<PAGE>
                                                                      EXHIBIT 99


FIRST FORTIS LIFE
INSURANCE COMPANY
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001, 2000
AND 1999



<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------




                                                                         PAGE(s)

Report of Independent Accountants                                          1

Financial Statements:

   Balance Sheets                                                          2

   Statements of Operations                                                3

   Statements of Changes in Shareholder's Equity                           4

   Statements of Cash Flows                                               5-6

   Notes to Financial Statements                                         7-21



<PAGE>
                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholder of
First Fortis Life Insurance Company

In our opinion, the accompanying balance sheet and the related statements of
income, of changes in shareholder's equity and of cash flows present fairly, in
all material respects, the financial position of First Fortis Life Insurance
Company, an indirect, wholly-owned subsidiary of Fortis (SA/NV) and Fortis N.V.
(the Company) at December 31, 2001 and 2000, and the results of its operations
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion. The financial statements of the Company as of
December 31, 1999 were audited by other independent accountants whose report
dated February 15, 2000 expressed an unqualified opinion on those statements.



PricewaterhouseCoopers LLP


February 15, 2002
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
BALANCE SHEETS
(in thousands, except share data)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                                      DECEMBER 31,
                                       ASSETS                                                       2001        2000
<S>                                                                                               <C>         <C>
Investments:
   Fixed maturities, at fair value (amortized cost 2001 - $158,417; 2000 - $130,242)              $  161,583  $  129,784
   Preferred stock                                                                                     2,640           -
   Policy loans                                                                                            6           4
   Short-term investments                                                                              6,601       9,450
   Real estate and other investment                                                                      474           -
                                                                                                ------------  -----------

                                                                                                     171,304     139,238

Cash and cash equivalents                                                                              5,598       1,659

Receivables:
   Uncollected premiums, less allowance (2001 and 2000 - $100)                                         3,830       3,417
   Reinsurance recoverable on unpaid and paid losses                                                 107,443      36,761
   Other                                                                                               3,274       1,267
   Intercompany receivables                                                                            1,974           -
                                                                                                ------------  -----------

                                                                                                     116,521      41,445

Accrued investment income                                                                              2,488       2,215
Deferred policy acquisition costs                                                                      3,760       4,127
Property and equipment at cost, less accumulated depreciation (2001 - $1,729;
     2000 - $1,732)                                                                                       60          78
Deferred federal income taxes                                                                          5,953       3,283
Goodwill, less accumulated amortization (2001 and 2000 - $46)                                          1,949         370
Assets held in separate accounts                                                                      66,341      73,582
                                                                                                ------------  -----------

     Total assets                                                                                 $  368,376  $  265,997
                                                                                                ------------  -----------

              POLICY RESERVES AND LIABILITIES AND SHAREHOLDER'S EQUITY

Policy reserves and liabilities:
   Future policy benefit reserves:
     Life insurance                                                                              $    65,123  $   32,443
     Interest sensitive and investment products                                                        5,010       4,916
     Accident and health                                                                              81,578      76,830
                                                                                                ------------  -----------

                                                                                                     151,711     114,189

   Unearned revenues                                                                                  27,048      10,058
   Other policy claims and benefits payable                                                           31,877      14,205
   Income taxes payable                                                                                6,537       1,035
   Other liabilities                                                                                  31,160       9,550
   Liabilities related to separate accounts                                                           66,341      73,582
                                                                                                ------------  -----------

     Total policy reserves and liabilities                                                           314,674     222,619
                                                                                                ------------  -----------

Shareholder's equity:
   Common stock, $20 par value:  authorized, issued and outstanding shares - 100,000                   2,000       2,000
   Additional paid-in capital                                                                         43,006      37,440
   Retained earnings                                                                                  12,047       4,223
   Accumulated other comprehensive income (loss)                                                       2,247       (285)
                                                                                                ------------  -----------

     Total shareholder's equity                                                                       59,300      43,378
                                                                                                ------------  -----------
     Total policy reserves, liabilities and shareholder's equity                                  $  373,974  $  265,997
                                                                                                ============  ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.

                                       2

<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS
(in thousands)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>

                                                                                   YEARS ENDED DECEMBER 31
                                                                              2001           2000            1999

<S>                                                                        <C>            <C>             <C>
Revenues:
    Insurance operations:
      Life insurance premiums                                              $ 21,213       $ 24,399        $ 24,765
      Interest sensitive and investment product policy charges                  377          1,197             950
      Accident and health insurance premiums                                 40,676         39,157          34,498
                                                                           --------       --------        --------

                                                                             62,266         64,753          60,213

    Net investment income                                                    10,006          9,330           8,564
    Net realized losses on investments                                       (1,722)        (1,883)           (123)
    Other income                                                              2,715          1,032             638
                                                                           --------       --------        --------

      Total revenues                                                         73,265         73,232          69,292

Benefits and expenses:
    Benefits to policyholders:
      Life insurance                                                         13,085         18,031          19,100
      Interest sensitive investment products                                    482            440             315
      Accident and health claims                                             28,902         28,657          27,585
                                                                           --------       --------        --------

                                                                             42,469         47,128          47,000

    Amortization of deferred policy acquisition costs                           534            360             240
    Insurance commissions                                                     6,391          5,773           5,114
    General and administrative expenses                                      11,806         13,208          13,840
                                                                           --------       --------        --------

      Total benefits and expenses                                            61,200         66,469          66,194

Income before federal income taxes                                           12,065          6,763           3,098

Federal income taxes                                                          4,241          2,416           1,032
                                                                           --------       --------        --------

Net income                                                                 $  7,824       $  4,347        $  2,066
                                                                           ========       ========        ========
</TABLE>

    The accompanying notes are an integral part of the financial statements.



