<PAGE>
                                   EXHIBIT 99
<PAGE>
 
FIRST FORTIS LIFE INSURANCE COMPANY
 
MAILING             STREET ADDRESS:                PHONE: 1-800-745-8248
ADDRESS:            220 SALINA MEADOWS PARKWAY
P.O. BOX 3249       SUITE 255
SYRACUSE            SYRACUSE
NEW YORK 13220      NEW YORK 13220
 
This  Prospectus describes  flexible premium  deferred combination  variable and
fixed annuity contracts  (a "Contract")  issued by First  Fortis Life  Insurance
Company  ("First  Fortis"). The  minimum initial  purchase payment  is generally
$5,000 and is $1,000 for each subsequent purchase payment.
 
A Contract allows you to accumulate funds on a tax-deferred basis. You may elect
a guaranteed interest accumulation option through First Fortis' Fixed Account or
a variable return accumulation option through Separate Account A (the  "Variable
Account")  of First  Fortis, or  a combination of  these two  options. Under the
variable rate  accumulation option,  you can  choose among  one or  more of  the
following investment portfolios of Fortis Series Fund, Inc. (the "Series Fund"):
Money  Market  Series,  U.S. Government  Securities  Series,  Diversified Income
Series, Global Bond Series, High  Yield Series, Asset Allocation Series,  Global
Asset  Allocation Series,  Value Series, Growth  & Income Series,  S&P 500 Index
Series, Blue  Chip Stock  Series,  Growth Stock  Series, Global  Growth  Series,
International  Stock  Series  and  Aggressive  Growth  Series.  The accompanying
Prospectus for Fortis Series Fund describes the investment objectives,  policies
and  risks of each of the Portfolios. Under the guaranteed interest accumulation
option, you can choose among ten different guarantee periods, each of which  has
its own interest rate.
 
The  Contract provides several different types of retirement and death benefits,
including fixed and variable annuity income options. Within limits, you may make
partial surrenders of the Contract Value  or may totally surrender the  Contract
for its Cash Surrender Value.
 
You  have the right to examine a Contract for ten days from the time you receive
the Contract and return it for a refund of the full Contract Value.
 
This Prospectus gives prospective investors information about the Contracts that
they should know  before investing.  This Prospectus  must be  accompanied by  a
current  Prospectus of Fortis Series Fund, Inc. Both Prospectuses should be read
carefully and kept for future reference.
 
A Statement of Additional Information, dated May 1, 1996, about certain  aspects
of  the Contracts has been filed with the Securities and Exchange Commission and
is available without charge, from First  Fortis at the address and phone  number
printed above. The Table of Contents for the Statement of Additional Information
appears on page 22 of this Prospectus.
 
THESE  CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK,
CREDIT UNION,  BROKER-DEALER  OR  OTHER  FINANCIAL  INSTITUTION.  THEY  ARE  NOT
FEDERALLY  INSURED  BY THE  FEDERAL DEPOSIT  INSURANCE CORPORATION,  THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; AND INVOLVE INVESTMENT RISKS, INCLUDING  THE
POSSIBLE LOSS OF PRINCIPAL.
 
THESE  SECURITIES HAVE  NOT BEEN APPROVED  OR DISAPPROVED BY  THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
 
FIRST
FORTIS
MASTERS
VARIABLE
ANNUITY
Flexible
Premium Deferred
Combination Variable and
Fixed Annuity Contracts
 
PROSPECTUS DATED
May 1, 1996
 
FORTIS LOGO
 
97104 (Ed. 5/96)


<PAGE>
TAX IMPLICATIONS
 
The  tax implications for Contract  Owners or any other  persons who may receive
payments under a Contract, and those of any related employee benefit plan can be
quite important. A brief discussion of some  of these is set out under  "Federal
Tax Matters" in this Prospectus and "Taxation Under Certain Retirement Plans" in
the   Statement  of   Additional  Information,   but  such   discussion  is  not
comprehensive. Therefore,  you  should  consider  these  matters  carefully  and
consult  a qualified tax  adviser before making purchase  payments or taking any
other action in connection with a Contract or any related employee benefit plan.
Failure to do so  could result in serious  adverse tax consequences which  might
otherwise have been avoided.
 
QUESTIONS AND OTHER COMMUNICATIONS
 
Any  question about procedures of the Contract  should be directed to your sales
representative, or First Fortis' Home Office: P.O. Box 3249, Syracuse, NY 13220;
1-800-745-8248. Purchase  payments  and Written  Requests  should be  mailed  or
delivered to the same Home Office address. All communications should include the
Contract  number, the Contract  Owner's name and,  if different, the Annuitant's
name. The number for telephone transfers is 1-800-745-8248.
 
Any purchase  payment  or  other communication,  except  a  10-day  cancellation
notice,  is deemed received at  First Fortis' Home Office  on the actual date of
receipt there in  proper form  unless received (1)  after the  close of  regular
trading on The New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.
 
FINANCIAL AND PERFORMANCE INFORMATION
 
This Prospectus contains no Accumulation Unit Information for subaccounts of the
Separate  Account because the Separate Account has not yet commenced operations,
has no  assets  or liabilities  and  has received  no  income nor  incurred  any
expenses as of the date of this Prospectus.
 
For the same reason, no audited financial statements of the Variable Account are
included in the Statement of Additional Information.
 
Advertising and other sales materials may include yield and total return figures
for  the  Subaccounts  of  the  Variable Account.  These  figures  are  based on
historical results and are not intended to indicate future performance.  "Yield"
is the income generated by an investment in the Subaccount over a period of time
specified in the advertisement. This rate of return is assumed to be earned over
a  full year and is  shown as a percentage of  the investment. "Total return" is
the total change in value  of an investment in the  Subaccount over a period  of
time specified in the advertisement. The rate of return shown would produce that
change in value over the specified period, if compounded annually. Yield figures
do  not reflect the surrender  charge and yield and  total return figures do not
reflect premium tax charges. This makes the performance shown more favorable.
 
Financial information concerning  First Fortis  is included  in this  Prospectus
under  "Further  Information About  First  Fortis" and  "First  Fortis Financial
Statements."
 
FIRST FORTIS LIFE INSURANCE COMPANY
 
First Fortis Life Insurance Company, the issuer of the Contracts, was founded in
1971. At the end of 1995, First  Fortis had approximately $6.5 billion of  total
life insurance in force. First Fortis is a New York corporation and is qualified
to  sell life  insurance and annuity  contracts in  New York. First  Fortis is a
wholly-owned subsidiary of Fortis AMEV.
 
First Fortis is affiliated  with the Fortis Financial  Group, a joint effort  by
Fortis  Benefits  Insurance Company,  Fortis  Advisers, Inc.,  Fortis Investors,
Inc., and  Time  Insurance  Company, offering  financial  products  through  the
management,  marketing and servicing of  mutual funds, annuities, life insurance
and disability income products.
 
Fortis  AMEV  is  a  diversified  multi-national  insurance,  real  estate,  and
financial  services group headquartered  in Utrecht, The  Netherlands, where its
insurance operations began in 1847.
 
All  of  the  guarantees  and  commitments  under  the  Contracts  are   general
obligations  of First Fortis, regardless of  whether the Contract Value has been
allocated to the Separate Account or to the Fixed Account. None of First Fortis'
affiliated companies has any legal obligation to back First Fortis'  obligations
under the Contracts.
 
THE VARIABLE ACCOUNT
 
The  Variable Account, which is a segregated investment account of First Fortis,
was established as Variable Account A by First Fortis pursuant to the  insurance
laws  of New  York as of  October 1, 1993.  Although the Variable  Account is an
integral part  of First  Fortis, the  Variable Account  is registered  with  the
Securities  and  Exchange  Commission  as  a  unit  investment  trust  under the
Investment Company  Act of  1940. Assets  in the  Variable Account  representing
reserves  and liabilities under  Contracts and other  variable annuity contracts
issued by First Fortis  will not be chargeable  with liabilities arising out  of
any other business of First Fortis.
 
