<PAGE>   1

FIRST FORTIS

MASTERS+
VARIABLE
ANNUITY

Flexible
Premium Deferred
Combination Variable and
Fixed Annuity Contracts
PROSPECTUS DATED

May 1, 2000


[FORTIS SOLID PARTNERS, FLEXIBLE SOLUTIONS(SM) LOGO]

FIRST FORTIS LIFE INSURANCE COMPANY


<TABLE>
<S>                 <C>                           <C>
MAILING ADDRESS:    STREET ADDRESS:               PHONE: 1-800-745-8248
P.O. BOX 3249       308 MALTBIE STREET, SUITE
SYRACUSE, NY 13220  200
                    SYRACUSE, NY 13204
</TABLE>


This prospectus describes flexible premium deferred combination variable and
fixed annuity contracts issued by First Fortis Life Insurance Company ("First
Fortis").

These contracts allow you to accumulate funds on a tax-deferred basis. You may
elect a guaranteed interest accumulation option through a fixed account or a
variable return accumulation option through a separate account, or a combination
of these two options. Under the guaranteed interest accumulation option, you can
choose among ten different guarantee periods, each of which has its own interest
rate which is guaranteed for the entire guarantee period.


Under the variable return accumulation option, you can choose among the
following investment portfolios of Fortis Series Fund (those portfolios which
have a non-Fortis subadvisor include the name of the subadvisor at the beginning
of the portfolio name):



<TABLE>
<S>                                           <C>
Money Market Series                           T. RowePrice -- Blue Chip Stock Series
U.S. Government Securities Series             AIM -- Blue Chip Stock Series II
Diversified Income Series                     Lazard Freres -- International Stock
AIM -- Multisector Bond Series                Series
High Yield Series                             Dreyfus -- Mid Cap Stock Series
Morgan Stanley -- Global Asset Allocation     Berger -- Small Cap Value Series
Series                                        Global Growth Series
Asset Allocation Series                       MFS -- Global Equity Series
American Leaders Series                       Alliance -- Large Cap Growth Series
Value Series                                  MFS -- Investors Growth Series
MFS -- Capital Opportunities Series           Growth Stock Series
Growth & Income Series                        Aggressive Growth Series
Dreyfus -- S&P 500 Index Series
</TABLE>


The accompanying prospectus for these investment portfolios describes the
investment objectives, policies and risks of each of the portfolios.

This prospectus gives you information about the contracts that you should know
before investing. This prospectus must be accompanied by a current prospectus of
the available investment portfolios. These prospectuses should be read carefully
and kept for future reference.


A Statement of Additional Information, dated May 1, 2000, 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 23 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. THEY INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>   2

TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                PAGE
<S>                                                             <C>
Special Terms Used in this Prospectus.......................      3
Information Concerning Fees and Charges.....................      4
Summary of Contract Features................................      6
     - First Fortis Life Insurance Company..................      8
     - The Variable Account.................................      8
     - The Portfolios.......................................      8
The Fixed Account...........................................      9
     - Guaranteed Interest Rates/Guarantee Periods..........      9
     - Market Value Adjustment..............................      9
     - Investments by First Fortis..........................     10
Accumulation Period.........................................     11
     - Issuance of a Contract and Purchase Payments.........     11
     - Contract Value.......................................     11
     - Allocation of Purchase Payments and Contract Value...     12
     - Total and Partial Surrenders.........................     12
     - Telephone Transactions...............................     13
     - Benefit Payable on Death of Contract Owner or
      Annuitant.............................................     13
The Annuity Period..........................................     14
     - Annuity Commencement Date............................     14
     - Commencement of Annuity Payments.....................     14
     - Relationship Between Subaccount Investment
      Performance and Amount of Variable Annuity Payments...     14
     - Annuity Options......................................     15
     - Death of Annuitant or Other Payee....................     15
Charges and Deductions......................................     15
     - Premium Taxes........................................     15
     - Charges Against the Variable Account.................     15
     - Tax Charge...........................................     16
     - Surrender Charge.....................................     16
     - Miscellaneous........................................     16
     - Reduction of Charges.................................     16
General Provisions..........................................     16
     - The Contracts........................................     16
     - Postponement of Payment..............................     16
     - Misstatement of Age or Sex and Other Errors..........     17
     - Assignment...........................................     17
     - Beneficiary..........................................     17
     - Reports..............................................     17
Rights Reserved by First Fortis.............................     17
Distribution................................................     17
Federal Tax Matters.........................................     18
Further Information About First Fortis......................     20
     - General..............................................     20
     - Ownership of Securities..............................     20
     - Selected Financial Data..............................     21
Management's Discussion and Analysis of Financial Condition
  and Results of Operations.................................     21
Voting Privileges...........................................     22
Legal Matters...............................................     23
Other Information...........................................     23
Contents of Statement of Additional Information.............     23
First Fortis Financial Statements...........................    F-1
Appendix A--Sample Market Value Adjustment Calculations.....    A-1
Appendix B--Sample Death Benefit Calculations...............    B-1
Appendix C--Explanation of Expense Calculations.............    C-1
Appendix D--Pro Rata Adjustments............................    D-1
</TABLE>


