<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: September 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.

        Date                    Class                    Shares Outstanding
--------------------------------------------------------------------------------
  November 12, 1999               A                          23,829,596

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


<PAGE>


                          PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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


<TABLE>
<CAPTION>
                                                                        September 30,     December 31,
(IN THOUSANDS)                                                              1999              1998
----------------------------------------------------------------------------------------------------------
                                                                         (Unaudited)
<S>                                                                     <C>               <C>
ASSETS
Cash and investments:
    Fixed maturities, available-for-sale, at fair value
       (amortized cost: September 30, 1999-
       $1,884,275; December 31, 1998 - $1,903,560)                          $1,678,654        $1,835,441
    Equity securities, at fair value (cost: September 30,
       1999 - $23,729; December 31, 1998 - $23,609)                             21,514            21,795
    Mortgage loans on real estate                                               12,372            14,554
    Policy loans                                                               132,033           129,163
    Cash and cash equivalents                                                  324,478           202,020
                                                                      ------------------------------------
Total cash and investments                                                   2,169,051         2,202,973

Assets held in separate accounts:
    Guaranteed                                                                 676,350           738,076
    Nonguaranteed                                                            1,756,216         1,641,005
Accrued investment income                                                       34,977            26,922
Deferred policy acquisition costs                                              162,023           125,589
Value of insurance in force                                                     64,943            49,651
Deferred federal income taxes                                                   10,400            57,892
Goodwill                                                                             -             5,348
Other assets                                                                    21,755            17,409
Discontinued operations - cash and investments and other assets                126,748         4,939,038
                                                                      ------------------------------------

Total assets                                                                $5,022,463        $9,803,903
                                                                      ------------------------------------
                                                                      ------------------------------------
</TABLE>


                                       2


<PAGE>


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




<TABLE>
<CAPTION>
                                                                         September 30,      December 31,
(IN THOUSANDS)                                                                1999              1998
------------------------------------------------------------------------------------------------------------
                                                                          (Unaudited)
<S>                                                                      <C>                <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:

    Customer deposits                                                      $2,360,511          $2,087,543
    Customer deposits in separate accounts:
        Guaranteed                                                            679,581             738,075
        Nonguaranteed                                                       1,756,216           1,641,005
    Long-term debt                                                                  -              38,000
    Notes payable                                                              62,222                   -
    Accounts payable and accrued expenses                                       9,433              20,117
    Payable for investment securities purchased                                 5,403              17,639
    Payable to reinsurer                                                       40,194               6,935
    Other liabilities                                                          39,860              24,175
    Discontinued operations - customer deposits                               130,153           5,019,981
                                                                        ------------------------------------
Total liabilities                                                           5,083,573           9,593,470

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                                                221,400             218,268
    Retained earnings (deficit)                                              (195,886)             55,253
    Accumulated other comprehensive income from net
      unrealized losses on available-for-sale securities                     (161,862)           (138,325)
                                                                        ------------------------------------
Total shareholders' equity                                                    (61,110)            210,433
                                                                        ------------------------------------

Total liabilities and shareholders' equity                                 $5,022,463          $9,803,903
                                                                        ------------------------------------
                                                                        ------------------------------------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       3
<PAGE>

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


<TABLE>
<CAPTION>
                                                            Three Months Ended             Nine Months Ended
                                                               September 30,                  September 30,
                                                        -----------------------------  -----------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)                     1999           1998            1999          1998
-------------------------------------------------------------------------------------  -----------------------------
<S>                                                     <C>            <C>             <C>            <C>
Investment income                                           $  59,547    $  58,026       $  178,423    $  171,800
Interest credited on customer deposits                        (44,960)     (40,355)        (128,045)     (120,765)
                                                        -----------------------------  -----------------------------
     Net investment spread                                     14,587       17,671           50,378        51,035

Fee income:
   Variable annuity fees                                        7,041        5,208           19,879        14,663
   Other fee income                                               191          253              742           640
                                                        -----------------------------  -----------------------------
     Total fee income                                           7,232        5,461           20,621        15,303

Other income and expenses:
   Surrender charges                                            4,960        1,307            7,972         4,457
   Operating expenses                                         (10,948)      (7,588)         (28,875)      (21,530)
   Commissions, net of deferrals                                 (228)        (375)          (1,002)       (1,397)
   Interest expense on debt                                      (493)        (677)          (1,862)       (1,955)
   Amortization:
     Deferred policy acquisition costs                         (7,616)      (3,243)         (16,796)       (9,152)
     Value of insurance in force                               (1,528)      (1,504)          (4,416)       (4,436)
     Acquisition-related deferred charges and goodwill           (235)        (178)            (611)         (602)
     Write-off of intangible assets                           (16,089)           -          (16,089)             -
   Non-recurring charges:
     Stock-based compensation                                       -            -                -        (2,036)
     Other                                                          -            -                -        (2,639)
   Other, net                                                  (2,090)        (940)          (3,848)       (1,823)
                                                        -----------------------------  -----------------------------
     Total other income and expenses                          (34,267)     (13,198)         (65,527)      (41,113)
Realized investment gains (losses)                             (6,590)      (4,638)         (28,428)        4,742
                                                        -----------------------------  -----------------------------

Income (loss) from continuing operations
     before income taxes                                      (19,038)       5,296          (22,956)       29,967
Income tax benefit (expense)                                  (20,576)          10          (31,356)       (6,937)
                                                        -----------------------------  -----------------------------

Income (loss) from continuing operations                      (39,614)       5,306          (54,312)       23,030
Discontinued operations:
    Income (loss) from operations of discontinued
      operations, net of applicable income taxes of
      $762 and $10,381, respectively, in 1999 and
      $220 and $2,980, respectively, in 1998                  (48,232)         372         (193,013)        5,524
                                                        -----------------------------  -----------------------------
Net income (loss)                                             (87,846)       5,678         (247,325)       28,554
Dividends on preferred stock                                   (1,045)      (2,000)          (3,135)       (4,376)
                                                        -----------------------------  -----------------------------
 Net income (loss) applicable to common
  shareholders                                              $ (88,891)     $ 3,678        $(250,460)      $24,178
                                                        -----------------------------  -----------------------------
                                                        -----------------------------  -----------------------------

Per common share:
    Income (loss) from continuing operations                $  (1.71)      $  0.14        $  (2.41)       $  0.80
    Discontinued operations                                    (2.02)         0.02           (8.10)          0.23
                                                        -----------------------------  -----------------------------
    Net income (loss)                                       $  (3.73)      $  0.16        $ (10.51)       $  1.03
                                                        -----------------------------  -----------------------------
                                                        -----------------------------  -----------------------------

Per common and common equivalent share (diluted):
    Income (loss) from continuing operations                $  (1.71)      $  0.14        $  (2.41)       $  0.77
    Discontinued operations                                    (2.02)         0.01           (8.10)          0.22
                                                        -----------------------------  -----------------------------
    Net income (loss)                                       $  (3.73)      $  0.15        $ (10.51)       $  0.99
Cash dividends paid per common share                                -      $  0.04        $   0.10        $  0.10
                                                        -----------------------------  -----------------------------
                                                        -----------------------------  -----------------------------
</TABLE>

SEE ACCOMPANYING NOTES.