There  are currently fifteen Subaccounts in  the Variable Account. The assets in
each Subaccount are  invested exclusively  in a  distinct class  (or series)  of
stock  issued by  Series Fund,  each of  which represents  a separate investment
Portfolio within Series Fund. Income and  both realized and unrealized gains  or
losses  from the assets of each Subaccount  of the Variable Account are credited
to or charged against that Subaccount without regard to income, gains or  losses
from  any other Subaccount of  the Variable Account or  arising out of any other
business we may  conduct. New  Subaccounts may be  added as  new Portfolios  are
added  to Series Fund and made available. Correspondingly, if any Portfolios are
eliminated from Series  Fund, Subaccounts  may be eliminated  from the  Variable
Account.
 
SERIES FUND
 
Series  Fund is  a "series"  type of  mutual fund  which is  registered with the
Securities and Exchange  Commission under  the Investment Company  Act of  1940.
Series  Fund has served as the investment  medium for the Variable Account since
the Variable Account commenced operations and has also served as the  investment
media of other variable accounts of an affiliated company since 1987.
 
First  Fortis purchases and redeems Series Fund' shares for the Variable Account
at their  net asset  value without  the imposition  of any  sales or  redemption
charges.  Such  shares  represent interests  in  the Portfolios  of  Series Fund
available for investment by the Variable Account. Each Portfolio corresponds  to
one of the Subaccounts of the Variable Account. The assets of each Portfolio are
separate  from the others  and each Portfolio operates  as a separate investment
portfolio whose performance has no effect  on the investment performance of  any
other Portfolio.
 
                                       7


<PAGE>
WITHHOLDING
 
Annuity  payments  and other  amounts received  under  Contracts are  subject to
income tax withholding unless the recipient  elects not to have taxes  withheld.
The  amounts withheld will vary among recipients  depending on the tax status of
the individual and the type of payments from which taxes are withheld.
 
Notwithstanding the  recipient's  election,  withholding may  be  required  with
respect  to certain payments to be delivered  outside the United States and with
respect to  certain distributions  from certain  types of  qualified  retirement
plans,  unless the proceeds are transferred  directly from the qualified plan to
another qualified retirement plan. Moreover, special "backup withholding"  rules
may  require First Fortis to disregard the recipient's election if the recipient
fails to supply  First Fortis  with a  "TIN" or  taxpayer identification  number
(social  security number  for individuals), or  if the  Internal Revenue Service
notifies First Fortis that the TIN provided by the recipient is incorrect.
 
PORTFOLIO DIVERSIFICATION
 
The United  States Treasury  Department has  adopted regulations  under  Section
817(h)  of the Code  which set standards of  diversification for the investments
underlying the Contracts, in order for the Contracts to be treated as annuities.
First Fortis believes  that these diversification  standards will be  satisfied.
Failure  to  do so  would result  in  immediate taxation  to Contract  Owners or
persons receiving annuity payments of all returns credited to Contracts,  except
in  the case  of certain Qualified  Contracts. Also, current  regulations do not
provide guidance as  to any circumstances  in which control  over allocation  of
values  among  different investment  alternatives may  cause Contract  Owners or
persons receiving  annuity payments  to be  treated as  the owners  of  Variable
Account  assets for tax purposes.  First Fortis reserves the  right to amend the
Contracts in any way necessary to avoid any such result. The Treasury Department
may establish  standards in  this regard  through regulations  or rulings.  Such
standards  may  apply only  prospectively,  although retroactive  application is
possible if such standards were considered not to embody a new position.
 
CERTAIN EXCHANGES
 
Section 1035  of the  Code  provides generally  that no  gain  or loss  will  be
recognized  under the exchange  of a life  insurance or annuity  contract for an
annuity contract. Thus, a properly completed exchange from one of these types of
products into a Contract pursuant to the special annuity contract exchange  form
we provide for this purpose is not generally a taxable event under the Code, and
your  investment in  the Contract  will be  the same  as your  investment in the
product you exchanged out of.
 
Because of the complexity of these and  other tax aspects in connection with  an
exchange, you should consult a tax adviser before making any exchange.
 
TAX LAW RESTRICTIONS AFFECTING SECTION 403(B) PLANS
 
Section 403(b)(12) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:
 
    (1) elective contributions made for years beginning after December 31, 1988;
 
    (2) earnings on those contributions; and
 
    (3) earnings on amounts held as of December 31, 1988.
 
Distribution  of  these  amounts may  only  occur  upon death  of  the employee,
attainment of  age 59  1/2, separation  from service,  disability, or  financial
hardship.  In addition, income attributable to elective contributions made after
December 31, 1988 may not be distributed in the case of hardship.
 
FURTHER INFORMATION ABOUT FIRST FORTIS
 
First Fortis Life  Insurance Company  is an  affiliate of  the worldwide  Fortis
group  of companies  owned by Fortis  AMEV of  the Netherlands and  Fortis AG of
Belgium. First Fortis is wholly owned by Fortis AMEV. The Company was originally
organized under New York Insurance Law on  August 12, 1971, and was acquired  by
the  current owners on March  24, 1989, to enable  the Fortis group of companies
the ability to distribute their products to the New York State marketplace.
 
On October 1, 1991,  First Fortis Life Insurance  Company and its affiliate  and
Fortis  Benefits  Insurance Company  (the  "Companies"), entered  into  an Asset
Transfer and Acquisition  Agreement (the "Agreement")  with Mutual Benefit  Life
Insurance  Company  in  Rehabilitation  (MBL). Pursuant  to  the  Agreement, the
Companies acquired  certain  assets  and  assumed  certain  liabilities  of  MBL
relating to the group life, accident and health, disability and dental insurance
business  of MBL. That portion of the business conducted in New York was assumed
by First  Fortis,  while the  remaining  and  more substantial  portion  of  the
business was assumed by Fortis Benefits Insurance Company. N.V. AMEV contributed
$25 million in cash to the paid-in-capital of First Fortis on October 1, 1991 in
connection with the acquisition.
 
GENERAL
 
First  Fortis is engaged in the offer  and sale of insurance products, including
fixed and  variable  annuity contracts,  and  group life,  accident  and  health
insurance  policies. First  Fortis markets  its products  to small  business and
individuals through  a network  of independent  agents, brokers,  and  financial
institutions.
 
                                       17
<PAGE>
SELECTED FINANCIAL DATA
 
The  following is  a summary  of certain  financial data  of First  Fortis. This
summary has been derived in part from,  and should be read in conjunction  with,
the financial statements of First Fortis included elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                    -----------------------------------------------------
                                                                      1995       1994       1993       1992       1991
                                                                    ---------  ---------  ---------  ---------  ---------
                                                                                       (IN THOUSANDS)
<S>                                                                 <C>        <C>        <C>        <C>        <C>
INCOME STATEMENT DATA
  Premiums........................................................  $  81,202  $  92,056  $  75,393  $  58,209  $  14,657
  Net investment income...........................................      7,466      6,261      6,074      6,245      2,027
  Realized investment gains (losses)..............................      2,683     (1,057)     3,062      1,773        146
  Other income....................................................        297        287        533        296        115
                                                                    ---------  ---------  ---------  ---------  ---------
    TOTAL REVENUES................................................     91,648     97,547     85,062     66,523     16,945
                                                                    ---------  ---------  ---------  ---------  ---------
  Benefits and expenses...........................................     96,371    104,582     85,170     63,215     14,991
  Income tax expense (benefit)....................................     (1,563)      (999)      (686)     1,058        671
                                                                    ---------  ---------  ---------  ---------  ---------
  Net income (loss)...............................................  $  (3,160) $  (6,036) $     578  $   2,250  $   1,283
                                                                    ---------  ---------  ---------  ---------  ---------
                                                                    ---------  ---------  ---------  ---------  ---------
BALANCE SHEET DATA
  Total assets....................................................  $ 139,913  $ 123,954  $ 132,077  $ 109,565  $ 101,679
  Total liabilities...............................................  $ 101,523  $  97,913  $  92,863  $  73,209  $  67,573
  Total shareholder's equity......................................  $  38,390  $  26,041  $  39,214  $  36,356  $  34,106
</TABLE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 
REVENUES
 
Life  premiums of First Fortis (the "Company") are principally composed of group
life coverages.  The decrease  in life  premiums resulted  from the  lapse of  a
minimum  premium  group life  insurance account  in  mid-1994. This  case, which
represented  24%  and  44%  of  the  group  life  business  in  1994  and  1993,
respectively,  did  not have  a significant  impact  on the  Company's operating
results.
 