THE CONTRACTS ARE NOT AVAILABLE IN ALL STATES. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE. FIRST FORTIS DOES NOT AUTHORIZE ANY INFORMATION OR
REPRESENTATION REGARDING THE OFFERING DESCRIBED IN THIS PROSPECTUS WHICH IS NOT
INCLUDED IN THIS PROSPECTUS, THE RELATED STATEMENT OF ADDITIONAL INFORMATION, OR
ANY SUPPLEMENTS THERETO OR IN ANY SUPPLEMENTAL SALES MATERIAL AUTHORIZED BY
FIRST FORTIS.
<PAGE>   3

SPECIAL TERMS USED IN THIS PROSPECTUS

Accumulation       The time period under a contract between the contract issue
Period             date and the annuity commencement date.

Accumulation Unit  A unit of measure used to calculate an owner's interest in
                   the Variable Account during the Accumulation Period.

Annuitant          A person during whose life annuity payments are to be made by
                   First Fortis under the contract. The Annuitant is the person
                   named in the application for the contract. If such person
                   dies before the annuity commencement date and there is an
                   additional annuitant named in the application, the additional
                   annuitant shall become the Annuitant. If there is no named
                   additional annuitant, or the additional annuitant has
                   predeceased the Annuitant who is named in the application,
                   the owner, if he or she is a natural person, shall become the
                   Annuitant.

Annuity Period     The time period following the Accumulation Period, during
                   which annuity payments are made by First Fortis.

Annuity Unit       A unit of measurement used to calculate variable annuity
                   payments.

Fixed Annuity      An annuity option under which First Fortis promises to pay
Option             the Annuitant or any other payee that you designate one or
                   more fixed payments.

Market Value       Positive or negative adjustment in fixed account value that
Adjustment         we make if such value is paid out more than fifteen days
                   before or after the end of a guarantee period in which it was
                   being held.

Non-Qualified      Contracts that do not qualify for the special federal income
Contracts          tax treatment applicable in connection with certain
                   retirement plans.

Qualified          Contracts that are qualified for the special federal income
Contracts          tax treatment applicable in connection with certain
                   retirement plans.

Valuation Date     All business days except, with respect to any subaccount,
                   days on which the related portfolio does not value its
                   shares. Generally, the portfolios value their shares on each
                   day the New York Stock Exchange is open.

Valuation Period   The period that starts at the close of regular trading on the
                   New York Stock Exchange on a Valuation Date and ends at the
                   close of regular trading on the exchange on the next
                   succeeding Valuation Date.

Variable Account   The segregated asset account referred to as Separate Account
                   A of First Fortis Life Insurance Company established to
                   receive and invest purchase payments under contracts.

Variable Annuity   An annuity option under which First Fortis promises to pay
Option             the Annuitant or any other payee chosen by you one or more
                   payments which vary in amount in accordance with the net
                   investment experience of the subaccounts selected by the
                   Annuitant.

                                        3
<PAGE>   4

INFORMATION CONCERNING FEES AND CHARGES

CONTRACT OWNER TRANSACTION CHARGES

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

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

<TABLE>
<S>  <C>                                                             <C>  <C>
     Other Surrender Fees........................................       0 %
     Exchange Fee................................................       0 %
ANNUAL CONTRACT ADMINISTRATION CHARGE............................      $0
VARIABLE ACCOUNT ANNUAL EXPENSES
  (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
     Mortality and Expense Risk Charge...........................    1.25%
     Variable Account Administrative Charge......................     .10%
     Total Variable Account Annual Expenses......................    1.35%
</TABLE>

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

MARKET VALUE ADJUSTMENT WITH RESPECT TO FIXED ACCOUNT

Surrenders and other withdrawals from the fixed account more than fifteen days
from the end of a guarantee period other than the one year guarantee period are
subject to a Market Value Adjustment. The Market Value Adjustment may increase
or reduce the fixed account value. We compute this adjustment according to a
formula that we describe in more detail under "Market Value Adjustment."