                                       4
<PAGE>

                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>

 (IN THOUSANDS)                                                                        1999               1998
 -------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>               <C>
 CASH FLOWS PROVIDED BY OPERATING ACTIVITIES                                       $ 251,412         $ 191,301

 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
 Fixed maturity investments:
     Purchases                                                                    (1,876,293)       (6,525,621)
     Maturities and redemptions                                                      529,251           559,558
     Sales                                                                         5,287,745         4,015,398
 Other investments:
     Purchases                                                                              -           (9,950)
     Maturities, redemptions and sales                                                 2,492             1,481
     Sales                                                                                 -             7,285
 Policy loans, net                                                                    (2,870)             (836)
 Transfers (to) from the separate accounts:
     Purchase of assets held in separate accounts                                   (286,875)         (371,163)
     Proceeds from sale of assets held in separate accounts                          719,561           151,215
                                                                                ------------------------------------
 Cash flows provided by (used in) investing activities                             4,373,011        (2,172,633)

 CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
     Amounts received from customers                                               1,106,820         2,474,486
     Amounts paid to customers                                                    (5,964,716)         (518,442)
     Net proceeds from issuance of common stock                                        1,577               655
     Net proceeds from issuance of preferred stock                                         -            73,638
     Change in payable to reinsurer                                                   33,259            (1,395)
     Tax benefit of exercised stock options                                            1,610                 -
     Dividends on preferred stock                                                     (1,905)           (4,376)
     Dividends on common stock                                                        (1,906)           (2,343)
                                                                                ------------------------------------
 Cash flows provided by (used in) financing activities                            (4,825,261)        2,022,223

 Net increase (decrease) in cash and cash equivalents                               (200,838)           40,891

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

 Cash and cash equivalents at end of period                                       $  324,478         $ 269,097
                                                                                ====================================

SEE ACCOMPANYING NOTES.
</TABLE>


                                       5
<PAGE>


                   ARM FINANCIAL GROUP, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 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 nine
months ended September 30, 1999 are not necessarily indicative of those to be
expected for the year ending December 31, 1999 (see Notes 2, 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.

     In addition, the accompanying unaudited condensed consolidated financial
statements have been prepared on the basis of accounting principles applicable
to going concerns and contemplate the realization of assets and the settlement
of liabilities and commitments in the normal course of business. The financial
statements do not include further adjustments, if any, reflecting the possible
future effects on the recoverability and classification of assets or the amount
and classification of liabilities that may result from the outcome of
uncertainties discussed herein.

     Certain amounts from prior years have been reclassified to conform to the
current year's presentation. Such reclassifications have no effect on previously
reported net income or shareholders' equity.

2.   MATERIAL EVENTS

     On July 29, 1999, the Company announced that it was restructuring its
institutional business and positioning its retail business and technology
operations for the sale of the Company or its businesses or its assets (a "
Sale Transaction"). The Company's efforts to consummate a Sale Transaction
have not yet been concluded. In order to preserve and maximize value for
policyholders as well as for the Company's creditors and/or stockholders, the
Company requested and was granted regulatory supervision with respect to its
insurance subsidiary, Integrity Life Insurance Company ("Integrity"), from
the Ohio Department of Insurance, its domiciliary regulator.

     On August 20, 1999, the Ohio Department of Insurance issued a
Supervision Order. Under the terms of the Supervision Order, Integrity has
continued 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 suspended the processing of surrenders of policies
except in cases of approved hardship.


                                       6
<PAGE>

On August 31, 1999, the Supervision Order was amended to allow Integrity to
resume processing surrender requests from its variable life and annuity
policyholders. The Supervision Order is automatically extended for successive
60-day periods until written notice ending the supervision is given to
Integrity. On October 30, 1999, the Supervision Order was automatically
extended.

     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 Ohio Department of Insurance,
in its supervision role, has retained outside consultants including
investment bankers, lawyers, and actuaries to monitor Integrity's operations.
There can be no assurance as to whether a Sale Transaction will be
consummated or whether the Ohio Department of Insurance will seek to place
Integrity in rehabilitation and/or liquidation. At present, the Company
believes that as long as the negotiation process with a current prospective
buyer has a reasonable probability of success, the Ohio Department of
Insurance will not take such action.

     Currently, National Integrity Life Insurance Company ("National
Integrity") is not under regulator supervision. However, the possibility
exists that National Integrity could be placed in 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.
National Integrity is domiciled in New York.

     The Board of Directors of the Company is continuing to explore certain
strategic alternatives, including a Sale Transaction. There can be no assurance
that a Sale Transaction or any other strategic alternative will be developed or
consummated or as to the price or value that might be obtained, or whether such
price would be sufficient to satisfy all known or potential claims of the
Company's creditors and/or stockholders.

     Regardless of whether the Company is able to find a suitable buyer for
its insurance subsidiaries or its businesses or assets, the Company is likely
to cease doing business as a going concern. Even in the event of a sale of
the Company's insurance subsidiaries, the Company is more likely to liquidate
its other assets rather than seek new business initiatives without its
insurance subsidiaries. Accordingly, the Company is considering all of the
options available to it, including a bankruptcy filing. Depending upon
whether a Sale Transaction occurs or not, and depending upon the amount of
the proceeds of any Sale Transaction, there can be no assurance that the
Company is or will be solvent or will be able to avoid a voluntary or
involuntary Chapter 11 or Chapter 7 proceeding under federal bankruptcy law.

     Seven shareholder class action lawsuits have been filed in the United
States District Court for the Western District of Kentucky against the Company
and certain of its officers. The 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 attorney 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.


                                       7

<PAGE>

     As part of the institutional restructuring, on August 3, 1999, the Company
and General American Life Insurance Company ("General American") completed a
transaction (the "General American 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 General American 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 General American
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.

     By October 15, 1999, the Company reached settlement agreements with its
remaining three institutional clients, each of which had, or may have had, the
right to withdraw their deposits due to the Company's lower ratings (described
below), the Supervision Order from the Ohio Department of Insurance and/or other
negotiated covenants. Pursuant to these settlement agreements, the parties
agreed to transactions (collectively, the "Termination Transactions") whereby
all of the liabilities of the Company's institutional business with these
remaining three clients were terminated and discharged subject only to the
payment of the March 2000 Note and the March 2000 Payable described below.

     As part of the Termination Transactions, the Company transferred or
assigned to these institutional clients all assets (and/or proceeds from the
sale of assets) backing the discharged institutional liabilities, including all
of the marketable securities owned by the Company's special purpose vehicles
("SPVs"), 212 Certificate Company and 312 Certificate Company, and all of the
assets held in certain Integrity separate accounts. Integrity, or the Company,
also paid these institutional clients an aggregate amount in cash of
approximately $15.75 million (the "Cash Payments") at or shortly following
execution of the settlement agreements.

     Integrity also executed and delivered a promissory note (the "March 2000
Note") in favor of an institutional client in the principal amount of $16.4
million as part of the Termination Transactions. The March 2000 Note will mature
on the earlier of March 31, 2000, or the closing of certain material sale
transactions ("Acquisition Transactions") with respect to Integrity or National
Integrity, including a change of control transaction. Maturity of the March 2000
Note may be accelerated in the event of a default by Integrity in connection
with insolvency, bankruptcy or certain other events involving Integrity or its
subsidiaries. At maturity, the unpaid principal and accrued interest is payable
in full, provided that if the maturity date occurs prior to March 31, 2000, by
reason of the closing of an Acquisition Transaction, the total principal amount
due will be only $12.0 million if paid in full, with all accrued interest, on
such earlier maturity date.

     Integrity also agreed to pay an institutional client, as part of the
Termination Transactions, $7.9 million with interest paid monthly, plus
certain fees and expenses not in excess of $500,000, on the earlier of March
31, 2000, or the closing of certain material transactions by Integrity,
including a change of control transaction (such payment obligation, the
"March 2000 Payable").


                                       8

<PAGE>


     The Company does not intend to pursue additional institutional spread or
fee business. As a result of the General American Transaction and the
Termination Transactions, the Company has now effectively exited from the
institutional line of business and, as such, the Company has presented the
operating results and financial condition for all of its institutional business
as discontinued operations on the Condensed Consolidated Statements of
Operations and Balance Sheets, respectively. Prior period amounts have been
restated to reflect this presentation (see Note 4 below). The Company recorded a
total charge of $48.2 million and $193.0 million during the three months and
nine months ended September 30, 1999, respectively, as loss from operations of
discontinued operations.

     The Company's decision to restructure and ultimately exit the
institutional business was driven by the need to address concerns of rating
agencies and potential purchasers, improve the Company's statutory
capitalization ratios, and address 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 a Sale Transaction. 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 substantially affected by credit
spread widening of 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 ratings of the
Company and its insurance subsidiaries were lowered several times by four
significant rating agencies (see ratings table in Management's Discussion and
Analysis of Financial Condition and Results of Operations, "Recent
Developments"). Following the publication of the lower ratings, the Company
complied with institutional customers' withdrawal requests of $160.3 million
during August 1999.

