
maturities portfolio as available-for-sale. Fixed maturities classified as
available-for-sale are carried at fair value and changes in fair value, net of
related value of insurance in force and deferred policy acquisition cost
amortization and deferred income taxes, are charged or credited directly to
shareholders' equity and classified as accumulated other comprehensive income
from net unrealized gains and losses on available-for-sale securities.

     Net unrealized losses on available-for-sale securities totaled $78.8
million (net of $43.4 million of related capitalization of deferred policy
acquisition costs and value of insurance in force and $20.0 million of deferred
income tax benefit) at June 30, 1999, compared to net unrealized losses of
$138.3 million (net of $20.6 million of related capitalization of deferred
policy acquisition costs and value of insurance in force and $74.5 million of
deferred income tax benefit) at December 31, 1998. The unrealized losses on
available-for-sale securities attributable to volatility in the bond market
began during the third quarter of 1998 and continue currently. Economic
contractions in Asia, Latin America and Russia created a "flight to quality,"
mainly U.S. Treasury securities, which decreased values in the rest of the bond
market as a result of the widening of credit spreads on bonds (i.e., the yield
on an investment above the yield of a U.S. Treasury security with a similar
duration). In addition, the liquidity in the bond


                                       29
<PAGE>

market has diminished which further depressed bond prices. Also, during 1999,
the overall level of interest rates increased further.

     The change in net unrealized gains and losses on available-for-sale
securities for the six months ended June 30, 1999 decreased reported
shareholders' equity by $59.5 million as compared to a decrease of $158.6
million for the year ended December 31, 1998. At June 30, 1999 and December 31,
1998, shareholders' equity excluding the effects of SFAS No. 115 was $186.8
million and $348.8 million, respectively.

     The Company manages assets and liabilities with the aim of reducing the
volatility of investment spreads during a changing interest rate environment. As
a result, adjusting shareholders' equity for changes in the fair value of the
Company's fixed maturities and equity securities without reflecting offsetting
changes in the value of the Company's liabilities or other assets creates
volatility in reported shareholders' equity.

     Collateralized mortgage obligations ("CMOs") are pools of mortgages that
are segregated into sections, or tranches, which provide prioritized retirement
of bonds rather than a pro rata share of principal return as in the agency
pass-through structure. The underlying mortgages of agency CMOs are guaranteed
by the U.S. government or U.S. government agencies. At June 30, 1999, 75% of the
Company's non-agency CMO investments (on an amortized cost basis) used mortgage
loans or mortgage loan pools (primarily residential in nature), letters of
credit, agency mortgage pass-through securities, and other types of credit
enhancement as collateral. The remaining 25% of the non-agency CMOs used
commercial mortgage loans as collateral.

     The Company attempts to manage prepayment exposure on CMO holdings by
diversifying among various CMO tranches, and across alternative collateral
classes. Additionally, prepayment sensitivity is evaluated and monitored, giving
consideration to the collateral characteristics such as weighted average coupon
rate, weighted average maturity and the prepayment history of the specific
collateral. Mortgage-backed securities ("MBSs") are subject to risks associated
with prepayments of the underlying collateral pools. Prepayments cause these
securities to have actual maturities different from those projected at the time
of purchase. Securities that have an amortized cost that is greater than par
(i.e., purchased at a premium) that are backed by mortgages that prepay faster
than expected will incur a reduction in yield or a loss, versus an increase in
yield or a gain if the mortgages prepay slower than expected. Those securities
that have an amortized cost that is less than par (i.e., purchased at a
discount) that are backed by mortgages that prepay faster than expected will
generate an increase in yield or a gain, versus a decrease in yield or a loss if
the mortgages prepay slower than expected. The reduction or increase in yields
may be partially offset as funds from prepayments are reinvested at current
interest rates. The degree to which a security is susceptible to either gains or
losses is influenced by the difference between its amortized cost and par, the
relative sensitivity of the underlying mortgages backing the assets to
prepayments in a changing interest rate environment and the repayment priority
of the securities in the overall securitization structure. The Company had gross
unamortized premiums and unaccreted discounts of MBSs of $10.3 million and $11.4
million, respectively, at June 30, 1999.


                                       30
<PAGE>

     Asset-backed securities ("ABS") are securitized bonds which can be backed
by, but not limited to, collateral such as home equity loans, second mortgages,
automobile loans and credit card receivables. At June 30, 1999, home equity loan
collateral represented 24.9% of the Company's investments in the ABS market. The
typical structure of an ABS provides for favorable yields, high credit rating
and stable prepayments.