PORTFOLIO ANNUAL EXPENSES

<TABLE>
<CAPTION>
                                           U.S.                    MULTI               GLOBAL
                               MONEY    GOVERNMENT   DIVERSIFIED   SECTOR    HIGH      ASSET        ASSET      AMERICAN
                               MARKET   SECURITIES     INCOME       BOND    YIELD    ALLOCATION   ALLOCATION   LEADERS    VALUE
                               SERIES     SERIES       SERIES      SERIES   SERIES     SERIES       SERIES      SERIES    SERIES
                               ------   ----------   -----------   ------   ------   ----------   ----------   --------   ------
<S>                            <C>      <C>          <C>           <C>      <C>      <C>          <C>          <C>        <C>
Investment Advisory and
  Management Fee.............  0.30%      0.47%         0.47%      0.75%    0.50%      0.90%        0.47%       0.90%     0.70%
Other Expenses...............  0.05%      0.05%         0.07%      0.15%    0.07%      0.12%        0.05%       0.35%     0.08%
Total Series Fund Operating
  Expenses...................  0.35%      0.52%         0.54%      0.90%    0.57%      1.02%        0.52%       1.25%     0.78%

<CAPTION>

                                  CAPITAL      GROWTH &
                               OPPORTUNITIES    INCOME
                                  SERIES        SERIES
                               -------------   --------
<S>                            <C>             <C>
Investment Advisory and
  Management Fee.............      0.90%        0.63%
Other Expenses...............      0.35%        0.06%
Total Series Fund Operating
  Expenses...................      1.25%        0.69%
</TABLE>


<TABLE>
<CAPTION>
                                       BLUE      BLUE                       MID     SMALL                      LARGE
                            S&P 500    CHIP      CHIP                       CAP      CAP     GLOBAL   GLOBAL    CAP     INVESTORS
                             INDEX    STOCK      STOCK     INTERNATIONAL   STOCK    VALUE    GROWTH   EQUITY   GROWTH    GROWTH
                            SERIES    SERIES   SERIES II   STOCK SERIES    SERIES   SERIES   SERIES   SERIES   SERIES    SERIES
                            -------   ------   ---------   -------------   ------   ------   ------   ------   ------   ---------
<S>                         <C>       <C>      <C>         <C>             <C>      <C>      <C>      <C>      <C>      <C>
Investment Advisory and
  Management Fee..........   0.40%    0.87%      0.95%         0.84%       0.90%    0.90%    0.70%    1.00%    0.90%      0.90%
Other Expenses............   0.06%    0.05%      0.35%         0.10%       0.28%    0.14%    0.07%    0.35%    0.07%      0.35%
Total Series Fund
  Operating Expenses......   0.46%    0.92%      1.30%         0.94%       1.18%    1.04%    0.77%    1.35%    0.97%      1.25%

<CAPTION>

                            GROWTH   AGGRESSIVE
                            STOCK      GROWTH
                            SERIES     SERIES
                            ------   ----------
<S>                         <C>      <C>
Investment Advisory and
  Management Fee..........  0.61%      0.66%
Other Expenses............  0.05%      0.06%
Total Series Fund
  Operating Expenses......  0.66%      0.72%
</TABLE>


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

(a) As a percentage of portfolio average net assets based on 1999 historical
    data, except that for American Leaders, Capital Opportunities, Blue Chip
    Stock Series II, Global Equity and Investors Growth, these amounts are based
    upon estimates for the current fiscal year.