     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 a $38 million note
from GenAmerica Corporation, an affiliate of General American ("GenAmerica"),
paid in full its outstanding long-term bank debt, and terminated its revolving
line of credit associated with the bank credit agreement.

     On November 15, 1999, the Company entered into an extension agreement
with GenAmerica in conjunction with the new note. Pursuant to the extension
agreement, the note will mature on November 30, 1999. The note had previously
been extended to November 15, 1999.Maturity of the note may be accelerated by
GenAmerica in the event of a default by the Company in connection with
insolvency, bankruptcy or certain other events involving the Company or its
subsidiaries upon written notice. At maturity the unpaid principal and all
accrued interest is payable. There can be no assurance that this note will be
further extended.

     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 Company's insurance subsidiaries' lower ratings.


                                       9

<PAGE>


Accordingly, management believes that the Company's ability to generate earnings
has been substantially impaired. However, it is not possible to determine the
financial effects of this impairment.

     On August 26, 1999, the New York Stock Exchange suspended trading of the
Company's common stock. Following the suspension, application was made to the
Securities and Exchange Commission to delist the issue. The Exchange's action
was taken due to the Company's unsatisfactory financial condition as well as the
stock's low selling price. The Exchange's appraisal was based on disclosures
included in the Company's June 1999 Form 10-Q, filed on August 23, 1999. The
Company's common stock subsequently began trading electronically on the OTC
Bulletin Board under the ticker symbol "ARMGA."

     On August 27, 1999, Martin H. Ruby resigned his position as Chief Executive
Officer of the Company and as Chairman and a member of the Board of Directors of
the Company. However, his employment has not been terminated by the Company.
Following Mr. Ruby's resignation, the Company's Board of Directors created an
Office of the President, which is comprised of John R. Lindholm, President -
Retail Business Division, John R. McGeeney, Executive Vice President - General
Counsel, and William H. Panning, Executive Vice President and Chief Investment
Officer. Effective as of November 15, 1999, by mutual agreement between David E.
Ferguson and the Company, Mr. Ferguson's employment with the Company was
terminated. Mr. Ferguson had served as the President-ARM Technology Group since
May 1998 and held other positions within the Company since July 1993. Under the
terms of the agreement, the Company will not provide severance pay to Mr.
Ferguson.

     No quarterly cash dividend was paid on the Company's common stock or
preferred stock during the third quarter of 1999. The Company will not pay or
declare a dividend on the Company's common stock or preferred stock during the
fourth 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, terminated the various
participation agreements between the VIP Funds and the Company's insurance
subsidiaries effective October 4, 1999. 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.


                                       10


<PAGE>

     During the third quarter of 1999, the Company experienced approximately 50
employee resignations out of 330 full time employees. Consequently, management
enacted an incentive stay pay program for certain of its remaining employees.
The program is intended to provide sufficient incentive to retain employees
through at least March 31, 2000. The program has been approved by the Ohio
Department of Insurance with payments to employees guaranteed by Integrity.
There can be no assurances that key employees will in fact be retained and the
Company could incur additional third party consulting expenses as a result.

3. 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.

     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 has been materially adversely affected
by the Company's insurance subsidiaries' lower ratings and the Supervision
Order. Each of the rating agencies continues to assess the Company's
insurance subsidiaries, and there can be no assurance that the Company's
insurance subsidiaries 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 $64.9
million for value of insurance in force and $162.0 million for deferred policy
acquisition costs as of September 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 has had, and
will continue to 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 margin estimates used to actuarially determine the amortization of the
assets, could be adversely affected by the acceleration of retail withdrawals.

     Considering the substantial doubt surrounding the Company's ability to
continue as a going concern, and the impairment of the Company's ability to
generate future business, $16.1 million of certain intangible assets were
written off during the third quarter of 1999. These intangible assets primarily
included goodwill and certain other costs associated with the SBM Company
acquisition in 1995 and the acquisition of a third party distributor in 1999.

4.   DISCONTINUED OPERATIONS

     As a result of the General American Transaction and the Termination
Transactions, the Company has now effectively exited from the institutional line
of business. In addition, the


                                       11

<PAGE>


Company has made the decision to no longer pursue additional institutional
spread or fee business (see Note 2 -- "Material Events").

     Accordingly, the Company has presented the operating results and financial
condition for all of its institutional business as discontinued operations on
the Condensed Consolidated Statements of Operations and Balance Sheets,
respectively. Prior period amounts have been restated to reflect this
presentation. The Company incurred charges of $193.0 million and $48.2 million
for the nine months ended and three months ended September 30, 1999,
respectively, as a loss from operations of discontinued operations. These
charges include realized losses, net of tax, of $206.6 million and $47.3 million
for the nine months ended and three months ended September 30,1999,
respectively.

     Revenues from discontinued operations (consisting of investment income and
fee income) for the nine months ended September 30, 1999 and 1998 totaled $177.3
million and $173.8 million, respectively, and for the three months ended
September 30, 1999 and 1998 totaled $17.4 million and $67.7 million,
respectively.

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. As
discussed in Note 4 - "Discontinued Operations," effective during the third
quarter, the institutional spread products ceased to be a reportable segment.
This change is reflected for all periods presented below. 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 broker-dealer operations, unallocated amortization expenses, and various
corporate expenditures that are not allocated to retail 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 sold. The reportable segments are 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 segment performance based on pretax operating earnings.


                                       12

<PAGE>


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

<TABLE>
<CAPTION>
                                                                                   THREE MONTHS ENDED SEPTEMBER 30,
                                                                                --------------------------------------
(IN THOUSANDS)                                                                         1999               1998
----------------------------------------------------------------------------------------------------------------------
REVENUES (INVESTMENT INCOME AND FEE INCOME)
<S>                                                                                   <C>                 <C>
Retail spread products and options                                                    $ 59,607            $54,568
Retail variable fund options                                                             7,041              5,208
Corporate and other                                                                        131              3,711
                                                                                 -------------------------------------
   Total revenues from continuing operations                                          $ 66,779            $63,487
                                                                                 =====================================


EARNINGS
Retail spread products and options                                                     $ 9,099            $ 9,163
Retail variable fund options                                                             2,792              1,797
Corporate and other                                                                    (24,339)            (1,026)
                                                                                 -------------------------------------
    Pretax operating earnings from continuing operations                               (12,448)             9,934
Realized investment losses                                                              (6,590)            (4,638)
                                                                                 -------------------------------------
Income (loss) from continuing operations before income taxes                           (19,038)             5,296
Income tax benefit (expense) on operations                                             (20,576)                10
                                                                                 -------------------------------------
Income (loss) from continuing operations                                               (39,614)             5,306
Income (loss) from operations of discontinued operations, net of income taxes          (48,232)               372
                                                                                 -------------------------------------
Net income (loss)                                                                      (87,846)             5,678
Preferred stock dividends                                                               (1,045)            (2,000)
                                                                                 -------------------------------------
    Net income (loss) applicable to common shareholders                               $(88,891)           $ 3,678
                                                                                 =====================================
</TABLE>


                                       13

<PAGE>

<TABLE>
<CAPTION>

                                                                                   NINE MONTHS ENDED SEPTEMBER 30,
                                                                                 ------------------------------------
(IN THOUSANDS)                                                                         1999              1998
---------------------------------------------------------------------------------------------------------------------
REVENUES (INVESTMENT INCOME AND FEE INCOME)
<S>                                                                                 <C>                 <C>
Retail spread products and options                                                  $ 172,792           $164,256
Retail variable fund options                                                           19,879             14,663
Corporate and other                                                                     6,373              8,184
                                                                                 ------------------------------------
    Total revenues from continuing operations                                       $ 199,044           $187,103
                                                                                 ====================================