Total accident  and  health premium  decreased  in  1995 as  compared  to  1994.
On-going  marketing efforts have continued  to increase the Company's disability
income and  dental  premiums,  whereas  premium rate  action  on  the  Company's
small-group  medical business has contributed to  a decline of approximately 57%
of inforce fully insured medical lives and a $25 million decrease in  annualized
inforce premium since 1994. During 1993 and 1994, medical premium grew primarily
from  the impact of New York State Regulation 145 "Open Enrollment and Community
Rating of Individual  and Small  Group Health  Insurance" ("Community  Rating").
Effective  January  1,  1996, the  Company  ceased  new sales  of  group medical
policies, however, the Company will continue to renew and service existing group
medical business,  which represented  $34 million  of 1995  accident and  health
premiums.  In  the  long-term,  the  Company expects  this  decision  to  have a
favorable impact on  its capital  position, although,  in the  short-term it  is
likely  that this product  line will have  an immaterial negative  impact on the
Company's operating results. The  group accident and  health premium mix,  which
remained  stable from 1993 to 1994  (medical -- averaging 67%; disability income
-- averaging 18%; and dental  -- averaging 14%), shifted  in 1995 to medical  --
54%; disability income -- 26%; and dental -- 20%.
 
The  Company continues  to match  investment portfolio  composition to liquidity
needs and capital requirements. Changes in interest rates during 1995, 1994  and
1993 resulted in recognition of realized gains and losses.
 
BENEFITS
 
In 1995 and 1993, the Company's group life claims ratio was higher than expected
as a result of increased mortality. In 1995, the Company also experienced larger
average claim amounts. In 1994, mortality experience levels were consistent with
Management's expectations.
 
Improved  recovery  rates  on  existing group  disability  income  claimants and
premium rate  increases resulting  in  the reduction  of inforce  fully  insured
medical lives have improved the accident and health benefits result from 1994 to
1995.  From  1993 to  1994, an  increased incidence  of group  disability income
claims, accompanied  by  lower  than  anticipated  recovery  rates  on  existing
claimants, and Community Rating medical loss ratios in excess of product pricing
assumptions, contributed to an increased accident and health claims ratio.
 
EXPENSES
 
The  Company  continues  to  monitor its  commission  rate  structures,  and, as
indicated by market conditions, periodically adjusts rates paid. Rates paid vary
by product type, group size and  duration. Commission rate decreases on  medical
products  have  been offset  by  changes in  the  mix of  inforce  business thus
resulting in a consistent commissions to premium ratio in 1993 through 1995.
 
Higher  medical  claims  volumes  have  increased  the  Company's  general   and
administrative expense to premium ratio from 1994 to 1995 and from 1993 to 1994.
During the last six months of 1995, as the Company's inforce medical lives began
to  decrease, the  Company began  to experience  a reduction  in medical related
expenses.
 
LIQUIDITY AND CAPITAL RESOURCES
 
The liquidity requirements of the Company  have been met by funds provided  from
operations,  including investment income. Funds  are principally used to provide
for policy benefits, operating  expenses, commissions and investment  purchases.
The  impact of  the declining  inforce medical  business has  been considered in
evaluating the  Company's  future  liquidity  needs.  The  Company  expects  its
operating activities to continue to generate sufficient funds.
 
                                       18
<PAGE>
The  National Association of Insurance Commissioners' risk-based capital formula
helps to establish guidelines  for capital levels. At  December 31, 1995,  First
Fortis' capital exceeded the minimum recommended risk-based capital level.
 
As  of  December 31,  1995,  98.1% of  the  Company's fixed  maturity securities
consisted of investment grade bonds.
 
REGULATION
 
The Company is subject to the laws  and regulations established by the New  York
State  Insurance Department governing  insurance business conducted  in New York
State. Periodic  audits  are conducted  by  the New  York  Insurance  Department
related  to the  Company's compliance with  these laws and  regulations. To date
there have been no adverse findings regarding the Company's operations.
 
As a small group (1-50  lives) medical insurer in the  State of New York,  First
Fortis  was impacted by the passage in  1992 of Regulation 145, "Open Enrollment
and Community  Rating  of  Individual  and Small  Group  Health  Insurance"  and
Regulation  146, "Establishment and Operation of Market Stabilization Mechanisms
for Individuals and Small Group Health Insurance". The purpose of Regulation 145
is to  promote  competition  among  insurers and  facilitate  access  to  health
insurance  by all  New York residents.  Beginning April 1,  1993, Regulation 145
required insurers to apply  a rating methodology (community  rate) in which  the
premium  for all persons covered by a policy  or contract form is the same based
on the experience of the entire pool of risks covered by that policy or contract
form without regard  to age, sex,  health status or  occupation. Regulation  146
established  a market stabilization process  to share among insurers substantive
cost  variations  attributable   to  significant   differences  in   demographic
characteristics  of the persons covered. During 1995, 1994 and 1993, demographic
characteristics of the Company's  medical business resulted  in payments to  the
pools which have been reflected in accident and health benefits.
 
                                       19
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
 
Set  forth  is  information  concerning First  Fortis'  directors  and executive
officers, together with their business experience and principal occupations  for
the past five years:
 
<TABLE>
<S>                          <C>
Larry M. Cains, 49           Treasurer; Senior Vice President of Fortis, Inc.
Director since 1995
Allen R. Freedman, 56        Chairman,  Chief Executive Officer and President; Chairman and Chief Executive
Director Since 1989          Officer of Fortis, Inc.
Thomas M. Keller, 48         President of Time  Insurance Company; President--Fortis  Healthcare of  Fortis
Director Since 1994          Benefits Insurance Company; before that Senior Vice President of Fortis, Inc.
Dean C. Kopperud, 43         Chief  Executive  Officer of  Fortis Advisers,  Inc.  and President  of Fortis
Director Since 1994          Investors,  Inc.;  President--Fortis  Financial   Group  of  Fortis   Benefits
                             Insurance Company
Terry J. Kryshak, 45         Senior Vice President and Chief Administrative Officer
Director Since 1991
Susie Gharib, 45             Anchorwoman, Cable NBC; before that, Anchorwoman, Financial News Network
Director Since 1991
Guy Gerard Rutherfurd, Jr.,  Executive  Vice  President  and  Chief  Investment  Officer  of  Nomura  Asset
56                           Management, Inc.
Director Since 1989
Dale Edward Gardner, 65      President, Gardner & Bull
Director Since 1989
Kenneth W. Nelson, 74        President, Tech Products, Inc.
Director Since 1989
Clarence Elkus Galston, 86   Attorney at Law
Director Since 1989
Robert B. Pollock, 41        President and Chief Executive Officer of Fortis Benefits Insurance Company
Director Since 1995
Robert O. Blaber, 44         Senior Vice President; before that  Regional Sales Director of Mutual  Benefit
                             Life Insurance Company
Leanne F. Hughes, 35         Assistant  Treasurer and Director of Accounting; before that Senior Manager of
                             Ernst & Young LLP
Jerome A. Atkinson, 46       Secretary; Vice  President, Secretary  and General  Counsel of  Fortis,  Inc.;
                             before  that Senior Vice President, Secretary  and General Counsel of American
                             Security Insurance Company
</TABLE>
 
First Fortis' officers  serve at  the pleasure of  the Board  of Directors,  and
members  of the Board who  are also officers or  employees of First Fortis serve
without compensation.  All  Directors  serve until  their  successors  are  duly
elected and qualified. The compensation of members of the Board who are not also
officers  or employees  of First  Fortis or  its affiliates  is as  follows. The
Director receives $1,000  for attendance  at the  annual Board  meeting. If  the
Director  is  also  a  member  of  the  Audit  Committee  and/or  the Investment
Committee, the Director also receives $1,000  for attending any meeting of  such
committee  unless the committee meeting date is  the same as the annual meeting,
in which case the committee meeting compensation is $500.
 
Mr. Freedman is also a director  of Systems and Computer Technology  Corporation
and  Genesis Health Ventures and  the following registered investment companies:
Fortis Equity Portfolios, Inc.; Fortis Growth Fund, Inc.; Fortis Fiduciary Fund,
Inc.; Fortis Income Portfolios, Inc.;  Fortis Securities, Inc.; Fortis  Tax-Free
Portfolios,  Inc.; Fortis  Money Portfolios, Inc.;  Fortis Advantage Portfolios,
Inc.; Fortis  Worldwide  Portfolios, Inc.;  Fortis  Series Fund,  Inc.;  Special
Portfolios, Inc.
 