     The Company's investment in corporate securities includes collateralized
bond obligations ("CBOs") and collateralized loan obligations ("CLOs"). CBOs are
securities backed by pools of bonds, structured so that there are several
classes of bondholders with varying maturities, called tranches. The principal
payments from the underlying pool of bonds are used to retire the bonds on a
priority basis. CLOs are similar to CBOs except that they are securities backed
by pools of commercial loans.

     Total cash and investments (on an amortized cost basis) were 96% and 95%
investment grade or equivalent at June 30, 1999 and December 31, 1998,
respectively. Investment grade securities are those classified as 1 or 2 by the
National Association of Insurance Commissioners ("NAIC") or, where such
classifications are not available, having a rating on the scale used by Standard
and Poor's Corporation ("S&P") of BBB- or above. Yields available on
non-investment grade securities are generally higher than are available on
investment grade securities. However, credit risk is greater with respect to
such non-investment grade securities. The Company attempts to reduce the risks
associated with non-investment grade securities by limiting exposure to any one
issuer and by closely monitoring the creditworthiness of such issuers.
Additionally, the Company has a diversified portfolio of dollar denominated
bonds issued in the U.S. by foreign governments, banks and corporations,
including a limited exposure to the Asian and Latin American markets. At June
30, 1999, such foreign securities represented 8% of the Company's cash and
investments (on an amortized cost basis), with Asian and Latin American
securities representing 2.6% of total cash and investments. The Company's Asian
and Latin American non-investment grade securities represented approximately 30%
of the Company's total investment in non-investment grade securities. The
Company's overall investments in foreign securities were 83% investment grade at
June 30, 1999. The Company reduces the risks associated with buying foreign
securities by limiting the exposure to both issuer and country. The Company
closely monitors the creditworthiness of such issuers and the stability of each
country. The Company's investment portfolio has minimal exposure to real estate,
mortgage loans and common equity securities, which represented less than 0.2% of
cash and investments as of June 30, 1999.


                                       31
<PAGE>

     At June 30, 1999, the ratings assigned by the NAIC and comparable S&P
ratings on the Company's fixed maturity portfolio were as follows:

<TABLE>
<CAPTION>
                                                                              Amortized Cost
                                                                         -------------------------
         NAIC                       S&P                                                Percent     Estimated
      Designation            Comparable Rating                             Amount      of Total    Fair Value
--------------------------------------------------------------------------------------------------------------
                                              (DOLLARS IN MILLIONS)
<S>                          <C>                                           <C>         <C>         <C>
           1                 AAA, AA, A                                     $3,747.2      58.5%        3,706.2
           2                 BBB                                             2,383.1      37.2         2,310.1
           3                 BB                                                167.1       2.6           151.7
           4                 B                                                  96.9       1.5            83.5
           5                 CCC, CC, C                                          9.9       0.2             9.9
           6                 CI, D                                               3.1       0.0             3.1
                                                                         -------------------------------------
                                             Total fixed maturities         $6,407.3     100.0%       $6,264.5
                                                                         -------------------------------------
                                                                         -------------------------------------
</TABLE>

     Assets held in the Company's insurance subsidiaries' guaranteed separate
accounts (on an amortized cost basis) include $1.27 billion and $1.25 billion of
cash and investments at June 30, 1999 and December 31, 1998, respectively, of
which approximately 85% and 94% were fixed maturities. Total guaranteed separate
account cash and investments were 95% and 97% investment grade at June 30, 1999
and December 31, 1998, respectively. Separate accounts are investment accounts
maintained by an insurer to which funds have been allocated for certain products
under provisions of relevant state law. The investments in each separate account
are maintained separately from those in other separate accounts and from the
insurer's general account.

     On March 9, 1999, the Company named BlackRock as the core fixed income
manager for the Company's investment portfolio. BlackRock provides the Company
with investment management services for a broad range of asset classes and
investment strategies.

     BlackRock, headquartered in New York City, is majority-owned by PNC Bank
Corp., one of the largest diversified financial services companies in the U.S.
As of December 31, 1998, BlackRock managed $131 billion of assets on behalf of
individual and institutional investors worldwide. As one of the largest
independent managers of insurance assets in the nation, BlackRock has combined
its capital markets capabilities with its sophisticated proprietary investment
technology to customize service on behalf of insurers in the U.S. and abroad.