EARNINGS
Retail spread products and options                                                  $  28,217           $ 29,182
Retail variable fund options                                                            7,182              5,492
Corporate and other                                                                   (29,927)            (4,774)
                                                                                 ------------------------------------
    Pretax operating earnings from continuing operations                                5,472             29,900
Non-recurring charges                                                                       -             (4,675)
Realized investment gains (losses)                                                    (28,428)             4,742
                                                                                 ------------------------------------
Income (loss) from continuing operations before income taxes                          (22,956)            29,967
Income tax expense on operations                                                      (31,356)            (6,937)
                                                                                 ------------------------------------
Income (loss) from continuing operations                                              (54,312)            23,030
Income (loss) from operations of discontinued operations, net of income taxes        (193,013)             5,524
                                                                                 ------------------------------------
Net income (loss)                                                                    (247,325)            28,554
Preferred stock dividends                                                              (3,135)            (4,376)
                                                                                 ------------------------------------
    Net income (loss) applicable to common shareholders                             $(250,460)          $ 24,178
                                                                                 ====================================
</TABLE>


6.   INCOME TAXES

     Income tax expense from both continuing and discontinued operations for the
nine months ended September 30, 1999, differs from that computed using the
expected federal income tax rate of 35%. The difference is primarily
attributable to (1) net increases of $9.1 million in valuation allowances
relating to existing deferred tax assets as of December 31, 1998; (2)
establishing a valuation allowance of $24.5 million for SFAS No. 115 unrealized
losses(see below); (3) the Company not recording a tax benefit of $92.5 million
for realized capital losses, partially offset by (4) the Company's use of
temporary differences of $19.1 million for which a full valuation allowance was
provided at December 31, 1998 (primarily net operating loss carry forwards).

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

<S>                                                                                  <C>
     Balance at December 31, 1998                                                    $ 28,033
     Realized investment losses                                                        92,505
     Unrealized investment losses                                                      74,377
     Nonlife (primarily utilization of net operating loss carryforward)               (19,079)
     Current operations                                                                 9,147
                                                                               ---------------------

     Balance at September 30, 1999                                                   $184,983
                                                                               =====================
</TABLE>



                                       14

<PAGE>

     For 1999, due to limited capital loss carry back potential, a full
valuation allowance of $92.5 million was provided against capital loss carry
forwards generated in excess of amounts available for capital loss carry
back. In addition, a full valuation allowance of $74.4 million was
established on deferred tax assets related to SFAS No. 115 unrealized losses
on available-for-sale securities. Furthermore, a valuation allowance of $9.1
million was provided against ordinary deferred tax assets net of deferred tax
liabilities. This valuation allowance reduced the net deferred tax asset to
$10.4 million, an amount equal to the potential benefit of operating loss
carry backs of the Company. Finally, the Company utilized temporary
differences of $19.1 million 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 $24.5 million for the
nine months ended September 30, 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.

     As of December 31, 1998 and March 31, 1999, it was management's judgment
that no valuation allowance was necessary on deferred tax assets related to SFAS
No. 115 unrealized investment losses. This judgment changed during the second
quarter of 1999, due primarily to 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. As a result of this change in estimate, a valuation allowance of
approximately 50% was provided. It is management's best estimate that as of
September 30, 1999, a valuation allowance of 100% is necessary on deferred tax
assets related to unrealized investment losses. This estimate changed during the
third quarter of 1999, as it is now likely that no substantial tax benefits will
ultimately be realized related to existing unrealized investment losses.

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.

                                       15
<PAGE>


     The following is a reconciliation of the number of shares used in the basic
and diluted EPS computations for continuing operations:
<TABLE>
<CAPTION>

                                                              THREE MONTHS ENDED SEPTEMBER 30,
                                             --------------------------------------------------------------------
                                                           1999                               1998
                                             ---------------------------------  ---------------------------------

                                                Weighted                           Weighted
                                                Average         Per Share          Average            Per Share
(SHARES IN THOUSANDS)                            Shares           Amount            Shares              Amount
------------------------------------------------------------------------------  ---------------------------------

<S>                                              <C>             <C>                <C>                <C>
Basic EPS                                        23,829          $ (1.71)           23,491             $0.14

Effect of dilutive stock options                      -               -                759                -
                                             ---------------------------------  ---------------------------------
Diluted EPS                                      23,829          $ (1.71)           24,250             $0.14
                                             =================================  =================================


<CAPTION>

                                                               NINE MONTHS ENDED SEPTEMBER 30,
                                             --------------------------------------------------------------------

                                                           1999                              1998
                                             --------------------------------- ----------------------------------
                                               Weighted                          Weighted
                                               Average           Per Share       Average          Per Share
(SHARES IN THOUSANDS)                           Shares            Amount          Shares           Amount
                                             --------------------------------- ----------------------------------

<S>                                              <C>              <C>               <C>            <C>
Basic EPS                                        23,823           $(2.41)           23,407         $  0.80

Effect of dilutive stock options                      8               -                904           (0.03)
                                             --------------------------------- ----------------------------------

Diluted EPS                                      23,831           $(2.41)           24,311          $ 0.77
                                             ================================= ==================================
</TABLE>


8.   COMPREHENSIVE INCOME

     The components of comprehensive loss, net of related tax, for the three and
nine months ended September 30, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>

                                                                                        THREE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                 ----------------------------------
(IN THOUSANDS)                                                                         1999             1998
-------------------------------------------------------------------------------------------------------------------

<S>                                                                                 <C>               <C>
Net income (loss)                                                                   $ (87,846)        $  5,678
Change in net unrealized gains and losses on available-for-sale securities            (83,072)         (38,985)
                                                                                 ----------------------------------
Comprehensive loss                                                                 $ (170,918)       $ (33,307)
                                                                                 ==================================
</TABLE>


                                       16

<PAGE>

<TABLE>
<CAPTION>

                                                                                         NINE MONTHS ENDED
                                                                                           SEPTEMBER 30,
                                                                                -------------------------------------

(IN THOUSANDS)                                                                        1999              1998
--------------------------------------------------------------------------------------------------------------------

<S>                                                                                <C>                 <C>
Net income (loss)                                                                  $ (247,325)         $ 28,554
Change in net unrealized gains and losses on available-for-sale                       (23,537)          (66,233)
securities
                                                                                -------------------------------------
Comprehensive loss                                                                 $ (270,862)        $ (37,679)
                                                                                =====================================
</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 was restructuring its
institutional business and positioning its retail business and technology
operations for the sale of the Company or its businesses or its assets (a
"Sale Transaction"). The Company's efforts to consummate a Sale Transaction
have not yet been concluded. In order to preserve and maximize value for
policyholders as well as for the Company's creditors and/or stockholders, the
Company requested and was granted regulatory supervision with respect to its
insurance subsidiary, Integrity Life Insurance Company ("Integrity"), from
the Ohio Department of Insurance, its domiciliary regulator.

     On August 20, 1999, the Ohio Department of Insurance issued a Supervision
Order. Under the terms of the Supervision Order, Integrity has continued
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
suspended the processing of surrenders of policies except in cases of approved
hardship. On August 31, 1999, the Supervision Order was amended to allow
Integrity to resume processing surrender requests from its variable life and
annuity policyholders. The Supervision Order is automatically extended for
successive 60-day periods until written notice ending the supervision is given
to Integrity. On October 30, 1999, the Supervision Order was automatically
extended.

     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 Ohio Department of Insurance,
in its supervision role, has retained outside consultants including
investment bankers, lawyers, and actuaries to monitor Integrity's operations.
There can be no assurance as to whether a Sale Transaction will be
consummated or whether the Ohio Department of Insurance will seek to place
Integrity in rehabilitation and/or liquidation. At present, the Company
believes that as long as the negotiation process with a current prospective
buyer has a reasonable probability of success, the Ohio Department of
Insurance will not take such action.

     Currently, National Integrity Life Insurance Company ("National Integrity")
is not under regulator supervision. However, the possibility exists that
National Integrity could be placed


                                       17

<PAGE>


in 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. National Integrity is domiciled in New York.

     The Board of Directors of the Company is continuing to explore certain
strategic alternatives, including a Sale Transaction. There can be no
assurance that a Sale Transaction or any other strategic alternative will be
developed or consummated or as to the price or value that might be obtained,
or whether such price would be sufficient to satisfy all known or potential
claims of the Company's creditors and/or stockholders.