                                       20
<PAGE>
EXECUTIVE COMPENSATION
 
Set  forth below is certain information concerning the compensation of the named
executive officers of First Fortis. Mr. Freedman and Mr. Greiter are compensated
by other affiliates of First Fortis.
 
--------------------------------------------------------------------------------
 
SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                     ANNUAL COMPENSATION
                                                               --------------------------------   ----------------
                                                                                   OTHER ANNUAL      ALL OTHER
                                                                SALARY    BONUS    COMPENSATION   COMPENSATION (1)
              NAME AND PRINCIPAL POSITION                YEAR    ($)       ($)         ($)              ($)
-------------------------------------------------------  ----  --------  --------  ------------   ----------------
<S>                                                      <C>   <C>       <C>       <C>            <C>
Allen R. Freedman                                        1995  $      0  $      0    $     0          $     0
 President
William D. Greiter                                       1995         0         0          0                0
 President                                               1994         0         0          0                0
Terry J. Kryshak                                         1995   107,350    25,764          0            8,288
 Senior Vice President and Chief Administrative Officer  1994    95,000    30,780          0            1,535
                                                         1993    85,439    17,000          0            7,056
Robert O. Blaber                                         1995    75,000   263,654          0           14,852
 Senior Vice President                                   1994    75,000   246,032          0           14,140
                                                         1993    52,500   218,232          0           14,150
</TABLE>
 
------------------------
1   This column includes contributions made by First Fortis for the year for the
    benefit for the named individual to defined contribution retirement plans.
 
As additional compensation to its employees and executive officers, First Fortis
has an Employees' Uniform Retirement Plan and an Executive Retirement Plan which
generally provide an  annual annuity  benefit upon retirement  at age  65 (or  a
reduced  benefit upon early retirement) equal  to: .9% of the employee's Average
Annual compensation up to the  employee's social security covered  compensation,
plus  1.3% of Average  Annual compensation above  the employee's social security
covered compensation up to $235,840, as adjusted by an index, multiplied by  the
employee's years of credited services.
 
The  following  table illustrates  the combined  estimated life  annuity benefit
payable from the Employees Uniform Retirement Plan and the Executive  Retirement
Plan  to employees with the specified Final  Average Salary and Years of Service
upon retirement.
 
PENSION TABLE
 
<TABLE>
<CAPTION>
                                                                        YEARS OF SERVICE
                                                         -----------------------------------------------
FINAL AVERAGE EARNINGS                                     10      15      20      25      30      35
-------------------------------------------------------  ------  ------  ------  ------  ------  -------
<S>                                                      <C>     <C>     <C>     <C>     <C>     <C>
125,000                                                  15,213  22,820  30,426  38,033  45,640   53,246
150,000                                                  18,463  27,695  36,926  46,158  55,390   64,621
175,000                                                  21,713  32,570  43,426  54,283  65,140   75,996
200,000                                                  24,963  37,445  49,926  62,408  74,890   87,371
225,000                                                  28,141  42,211  56,282  70,352  84,423   98,493
250,000+                                                 29,557  44,336  59,115  73,894  88,672  103,451
</TABLE>
 
The table above excludes social security benefits. In general, for the  purposes
of  these plans compensation includes salary  and bonuses. The credited years of
service  with  First  Fortis  for   those  individuals  named  in  the   Summary
Compensation Table above are as follows: 0, 0, 5, and 9.
 
OWNERSHIP OF SECURITIES
 
All   of  First   Fortis'  outstanding  shares   are  owned   by  Fortis  AMEV.,
Archimedeslaan 10, 3584 BA, Utrecht, The Netherlands.
 
VOTING PRIVILEGES
 
In accordance with its  view of current applicable  law, First Fortis will  vote
shares of each of the Portfolios which are attributable to a Contract at regular
and  special  meetings  of the  shareholders  of  Series Fund  in  proportion to
instructions received  from  the  persons  having the  voting  interest  in  the
Contract  as of the  record date for the  corresponding Series Fund shareholders
meeting. Contract  Owners  have  the voting  interest  during  the  Accumulation
Period,  persons  receiving  annuity  payments during  the  Annuity  Period, and
Beneficiaries after the death  of the Annuitant or  Contract Owner. However,  if
the  Investment Company Act of 1940 or any rules thereunder should be amended or
if the  present interpretation  thereof should  change, and  as a  result  First
Fortis  determines that it is permitted to  vote shares of the Portfolios in its
own right, it may elect to do so.
 
During the Accumulation Period, the number of shares of a Portfolio attributable
to a Contract  is determined by  dividing the  amount of Contract  Value in  the
corresponding  Subaccount pursuant to the Contract as of the record date for the
shareholders meeting by the net  asset value of one  Portfolio share as of  that
date. During the Annuity Period, or after the death of the Annuitant or Contract
Owner,  the number of Portfolio shares  deemed attributable to the Contract will
be computed in a comparable manner,  based on the liability for future  variable
annuity  payments  allocable to  that Subaccount  under the  Contract as  of the
record date. Such liability for future payments will be calculated on the  basis
of  the mortality assumptions and the  assumed interest rate used in determining
the number of Annuity Units credited to the Contract and the applicable  Annuity
Unit  value on the record  date. During the Annuity  Period, the number of votes
attributable to a Contract will generally decrease since funds set aside to make
the annuity payments will decrease.
 
First Fortis will vote shares for which it has received no timely  instructions,
and  any shares attributable  to excess amounts First  Fortis has accumulated in
the related  Subaccount,  in proportion  to  the voting  instructions  which  it
receives  with respect  to all  Contracts and  other variable  annuity contracts
participating in a Portfolio. To the extent that First Fortis or any  affiliated
company  holds  any  shares of  a  Portfolio, they  will  be voted  in  the same
proportion as instructions for
 
                                       21
<PAGE>
that Portfolio that are received from  persons holding the voting interest  with
respect  to all First Fortis separate  accounts participating in that Portfolio.
Shares held by separate accounts other than the Variable Account will in general
be voted in accordance with instructions of participants in such other  separate
accounts. This diminishes the relative voting influence of the Contracts.
 
Each  person having a  voting interest in  a Subaccount of  the Separate Account
will receive  proxy  material,  reports  and other  materials  relating  to  the
appropriate Portfolio. Pursuant to the procedures described above, these persons
may give instructions regarding the election of the Board of Directors of Series
Fund, ratification of the selection of its independent auditors, the approval of
the  investment  managers  of  a Portfolio,  changes  in  fundamental investment
policies of a Portfolio and all other matters  that are put to a vote by  Series
Fund shareholders.
 
LEGAL MATTERS
 
The  legality of the Contracts described in this Prospectus has been passed upon
by Douglas R. Lowe, Esquire, Assistant  General Counsel with the law  department
of  Fortis Benefits  Insurance Company,  an affiliate  of First  Fortis. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised First Fortis  on
certain federal securities law matters.
 
OTHER INFORMATION
 
Registration  Statements  have  been  filed  with  the  Securities  and Exchange
Commission under the  Securities Act  of 1933 as  amended, with  respect to  the
Contracts  discussed in this Prospectus. Not all of the information set forth in
the Registration Statement, amendments and exhibits thereto has been included in
this Prospectus. Statements contained in this Prospectus concerning the  content
of the Contracts and other legal instruments are intended to be summaries. For a
complete  statement of the terms of these documents, reference should be made to
the instruments filed with the Securities and Exchange Commission.
 
A Statement of Additional  Information is available  upon request. Its  contents
are as follows:
 
CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
 
<TABLE>
<CAPTION>
                                                          PAGE
<S>                                                       <C>
First Fortis and the Variable Account..................      2
Calculation of Annuity Payments........................      2
Postponement of Payments...............................      3
Services...............................................      3
  - Safekeeping of Variable Account Assets.............      3
  - Experts............................................      3
  - Principal Underwriter..............................      3
Limitations on Allocations.............................      4
Change of Investment Adviser or Investment Policy......      4
Taxation Under Certain Retirement Plans................      4
Withholding............................................      8
Terms of Exemptive Relief in Connection With Mortality
 and Expense Risk Charge...............................      8
Variable Account Financial Statements..................      9
APPENDIX A--Performance Information....................    A-1
</TABLE>
 
FIRST FORTIS FINANCIAL STATEMENTS
 
The  financial statements of  First Fortis that are  included in this Prospectus
should be considered primarily as bearing on the ability of First Fortis to meet
its  obligations  under  the  Contracts.  The  Contracts  are  not  entitled  to
participate in earnings, dividends or surplus of First Fortis.
 