                                       3

<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
(in thousands)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                      RETAINED        ACCUMULATED
                                                                        ADDITIONAL    EARNINGS           OTHER
                                                            COMMON       PAID-IN    (ACCUMULATED     COMPREHENSIVE
                                                 TOTAL      STOCK        CAPITAL       DEFICIT)      (LOSS) INCOME

<S>                                            <C>         <C>          <C>         <C>              <C>
Balance, December 31, 1998                      $40,026     $ 2,000      $37,440       $(2,190)         $ 2,776

Comprehensive loss:
    Net income                                    2,066           -            -         2,066                -

    Change in unrealized gains (losses)
        on investments, net                      (6,156)          -            -             -           (6,156)
                                                -------

Comprehensive loss                               (4,090)
                                                -------     -------      -------       -------          -------

Balance, December 31, 1999                       35,936       2,000       37,440          (124)          (3,380)

Comprehensive income:
    Net income                                    4,347           -            -         4,347                -

    Change in unrealized gains (losses)
        on investments, net                       3,095           -            -             -            3,095
                                                -------

Comprehensive income                              7,442
                                                -------     -------      -------       -------          -------

Balance, December 31, 2000                       43,378       2,000       37,440         4,223             (285)

    BALAC equity as of 11/30/01                   5,566           -        5,566             -                -

Comprehensive income:
    Net income                                    7,824           -            -         7,824                -

    Change in unrealized gains (losses)
        on investments, net                       2,532           -            -             -            2,532
                                                -------

Comprehensive income                             10,356
                                                -------     -------      -------       -------          -------

Balance, December 31, 2001                      $59,300     $ 2,000      $43,006       $12,047          $ 2,247
                                                =======     =======      =======       =======          =======
</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       4

<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(in thousands)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>


                                                                                   YEARS ENDED DECEMBER 31
                                                                           2001             2000            1999

<S>                                                                      <C>              <C>             <C>
Cash flows from operating activities:
     Net income                                                          $  7,824         $  4,347        $  2,066
     Adjustments to reconcile net income to net cash
         provided by operating activities:
       Depreciation, amortization and accretion                               998              156             330
       Net realized losses (gains) on investments                           1,040            1,535             123
       Write-off on investment                                                917              348               -
       Amortization of gain on reinsured business                          (1,984)            (406)              -
       Policy acquisition costs deferred                                     (870)            (950)         (1,445)
       Amortization of policy acquisition costs                                 -              360             240
       Increase in uncollected premiums,
           accrued investment income and other                                 40             (212)           (837)
       Increase in reinsurance recoverable                                (15,412)          (5,127)         (3,176)
       Loss on disposal of property and equipment                            (177)               -               -
       Provision for deferred taxes                                        (5,462)          (1,415)            930
       Increase in future policy benefit reserves, unearned
           revenues and other policy claims and benefits                    2,382            7,679           8,894
       (Decrease) increase in other liabilities                             7,880           (3,128)          5,693
       (Decrease) increase in income taxes payable                          5,000             (178)           (804)
                                                                         --------         --------        --------

       Net cash provided by operating activities                            2,176            3,009          12,014
                                                                         --------         --------        --------

Cash flows from investing activities:
     Purchases of fixed maturity investments                              (51,827)        (172,388)       (159,025)
     Sales and repayments of fixed maturity investments                    74,042          166,630         158,172
     (Increase) decrease in short-term investments                          4,026           (3,650)         (4,970)
     Cash used for BALAC                                                  (32,115)               -               -
     Cash pursuant to reinsurance agreement                                 6,766            2,397               -
                                                                         --------         --------        --------

       Net cash provided by (used in) investing activities                    892           (7,011)         (5,823)
                                                                         --------         --------        --------

Cash flows from financing activities:
     Activities related to investment products:
       Considerations received                                              1,864            5,640           2,875
       Surrenders and death benefits                                         (317)          (4,855)         (5,941)
       Interest credited to policyholders                                      84              314             277
                                                                         --------         --------        --------

       Net cash provided by (used in) financing activities                  1,631            1,099          (2,789)
                                                                         --------         --------        --------

Increase (decrease) in cash and cash equivalents                            4,699           (2,903)          3,402

Cash and cash equivalents at beginning of year                                899            4,562           1,169
                                                                         --------         --------        --------

Cash and cash equivalents at end of year                                 $  5,598         $  1,659        $  4,571
                                                                         ========         ========        ========
</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       5

<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS
(in thousands)
--------------------------------------------------------------------------------



<TABLE>
<CAPTION>
                                                                                 YEARS ENDED DECEMBER 31
                                                                          2001             2000            1999
<S>                                                                     <C>                <C>             <C>
Supplemental schedule of non-cash investing activities:
     Assets and liabilities transferred in reinsurance
         transactions (Note 7):
       Non-cash assets (ceded) received:
         Other assets                                                     $  (182)          $   (7)         $   -
         Deferred acquisition costs                                        (3,957)            (816)             -
         Separate accounts                                                    143                -              -
                                                                         --------          -------          -----

       Total value of assets (ceded) received                            $ (3,996)         $  (823)         $   -
                                                                         ========          =======          =====

       Non-cash liabilities ceded (assumed):
         Future policy benefit reserves                                  $  6,957          $   404          $   -
         Unearned premium reserves                                              -              505              -
         Other liabilities                                                     25                9              -
                                                                         --------          -------          -----

       Total liabilities ceded (assumed)                                 $  6,982          $   918          $   -
                                                                         ========          =======          =====
</TABLE>


    The accompanying notes are an integral part of the financial statements.