     Regardless of whether the Company is able to find a suitable buyer for
its insurance subsidiaries or its businesses or assets, the Company is likely
to cease doing business as a going concern. Even in the event of a sale of
the Company's insurance subsidiaries, the Company is more likely to liquidate
its other assets rather than seek new business initiatives without its
insurance subsidiaries. Accordingly, the Company is considering all of the
options available to it, including a bankruptcy filing. Depending upon
whether a Sale Transaction occurs or not, and depending upon the amount of
the proceeds of any Sale Transaction, there can be no assurance that the
Company is or will be solvent or will be able to avoid a voluntary or
involuntary Chapter 11 or Chapter 7 proceeding under federal bankruptcy law.

     As part of the institutional restructuring, on August 3, 1999, the Company
and General American Life Insurance Company ("General American") completed a
transaction (the "General American 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 General American 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 General American
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.

     By October 15, 1999, the Company reached settlement agreements with its
remaining three institutional clients, each of which had, or may have had, the
right to withdraw their deposits due to the Company's lower ratings (described
below), the Supervision Order from the Ohio Department of Insurance and/or other
negotiated covenants. Pursuant to these settlement agreements, the parties
agreed to transactions (collectively, the "Termination Transactions") whereby
all of the liabilities of the Company's institutional business with these
remaining three clients were terminated and discharged subject only to the
payment of the March 2000 Note and the March 2000 Payable described below.

     Seven shareholder class action lawsuits have been filed in the United
States District Court for the Western District of Kentucky against the
Company and certain of its officers.  The 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 attorney 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.

     As part of the Termination Transactions, the Company transferred or
assigned to these institutional clients all assets (and/or proceeds from the
sale of assets) backing the discharged institutional liabilities, including all
of the marketable securities owned by the Company's special purpose vehicles
("SPVs"), 212 Certificate Company and 312 Certificate Company, and all of the
assets held in certain Integrity separate accounts. Integrity, or the Company,
also paid these


                                       18


<PAGE>


institutional clients an aggregate amount in cash of approximately $15.75
million (the "Cash Payments") at or shortly following execution of the
settlement agreements.

     Integrity also executed and delivered a promissory note (the "March 2000
Note") in favor of an institutional client in the principal amount of $16.4
million as part of the Termination Transactions. The March 2000 Note will mature
on the earlier of March 31, 2000, or the closing of certain material sale
transactions ("Acquisition Transactions") with respect to Integrity or National
Integrity, including a change of control transaction. Maturity of the March 2000
Note may be accelerated in the event of a default by Integrity in connection
with insolvency, bankruptcy or certain other events involving Integrity or its
subsidiaries. At maturity, the unpaid principal and accrued interest is payable
in full, provided that if the maturity date occurs prior to March 31, 2000, by
reason of the closing of an Acquisition Transaction, the total principal amount
due will be only $12.0 million if paid in full, with all accrued interest, on
such earlier maturity date.

     Integrity also agreed to pay an institutional client, as part of the
Termination Transactions, $7.9 million with interest paid monthly, plus
certain fees and expenses not in excess of $500,000, on the earlier of March
31, 2000, or the closing of certain material transactions by Integrity,
including a change of control transaction (such payment obligation, the
"March 2000 Payable").

     The Company does not intend to pursue additional institutional spread or
institutional fee business. As a result of the General American Transaction and
the Termination Transactions, the Company has now effectively exited from the
institutional line of business and, as such, the Company has presented the
operating results and financial condition for all of its institutional business
as discontinued operations on the Condensed Consolidated Statements of
Operations and Balance Sheets, respectively. Prior period amounts have been
restated to reflect this presentation (see Note 4 below). The Company recorded a
total charge of $48.2 million and $193.0 million during the three months and
nine months ended September 30, 1999, respectively, as loss from operations of
discontinued operations.

     The Company's decision to restructure and ultimately exit the
institutional business was driven by the need to address concerns of rating
agencies and potential purchasers, improve the Company's statutory
capitalization ratios, and address 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 a Sale Transaction. 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.


                                       19

<PAGE>


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

                                                                                     Rating
                                                             -----------------------------------------------------
    Rating Agency                                                       From                         To
    -----------------------------                            -----------------------------------------------------
    Financial Strength and Claims-Paying Ability:
<S>                                                          <C>                         <C>
        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 has been and is likely to be materially
adversely affected by the lower ratings and Supervision Order.

     Following publication of the lower ratings, the Company complied with
institutional customers' withdrawal requests of $160.3 million during August
1999.

     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 a $38 million note
from GenAmerica Corporation, an affiliate of General American ("GenAmerica"),
paid in full its outstanding long-term bank debt, and terminated its revolving
line of credit associated with the bank credit agreement.

     On November 15, 1999, the Company entered into an extension agreement
with GenAmerica in conjunction with the new note. Pursuant to the extension
agreement, the note will mature on November 30, 1999. The note had previously
been extended to November 15, 1999. Maturity of the note may be accelerated
by GenAmerica in the event of a default by the Company in connection with
insolvency, bankruptcy or certain other events involving the Company or its
subsidiaries upon written notice. At maturity the unpaid principal and all
accrued interest is payable. There can be no assurance that this note will be
further extended.


                                       20

<PAGE>

     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 Company's insurance subsidiaries' lower ratings.
Accordingly, management believes that the Company's ability to generate
earnings has been substantially impaired. However, it is not possible to
determine the financial effects of this impairment.

     On August 26, 1999, the New York Stock Exchange suspended trading of the
Company's common stock. Following the suspension, application was made to the
Securities and Exchange Commission to delist the issue. The Exchange's action
was taken due to the Company's unsatisfactory financial condition as well as the
stock's low selling price. The Exchange's appraisal was based on disclosures
included in the Company's June 1999 Form 10-Q, filed on August 23, 1999. The
Company's common stock subsequently began trading electronically on the OTC
Bulletin Board under the ticker symbol "ARMGA."

     On August 27, 1999, Martin H. Ruby also resigned his position as Chief
Executive Officer of the Company and as Chairman and a member of the Board of
Directors of the Company. However, his employment has not been terminated by
the Company. Following Mr. Ruby's resignation, the Company's Board of
Directors created an Office of the President, which is comprised of John R.
Lindholm, President - Retail Business Division, John R. McGeeney, Executive
Vice President - General Counsel, and William H. Panning, Executive Vice
President and Chief Investment Officer. Effective as of November 15, 1999, by
mutual agreement between David E. Ferguson and the Company, Mr. Ferguson's
employment with the Company was terminated. Mr. Ferguson had served as the
President-ARM Technology Group since May 1998 and held other positions within
the Company since July 1993. Under the terms of the agreement, the Company
will not provide severance pay to Mr. Ferguson.

     No quarterly cash dividend was paid on the Company's common stock or
preferred stock during the third quarter of 1999. The Company will not pay or
declare a dividend on the Company's common stock or preferred stock during the
fourth 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, terminated the various
participation agreements between the VIP Funds and the Company's insurance
subsidiaries effective October 4, 1999. 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


                                       21

<PAGE>


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.

     During the third quarter of 1999, the Company experienced approximately 50
employee resignations out of 330 full time employees. Consequently, management
enacted an incentive stay pay program for certain of its remaining employees.
The program is intended to provide sufficient incentive to retain employees
through at least March 31, 2000. The program has been approved by the Ohio
Department of Insurance with payments to employees guaranteed by Integrity.
There can be no assurances that key employees will in fact be retained and the
Company could incur additional third party consulting expenses as a result.

GENERAL

     The Company provides retirement savings and investment products through its
insurance company subsidiaries. During July 1999, the Company made a decision to
no longer pursue institutional spread or institutional fee business. This
business is now classified as discontinued operations for all periods presented
(see Notes 2 and 4 of Notes to Condensed Consolidated Financial Statements). The
Company derives its earnings from the investment spread and fee income generated
by the assets it manages. The Company groups its operations into two operating
segments (retail spread products and options and retail variable fund options)
and a corporate segment, based on 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). 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.

RESULTS OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1998.