                                       22
<PAGE>
REPORT OF INDEPENDENT AUDITORS
 
Board of Directors
First Fortis Life Insurance Company
 
We  have audited the accompanying balance  sheets of First Fortis Life Insurance
Company (a wholly-owned subsidiary of Fortis  AMEV) as of December 31, 1995  and
1994, and the related statements of operations, changes in shareholder's equity,
and  cash flows  for each of  the three years  in the period  ended December 31,
1995. Our audits also included the  financial statement schedules listed in  the
Index   at  Item   14.  These  financial   statements  and   schedules  are  the
responsibility of the Company's management. Our responsibility is to express  an
opinion on these financial statements and schedules based on our audits.
 
We   conducted  our  audits  in  accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
In  our opinion, the  financial statements referred to  above present fairly, in
all material respects,  the financial  position of First  Fortis Life  Insurance
Company at December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity  with generally accepted accounting principles. Also, in our opinion,
the related financial statement  schedules, when considered  in relation to  the
basic  financial statements  taken as  a whole,  present fairly  in all material
respects the information set forth therein.
 
                                                            [SIG]
Ernst & Young LLP
Syracuse, New York
February 19, 1996
 
                                      F-1
<PAGE>
BALANCE SHEETS
FIRST FORTIS LIFE INSURANCE COMPANY
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                         -----------------------------
                                                             1995             1994
                                                         ------------     ------------
<S>                                                      <C>              <C>
ASSETS
Investments (Note 3):
  Fixed maturities, at fair value (amortized cost
   1995--$106,648,754; 1994--$102,195,927).............  $112,183,452     $ 97,337,464
  Preferred stock at fair value (cost $92,029).........        89,345               --
  Short-term investments...............................     6,850,000        1,900,000
                                                         ------------     ------------
                                                          119,122,797       99,237,464
Cash...................................................     1,145,131          483,075
Receivables:
  Uncollected premiums, less allowance--$100,000.......     4,440,446        4,595,706
  Reinsurance recoverable on unpaid and paid losses....     9,335,947        8,875,349
  Prepaid federal income taxes and other...............     2,255,199        2,215,328
                                                         ------------     ------------
                                                           16,031,592       15,686,383
Accrued investment income..............................     1,814,291        1,945,610
Deferred policy acquisition costs (Note 2).............            --        4,595,000
Property and equipment at cost, less accumulated
 depreciation (1995--$1,249,280; 1994--$766,831).......     1,199,482        1,360,471
Goodwill...............................................       600,000          646,000
                                                         ------------     ------------
TOTAL ASSETS...........................................  $139,913,293     $123,954,003
                                                         ------------     ------------
                                                         ------------     ------------
 
RESERVES, LIABILITIES, AND SHAREHOLDER'S EQUITY
Policy reserves and liabilities:
  Future policy benefit reserves:
    Life insurance.....................................  $ 22,529,817     $ 21,233,643
    Accident and health................................    59,442,638       52,844,913
                                                         ------------     ------------
                                                           81,972,455       74,078,556
  Other policy claims and benefits payable.............    13,561,740       17,974,419
Other liabilities......................................     5,988,794        5,860,473
                                                         ------------     ------------
      TOTAL POLICY RESERVES AND LIABILITIES............   101,522,989       97,913,448
Commitments and contingencies (Note 11)
 
Shareholder's equity (Notes 1, 8, 9, and 10):
  Common stock, $20 par value 100,000 shares
   authorized, issued, and outstanding.................     2,000,000        2,000,000
  Additional paid-in capital...........................    37,440,000       30,440,000
  Retained earnings (deficit)..........................    (4,700,825)      (1,540,982)
  Unrealized appreciation (depreciation) of investment
   securities, net (Note 3)............................     3,651,129       (4,858,463)
                                                         ------------     ------------
      TOTAL SHAREHOLDER'S EQUITY.......................    38,390,304       26,040,555
                                                         ------------     ------------
      TOTAL RESERVES, LIABILITIES, AND SHAREHOLDER'S
      EQUITY...........................................  $139,913,293     $123,954,003
                                                         ------------     ------------
                                                         ------------     ------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-2
<PAGE>
STATEMENTS OF OPERATIONS
FIRST FORTIS LIFE INSURANCE COMPANY
 
<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                         ------------------------------------------
                                                            1995            1994           1993
                                                         -----------    ------------    -----------
<S>                                                      <C>            <C>             <C>
REVENUES
  Insurance operations (NOTE 7):
    Life insurance premiums............................  $18,879,246    $ 19,431,130    $19,541,946
    Accident and health premiums.......................   62,322,484      72,624,559     55,850,949
  Net investment income (NOTE 3).......................    7,465,751       6,261,593      6,073,726
  Realized gains (losses) on investments (NOTE 3)......    2,683,100      (1,057,438)     3,062,050
  Other income.........................................      297,767         287,426        533,390
                                                         -----------    ------------    -----------
      TOTAL REVENUES...................................   91,648,348      97,547,270     85,062,061
BENEFITS AND EXPENSES
  Benefits to policyholders:
    Life insurance.....................................   16,206,930      15,345,645     19,102,079
    Accident and health................................   56,592,227      68,115,512     49,026,058
  Amortization of deferred policy acquisition costs
   (NOTE 2)............................................    4,595,000       1,838,000      1,787,000
  Insurance commissions................................    5,070,934       5,768,504      4,761,665
  General and administrative expenses (NOTES 1 AND
   9)..................................................   13,906,043      13,514,820     10,493,066
                                                         -----------    ------------    -----------
      TOTAL BENEFITS AND EXPENSES......................   96,371,134     104,582,481     85,169,868
                                                         -----------    ------------    -----------
  Loss before federal income taxes.....................   (4,722,786)     (7,035,211)      (107,807)
  Federal income taxes (benefit) (NOTE 6)..............   (1,562,943)       (999,671)      (686,000)
                                                         -----------    ------------    -----------
      NET INCOME (LOSS)................................  $(3,159,843)   $ (6,035,540)   $   578,193
                                                         -----------    ------------    -----------
                                                         -----------    ------------    -----------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-3
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FIRST FORTIS LIFE INSURANCE COMPANY
 