INSURANCE REGULATION

     The Company's insurance subsidiaries are subject to regulation and
supervision by the states in which they are organized and in the other
jurisdictions where they are authorized to transact business. State insurance
laws establish supervisory agencies with broad administrative and supervisory
powers including granting and revoking licenses to transact business, regulation
of marketing and other trade practices, operating guaranty associations,
licensing agents, approving


                                       32
<PAGE>

policy forms, regulating certain premium rates, regulating insurance holding
company systems, establishing reserve requirements, prescribing the form and
content of required financial statements and reports, performing financial and
other examinations, determining the reasonableness and adequacy of statutory
capital and surplus, regulating the type and amount of investments permitted,
limiting the amount of dividends that can be paid without first obtaining
regulatory approval, and other related matters. The primary purpose of such
supervision and regulation under the insurance statutes of Ohio and New York
(the domiciliary states of the Company's insurance subsidiaries, Integrity and
National Integrity Life Insurance Company ("National Integrity"), respectively),
as well as other jurisdictions, is the protection of policyholders rather than
investors or shareholders of an insurer. State insurance departments also
conduct periodic examinations of the affairs of insurance companies and require
the filing of annual and other reports relating to the financial condition of
insurance companies.

     In the event of a default on the Company's debt or the insolvency,
liquidation or other reorganization of the Company, the creditors and
stockholders of the Company will have no right to proceed against the assets of
Integrity or National Integrity or to cause their liquidation under federal or
state bankruptcy laws. Insurance companies are not subject to such bankruptcy
laws but are instead governed by state insurance laws relating to liquidation or
rehabilitation due to insolvency or impaired financial condition. Therefore, if
Integrity or National Integrity were to be liquidated or be the subject of
rehabilitation proceedings, such liquidation or rehabilitation proceedings would
be conducted by the Ohio Insurance Director and the New York Insurance
Superintendent, respectively, as the receiver with respect to all of Integrity's
or National Integrity's assets and business. Under the Ohio and New York
insurance laws, all creditors of Integrity or National Integrity, including
policyholders, would be entitled to payment in full from such assets before the
Company or Integrity Holdings, Inc., as indirect or direct stockholders, would
be entitled to receive any distribution therefrom. On August 20, 1999, a
Supervision Order was issued with respect to Integrity (see "--Recent
Developments").

LIQUIDITY AND FINANCIAL RESOURCES

HOLDING COMPANY OPERATIONS
     The Company's principal need for liquidity has historically consisted of
debt service obligations under its bank financing agreement, dividend
payments  on its common and preferred stock, operating expenses not absorbed
by  management fees charged to its subsidiaries, and corporate development
expenditures. At June 30, 1999, the Company had cash and investments at the
holding company level of $37.5 million. The agreement for the Company's new
debt financing in the amount of $38 million provides that the debt will
mature on the later  of November 2, 1999, or if a definitive agreement to
transfer control of the stock or substantially all of the assets of the
Company, Integrity or National Integrity is executed on or prior to such date,
upon the closing date of such transaction.  Maturity of debt may be accelerated
by General American in the event of a default by the Company in connection with
insolvency or certain other events affecting the Company or its subsidiaries
upon written notice.  At maturity, the unpaid  principal and all accrued
interest is payable, unless the parties agree to  extend the maturity date.

     To support the operations of its subsidiaries, the Company may from time to
time made capital contributions to its subsidiaries. To date during 1999, the
Company has made capital contributions of approximately $15 million to 312
Certificate Company, one of its subsidiaries.


                                       33
<PAGE>

     The Company is dependent on dividends from Integrity and management and
service fee income from the Company's subsidiaries to meet ongoing cash needs,
including amounts needed to pay dividends and for debt service. The ability of
the Company's insurance subsidiaries to pay dividends and enter into agreements
with affiliates for the payment of fee income is limited by state insurance
laws. During 1998, the Company received dividends in the amount of $6 million
from Integrity. During the first half of 1999, the Company received dividends in
the amount of $4 million from Integrity.  As a result of the Supervision Order,
Integrity may not pay dividends to the Company without prior approval of the
Ohio Department of Insurance. There can be no assurance that the Ohio
Department of Insurance will allow Integrity to pay any dividends to the
Company for the foreseeable future.

     The Company's efforts to find a buyer have been unsuccessful. Because of
the ratings downgrades the Company has sought protection with respect to
Integrity from the Ohio Department of Insurance. On August 20, 1999 Integrity
consented to a Supervision Order issued by the Ohio Department of Insurance.

     The Board of Directors of the Company is continuing to explore all
strategic alternatives, including the sale of the Company's subsidiaries or its
businesses. There can be no assurance that a transaction for the sale of the
Company's insurance subsidiaries or its businesses will be developed or
consummated or as to the price or value that might be obtained.