     The Company recognized a net loss of $39.6 million from continuing
operations during the third quarter of 1999 compared to net income of $5.3
million for the third quarter of 1998. For the nine months ended September 30,
the net loss from continuing operations was $54.3 million in 1999, compared with
net income of $23.0 million in 1998. Major components of the net loss from
continuing operations includes a $16.1 million write-off of intangible assets
(mainly goodwill) in each period, realized investment losses of $6.6 million and
$28.4 million for the three and nine months periods, respectively, and income
taxes substantially higher than the expected 35% federal income tax rate in each
period. (See Note 6 of Notes to Condensed Consolidated Financial Statements.)

     Annualized pretax operating earnings for the retail spread products and
options segment were 1.19% and 1.32% of average assets under management of $3.1
billion and $2.78 billion for that segment during the third quarter of 1999 and
1998, respectively. For the nine months ended


                                       22

<PAGE>


September 30, annualized pretax operating earnings for that segment were 1.28%
and 1.39% of average assets under management of $3.0 billion and $2.80 billion
in 1999 and 1998, respectively. Annualized pretax operating earnings for the
retail variable fund options segment (fee business) were 0.61% and 0.53% of
average assets under management of $1.84 billion and $1.36 billion for that
segment during the third quarter of 1999 and 1998, respectively. For the nine
months, annualized pretax operating earnings for that segment were 0.54% and
0.57% of average assets under management of $1.77 billion and $1.29 billion in
1999 and 1998, respectively.

     Annualized investment spread rates for the Company's spread-based operating
segment for the three and nine months ended September 30, 1999 and 1998 were as
follows:

<TABLE>
<CAPTION>

                                                                                      Three Months Ended
                                                                                         September 30,
                                                                           -----------------------------------------
                                                                                   1999                 1998
 ------------------------------------------------------------------------  ---------------------  ------------------
 Retail spread products and options segment:
<S>                                                                                 <C>                  <C>
     Investment yield                                                                7.75%                7.81%
     Average credited rate                                                          (5.86%)              (5.78%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      1.89%                2.03%
                                                                           =====================  ==================


<CAPTION>


                                                                                      Nine Months Ended
                                                                                        September 30,
                                                                           -----------------------------------------
                                                                                   1999                 1998
                                                                           ---------------------  ------------------
 Retail spread products and options segment:
<S>                                                                                 <C>                  <C>
     Investment yield                                                                7.84%                7.85%
     Average credited rate                                                          (5.81%)              (5.77%)
                                                                           ---------------------  ------------------
         Investment spread rate                                                      2.03%                2.08%
                                                                           =====================  ==================
</TABLE>


     During the third quarter of 1999, the Company held higher cash balances in
order to meet increased surrender activity. This resulted in an overall decrease
in investment yields for 1999 compared to 1998.

     The average credited rate pattern is dependent upon the general trend of
market interest rates, frequency of credited rate resets and business mix.

     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 $7.0 million in the third quarter of 1999 from
$5.2 million in the third quarter of 1998. For the nine months ended September
30, variable annuity fees increased to $19.9 million in 1999 from $14.7 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.


                                       23


<PAGE>

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

<TABLE>
<CAPTION>

                                                                               SEPTEMBER 30,
                                                         ----------------------------------------------------------
                                                                    1999                          1998
                                                         ----------------------------------------------------------
                                                                          Percent of                 Percent of
 (DOLLARS IN MILLIONS)                                       Amount         Total        Amount         Total
 -----------------------------------------------------------------------------------------------------------------

<S>                                                         <C>            <C>          <C>          <C>
   Spread products and options (primarily fixed annuity
      deposits)                                               $3,063.7        64%        $2,760.9        67%
   Variable fund options (variable annuity deposits
      invested in mutual funds)                                1,723.1        36          1,340.2        33
                                                         ---------------------------------------------------------
 Total assets under management                               $ 4,786.8*      100%       $ 4,101.1       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 2 and 3 of Notes to Condensed Consolidated
 Financial Statements and "--Recent Developments.")


     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 subsidiaries. Sales by market and type of product for
the three and nine months ended September 30, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>

                                          THREE MONTHS ENDED
                                            SEPTEMBER 30,
                                   ---------------------------------

 (IN MILLIONS)                          1999              1998
 --------------------------------  ----------------  ---------------



 Retail sales:
<S>                                    <C>           <C>
   Spread products                     $  88.4       $       40.3
   Variable products:
     Spread options                       20.3               27.0
     Fund options                         47.7               72.5
                                   ----------------  ---------------
   Total variable products                68.0               99.5
                                   ================  ===============
 Total retail sales                   $  156.4       $      139.8
                                   ================  ===============
</TABLE>


                                       24

<PAGE>


<TABLE>
<CAPTION>

                                                 NINE MONTHS ENDED
                                                   SEPTEMBER 30,
                                          ---------------------------------
 (IN MILLIONS)                                 1999              1998
 ---------------------------------------  ----------------  ---------------

 Retail sales:
<S>                                          <C>            <C>
   Spread products                           $  414.0       $    104.4
   Variable products:
     Spread options                              97.1             63.0
     Fund options                               172.3            237.1
                                          ----------------  ---------------
   Total variable products                      269.4            300.1
                                          ----------------  ---------------
 Total retail sales                          $  683.4       $    404.5
                                          ================  ===============
</TABLE>

     The lowering of the Company's insurance subsidiaries' ratings during the
third quarter of 1999 and the Supervision Order have materially adversely
affected both current and future retail sales growth and persistency of existing
retail business. As a result of the downgrades a number of broker dealers are no
longer accepting business from the Company. Also, effective October 4, 1999,
Fidelity Management and Research Company terminated the various participation
agreements between the Variable Insurance Product Funds and the Company's
insurance subsidiaries. In addition, the Company has exited the institutional
spread and institutional fee businesses. Accordingly, management believes that
the Company's ability to generate earnings has been substantially impaired. (See
Note 2 of Notes to Condensed Consolidated Financial Statements and "-Recent
Developments").

     Total retail sales increased during the nine months and three months ended
September 30, 1999 with an increase of approximately 69% and 12%, respectively,
over the corresponding prior periods. The increase in retail sales occurred
during the first half of the year and early in the third quarter prior to the
lowering of the Company's insurance subsidiaries' ratings during the third
quarter of 1999 and the Supervision Order. The previous growth in the first half
of the year and early third quarter 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, was a key distributor of the Company's products. The
acquisition was intended to expand the Company's in-house retail distribution
capabilities. However, as discussed above, sales of all retail products have
been materially adversely affected by the lowering of the Company's insurance
subsidiaries' ratings during the third quarter of 1999 and the Supervision
Order.

     Net surrenders of retail spread and variable annuity products and options
issued by the Company's insurance subsidiaries were $232.5 million for the third
quarter of 1999, compared to $99.7 million for the third quarter of 1998. For
the nine months, such net surrenders were $427.8 million in 1999, compared to
$283.7 million in 1998. Surrender charge income increased to $5.0 million in the
third quarter of 1999, from $1.3 million in the third quarter of 1998. For the
nine months ended September 30, surrender charge income increased to $8.0
million in 1999 from $4.5 million in 1998. Current and future surrenders of
retail products have been adversely affected due to the lowering of the
Company's insurance subsidiaries' ratings


                                       25
<PAGE>

during the third quarter of 1999 and the Supervision Order. However, the
Supervision Order regarding Integrity suspended the processing of surrender of
policies (except variable life and annuity policies) which has kept the level of
surrenders from being even higher. It is likely that surrender activity will
continue at a high level if the Company is unable to find a suitable buyer
for the Company's insurance subsidiaries.

     Operating expenses were $10.9 million in the third quarter of 1999,
compared to $7.6 million in the third quarter of 1998. For the nine months ended
September 30, operating expenses were $28.9 million in 1999, compared to $21.5
million in 1998. Operating expenses for the first nine months of 1999 included
increased spending to strengthen the in-house investment department, marketing
operations and on technology infrastructure to enhance retail franchise Internet
applications. In addition, the third quarter operating expenses include certain
costs associated with the potential sale of the Company.

     Amortization of deferred policy acquisition costs related to operations was
$7.6 million in the third quarter of 1999, compared to $3.2 million in the third
quarter of 1998. For the nine months ended September 30, such amortization was
$16.8 million in 1999, compared to $9.2 million in 1998. This increase was the
result of growth in the deferred policy acquisition cost asset due to additional
sales of fixed, indexed and variable annuity products and increased amortization
in the third quarter as the result of higher surrenders as discussed previously.
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.