                                       6

<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


1.     NATURE OF OPERATIONS

       NATURE OF OPERATIONS
       First Fortis Life Insurance Company (the Company) is a wholly-owned
       subsidiary of Fortis, Inc. (Fortis), which itself is a wholly-owned
       subsidiary of Fortis (SA/NV) and Fortis N.V. The Company was organized to
       enable the Fortis group of companies to distribute their products to the
       New York State marketplace. The Company's revenues are derived primarily
       from group employee benefits products. Effective January 1, 1996, the
       Company stopped offering its group medical products; however, the Company
       will continue to renew and service existing medical business, which
       represented $91, $421 and $1,859 of 2001, 2000 and 1999 of the accident
       and health premiums, respectively.

       Effective March 1, 2000, the Company ceded long-term care insurance
       business to John Hancock Life Insurance Company on a 100% co-insurance
       basis. (See Note 7 "Reinsurance" for more information on this reinsurance
       transaction.)

       Effective April 1, 2001, the Company ceded, among other blocks of
       business, certain individual life insurance policies and annuity
       contracts to Hartford Life Insurance Company on a 100% co-insurance
       basis. (See Note 7 "Reinsurance" for more information on this reinsurance
       transaction.)

       Effective as of November 30, 2001, the Company completed a statutory
       merger in which Bankers American Life Assurance Company, a New York
       insurance company ("BALAC"), will merge with and into FFLIC (the
       "Merger"). The Merger is being completed as part of an internal
       reorganization being effected by Fortis, Inc. with respect to certain of
       its life and health insurance companies.

       On December 31, 2001, the Company purchased (the "Purchase") the Dental
       Benefits Division of Protective Life Corporation ("Protective"). The
       Purchase includes group dental, group life and group disability insurance
       products ("Insurance Products"). The Company will reinsure these
       Insurance Products on a 100% co-insurance basis and perform
       administration of such Insurance Products. The Company paid $2,500 for
       the business and recorded goodwill of $1,625 in the transaction.


2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

       NEW ACCOUNTING PRONOUNCEMENTS

       In June 2001, the Financial Accounting Standards Board issued statement
       of Financial Accounting Standards (SFAS) 141, Business Combinations, and
       SFAS 142, Goodwill and Other Intangible Assets. SFAS 141 addresses
       financial accounting and reporting for business combinations and requires
       that all business combinations initiated after June 30, 2001 be accounted
       for using the purchase method. The Company applied the provisions of SFAS
       141 for all business combinations subsequent to June 30, 2001. SFAS 142
       eliminates the amortization of goodwill and certain intangible assets
       that are deemed to have indefinite lives and requires such assets to be
       tested for impairment and to be written down to fair value, if necessary.
       The Company is currently assessing its goodwill for impairment and has
       not yet determined whether or to what extent this new statement will
       affect the financial statements.

       Effective January 1, 2000, the Company adopted Statement of Position
       ("SOP") 98-7, Deposit Accounting: Accounting for Insurance and
       Reinsurance Contracts that do not Transfer Insurance Risk. SOP 98-7
       provides guidance on how to account for insurance and reinsurance
       contracts that do not transfer insurance risk. The adoption of SOP 98-7
       did not have a material effect on the Company's results of operations or
       financial position.



                                       7
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------



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

       All fixed maturity investments and all marketable equity securities are
       classified as available-for-sale and carried at fair value. Changes in
       fair values of available-for-sale securities, after related deferred
       income taxes and after adjustment for the changes in pattern of
       amortization of deferred policy acquisition costs are reported directly
       in shareholder's equity as accumulated other comprehensive income and,
       accordingly, have no effect on net income. The unrealized appreciation or
       depreciation is net of deferred policy acquisition cost amortization and
       taxes that would have been required as a charge or credit to income had
       such unrealized amounts been realized.

       Policy loans are reported at the aggregate of the unpaid loan balances
       which do not exceed the cash surrender values of the related policies.
       Short-term investments are carried at cost which approximates fair value.

       Real estate and other investments consist principally of property
       acquired in satisfaction of debt and limited partnerships, respectively.
       Real estate is recorded at cost or carrying value of loans foreclosed
       less allowances for depreciation. The Company provides for depreciation
       on a straight-line basis over the estimated useful lives. Other
       investments are accounted for using the equity method of accounting.

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

       DEFERRED POLICY ACQUISITION COSTS
       The costs of acquiring new business, which vary with and are directly
       related to the production of new business, are deferred to the extent
       recoverable and amortized. For credit life, disability and accident and
       health insurance products, such costs are amortized over the premium
       paying period. For interest sensitive and investment products, such costs
       are amortized in relation to expected future gross profits. Estimation of
       future gross profits requires significant management judgment and is
       reviewed periodically. As excess amounts of deferred costs over future
       premiums or gross profits are identified, such excess amounts are
       expensed.