     Due to the Company's limited resources and the substantial likelihood that
the Company will be unable to receive dividends from its insurance subsidiaries
sufficient to meet ongoing cash needs, management believes that if a sale of the
Company or its insurance subsidiaries or businesses is not consummated or a
significant infusion of capital is not received from an investor or investors,
then the Company's ability to continue as a going concern is in substantial
doubt. Without the financial strength of a buyer or investor, the Company may
not have adequate levels of capital to service its obligations, including the
$38 million debt and the $75 million of preferred stock.  There can be no
assurance that the Company will be able to obtain sufficient capital to meet
its liquidity needs.  Accordingly, the Company is considering all of the
options available ot it, including a possible bankruptcy filing at the
holding company level.

     No quarterly cash dividend will be paid on the Company's common stock or
preferred stock during the third quarter of 1999.

INSURANCE SUBSIDIARIES OPERATIONS
     The primary sources of liquidity for the Company's insurance subsidiaries
are investment income and proceeds from maturities and redemptions of
investments. The principal uses of such funds are benefits, withdrawals and
loans associated with customer deposits, commissions, operating expenses, and
the purchase of new investments.

     The Company develops cash flow projections under a variety of interest rate
scenarios generated by the Company. The Company attempts to structure asset
portfolios supporting retail business so that the interest and principal
payments, along with other fee income, are more than sufficient to cover the
cash outflows for benefits, withdrawals and expenses under the expected
scenarios developed by the Company. In addition, the Company maintains other
liquid assets


                                       34
<PAGE>

and aims to meet unexpected cash requirements without exposure to material
realized losses during a higher interest rate environment.

     The regulatory action of the Ohio Department of Insurance is intended to
ensure an orderly process for addressing the financial obligations of Integrity
and to protect the interests of its individual policyholders. The Company
believes that Integrity has adequate assets to meet its obligations to
individual retail policyholders. Integrity will continue payments of death
benefits, previously scheduled systematic withdrawals, previously scheduled
immediate annuity payments, and agent commissions, but must receive written
consent from the Ohio Department of Insurance for other payments including
dividends to the Company. In particular the of Supervision Order also suspends
the processing of surrenders of policies except in cases of approved hardship.

     If a sale of the Company's subsidiaries or its businesses is not
consummated, the Ohio and New York Departments of Insurance may take action with
regard to the insurance subsidiaries that could include rehabilitation or
liquidation proceedings. (See "--Insurance Regulation").

     During 1998, Integrity entered into total yield swap transactions with two
of its subsidiaries, 312 Certificate Company ("312 CC") and 212 Certificate
Company ("212 CC"). The swap transactions generally provide that Integrity
guarantees certain levels of book yield and asset fair values in 312 CC and 212
CC, and if these levels are not maintained, Integrity would be required to make
payments under the swaps to 312 CC or 212 CC. Such payments must first be
approved by the Ohio Department of Insurance. (See Note 3 of Notes to Condensed
Consolidated Financial Statements and "--Recent Developments").

     During the second quarter of 1999, the Company realized approximately $57.4
million in investment losses for other-than-temporary declines in market value
on its three remaining institutional structures. If these three institutional
structures were unwound and the related investment portfolio were immediately
liquidated, the amount of losses that the Company would ultimately realize could
materially exceed the amount already recognized during the second quarter of
1999. Consideration received for investments sold during a liquidation sale
could be lower than if the investments were sold over a longer period of time.

     During the six months ended June 30, 1999 and 1998, the Company met its
liquidity needs entirely by cash flows from operating activities and principal
payments and redemptions of investments. At June 30, 1999, cash and cash
equivalents totaled $393.8 million compared to $525.3 million at December 31,
1998. The Company's aim is to manage its cash and cash equivalents position in
order to satisfy short-term liquidity needs. In connection with this management
of cash and cash equivalents, the Company may invest cash in short-duration
fixed maturities to capture additional yield when short-term liquidity
requirements permit.

     The Company generated cash flows of $173.2 million and $132.4 million from
operating activities during the six months ended June 30, 1999 and 1998,
respectively. These cash flows resulted principally from investment income, less
commissions and operating expenses. Proceeds from sales, maturities and
redemptions of investments generated $1.2 billion and $3.2 billion in cash flows
during the six months ended June 30, 1999 and 1998, respectively, which were
offset by purchases of investments of $1.8 billion and $4.5 billion.


                                       35
<PAGE>

EFFECTS OF INTEREST RATE CHANGES

     The Company's retail and institutional spread businesses are subject to
several inherent risks arising from movements in interest rates, especially if
the Company fails to anticipate or respond to such movements. First, interest
rate changes can cause compression of the Company's net spread between interest
earned on investments and interest credited on customer deposits, thereby
adversely affecting the Company's results. Second, if interest rate changes
produce an unanticipated increase in surrenders of the Company's spread-based
products, the Company may be forced to sell investment assets at a loss in order
to fund such surrenders. Finally, changes in interest rates can have significant
effects on the performance of the Company's portfolio of MBSs, including its
CMOs, as a result of changes in the prepayment rate of the loans underlying such
securities.