     Approximately $16.0 million of certain intangible assets were written
off during the third quarter of 1999. These intangible assets primarily
include goodwill and certain other costs associated with the SBM Company
acquisition in 1995 and the acquisition of a third party distributor in 1999.

     The Company recorded non-recurring charges of $4.7 million for the nine
months ended September 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 $3.8 million in 1999, from $1.8 million
in 1998. The increase is primarily attributable to higher mortality related
costs in 1999.

     Realized investment gains and losses, which are reported net of related
amortization of deferred policy acquisition costs and value of insurance in
force, were losses of $6.6 million during the third quarter of 1999 and $4.6
million during the third quarter of 1998. For the nine months ended September
30, realized investment losses were $28.4 million in 1999, compared to realized
investment gains of $4.7 million in 1998. The higher level of losses in 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 and
securities sold in the third quarter at a loss in order to increase liquidity
for higher surrenders from the ratings downgrade and Supervision Order.

     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


                                       26

<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 from both continuing and
discontinued operations of $21.3 million for the third quarter of 1999, compared
to income tax expense of $0.2 million for the third quarter of 1998. For the
nine months ended September 30, income tax expense was $41.7 million in 1999,
compared to $9.9 million in 1998. The difference between the 35% statutory tax
rate and the 1999 effective rates for both the three months and nine months
ended September 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 related to
continuing operations and SFAS No. 115 in unrealized losses 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 and other temporary
differences 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 September 30, 1999 totaled $1.9
billion, compared with $1.9 billion at December 31, 1998, representing
approximately 79% and 84% of total cash and investments, respectively.


                                       27

<PAGE>


     The Company's cash and investments as of September 30, 1999 are detailed as
follows:

<TABLE>
<CAPTION>

                                                                     Amortized Cost
                                                               ---------------------------
                                                                             Percent of     Estimated
 (DOLLARS IN MILLIONS)                                            Amount        Total       Fair Value
 --------------------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>        <C>
 Fixed maturities:
   Corporate securities                                            $1,155.5       48.7%      1,018.4
   Mortgage-backed securities:
     Collateralized mortgage obligations:
       Non-agency                                                     426.5      17.9          390.1
       Agency                                                          58.0       2.4           50.7
     Agency pass-throughs                                              17.4       0.7           17.3
   Asset-backed securities                                            136.6       5.7          119.8
   U.S. Treasury securities and obligations
     of U.S. government agencies                                       50.7       2.1           49.6
   Other government securities (primarily foreign)                     39.5       1.7           32.8
                                                               ------------------------------------------
 Total fixed maturities                                             1,884.2      79.2        1,678.7

 Equity securities (i.e., non-redeemable
   preferred stock)                                                    23.7       1.0           21.5
 Mortgage loans on real estate                                         12.4       0.5           12.4
 Policy loans                                                         132.0       5.6          132.0
 Cash and cash equivalents                                            324.5      13.7          324.5
                                                               ------------------------------------------

 Total cash and investments                                        $2,376.8       100.0%     2,169.1
                                                               ==========================================
</TABLE>


                                       28

<PAGE>



     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 $161.9
million (net of $40.2 million of related capitalization of deferred policy
acquisition costs and value of insurance in force and $10.5 million of deferred
income tax benefit which was completely offset by a full valuation allowance
included in the Company's tax provision) at September 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 are attributable to
volatility in the bond market that began during the third quarter of 1998 and
continue currently. Economic contractions in Asia, Latin America and Russia
created a "flight to quality," mainly to 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 market has diminished which further depressed bond prices. Also, during
1999, the overall level of interest rates increased further. Further increases
in interest rates and/or widening of credit spreads will further decrease bond
prices and increase the unrealized losses on available-for-sale securities.

     The change in net unrealized gains and losses on available-for-sale
securities for the nine months ended September 30, 1999 decreased reported
shareholders' equity by $23.5 million as compared to a decrease of $158.6
million for the year ended December 31, 1998. At September 30, 1999 and December
31, 1998, shareholders' equity excluding the effects of SFAS No. 115 was $100.8
million and $348.8 million, respectively.

     The Company's portfolio includes collateralized mortgage obligations
("CMOs"), which are pools of mortgages that are segregated into sections, or
tranches, that 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 September 30, 1999, 77% 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 23% 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.


                                       29

<PAGE>


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 $2.9 million and $11.2 million,
respectively, at September 30, 1999.

     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 September 30, 1999, home equity
loan collateral represented 44% 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 91% and 89%
investment grade or equivalent at September 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 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 an exposure to the Asian and Latin American markets. At September
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 6% of total cash and investments. The Company's Asian
and Latin American non-investment grade securities represented approximately
37% of the Company's total investment in non-investment grade securities. The
Company reduces the risks associated with buying foreign securities by
limiting the exposure to both issuer and country. The Company 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 0.5% of cash
and investments as of September 30, 1999.


                                       30

<PAGE>


     At September 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>         <C>
                 1                 AAA, AA, A                                     $  840.7      44.5%         760.4
                 2                 BBB                                               819.9      43.5          732.1
                 3                 BB                                                114.1       6.1           89.8
                 4                 B                                                 101.6       5.4           88.6
                 5                 CCC, CC, C                                          6.7       0.4            6.4
                 6                 CI, D                                               1.2       0.1            1.4
                                                                                ------------ ------------ ------------
                                                   Total fixed maturities         $1,884.2     100.0%       1,678.7
                                                                                ------------ ------------ ------------
                                                                                ------------ ------------ ------------
</TABLE>


     Assets held in the Company's insurance subsidiaries' guaranteed separate
accounts (on an amortized cost basis) include $820 million and $720 million of
cash and investments at September 30, 1999 and December 31, 1998, respectively,
of which approximately 85% and 91% were fixed maturities. Total guaranteed
separate account cash and investments were 91% investment grade at both
September 30, 1999 and December 31, 1998. 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 Financial Management, Inc.
("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


                                       31

<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, 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 OhioSuperintendent of Insurance 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. On October 30, 1999, the
Supervision Order was automatically extended (see " - Recent Developments").]

LIQUIDITY AND FINANCIAL RESOURCES

HOLDING COMPANY OPERATIONS

     The Company's efforts to consummate a Sale Transaction have not yet been
concluded. In order to preserve and maximize value for policyholders as well
as for the Company's creditors and/or stock holders the Company requested and
was granted regulatory 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. On August 31,
1999, the Supervision Order was amended and on October 30, 1999, the
Supervision Order was automatically extended.

     The Board of Directors of the Company is continuing to explore certain
strategic alternatives, including a Sale Transaction. There can be no
assurance that a Sale Transaction or any other strategic alternative will be
developed or consummated or as to the price or value that might be obtained,
or whether such price would be sufficient to satisfy all known or potential
claims of the Company's creditors and/or stockholders.

     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 Transaction is not consummated, then the Company's ability to


                                       32

<PAGE>

continue as a going concern is in substantial doubt. Without the financial
strength of a buyer, the Company may not have adequate levels of capital to
service its obligations, including the $38 million note 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. Even in the event
of a sale of the Company's insurance subsidiaries, the Company is more likely
to liquidate its other assets rather than seek new business initiatives
without its insurance subsidiaries. Accordingly, the Company is considering
all of the options available to it, including a bankruptcy filing. Depending
upon whether a Sale Transaction occurs or not, and depending upon the amount
of the proceeds of any Sale Transaction, there can be no assurance that the
Company is or will be solvent or will be able to avoid a voluntary or
involuntary Chapter 11 or Chapter 7 proceeding under federal bankruptcy law.

     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 September 30, 1999, the Company had cash and investments at
the holding company level of approximately $30.0 million. The agreement for
the Company's new debt financing in the amount of a $38 million note provides
that the note will mature on November 30, 1999. Maturity of the note may be
accelerated by GenAmerica 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. There can be no assurance that this note
will be further extended.

     To support the operations of its subsidiaries, the Company has 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.