       PROPERTY AND EQUIPMENT
       Property and equipment are recorded at cost less accumulated
       depreciation. The Company provides for depreciation principally on the
       straight-line method over the estimated useful lives of the related
       property. Depreciation expense was $51, $46 and $202 at December 31,
       2001, 2000 and 1999, respectively.


                                       8
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------

       GOODWILL
       Goodwill represents the excess of the purchase price paid over net assets
       acquired in connection with the purchase of the New York shell of
       Metropolitan Life. The block of business purchased included ordinary
       life, other accident and health, and annuities. Goodwill is amortized on
       a straight line basis over 18 years.

       On December 31,2001, the Company entered into an agreement with
       Protective Life Corporation which provided for the assumption of its
       Dental Benefits Division. The blocks of business purchased included group
       dental, group life and group disability insurance products. The Company
       recorded $1,625 of goodwill which will be amortized over the life of this
       assumed business.

       GUARANTY FUND ASSESSMENTS
       There are a number of insurance companies that are currently under
       regulatory supervision. This may result in future assessments by state
       guaranty fund associations to cover losses to policyholders of insolvent
       or rehabilitated companies. These assessments can be partially recovered
       through a reduction in future premium taxes in some states. The Company
       believes it has adequately provided for the impact of future assessments
       relating to current insolvencies.

       SEPARATE ACCOUNTS
       Revenues and expenses related to the separate account assets and
       liabilities are excluded from the amounts reported in the accompanying
       statements of operations. Assets and liabilities associated with separate
       accounts relate to deposit and annuity considerations for which the
       contract owner, rather than the Company, bears the investment risk.
       Separate account assets are reported at fair value and represent funds
       held for the exclusive benefit of the variable annuity contract owners.
       The Company receives mortality and expense risk fees from the separate
       accounts.

       The Company makes contractual mortality assurances to the variable
       annuity contract owners that the net assets of the separate accounts will
       not be affected by future variations in the actual life expectancy
       experience of the annuitants and beneficiaries from the mortality
       assumptions implicit in the annuity contracts. The Company makes periodic
       fund transfers to, or withdrawals from, the separate account assets for
       such actuarial adjustments for variable annuities that are in the benefit
       payment period. The Company also guarantees that the rates at which
       administrative fees are deducted from contract funds will not exceed
       contractual maximums.

       For variable life insurance, the Company guarantees that the rates at
       which insurance charges and administrative fees are deducted from
       contract funds will not exceed contractual maximums. The Company also
       guarantees that the death benefit will continue payable at the initial
       level regardless of investment performance so long as minimum premium
       payments are made.

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


                                       9
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


       Revenues for interest sensitive and investment products consist of
       charges assessed against policy account balances during the period for
       the cost of insurance, policy administration, and surrender charges.
       Future policy benefit reserves are computed under the retrospective
       deposit method and consist of policy account balances before applicable
       surrender charges. Policy benefits charged to expense during the period
       include amounts paid in excess of policy account balances and interest
       credited to policy account balances. Interest credit rates for universal
       life and investment products ranged from 3.00% to 10.75% in 2001, 4.00%
       to 12.00% in 2000 and 4.00% to 6.75% in 1999.

       Premiums for accident and health insurance products, including medical,
       long and short-term disability and dental insurance products, are
       recognized as revenues ratably over the contract period in proportion to
       the risk insured. Reserves for future disability benefits are based on
       the 1987 Commissioners Group Disability Table. The valuation interest
       rate is the Single Premium Immediate Annuity Valuation rate less 100
       basis points. Claims in the first five years are modified based on the
       Company's actual experience.

       Premiums for credit insurance included in life insurance premiums and
       accident and health insurance premiums are recognized as revenues when
       due over the estimated coverage period.

       CLAIMS AND BENEFITS PAYABLE
       Other policy claims and benefits payable for reported and incurred but
       not reported claims and related claims adjustment expenses are determined
       using case-basis estimates and past experience. The methods of making
       such estimates and establishing the related liabilities are continually
       reviewed and updated. Any adjustments resulting therefrom are reflected
       in income currently.

       INCOME TAXES
       Income taxes have been provided using the liability method. Deferred tax
       assets and liabilities are determined based on the temporary differences
       between the financial reporting and the tax bases and are measured using
       the enacted tax rates.

       COMPREHENSIVE INCOME
       Comprehensive income is comprised of net income and other comprehensive
       income which includes unrealized gains and losses adjusted for the impact
       of gains and losses realized during the current year on securities
       classified as available for sale, net of the effect on deferred policy
       acquisition costs, and taxes.

       STATEMENTS OF CASH FLOWS
       The Company considers investments with a maturity at the date of their
       acquisition of three months or less to be cash equivalents. These
       securities are carried principally at amortized cost which approximates
       fair value

       RECLASSIFICATIONS
       Certain amounts in the 2000 and 1999 financial statements have been
       reclassified to conform to the 2001 presentation.