     The Company will experience spread compression when it is unable to
maintain the margin between its investment earnings and its crediting rates.
When interest rates rise, the Company may not be able to replace the assets in
its investment portfolio with sufficient higher-yielding assets to fund higher
crediting rates or to maintain full profit margins without assuming excessive
asset side risk. As a result, the Company may experience either a decrease in
sales and an increase in surrenders where it is able to maintain its spread by
not raising its crediting rates, or spread compression if it is willing or
contractually required to increase its crediting rates. Conversely, when
interest rates fall, the Company would have to reinvest the cash received from
its investments (i.e., interest and payments of principal upon maturity or
redemption) in the lower-yielding instruments then available. If the Company
chose not to or was unable (i.e., due to guaranteed minimum or fixed crediting
rates or limitations on the frequency of crediting-rate resets) to reduce the
crediting rate on its spread-based products or acquire relatively higher-risk
securities yielding higher rates of return, spread compression would occur.

     If, as a result of interest rate increases, the Company were unable or
chose not to raise its crediting rates to keep them competitive, the Company
might experience a decrease in sales and increase in surrenders. If the Company
lacked sufficient liquidity, the Company might have to sell investment
securities to fund associated surrender payments. Because the value of such
securities would likely have decreased in response to the increase in interest
rates, the Company would realize a loss on such sales. Although certain of the
Company's products contain market value adjustment features which approximate
and transfer such loss to the customer if the selected time horizon for the
fixed return investment is terminated prior to maturity, there can be no
assurance that the Company would be fully insulated from realizing any losses on
sales of its securities. In addition, regardless of whether the Company realizes
an investment loss, surrenders would produce a decrease in invested assets, with
an adverse effect on future earnings therefrom.

     During the three and six months ended June 30, 1999, the Company recorded
realized investment losses of $180.8 million and $181.1 million, respectively
(see "--Recent Developments").


                                       36
<PAGE>

YEAR 2000

      The Company has undertaken a Year 2000 project that includes all of its
subsidiaries. The Company has completed the assessment phase of the project for
all production applications, hardware (personal computers and servers), system
software, vendors, facilities and business partners. Although the Company is
still receiving information from a few vendors and business partners and
assessing various logistic concerns with its facilities, the Company's major
production systems are substantially Year 2000 compliant. Where Year 2000
problems were found, the necessary upgrades and repairs have begun and are
scheduled for completion no later than September 30, 1999.

      The Company is also conducting certification testing. Certification
testing, which serves to verify that the results of repairs and assessments have
been completed for all mission critical production systems and the few problems
that were discovered have been repaired and re-tested. The Company's Year 2000
project is well underway and management believes that it will be Year 2000
compliant by September 30, 1999. However, as a precaution, the Company is
developing a contingency and business resumption plan to address various
logistic concerns with its facilities. Preparations to implement the contingency
and business resumption plan will continue through December 31, 1999.

      Although the Company anticipates no major interruption of business
activities, that will be dependent, in part, upon the activity of third parties.
Even though the Company has assessed and continues to assess third party issues,
it has no direct ability to influence the compliance actions of such parties.
Accordingly, while the Company believes its actions in this regard should have
the effect of reducing Year 2000 risks, it is unable to eliminate them or to
estimate the ultimate effect Year 2000 risks will have on the Company's
operations.

     The cost of the Company's Year 2000 initiatives has not been and is not
expected to be material to the Company's results of operations or financial
condition.

     The estimated date on which the Company believes it will complete its Year
2000 compliance efforts, and the expenses related to the Company's Year 2000
compliance efforts are based upon management's best estimates, which were based
on assumptions of future events, including the availability of certain
resources, third party modification plans and other factors. There can be no
assurance that these results and estimates will be achieved and the actual
results could materially differ from those anticipated.

FORWARD-LOOKING STATEMENTS

     Statements other than historical information contained in this report are
forward-looking statements and, therefore, subject to risks and uncertainties,
including those identified below, which would cause the actual results to differ
materially from statements made. In addition to statements which are
forward-looking by reason of context, the words "believe," "expect,"
"anticipate," "intend," "designed," "goal," "objective," "optimistic," "will"
and similar expressions identify forward-looking statements. Factors which could
cause actual results to