     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. It is unlikely that the Ohio Department of
Insurance will allow Integrity to pay any dividends to the Company for the
foreseeable future.

     No quarterly cash dividend was paid on the Company's common stock or
preferred stock during the third quarter of 1999. The Company will not pay or
declare a dividend on the Company's common stock or preferred stock during
the fourth quarter of 1999.

                                       33

<PAGE>


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 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. Integrity has
continued 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 suspended the processing of surrenders of policies except in cases of
approved hardship. On August 31, 1999, the Supervision Order was amended to
allow Integrity to resume processing surrender requests from its variable life
and annuity policyholders. The Supervision Order is automatically extended for
successive 60-day periods until written notice ending the supervision is given
to Integrity. On October 30, 1999, the Supervision Order was automatically
extended.

     If a Sale Transaction 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 the nine months ended September 30, 1999 and 1998, the Company
met its liquidity needs primarily by cash flows from operating activities and
principal payments and redemptions of investments. At September 30, 1999,
cash and cash equivalents totaled $324.5 million compared to $202.0 million
($525.3 million including cash from discontinued operations) 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 $286.1 million and $191.3 million from
operating activities during the nine months ended September 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 $5.8 billion and $4.6 billion in cash flows
during the nine months ended September 30, 1999 and 1998, respectively, which
were offset by purchases of investments of $1.9 billion and $6.5 billion.


                                       34

<PAGE>

EFFECTS OF INTEREST RATE CHANGES

     The Company's retail spread and its discontinued institutional spread
businesses are subject to several inherent risks arising from movements in
interest rates. 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 a portion of 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.

YEAR 2000

The Company has undertaken a Year 2000 project that includes all of its
subsidiaries. The Company's Year 2000 project is on schedule and is currently
95% complete.

     During the assessment phase of the project, the Company assessed all
production applications, hardware (personal computers and servers), system
software, vendors, facilities and business partners. Where Year 2000 problems
were found, the necessary upgrades and repairs have been


                                       35
<PAGE>


completed. Although the Company is still assessing various logistic concerns
with its facilities, its production systems are now Year 2000 compliant.

     The Company has also conducted certification testing. Certification testing
serves to verify the results of the assessment and repairs. The few problems
that were discovered in this phase have been repaired and re-tested.

     As a precaution, the Company is in the process of developing a contingency
and business resumption plan. 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 due to Year 2000 problems, 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 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) the Company's ability to consummate a Sale Transaction, to continue as a
going concern, to service its obligations or to meet its liquidity needs; (ii)
access to sufficient capital to fund the Company's operations; (iii) changes in
population demographics; (iv) changes in current federal income tax, securities
and insurance laws and regulations; (v) 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; (vi) regulatory constraints on
existing or future products rendering the products unmarketable or unprofitable;
(vii) 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; (viii) the


                                       36

<PAGE>


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; (ix) loss of key personnel; (x) the Company's ability to
manage assets and produce returns providing sufficient spread on invested assets
backing policyholder and other liabilities; (xi) the strength and liquidity of
the securities markets and the interest rate environment; (xii) increase in the
size and improvement in the productivity of the Company's distribution system;
(xiii) access to sufficient capital at favorable rates as needed to operate and
grow the Company's business lines; (xiv) 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; (xv) litigation, with or without merit, claiming
significant resources of the enterprise; (xvi) 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 (xvii) 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.


                                       37

<PAGE>


                                 PART II. OTHER
                                   INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

     Seven shareholder class action lawsuits have been filed in the United
States District Court for the Western District of Kentucky against the Company
and certain of its officers. These lawsuits are as follows: Gottlieb v. ARM
Financial Group, Inc., et al. (Civil Action No. 3:99 CV-539-H), was filed on
August 18, 1999; Kehoe v. ARM Financial Group, Inc., et al. (Civil Action No.
3:99 CV-542-H), was filed on August 19, 1999; Yurkoski v. ARM Financial Group,
Inc. et al. (Civil Action No. 3:99 CV-571-H) was filed on August 30, 1999; Trust
Advisors Equity Plus, LLC v. ARM Financial Group, Inc. et al. (Civil Action No.
3:99 CV-577-H) was filed on September 1, 1999; Galli v. ARM Financial Group,
Inc. et al. (Civil Action No. 3:99 CV-580-S) was filed on September 3, 1999;
Gross and Chaveton v. ARM Financial Group, Inc. et al. (Civil Action No. 3:99
CV-596-S) was filed on September 9, 1999; and Shaheen v. ARM Financial Group,
Inc. et al. (Civil Action No. 3:99 CV-605-H) was filed on September 15, 1999.

     The 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 attorney 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 5.   OTHER INFORMATION

     On August 26, 1999, the New York Stock Exchange suspended trading of the
Company's common stock. Following the suspension, application was made to the
Securities and Exchange Commission to delist the issue. The Exchange's action
was taken due to the Company's unsatisfactory financial condition as well as the
stock's low selling price. The Exchange's appraisal was based on disclosures
included in the Company's 10-Q, filed on August 23, 1999. The Company's common
stock has subsequently begun trading electronically on the NASD Bulletin Board
under the ticker symbol "ARMGA."

     Effective as of November 15, 1999, by mutual agreement between David E.
Ferguson and the Company, Mr. Ferguson's employment with the Company was
terminated. Mr. Ferguson had served as the President-ARM Technology Group since
May 1998 and held other positions within the Company since July 1993. Under the
terms of the agreement, the Company will not provide severance pay to Mr.
Ferguson.


                                       38
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

REPORTS ON FORM 8-K

     A report on form 8-K was filed by the Company on August 18, 1999, to
announce the completion of the transaction whereby General American Life
Insurance Company 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 Life Insurance Company.


                                       39
<PAGE>

  EXHIBITS  (ELECTRONIC FILING ONLY)

10.1      Forbearance Agreement dated as of August 11, 1999, by and among 312
          Certificate Company, Integrity Capital Advisors, Inc., Integrity Life
          Insurance Company, International Securitization Corporation, each of
          the Liquidity Banks whose names appear on the signature pages of the
          Forbearance Agreement, and The First National Bank of Chicago.

10.2      Termination and Sale Agreement dated as of August 27, 1999, by and
          among 312 Certificate Company, Integrity Capital Advisors, Inc.,
          Integrity Life Insurance Company, International Securitization
          Corporation, and The First National Bank of Chicago.

10.3      Termination Agreement between The Chase Manhattan Bank and 212
          Certificate Company.

10.4      Form of Settlement Agreement dated as of September 23, 1999, by and
          among 212 Certificate Company, Integrity Life Insurance Company, Park
          Avenue Receivables Corporation and The Chase Manhattan Bank.

10.5      Promissory Note dated as of September 23, 1999, made by Integrity Life
          Insurance Company in favor of The Chase Manhattan Bank.

10.6      Termination Agreement dated as of October 14, 1999, by and among the
          Corporation, Bayerische Landesbank Girozentrale, New York Branch,
          Lehman Brothers Inc., The Bank of New York, U.S. Bank Trust National
          Association, and BRAVO Trust Series 1997-1.

10.7      Note and Term Loan Agreement Revision Agreement dated as of October
          29, 1999, between GenAmerica Corporation and ARM Financial Group, Inc.


10.8      Revision Agreement dated as of November 15, 1999, between GenAmerica
          Corporation and ARM Financial Group, Inc.

27        Financial Data Schedule.

99.1      Amended Supervision Order dated August 31, 1999, issued by the
          Director of Insurance of the State of Ohio.


                                       40

<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 November 15, 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/ JOHN R. LINDHOLM
                                           -------------------------------------
                                         John R. Lindholm
                                         President-Retail Business Division
                                         (Office of the President)



                                         By:     /s/ JOHN R. MCGEENEY
                                           -------------------------------------
                                         John R. McGeeney
                                         Executive Vice President-General
                                           Counsel
                                         (Office of the President)


                                         By:     /s/ WILLIAM H. PANNING
                                           -------------------------------------
                                         William H. Panning
                                         Executive Vice-President and
                                           Chief Investment Officer
                                         (Office of the President)


                                       41