                                       10
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


3.     INVESTMENTS

       AVAILABLE-FOR-SALE SECURITIES
       The following is a summary of the available-for-sale securities:

<TABLE>
<CAPTION>
                                                                        GROSS           GROSS
                                                      AMORTIZED         UNREALIZED     UNREALIZED        FAIR
                                                        COST            GAINS           LOSSES          VALUE
<S>                                                      <C>              <C>             <C>             <C>
       At December 31, 2001:
           Governments                                  $  16,600        $   397         $   201         $  16,796
           Public utilities                                11,710            336             302            11,744
           Industrial and miscellaneous                   130,107          4,111           1,175           133,043
                                                    --------------   ------------     -----------   ---------------

       Total                                            $ 158,417        $ 4,844         $ 1,678         $ 161,583
                                                    --------------   ------------     -----------   ---------------

       At December 31, 2000:
           Governments                                  $  19,185        $   805         $    46         $  19,944
           Public utilities                                15,505            215             387            15,333
           Industrial and miscellaneous                    95,552          1,775           2,820            94,507
                                                    --------------   ------------     -----------   ---------------

       Total                                            $ 130,242        $ 2,795         $ 3,253         $ 129,784
                                                    ==============   ============     ===========   ===============
</TABLE>


       The amortized cost and fair value of fixed maturity securities at
December 31, 2001, by contractual maturity, are shown below:


<TABLE>
<CAPTION>
                                                                                 AMORTIZED            FAIR
                                                                                   COST              VALUE

<S>                                                                               <C>              <C>
        Due in one year or less                                                  $   2,794        $   2,862
        Due after one year through five years                                       41,712           43,368
        Due after five years through ten years                                      53,364           53,883
        Due after ten years                                                         60,547           61,470
                                                                             --------------  ---------------

Total                                                                            $ 158,417        $ 161,583
                                                                             ==============  ===============
</TABLE>



       Expected maturities will differ from contractual maturities because
       borrowers may have the right to call or prepay obligations with or
       without call or prepayment penalties.

       INVESTMENTS ON DEPOSIT
       The Company had fixed maturities carried at $963 and $505 at December 31,
       2001 and 2000, respectively, on deposit with various governmental
       authorities as required by law.


                                       11
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


       NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS
       Major categories of net investment income for each year were as follows:

<TABLE>
<CAPTION>
                                           2001          2000          1999

<S>                                      <C>           <C>           <C>
Net investment income:
    Fixed maturities                    $  8,908       $ 8,956       $ 8,375
    Short-term investments                 1,269           494           326
                                        --------      --------      --------

                                          10,177         9,450         8,701

Expenses                                    (171)         (120)         (137)
                                        --------       -------       -------

Net investment income                   $ 10,006       $ 9,330       $ 8,564
                                        ========       =======       =======
</TABLE>



       All net realized gains (losses) on investments resulted from sales of
fixed maturities.

       Proceeds from sales of investments were $229,713, $165,630 and $157,672
       in 2001, 2000 and 1999, respectively. Gross gains of $1,513, $448 and
       $738 and gross losses of $2,981, $2,331 and $861 were realized on the
       sales in 2001, 2000 and 1999, respectively.


                                       12
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------



       NET UNREALIZED GAINS (LOSSES)
       The adjusted net unrealized gains (losses) on investments recorded in
       accumulated other comprehensive income for the year ended December 31,
       were as follows:

<TABLE>
<CAPTION>
                                                        BEFORE-      TAX
                                                         TAX       BENEFIT      NET-OF-TAX
                                                        AMOUNT    (EXPENSE)       AMOUNT

<S>                                                     <C>        <C>          <C>
December 31, 2001:
    Unrealized gains (losses) on investments:
      Unrealized gains (losses) on available-for-sale
           investments                                  $ 5,611    $(1,959)      $ 3,652
      Reclassification adjustment for gains (losses)
           realized in net income                        (1,722)       602        (1,120)
                                                        -------    -------       -------

Other comprehensive income                              $ 3,889    $(1,357)      $ 2,532
                                                        =======    =======       =======

December 31, 2000:
    Unrealized gains (losses) on investments:
      Unrealized gains (losses) on available-for-sale
           investments                                  $ 6,644    $(2,325)      $ 4,319
      Reclassification adjustment for gains (losses)
           realized in net income                        (1,883)       659        (1,224)
                                                        -------    -------       -------

Other comprehensive income                              $ 4,761    $(1,666)      $ 3,095
                                                        =======    =======       =======

December 31, 1999:
    Unrealized gains (losses) on investments:
      Unrealized gains (losses) on available-for-sale
           investments                                  $(9,348)   $ 3,272       $(6,076)
      Reclassification adjustment for gains (losses)
           realized in net income                          (123)        43           (80)
                                                        -------    -------       -------

Other comprehensive loss                                $(9,471)   $ 3,315       $(6,156)
                                                        =======    =======       =======
</TABLE>


4.     LEASES

       The Company leases office space under operating lease arrangements that
       have various renewal options and are subject to escalation clauses for
       real estate taxes and operating expenses. Rent expense was $698, $791 and
       $915 in 2001, 2000 and 1999, respectively. Future minimum payments
       required under operating lease arrangements that have initial or
       noncancelable terms in excess of one year or more are: 2002 - $624, 2003
       - $597, 2004 - $601, 2005 - $604, 2006 - $521 and thereafter $696.