                                       37
<PAGE>

differ materially from the forward-looking statements, thereby resulting in a
material adverse impact on the business, results of operations or financial
condition of the Company, include but are not limited to (i) access to
sufficient capital to fund the Company's operations; (ii) changes in population
demographics; (iii) changes in current federal income tax, securities and
insurance laws and regulations; (iv) the Company's ability to develop and
receive any necessary regulatory or other approval of new products intended to
be marketed to individuals for retirement planning and/or to large institutions
for cash management and other investment; (v) regulatory constraints on existing
or future products rendering the products unmarketable or unprofitable; (vi) a
downgrade in the short term, financial strength or other credit ratings of the
Company's insurance affiliates, the Company's counterparties or other issuers of
securities invested in by the Company; (vii) the Company's ability to favorably
differentiate its products and service levels from those of competitors,
including other insurance and financial services companies and various
investment vehicles readily available to consumers and large institutions;
(viii) loss of key personnel; (ix) the Company's ability to manage assets and
produce returns providing sufficient spread on invested assets backing
policyholder and other liabilities; (x) the strength and liquidity of the
securities markets and the interest rate environment; (xi) increase in the size
and improvement in the productivity of the Company's distribution system; (xii)
access to sufficient capital at favorable rates as needed to operate and grow
the Company's business lines; (xiii) the Company's ability to ensure the
continuous availability of technology at levels necessary to efficiently process
and maintain the business produced for the entire enterprise and manage the
assets of the enterprise; (xiv) litigation, with or without merit, claiming
significant resources of the enterprise; (xv) the impact of consolidations,
mergers, acquisitions or other business investments or combinations in the
financial services industry, including or not including, the Company and/or its
affiliates; and (xvi) the ability of the Company to adequately remediate all
operational systems and non-computer devices and internal computer software to
avoid Year 2000 problems without significant additional expense, and the
reliability of assurances obtained from and ongoing data exchange testing with
key vendors and business partners to address Year 2000 problems. In addition,
there can be no assurance that (i) the Company has correctly identified and
assessed all of the factors affecting its business; (ii) the publicly available
and other information on which the Company has based its analyses is complete or
correct; (iii) the Company's analyses are correct; or (iv) the Company's
strategy, which is based in part on these analyses, will be successful.
Forward-looking statements speak only as of the date on which they are made, and
the Company does not undertake an obligation to update or revise any
forward-looking statements.


                                       38
<PAGE>

                                 PART II. OTHER
                                   INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     The Company has been served with, or has been placed on notice of, three
shareholder class action lawsuits filed in the United States District Court for
the Western District of Kentucky. One such lawsuit, styled Gottlieb v. ARM
Financial Group, Inc., et al. (Civil Action No. 3:99 CV-539-H), was filed on
August 18, 1999. A second lawsuit, styled Kehoe v. ARM Financial Group, Inc., et
al. (Civil Action No. 3:99 CV-542-H), was filed on August 19, 1999. The Company
has not yet been served with the third lawsuit, although it has been put on
notice of an intent to file such a suit. These lawsuits allege that the Company
and certain of its officers violated sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 by, among other things, misrepresenting and/or omitting
material information about its results of operations and financial condition.
The lawsuits further allege that as a result of the purportedly false and
misleading information and failure to disclose material facts, the price of the
Company's securities were artificially inflated. The lawsuits seek damages in an
amount to be proven at trial, interest thereon, reasonable attorneys and expert
witness fees and other costs, and other relief as permitted by law or equity.
The Company intends to defend such lawsuits vigorously. The ultimate outcome of
these lawsuits cannot be predicted with certainty.

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

     The Company held its annual meeting of the stockholders on May 14, 1999. At
the annual meeting, the stockholders elected three directors, each to serve for
a term of three years expiring in 2002. The number of votes cast for or withheld
for each director were as follows:

<TABLE>
<CAPTION>
                                            Votes For          Votes Withheld
                                            ---------          --------------
<S>                                         <C>                <C>
Edward D. Powers                            19,857,794             432,889
Colin F. Raymond                            19,835,180             455,503
Martin H. Ruby                              19,838,330             452,353
</TABLE>

ITEM 5.   OTHER INFORMATION

     On July 27, 1999, Mark V. Kaminski resigned as a director of the Company.


ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K

REPORTS ON FORM 8-K

     No reports on Form 8-K were filed by the Company during the second quarter
of 1999.


                                       39
<PAGE>

EXHIBITS  (ELECTRONIC FILING ONLY)

10.1      Offering Circular dated November 25, 1997, for the BRAVO Trust Series
          1997-1 Floating Rate Trust Certificates.

10.2      Offering Circular Supplement dated November 25, 1997, for the BRAVO
          Trust Series 1997-1 Floating Rate Trust Certificates.

10.3      Declaration of Trust and Trust Agreement dated as of November 25,
          1997, between The Bank of New York, as Trustee and The Holders of
          Trust Certificates.