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
 
<TABLE>
<CAPTION>
                                                                                                       UNREALIZED
                                                                                                      APPRECIATION
                                                                                                     (DEPRECIATION)
                                                                       ADDITIONAL      RETAINED      OF INVESTMENT
                                                           COMMON        PAID-IN       EARNINGS       SECURITIES,
                                                           STOCK         CAPITAL       (DEFICIT)          NET              TOTAL
                                                         ----------    -----------    -----------    --------------     -----------
<S>                                                      <C>           <C>            <C>            <C>                <C>
Balance January 1, 1993................................  $2,000,000    $30,440,000    $ 3,916,365                       $36,356,365
  Net income...........................................                                   578,193                           578,193
  Unrealized appreciation of investment securities,
   net.................................................                                                $2,280,000         2,280,000
                                                         ----------    -----------    -----------    --------------     -----------
Balance December 31, 1993..............................   2,000,000     30,440,000      4,494,558       2,280,000        39,214,558
  Net loss.............................................                                (6,035,540)                       (6,035,540)
  Unrealized depreciation of investment securities,
   net.................................................                                                (5,486,586)       (5,486,586)
  Change in deferred tax valuation allowance for
   unrealized depreciation on investment securities....                                                (1,651,877)       (1,651,877)
                                                         ----------    -----------    -----------    --------------     -----------
  Balance December 31, 1994............................   2,000,000     30,440,000     (1,540,982)     (4,858,463)       26,040,555
  Additional paid-in capital from Fortis AMEV..........                  7,000,000                                        7,000,000
  Net loss.............................................                                (3,159,843)                       (3,159,843)
  Unrealized appreciation of investment securities,
   net.................................................                                                 6,857,715         6,857,715
Change in deferred tax valuation allowance for
 unrealized depreciation on investment securities......                                                 1,651,877         1,651,877
                                                         ----------    -----------    -----------    --------------     -----------
Balance December 31, 1995..............................  $2,000,000    $37,440,000    $(4,700,825)     $3,651,129       $38,390,304
                                                         ----------    -----------    -----------    --------------     -----------
                                                         ----------    -----------    -----------    --------------     -----------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-4
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST FORTIS LIFE INSURANCE COMPANY
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                         ---------------------------------------------
                                                             1995            1994             1993
                                                         ------------    -------------    ------------
<S>                                                      <C>             <C>              <C>
OPERATING ACTIVITIES
  Net income (loss)....................................  $ (3,159,843)   $  (6,035,540)   $    578,193
  Adjustments to reconcile net income (loss) to net
   cash provided by operating activities:
    Deferred tax valuation allowance...................      (177,708)       1,515,531              --
    Increase in future policy benefit reserves and
     other policy claims and benefits..................     3,481,220        7,835,342       8,696,790
    Decrease in income taxes...........................    (1,569,235)      (2,903,210)     (2,289,946)
    Amortization of policy acquisition costs...........     4,595,000        1,838,000       1,787,000
    Policy acquisition costs deferred..................            --         (432,000)       (364,000)
    Increase (decrease) in other liabilities...........       128,321       (2,118,752)      1,219,368
    Depreciation, amortization and accretion...........       750,029          716,129         838,727
    (Increase) decrease in uncollected premiums,
     accrued investment income and other...............       112,767        2,258,061      (3,768,978)
    (Increase) decrease in reinsurance recoverable.....      (460,598)         333,480       1,591,543
    Net realized (gains) losses on investments.........    (2,683,100)       1,057,438      (3,062,050)
                                                         ------------    -------------    ------------
      NET CASH PROVIDED BY OPERATING ACTIVITIES........     1,016,853        4,064,479       5,226,647
INVESTING ACTIVITIES
  Purchases of fixed maturity investments..............  (122,289,460)     (77,995,025)   (120,655,536)
  Sales and maturities of fixed maturity investments...   120,298,152       69,440,809     116,306,946
  (Increase) decrease in equity securities and
   short-term investments..............................    (5,042,029)       3,731,866         (86,873)
  Purchase of property and equipment...................      (321,460)        (562,438)       (519,408)
                                                         ------------    -------------    ------------
      NET CASH USED IN INVESTING ACTIVITIES............    (7,354,797)      (5,384,788)     (4,954,871)
                                                         ------------    -------------    ------------
FINANCING ACTIVITIES
  Proceeds from additional paid-in-capital.............     7,000,000               --              --
                                                         ------------    -------------    ------------
      NET CASH PROVIDED BY FINANCING ACTIVITIES........     7,000,000               --              --
                                                         ------------    -------------    ------------
  Increase (decrease) in cash..........................       662,056       (1,320,309)        271,776
      CASH AT BEGINNING OF YEAR........................       483,075        1,803,384       1,531,608
                                                         ------------    -------------    ------------
      CASH AT END OF YEAR..............................  $  1,145,131    $     483,075    $  1,803,384
                                                         ------------    -------------    ------------
                                                         ------------    -------------    ------------
</TABLE>
 
                       See notes to financial statements.
 
                                      F-5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FIRST FORTIS LIFE INSURANCE COMPANY
 
DECEMBER 31, 1995, 1994, AND 1993
 
1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
 
First  Fortis  Life  Insurance  Company  ("First  Fortis"  or  "Company")  is an
affiliate of the worldwide Fortis group of companies owned by Fortis AMEV of the
Netherlands and Fortis  AG of Belgium.  First Fortis is  wholly-owned by  Fortis
AMEV. The other U.S. subsidiaries of Fortis AMEV and Fortis AG operate under the
holding company name Fortis, Inc. The Company was organized to enable the Fortis
group  of  companies  to  distribute  their  products  to  the  New  York  State
marketplace. To date, the  Company's revenues have  been derived primarily  from
group  employee benefits products.  During 1995, the  Company had $17,825,000 of
direct  premium  written  principally   by  three  third  party   administrators
("TPA's").  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 $34,011,000 of  1995 accident and
health premiums. At December 31, 1995, $250,000 of related termination  benefits
was accrued and included in general and adminstrative expenses.
 
BASIS OF STATEMENT PRESENTATION
 
The  financial statements  are presented  in conformity  with generally accepted
accounting principles which differ in certain respects from statutory accounting
practices prescribed or permitted  by the New  York State Insurance  Department.
Significant accounting policies followed by the Company are:
 
    POLICY REVENUES
 
    For  group  life, medical,  disability,  and credit  life  products, amounts
    collected from  policyholders  are recognized  as  premium income  over  the
    premium  paying period and are reported net of experience rating refunds and
    unearned premiums.
 
    CLAIMS AND BENEFITS PAYABLE
 
    Claims and  benefits payable  for  reported and  incurred but  not  reported
    losses  are determined using case base estimates and prior experience. These
    estimates are  subject  to the  effects  of  trends in  claim  severity  and
    frequency  and represent  the estimates of  the ultimate cost  of all unpaid
    losses incurred  through December  31 of  each year.  Although  considerable
    variability  is  inherent in  such estimates,  management believes  that the
    reserve for claims and benefits payable  is adequate. The methods of  making
    such  estimates  and establishing  the  related liabilities  are continually
    reviewed and updated, and any adjustments resulting therefrom are  reflected
    in income currently.
 
    RESERVES FOR FUTURE POLICY BENEFITS
 
    Active  life reserves  for future policy  and contract benefits  on life and
    accident and health products are provided  on the net level premium  method.
    The   reserves  are  calculated  based  upon  assumptions  as  to  interest,
    withdrawal, mortality, and morbidity  that were appropriate  at the date  of
    issue.  Interest rate  assumptions range principally  from 3.0%  to 5.5% for
    traditional life products and 4.0% to 10.0% for annuity products. Withdrawal
    assumptions are based on actual Company experience. Mortality and  morbidity
    assumptions  are based  upon industry  standards adjusted  as appropriate to
    reflect actual Company  experience. The  assumptions vary by  plan, year  of
    issue, and policy duration and include a provision for adverse deviation.
 
    Disabled   lives  reserves  for  future  policy  and  contract  benefits  on
    disability income  policies  are calculated  based  upon assumptions  as  to
    interest  and  claim  termination  rates  that  are  currently  appropriate.
    Disabled lives reserves for group life policies are based on a 3.5% interest
    rate  assumption.  For  group  long-term  disability  income  policies,  the
    interest rate assumption on claims is 6.0%. Termination rate assumptions are
    based  upon  industry standards  adjusted as  appropriate to  reflect actual
    Company experience. The assumptions vary by year of claim incurred.
 
    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.
 
    Available-for-sale  securities  are  reported  at  fair  value;   short-term
    investments  are reported at cost, which approximates fair value. Changes in
    the fair values  of available-for-sale  securities, net  of deferred  income
    taxes,  are reported as unrealized  appreciation or depreciation directly in
    shareholder's equity  and,  accordingly,  have  no  effect  on  net  income.
    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.
 
    PROPERTY AND DEPRECIATION
 
    The  Company provides depreciation (principally on the straight-line method)
    over the estimated useful life of the related property.
 
    INCOME TAXES
 
    Income taxes have  been provided  using the liability  method. Deferred  tax
    assets and liabilities are determined based on the differences between their
    financial  reporting and their tax bases  and are measured using the enacted
    tax rates.
 
                                      F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
 
2.  DEFERRED POLICY ACQUISITION COSTS
On October 1, 1991, First Fortis Life Insurance Company and an affiliate, Fortis
Benefits Insurance Company, (the "Companies") entered into an Asset Transfer and
Acquisition Agreement  (the  "Agreement")  with Mutual  Benefit  Life  Insurance
Company  in  Rehabilitation ("MBL").  Pursuant to  the Agreement,  the Companies
acquired certain assets and assumed certain  liabilities of MBL relating to  the
group  life, disability, dental and  medical insurance business (the "Business")
of MBL. That portion of the Business conducted in New York was assumed by  First
Fortis, while the most substantial portion of the Business was assumed by Fortis
Benefits Insurance Company. First Fortis paid $10,166,000 for its portion of the
Business   acquired  including  contingent  Promissory  Note  ("Note")  payments
aggregating $1,366,000 from 1992 to 1994 which were based on the persistency  of
the acquired Business through September 30, 1994. No additional payments will be
made.  Note payments  were added to  deferred policy  acquisition costs ("DPAC")
when made. The DPAC amortization period, which was originally scheduled  through
September  30,  1997,  was  completed  December  31,  1995  (an  acceleration of
$2,749,000 into 1995), based on the overall experience of the acquired block  of
business.
 