                                       13
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


5.     ACCIDENT AND HEALTH RESERVES

       Activity for the liability for unpaid accident and health claims is
       summarized as follows:

<TABLE>
<CAPTION>
                                                                   YEARS ENDED DECEMBER 31
                                                             2001           2000            1999
<S>                                                        <C>             <C>            <C>
Balance as of January 1, net of reinsurance
      recoverables:                                        $ 65,615        $ 63,788       $ 62,540

    Add:  Incurred losses related to:
      Current year                                           35,983          28,676         18,907
      Prior years                                            (6,950)           (928)         8,678
                                                           --------        --------       --------

Total incurred losses                                        29,033          27,748         27,585

    Deduct:  Paid losses related to:
      Current year                                           12,034          16,321         14,717
      Prior year                                             10,083           9,600         11,620
                                                           --------        --------       --------

Total paid losses                                            22,117          25,921         26,337
                                                           --------        --------       --------

Balance as of December 31, net of reinsurance
      recoverables                                         $ 72,531        $ 65,615       $ 63,788
                                                           ========        ========       ========
</TABLE>



       The table above differs from the amounts reported on the balance sheet in
       the following respects: (1) the table above is presented net of ceded
       reinsurance and the accident and health reserves reported on the balance
       sheet are gross of ceded reinsurance; and (2) the table above includes
       accident and health benefits payable which are included with other policy
       claims and benefits payable reported on the balance sheet.

       The 2001, 2000 and 1999 claims incurred related to prior years is
       principally additional payments and increases to the discounted accident
       and health reserves based on actual experience of claims liabilities
       through the current year.

       The liability for unpaid accident and health claims includes $55,566 and
       $57,704 of total disability income reserves as of December 31, 2001 and
       2000, respectively, which were discounted for anticipated interest
       earnings assuming a 6.0% interest rate.


                                       14
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


6.     FEDERAL INCOME TAXES

       As of May 1, 1997, the Company reports its taxable income in a
       consolidated federal income tax return along with other affiliated
       subsidiaries of Fortis. Income tax expense or credits are allocated among
       the affiliated subsidiaries by applying corporate income tax rates to
       taxable income or loss determined on a separate return basis according to
       a Tax Allocation Agreement.

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

       The significant components of the Company's deferred tax liabilities and
       assets as of December 31, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                 DECEMBER 31
                                                             2001          2000

<S>                                                        <C>            <C>

       Deferred tax assets:                                $     -       $   809
           Reserves                                              -           645
           Separate account assets/liabilities                   -         1,772
           Unrealized losses                                 1,441             -
           Accrued expenses                                  4,373             -
           Deferred gains on reinsurance                     1,020             -
           Unearned ceding fees                              3,144           442
                                                           -------       -------
           Other
                                                             9,978         3,668
       Total deferred tax assets

       Deferred tax liabilities:                               205           238
           Deferred policy acquisition costs                 1,168             -
           Reserves                                          1,045             -
           Investments                                       1,607           147
                                                           -------       -------
           Other
                                                             4,025           385
                                                           -------       -------
       Total gross deferred tax liabilities
                                                           $ 5,953       $ 3,283
                                                           =======       =======
       Net deferred tax asset
</TABLE>


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



                                       15
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------



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

<TABLE>
<CAPTION>
                                                                 2001       2000      1999

<S>                                                            <C>        <C>       <C>
       Current                                                 $ 8,917    $ 3,831   $   102
       Deferred                                                 (4,676)    (1,415)      930
                                                               -------    -------   -------

                                                               $ 4,241    $ 2,416   $ 1,032
                                                               =======    =======   =======
</TABLE>

       Federal income tax payments and refunds resulted in net payments of
       $4,703 and $4,011 in 2001 and 2000, respectively, and net refunds of $906
       in 1999.

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

<TABLE>
<CAPTION>
                                                                 2001      2000      1999

<S>                                                             <C>       <C>       <C>
       Statutory income tax rate                                35.0 %    35.0 %    35.0 %
       Other, including provision for prior year adjustments     0.2       0.7      (1.7)
                                                                ------    ------    ------

                                                                35.2 %    35.7 %    33.3 %
                                                                ======    ======    ======
</TABLE>



       At December 31, 2000, the Company has fully utilized all net operating
       loss, capital loss, and alternative minimum tax credit carryforwards.


7.     REINSURANCE

       In the second quarter of 1996, the Company received approval from the New
       York State Insurance Department for a reinsurance agreement with the
       Fortis Benefits Insurance Company (Fortis Benefits), an affiliate. The
       agreement, which became effective as of January 1, 1996, decreased the
       Company's long-term disability reinsurance retention from a $10 net
       monthly benefit to a $2 net monthly benefit for claims incurred on and
       after January 1, 1996. The Company has ceded $6,622, $6,884 and $6,580 of
       premium and $17,480, $14,366 and $11,047 of reserves in 2001, 2000 and
       1999, respectively, to Fortis Benefits. In the future, the agreement is
       expected to reduce the variability of financial results for this product
       line.

       Future policy benefits and other policy claims and benefits payable are
       reported gross of reinsurance. The reinsured portion of future policy
       benefits and other policy claims and benefits payable are $107,443 and
       $36,373 in 2001 and 2000, respectively.

       The maximum amounts that the Company retains on any one life are $500 for
       group life; $250 for group accidental death; $2 net monthly benefit for
       long-term disability; from 10% to 100% of possible benefits payable under
       credit life and credit disability insurance; and none of a closed block
       of individual life business. Amounts in excess of these limits are
       reinsured with various insurance companies on a yearly renewable term,
       coinsurance or other basis.


                                       16
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


       In the fourth quarter of 2001, the Company entered into a reinsurance
       agreement with Protective Life Corporation (Protective). The agreement,
       which became effective December 31, 2001, provided for the assumption of
       Protective's Dental Benefits Division on a 100% co-insurance basis. The
       Company assumed approximately $220 of reserves, paid cash of
       approximately $2,500, and recorded $1,625 of goodwill as of December 31,
       2001.