10.5      Agency Agreement dated as of November 25, 1997, between BRAVO Trust
          Series 1997-1 and Bayerische Landesbank Girozentrale, New York Branch.

10.6      Separate Account Group Annuity Contract dated November 25, 1997,
          issued by BRAVO Trust Series 1997-1.

10.7      Standby Trust Certificate Purchase Agreement dated as of November 25,
          1997, among BRAVO Trust Series 1997-1, Bayerische Landesbank
          Girozentrale, New York Branch, and Integrity Life Insurance Company.

10.8      Custody Agreement dated as of November 27, 1997, among First Trust
          National Association, BRAVO Trust Series 1997-1, Integrity Life
          Insurance Company and Bayerische Landesbank Girozentrale, New York
          Branch.

10.9      Custody Agreement dated as of November 25, 1997, between Signet Trust
          Company and BRAVO Trust Series 1997-1.

10.10     Agreement dated as of November 25, 1997, among Integrity Life
          Insurance Company, Bayerische Landesbank Girozentrale, New York
          Branch, and BRAVO Trust Series 1997-1

10.11     Purchase Agreement dated as of November 25, 1997, between BRAVO Trust
          Series 1997-1 and Lehman Brothers, Inc.

10.12     Market Agent Agreement dated as of November 25, 1997, between
          Bayerische Landesbank Girozentrale, New York Branch, and BRAVO Trust
          Series 1997-1.

10.13     Remarketing Agreement dated as of November 25, 1997, between BRAVO
          Trust Series 1997-1 and Lehman Brothers, Inc.

10.14     Calculation Agent Agreement dated as of November 25, 1997, between
          BRAVO Trust Series 1997-1 and Lehman Brothers, Inc.


                                       40
<PAGE>

10.15     Indemnity Agreement dated as of November 25, 1997, between BRAVO Trust
          Series 1997-1 and Bayerische Landesbank Girozentrale, New York Branch.

10.16     Installment Face-Amount Certificate Agreement dated as of September
          15, 1998, among 212 Certificate Company, Park Avenue Receivables
          Corporation and The Chase Manhattan Bank, as Funding Agent, together
          with Annex X attached thereto.

10.17     Investment Management Agreement dated as of September 15, 1998, among
          212 Certificate Company, Integrity Capital Advisors, Inc. and The
          Chase Manhattan Bank, as Funding Agent.

10.18     Domestic Custody Agreement dated as of September 15, 1998, between 212
          Certificate Company and The Chase Manhattan Bank.

10.19     Account Control Agreement dated as of September 15, 1998, between The
          Chase Manhattan Bank and 212 Certificate Company.

10.20     Pledge and Security Agreement dated as of September 15, 1998, made by
          212 Certificate Company in favor of The Chase Manhattan Bank, as
          Funding Agent.

10.21     ISDA Master Agreement, Schedule and Confirmation dated as of September
          15, 1998, between Integrity Life Insurance Company and 212 Certificate
          Company.

10.22     Face-Amount Certificate dated as of September 15, 1998, issued by 212
          Certificate Company.

10.23     Amendment No. 1 to Installment Face-Amount Certificate Agreement dated
          as of February 23, 1999, to Installment Face-Amount Certificate
          Agreement dated as of September 15, 1998, among 212 Certificate
          Company, Park Avenue Receivables Corporation, the Chase Manhattan
          Bank, as Fidelity agent and as APA Bank thereunder.

10.24     Amendment No. 1 to Asset Purchase Agreement dated as of February 23,
          1999, to Asset Purchase Agreement dated as of September 15, 1998,
          between Park Avenue Receivables Corporation and The Chase Manhattan
          Bank, as Funding Agent and as APA Bank thereunder.

10.25     Amendment No. 1 to Investment Management Agreement dated as of
          February 23, 1999, to Investment Management Agreement dated as of
          September 15, 1998, among 212 Certificate Company, Integrity Capital
          Advisors, Inc. and The Chase Manhattan Bank, as Funding Agent.

10.26     Face-Amount Certificate dated as of February 23, 1999, issued by 212
          Certificate Company.


                                       41
<PAGE>

10.27     Amendment No. 2 to Investment Management Agreement dated as of May 11,
          1999, to Investment Management Agreement dated as of September 15,
          1998, among 212 Certificate Company, Integrity Capital Advisors, Inc.
          and The Chase Manhattan Bank, as Funding Agent.

10.28     Face-Amount Certificate Agreement dated as of April 24, 1998, among
          312 Certificate Company, International Securitization Corporation, and
          The First National Bank of Chicago, as agent for the Certificate
          holders.