3.  INVESTMENTS
FIXED MATURITIES
 
The  following  is a  summary  of the  amortized cost  and  fair value  of fixed
maturity securities:
 
<TABLE>
<CAPTION>
                                                                            GROSS           GROSS
                                                          AMORTIZED       UNREALIZED      UNREALIZED
                                                             COST            GAIN            LOSS          FAIR VALUE
                                                         ------------     ----------     ------------     ------------
<S>                                                      <C>              <C>            <C>              <C>
December 31, 1995:
  Governments..........................................  $ 17,068,216     $1,025,440               --     $ 18,093,656
  Public utilities.....................................     4,906,703       262,773                --        5,169,476
  Industrial and miscellaneous.........................    84,673,835     4,272,901      $    (26,416)      88,920,320
                                                         ------------     ----------     ------------     ------------
TOTAL..................................................  $106,648,754     $5,561,114     $    (26,416)    $112,183,452
                                                         ------------     ----------     ------------     ------------
                                                         ------------     ----------     ------------     ------------
</TABLE>
 
<TABLE>
<S>                                                      <C>           <C>         <C>           <C>
December 31, 1994:
  Governments..........................................  $ 38,197,817  $  33,725   $ (1,700,807) $ 36,530,735
  State and municipal..................................    18,793,434        690       (901,799)   17,892,325
  Public utilities.....................................     4,512,407         --       (295,936)    4,216,471
  Industrial and miscellaneous.........................    40,692,269      8,630     (2,002,966)   38,697,933
                                                         ------------  ----------  ------------  ------------
TOTAL..................................................  $102,195,927  $  43,045   $ (4,901,508) $ 97,337,464
                                                         ------------  ----------  ------------  ------------
                                                         ------------  ----------  ------------  ------------
</TABLE>
 
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.
 
The  amortized cost and fair value of  fixed maturity securities at December 31,
1995, by contractual maturity, are shown below. Expected maturities will  differ
from  contractual maturities  because borrowers  may have  the right  to call or
prepay obligations with or without call or prepayment penalties.
 
<TABLE>
<CAPTION>
                                                            AMORTIZED
                                                               COST          FAIR VALUE
                                                           ------------     ------------
<S>                                                        <C>              <C>
Due in one year or less................................    $  2,084,737     $  2,103,881
Due after one year through five years..................      23,936,241       24,692,303
Due after five years through ten years.................      54,663,995       57,329,162
Due after ten years....................................      25,963,781       28,058,106
                                                           ------------     ------------
                                                           $106,648,754     $112,183,452
                                                           ------------     ------------
                                                           ------------     ------------
</TABLE>
 
Proceeds  from  sales   and  maturities  of   fixed  maturity  securities   were
$120,298,152,   $69,440,809,  and   $116,306,946  in   1995,  1994,   and  1993,
respectively. Gross  gains of  $3,373,880, $510,242,  and $3,159,461  and  gross
losses  of $690,780, $1,572,163, and $97,411 were realized on the sales in 1995,
1994, and 1993.
 
                                      F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
 
3.  INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS
 
Major categories  of  net  investment  income and  realized  gains  (losses)  on
investments for each year were as follows:
 
<TABLE>
<CAPTION>
                                                                                NET REALIZED GAINS (LOSSES) ON
                                                NET INVESTMENT INCOME                     INVESTMENTS
                                          ----------------------------------  -----------------------------------
                                             1995        1994        1993        1995        1994         1993
                                          ----------  ----------  ----------  ----------  -----------  ----------
<S>                                       <C>         <C>         <C>         <C>         <C>          <C>
Fixed maturities........................  $7,578,652  $6,341,978  $6,210,423  $2,683,100  $(1,061,921) $3,062,050
Short-term investments..................     152,211     200,274     113,436          --        4,483          --
                                          ----------  ----------  ----------  ----------  -----------  ----------
                                           7,730,863   6,542,252   6,323,859  $2,683,100  $(1,057,438) $3,062,050
                                                                              ----------  -----------  ----------
                                                                              ----------  -----------  ----------
Expenses................................    (265,112)   (280,659)   (250,133)
                                          ----------  ----------  ----------
Net investment income...................  $7,465,751  $6,261,593  $6,073,726
                                          ----------  ----------  ----------
</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 $673,407, $597,365, and $554,213
in 1995, 1994, and  1993, respectively. Future  minimum payments required  under
operating  lease arrangements that have initial or noncancelable terms in excess
of one year  or more  are: 1996--$701,250,  1997--$678,367, 1998--$718,322,  and
1999--$550,219.
 
5.  UNPAID LOSSES AND LOSS EXPENSE ALLOWANCE
Activity  for the  liability for unpaid  accident and health  losses and related
loss expense allowance is summarized as follows:
 
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                           -----------------------------------------
                                                              1995           1994           1993
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
Balance as of January 1, net of reinsurance
 recoverable...........................................    $66,136,369    $58,646,889    $48,837,776
  Add: Incurred losses related to:
    Current year.......................................     57,400,613     66,066,609     49,505,698
    Prior years........................................       (808,386)     2,048,903       (479,640)
                                                           -----------    -----------    -----------
  Total incurred losses................................     56,592,227     68,115,512     49,026,058
                                                           -----------    -----------    -----------
  Deduct: Paid losses related to:
    Current year.......................................     35,779,078     40,882,341     26,688,924
    Prior years........................................     21,185,448     19,743,691     12,528,021
                                                           -----------    -----------    -----------
  Total paid losses....................................     56,964,526     60,626,032     39,216,945
                                                           -----------    -----------    -----------
Balance as of December 31, net of reinsurance
 recoverable...........................................    $65,764,070    $66,136,369    $58,646,889
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------
</TABLE>
 
In 1994, lower than anticipated recovery rates on existing long-term  disability
income  claimants,  offset  by  a favorable  refinement  in  the  claims reserve
estimates contributed to the  "incurred losses related  to prior years"  result.
The  liability for unpaid accident and  health losses and loss expense allowance
includes $53,953,000,  $47,489,000,  and  $42,474,000  of  long-term  disability
income  reserves as  of December 31,  1995, 1994, and  1993, respectively, which
were discounted for anticipated interest earnings assuming a 6.0% interest rate.
 
                                      F-8
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
 
6.  FEDERAL INCOME TAXES
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 assets and liabilities as of December 31 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31
                                                                                 --------------------
                                                                                   1995       1994
                                                                                 ---------  ---------
<S>                                                                              <C>        <C>
Deferred tax assets:
  Reserves.....................................................................  $   2,104  $   2,073
  Deferred policy acquisition costs............................................        470         --
  Alternative minimum tax credit carryforward..................................        191        243
  Unrealized losses............................................................         --      1,652
  Other........................................................................        485        406
                                                                                 ---------  ---------
Total gross deferred tax assets................................................      3,250      4,374
Valuation allowance............................................................     (1,338)    (3,167)
                                                                                 ---------  ---------
Net deferred tax assets........................................................      1,912      1,207
Deferred tax liabilities:
  Unrealized gains.............................................................      1,881         --
  Deferred policy acquisition costs............................................         --      1,172
  Other........................................................................         31         35
                                                                                 ---------  ---------
Total gross deferred tax liabilities...........................................      1,912      1,207
                                                                                 ---------  ---------
Net deferred tax liability.....................................................  $      --  $      --
                                                                                 ---------  ---------
                                                                                 ---------  ---------
</TABLE>
 
As of December 31, 1995 and 1994,  respectively, the Company had a deferred  tax
asset  valuation  allowance  of $1,337,823  and  $3,167,408, of  which  $-0- and
$1,651,877 in 1995 and 1994, respectively, related to unrealized depreciation on
investment securities.  The  valuation  allowance  decrease  of  $1,829,585  was
recognized   as   a  $1,651,877   increase   to  the   "unrealized  appreciation
(depreciation) of investment securities, net" component of shareholder's  equity
and a $177,708 tax benefit in the statement of operations in 1995.
 