       Ceded reinsurance premiums for the year ended December 31 were as
       follows:

<TABLE>
<CAPTION>
                                                                    2001           2000            1999

<S>                                                                 <C>              <C>            <C>
Life insurance                                                      $ 40,746         $ 5,399        $ 5,001
Accident and health insurance                                         41,747          15,713         11,186
                                                                -------------  --------------  -------------

                                                                    $ 82,493        $ 21,112       $ 16,187
                                                                =============  ==============  =============
</TABLE>

       Recoveries under reinsurance contracts for the year ended December 31
       were as follows:



<TABLE>
<CAPTION>
                                                                    2001           2000            1999

<S>                                                                 <C>              <C>            <C>
Life insurance                                                      $ 14,344         $ 1,791        $ 2,571
Accident and health insurance                                         15,062           5,280          5,522
                                                                -------------  --------------  -------------

                                                                    $ 29,406         $ 7,071        $ 8,093
                                                                =============  ==============  =============
</TABLE>


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

       In the first quarter of 2000, the Company entered into a reinsurance
       agreement with John Hancock Life Insurance Company (John Hancock) for the
       sale of the Long-Term Care (LTC) line of business. The sale of the LTC
       line of business was effective March 1, 2000. The Company recorded a gain
       on this transaction of $2,492. The gain has been deferred and is being
       amortized as the level of direct inforce LTC policies decreases over
       future years, not to exceed 30 years. The amount of gain amortized was
       $338 and $406 in 2001 and 2000, respectively. The Company ceded $8,013
       and $3,330 of premiums and $5,136 and $1,577 of reserves to John Hancock
       in 2001 and 2000, respectively.

       In the second quarter of 2001, the Company entered into a reinsurance
       agreement with Hartford Life Insurance Company (Hartford) for the sale of
       its Fortis Financial Group division (the Division). The Division
       includes, among other blocks of business, certain individual life
       insurance policies and annuity contracts (collectively, the Insurance
       Contracts) written by The Company. Certain of the Insurance Contracts
       permit investment in, among other investment options, various series of
       the Fortis Series Fund.


                                       17
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


       To effect the Sale as it relates to the Company, The Hartford reinsured
       the Insurance Contracts on a 100% co-insurance basis (or 100% modified
       co-insurance basis for some of the block) and agreed to administer the
       Insurance Contracts going forward. The Company received, in connection
       with the Sale, aggregate cash consideration of approximately $15,000 from
       The Hartford. The reinsurance transaction resulted in a gain of $10,457
       which was deferred and will be amortized into income at the rate that
       earnings from the business sold would have been expected to emerge. The
       amount of gain amortized in 2001 was $1,646.


8.     DIVIDEND RESTRICTIONS

       Per section 4207 of New York Insurance Laws, dividends may be paid by
       domestic stock life insurance companies in the following manner: 100% of
       the net gain from operations excluding realized capital gains or 10% of
       policyholders surplus, whichever is less.


9.     REGULATORY ACCOUNTING REQUIREMENTS

       The Company prepares its statutory-basis financial statements in
       accordance with accounting practices prescribed or permitted by the
       Department of Insurance of the State of New York. Prescribed statutory
       accounting practices include a variety of publications of the National
       Association of Insurance Commissioners (NAIC), as well as state laws,
       regulations and general administrative rules. Permitted statutory
       accounting practices encompass all accounting practices that are not
       prescribed; such practices may differ from company to company within a
       state, and may change in the future. The Company does not employ any
       significant permitted practices.

       In 1998, the NAIC adopted codified statutory accounting practices
       (Codification) effective January 1, 2001. Codification will likely
       change, to some extent, prescribed statutory accounting practices and may
       result in changes to the accounting practices that the Company uses to
       prepare its statutory-basis financial statements. Codification requires
       adoption by the various states before it becomes the prescribed statutory
       basis of accounting for insurance companies domesticated within those
       states.

       The New York Insurance Department recently adopted the Codification
       guidance (Regulation 172), effective January 1, 2001, but did not adopt
       several key provisions of the guidance, including deferred income taxes
       and the establishment of goodwill as an asset.

       The cumulative effect of all changes resulting from the Codification
       guidance will be recorded as a direct adjustment to statutory surplus on
       January 1, 2001. The effect of the adoption is expected to increase
       statutory surplus by a material amount.

       Insurance enterprises are required by state insurance departments to
       adhere to minimum risk-based capital (RBC) requirements developed by the
       NAIC. The Company exceeds the minimum RBC requirements.