10.29     Liquidity Agreement dated as of April 24, 1998, among International
          Securitization Corporation, certain financial institutions party
          thereto, and The First National Bank of Chicago, as the Liquidity
          Agent.

10.30     Letter of Credit Reimbursement Agreement dated as of April 24, 1998,
          among International Securitization Corporation, the financial
          institutions party thereto, and The First National Bank of Chicago as
          the Letter of Credit Agent.

10.31     Investment Management Agreement dated as of April 24, 1998, among 312
          Certificate Company, Integrity Capital Advisors, Inc., as Portfolio
          Manager, and The First National Bank of Chicago, as agent for the
          Certificateholders.

10.32     Pledge and Security Agreement dated as of April 24, 1998, between 312
          Certificate Company and The First National Bank of Chicago, as agent
          for the Certificateholders.

10.33     Standard Custody Agreement between 312 Certificate Company and Bank
          One, Kentucky, N.A., as Custodian.

10.34     Control Agreement dated as of April 24, 1998, among 312 Certificate
          Company, Bank One, as Custodian, and The First National Bank of
          Chicago, as agent for the Certificateholders.

10.35     ISDA Master Agreement dated as of April 24, 1998, between 312
          Certificate Company and Integrity Life Insurance Company, together
          with the Schedule attached thereto.

10.36     Initial Swap Confirmation dated as of April 24, 1998, made by
          Integrity Life Insurance Company and acknowledged by 312 Certificate
          Company.

10.37     Amendment No. 1 dated as of April 21, 1999, to Face-Amount Certificate
          Agreement dated as of April 24, 1998, among 312 Certificate Company,
          International Securitization Corporation, and The First National Bank
          of Chicago, as agent for the Certificateholders.


                                       42
<PAGE>

10.38     $600,000,000 Installment Face-Amount Certificate dated as of April 21,
          1999, issued in favor of The First National Bank of Chicago, as agent
          for the Certificateholders, for the benefit of International
          Securitization Corporation and certain financial institutions party
          thereto.

10.39     Amendment No. 1 dated as of April 21, 1999, to Liquidity Agreement
          dated as of April 24, 1998, among International Securitization
          Corporation, certain financial institutions party thereto, and The
          First National Bank of Chicago, as the Liquidity Agent.

10.40     Amendment No. 1 dated as of April 21, 1999, to Letter of Credit
          Reimbursement Agreement dated as of April 24, 1998, among
          International Securitization Corporation, the financial institutions
          party thereto, and The First National Bank of Chicago as the Letter of
          Credit Agent.

10.41     Amendment No. 1 dated as of April 21, 1999, to Investment Management
          Agreement dated as of April 24, 1998, among 312 Certificate Company,
          Integrity Capital Advisors, Inc., as Portfolio Manager, and The First
          National Bank of Chicago, as agent for the Certificateholders.

10.42     Amendment No. 1 dated as of April 21, 1999, to Swap Transaction
          between Integrity Life Insurance Company and 312 Certificate Company.

10.43     Amendment No. 1 dated as of April 21, 1999, to Pledge and Security
          Agreement dated as of April 24, 1998, between 312 Certificate Company
          and The First National Bank of Chicago, as agent for the
          Certificateholders.

10.44     Termination Master Agreement effective as of July 26, 1999, between
          ARM Financial Group, Inc., Integrity Life Insurance Company and
          General American Life Insurance Company.

10.45     Commutation Agreement dated as of August 3, 1999 between Integrity
          Life Insurance Company and General American Life Insurance Company.

10.46     Termination Agreement dated as of August 3, 1999 between General
          American Life Insurance Company and ARM Financial Group, Inc.

10.47     Term Loan Agreement dated as of August 3, 1999 between ARM Financial
          Group, Inc. and GenAmerica Corporation.

10.48     Promissory Note dated as of August 3, 1999 between ARM Financial
          Group, Inc. and GenAmerica Corporation.


                                       43
<PAGE>

10.49     Waiver, Release and Termination Agreement dated as of August 3, 1999
          between ARM Financial Group, Inc. and The Chase Manhattan Bank, as
          Administrative Agent for the lenders.

27        Financial Data Schedule.

99.1      Supervision Order dated as of August 20, 1999 issued by the Director
          of Insurance of the State of Ohio.


                                       44
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on August 20, 1999.


                            ARM FINANCIAL GROUP, INC.

                                  By:     /S/ EDWARD L. ZEMAN
                                     -------------------------------
                                  Edward L. Zeman
                                  Executive Vice President and
                                  Chief Financial Officer
                                  (Principal Financial Officer)

                                  By:     /S/ BARRY G. WARD
                                     -------------------------------
                                  Barry G. Ward
                                  Controller
                                  (Principal Accounting Officer)


                                       45