The income tax provision is summarized as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                       1995       1994       1993
                                                      -------    -------    -------
<S>                                                   <C>        <C>        <C>
Current...........................................    $   393    $(1,775)   $   384
Deferred..........................................     (1,778)      (740)    (1,070)
Valuation allowance...............................       (178)     1,516         --
                                                      -------    -------    -------
                                                      -------    -------    -------
Federal income taxes (benefit)....................    $(1,563)   $  (999)   $  (686)
                                                      -------    -------    -------
                                                      -------    -------    -------
</TABLE>
 
Tax  payments of $251,591,  $1,442,818, and $1,670,000 were  made in 1995, 1994,
and 1993, respectively.
 
The differences between the  benefit for income taxes  at the federal  statutory
income tax rate and the tax benefit were as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                       1995       1994       1993
                                                      -------    -------    -------
<S>                                                   <C>        <C>        <C>
Federal statutory rate............................      (34.0)%    (34.0)%    (34.0)%
                                                      -------    -------    -------
                                                      -------    -------    -------
Tax benefit at statutory rate.....................    $(1,606)   $(2,392)   $   (38)
Tax exempt interest...............................       (188)      (406)      (603)
Other, net........................................        409        283        (45)
Valuation allowance...............................       (178)     1,516         --
                                                      -------    -------    -------
                                                      -------    -------    -------
Tax benefit as reported...........................    $(1,563)   $  (999)   $  (686)
                                                      -------    -------    -------
                                                      -------    -------    -------
</TABLE>
 
At  December  31, 1995,  the Company  has net  operating loss  carryforwards for
federal income tax  purposes of $389,000  which are available  to offset  future
federal  taxable income, if any, through  2010. The Company also has alternative
minimum tax  credit carryforwards  of $191,000,  which are  available to  reduce
future federal regular income taxes, if any, over an indefinite period of time.
 
7.  REINSURANCE
The  maximum amounts that the  Company retains on any  one life are $500,000 for
group life; $250,000 for group accidental death; $10,000 net monthly benefit for
long-term disability; from 10% to 50% of possible benefits payable under  credit
life  and credit disability  insurance; and 0%  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.
 
                                      F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
 
7.  REINSURANCE (CONTINUED)
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  $9,335,947 and $8,875,349  in
1995  and 1994,  respectively. The  Company remains  contingently liable  in the
event the reinsuring companies are unable  to meet their obligations under  such
reinsurance agreements.
 
Additional  information  regarding the  Company's  reinsurance activity  for the
years ended December 31, 1995, 1994, and 1993 is as follows:
 
<TABLE>
<CAPTION>
                                                       GROSS
                                                      AMOUNT       CEDED     NET AMOUNT
                                                    -----------  ----------  -----------
<S>                                                 <C>          <C>         <C>
1995
Life insurance in force (000s)....................  $ 6,864,625  $  321,785  $ 6,542,840
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
Premiums:
  Group and individual life.......................  $20,376,696  $1,497,450  $18,879,246
  Accident and health.............................   63,696,935   1,374,451   62,322,484
                                                    -----------  ----------  -----------
Total premiums....................................  $84,073,631  $2,871,901  $81,201,730
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
1994
  Life insurance in force (000s)..................  $ 5,116,384  $  297,027  $ 4,819,357
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
Premiums:
  Group and individual life.......................  $20,508,492  $1,077,362  $19,431,130
  Accident and health.............................   72,835,490     210,931   72,624,559
                                                    -----------  ----------  -----------
Total premiums....................................  $93,343,982  $1,288,293  $92,055,689
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
1993
Life insurance in force (000s)....................  $ 4,903,885  $  328,733  $ 4,575,152
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
Premiums:
  Group and individual life.......................  $21,059,528  $1,517,582  $19,541,946
  Accident and health.............................   56,278,535     427,586   55,850,949
                                                    -----------  ----------  -----------
Total premiums....................................  $77,338,063  $1,945,168  $75,392,895
                                                    -----------  ----------  -----------
                                                    -----------  ----------  -----------
</TABLE>
 
8.  DIVIDEND RESTRICTIONS
The Company  is subject  to insurance  regulatory restrictions  that limit  cash
dividends  which  can be  paid from  the  Company to  its parent.  All dividends
require prior approval by the New York State Insurance Department.
 
9.  TRANSACTIONS WITH AFFILIATED COMPANIES
Affiliates of  the  Company  provide  services,  such  as  information  systems,
actuarial and investment management in return for payment representing the costs
incurred  for  such services.  In  1995, 1994,  and  1993, the  Company incurred
$1,581,000, $1,443,000, and $1,491,000, respectively, in service fees under  the
arrangements  with  the  affiliates.  In  1995,  the  Company  received  cash of
$7,000,000 representing additional paid-in capital from Fortis AMEV.
 
The Company participates  in the  Fortis, Inc.  noncontributory defined  benefit
pension  plan and a contributory profit  sharing plan covering substantially all
of its employees. Amounts  expensed under these  plans were $232,252,  $171,519,
and $109,328 in 1995, 1994, and 1993, respectively.
 
10. STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory-basis financial statements in accordance with
accounting   practices   prescribed   or  permitted   by   insurance  regulatory
authorities. Prescribed  statutory accounting  practices  include a  variety  of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well  as  state laws,  regulations and  general administrative  rules. Permitted
statutory  accounting  practices  encompass  all  accounting  practices  not  so
prescribed;  such  practices may  differ from  state to  state, may  differ from
company to company within  a state, and  may change in the  future. The NAIC  is
currently  in the  process of  recodifying statutory  accounting practices. This
project, which is expected to be completed in 1997, may result in changes to the
accounting  practices   that  insurance   enterprises  use   to  prepare   their
statutory-basis financial statements.
 
Insurance  enterprises are required by state  insurance departments to adhere to
minimum risk-based  capital  ("RBC") requirements  developed  by the  NAIC.  The
Company exceeds minimum RBC requirements.
 
                                      F-10
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
 
10. STATUTORY ACCOUNTING PRACTICES (CONTINUED)
Reconciliations  of net income or loss 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 (LOSS)              SHAREHOLDER'S EQUITY
                                                    -------------------------------------  ------------------------
                                                       1995         1994         1993         1995         1994
                                                    -----------  -----------  -----------  -----------  -----------
<S>                                                 <C>          <C>          <C>          <C>          <C>
Based on statutory accounting practices...........  $(1,627,624) $(2,004,993) $  (551,557) $27,773,005  $22,394,191
Deferred policy acquisition costs.................   (4,595,000)  (1,838,000)  (1,787,000)          --    4,595,000
Deferred and uncollected premiums.................           --     (100,000)     332,588      149,066      207,171
Property and equipment............................           --           --           --      583,613      766,547
Policy reserves...................................       68,018      (16,872)     (73,025)     182,546      114,530
Investment valuation difference...................           --           --           --    5,532,013   (4,858,463)
Realized gains (losses) on investments............    2,683,736   (1,060,352)   2,309,360           --           --
Amortization of goodwill..........................      (46,000)     (46,000)     (45,550)     600,000      646,000
Income taxes......................................      674,642    1,035,479      686,000    1,337,823    1,614,329
Deferred tax valuation allowance..................      177,708   (1,515,531)          --   (1,337,823)  (1,515,531)
Interest maintenance reserve ("IMR")..............           --           --           --    2,430,093    1,135,461
Amortization of IMR...............................     (432,656)    (451,286)    (324,446)          --           --
Asset valuation reserve...........................           --           --           --      881,150      753,187
Other.............................................      (62,667)     (37,985)      31,823      258,818      188,133
                                                    -----------  -----------  -----------  -----------  -----------
                                                    $(3,159,843) $(6,035,540) $   578,193  $38,390,304  $26,040,555
                                                    -----------  -----------  -----------  -----------  -----------
                                                    -----------  -----------  -----------  -----------  -----------
</TABLE>
 
11. COMMITMENTS AND CONTINGENCIES
The  Company is party to  various legal actions arising  in the normal course of
its operations. The Company  does not believe that  the eventual outcome of  any
such litigation will have a materially adverse effect on its financial condition
or future operations.
 
                                      F-11