                                       18
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


       Reconciliations of net income and shareholder's equity on the basis of
       statutory accounting to the related amounts presented in the accompanying
       statements were as follows:

<TABLE>
<CAPTION>
                                                            NET INCOME                SHAREHOLDER'S EQUITY
                                              ---------------------------------      ----------------------
                                              2001         2000         1999         2001          2000
                                                         RESTATED     RESTATED                   RESTATED

<S>                                           <C>          <C>          <C>          <C>           <C>
Based on statutory accounting practices       $12,478      $10,163      $ 6,348      $ 55,786      $ 67,504
Deferred policy acquisition costs                (361)         598        1,356         3,760         4,127
Deferred and uncollected premiums             (14,724)     (26,606)     (28,226)          100          (786)
Policy reserves                                 4,360       12,123       13,303         2,563        15,136
Investment valuation difference                     -            -            -         3,185       (49,343)
Commissions                                       308        6,112        7,248          (125)        3,192
Deferred gain on LTC sale                         338          406            -        (1,748)       (2,086)
Deferred gain on FFG sale                       1,646            -            -       (10,457)            -
Unearned ceding fee                                 -            -            -        (2,914)            -
Amounts payable reinsurance ceded                   -            -            -           943             -
Funds held under reinsurance treaty                 -            -            -             -             -
      unauthorized reinsurer                        -            -            -            89             -
Realized (losses) gains on investments         (2,963)      (4,591)      (2,771)            -             -
Amortization of goodwill                          (46)         (46)         (46)        1,949           370
Income taxes                                    5,606        3,598        1,304         4,375         3,633
Pension                                           249          (82)         (84)         (238)         (487)
Amortization of IMR                              (142)        (306)        (393)            -             -
Reinsurance in unauthorized companies               -            -            -            43           504
Interest maintenance reserve                        -            -            -           637           735
Asset valuation reserve                             -            -            -           540         1,175
Property and equipment                              -            -            -            23             9
Agents balances                                     -            -            -           694          (591)
Other                                           1,075        2,978        4,027            95           286
                                              -------      -------      -------      --------      --------

Based on generally accepted
      accounting principles                   $ 7,824      $ 4,347      $ 2,066      $ 59,300      $ 43,378
                                              =======      =======      =======      ========      ========
</TABLE>


10.    TRANSACTIONS WITH AFFILIATED COMPANIES

       The Company received various services from Fortis and its affiliates.
       These services include assistance in benefit plan administration,
       corporate insurance, accounting, tax, auditing, investment, information
       systems, actuarial and other administrative functions. The fees paid for
       these services for years ended December 31, 2001, 2000 and 1999 were
       $1,761, $2,736 and $1,541, respectively.

       Administrative expenses allocated for the Company may be greater or less
       than the expenses that would be incurred if the Company were operating on
       a separate company basis.


                                       19
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------


11.    FAIR VALUE DISCLOSURES

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

       For short-term investments, the carrying amount is a reasonable estimate
       of fair value. The carrying amount of policy loans reported in the
       balance sheet approximates fair value. The fair values for the Company's
       policy reserves under the investment products are determined using cash
       surrender value.

       Separate account assets and liabilities are reported at their estimated
       fair value in the Balance Sheet.

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

<TABLE>
<CAPTION>

                                                  DECEMBER 31, 2001                 DECEMBER 31, 2000
                                               -------------------------         --------------------------
                                                CARRYING          FAIR           CARRYING           FAIR
                                                 AMOUNT           VALUE           AMOUNT           VALUE

<S>                                             <C>             <C>              <C>              <C>
Assets:
    Investments:
      Securities available-for-sale:
        Fixed maturities                        $ 161,583       $ 161,583        $ 129,784        $ 129,784
    Short-term investments                          6,601           6,601            9,450            9,450
    Cash                                            5,598           5,598            1,659            1,659
    Policy loans                                        6               6                4                4
    Assets held in separate accounts               66,341          66,341           73,582           73,582

Liabilities:
    Individual and group annuities
        (subject to discretionary
        withdrawal)                                 4,706           4,260            6,593            6,418
    Liabilities related to separate
        accounts                                   66,341          66,341           73,582           73,582
</TABLE>



                                       20
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
(in thousands)
--------------------------------------------------------------------------------



12.    RETIREMENT AND OTHER EMPLOYEE BENEFITS

       The Company is an indirect wholly-owned subsidiary of Fortis, which
       sponsors a defined benefit pension plan covering employees and certain
       agents who meet eligibility requirements as to age and length of service.
       The benefits are based on years of service and career compensation. As a
       matter of policy, pension costs are funded as they accrue and vested
       benefits are fully funded. Fortis' funding policy is to contribute
       annually the maximum amount that can be deducted for federal income tax
       purposes, and to charge each subsidiary an allocable amount based on its
       employee census. Pension cost allocated to the Company amounted to $249,
       $82 and $20 for 2001, 2000 and 1999, respectively.

       The Company has a contributory profit sharing plan, sponsored by Fortis,
       covering employees and certain agents who meet eligibility requirements
       as to age and length of service. Benefits are payable to participants on
       retirement or disability and to the beneficiaries of participants in the
       event of death. For employees hired on or before December 31, 2000, the
       first 3% of an employee's contribution is matched 200% by the Company.
       The second 2% is matched 50% by the Company. For employees hired after
       December 31, 2000, the first 3% of an employee's contribution is matched
       100% by the Company. The second 2% is matched 50% by the Company. The
       amount expensed was approximately $107, $168 and $133 for 2001, 2000 and
       1999, respectively.

       In addition to retirement benefits, the Company participates in other
       health care and life insurance benefit plans (postretirement benefits)
       for retired employees, sponsored by Fortis. Health care benefits, either
       through a Fortis-sponsored retiree plan for retirees under age 65 or
       through a cost offset for individually purchased Medigap policies for
       retirees over age 65, are available to employees who retire on or after
       January 1, 1993, at age 55 or older, with 10 years or more service. Life
       insurance, on a retiree pay all basis, is available to those who retire
       on or after January 1, 1993.


13.    COMMITMENTS AND CONTINGENCIES

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



                                       21