                                        4
<PAGE>   5

EXAMPLES*

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


<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO:                   1 YEAR    3 YEARS    5 YEARS    10 YEARS
---------------------------------------------                   ------    -------    -------    --------
<S>                                                             <C>       <C>        <C>        <C>
Money Market................................................      80        107        136        198
U.S. Government Securities..................................      82        112        145        216
Diversified Income..........................................      82        112        146        218
Multisector Bond............................................      86        123        164        255
High Yield..................................................      82        113        147        221
Global Asset Allocation.....................................      87        127        170        267
Asset Allocation............................................      82        112        145        216
American Leaders............................................      89        134        181        290
Value.......................................................      84        120        158        243
Capital Opportunities.......................................      89        134        181        290
Growth & Income.............................................      83        117        153        233
S&P 500 Index...............................................      81        110        141        209
Blue Chip Stock.............................................      86        124        165        257
Blue Chip Stock II..........................................      90        135        184        295
International Stock.........................................      86        125        166        259
MidCap Stock Series.........................................      88        132        178        283
Small Cap Value Series......................................      87        128        171        269
Global Growth...............................................      84        119        157        242
Global Equity...............................................      90        137        186        300
Large Cap Growth Series.....................................      86        125        167        262
Investors Growth Series.....................................      89        134        181        290
Growth Stock................................................      83        116        152        230
Aggressive Growth...........................................      84        118        155        237
</TABLE>


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


<TABLE>
<CAPTION>
IF ALL AMOUNTS ARE INVESTED IN ONE PORTFOLIO:                   1 YEAR    3 YEARS    5 YEARS    10 YEARS
---------------------------------------------                   ------    -------    -------    --------
<S>                                                             <C>       <C>        <C>        <C>
Money Market................................................      17        53          91        198
U.S. Government Securities..................................      19        58         100        216
Diversified Income..........................................      19        58         101        218
Multisector Bond............................................      23        69         119        255
High Yield..................................................      19        59         102        221
Global Asset Allocation.....................................      24        73         125        267
Asset Allocation............................................      19        58         100        216
American Leaders............................................      26        80         136        290
Value.......................................................      21        66         113        243
Capital Opportunities.......................................      26        80         136        290
Growth & Income.............................................      20        63         108        233
S&P 500 Index...............................................      18        56          96        209
Blue Chip Stock.............................................      23        70         120        257
Blue Chip Stock II..........................................      27        81         139        295
International Stock.........................................      23        71         121        259
MidCap Stock Series.........................................      25        78         133        283
Small Cap Value Series......................................      24        74         126        269
Global Growth...............................................      21        65         112        242
Global Equity...............................................      27        83         141        300
Large Cap Growth Series.....................................      23        71         122        262
Investors Growth Series.....................................      26        80         136        290
Growth Stock................................................      20        62         107        230
Aggressive Growth...........................................      21        64         110        237
</TABLE>


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

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

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

We have included the foregoing tables and examples to help you understand the
transaction and operating expenses we directly or indirectly impose under the
contracts and under the portfolios. We will also deduct amounts for state
premium taxes or similar assessments where these deductions are applicable.

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

                                        5
<PAGE>   6

SUMMARY OF CONTRACT FEATURES

The following summary should be read in conjunction with the detailed
information in this prospectus.

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

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

Depending on the state that you live in, the contract that is issued to you may
be as a part of a group contract or as an individual contract. Participation in
a group contract will be evidenced by the issuance of a certificate showing your
interest under the group contract. In other states, an individual contract will
be issued to you. Both the certificate and the contract are referred to as a
"contract" in this prospectus.

FREE LOOK

You have the right to examine a contract during a "free look" period after you
receive the contract and return it for a refund of the amount of the then
current contract value. However, in certain states where required by state law
the refund will be in the amount of all purchase payments that have been made,
without interest or appreciation or depreciation. The "free look' period is
generally 10 days unless a longer time is specified on the face page of your
contract.

PURCHASE PAYMENTS

The initial purchase payment under a contract must be at least $5,000 ($2,000
for a contract which is part of a qualified plan). Additional purchase payments
under a contract must be at least $50. See "Issuance of a Contract and Purchase
Payments."

ALLOCATION OF PURCHASE PAYMENTS

On the date that the contract is issued, the initial purchase payment is
allocated, as specified by you in the contract application, among one or more of
the portfolios, or to one or more of the guarantee periods in the fixed account,
or to a combination thereof. Subsequent purchase payments are allocated in the
same way, or pursuant to different allocation percentages that you may request
in writing.

VARIABLE ACCOUNT INVESTMENT OPTIONS

Each of the subaccounts of the Variable Account invests in shares of a
corresponding portfolio. Contract value in each of the subaccounts of the
Variable Account will vary to reflect the investment experience of each of the
corresponding portfolios, as well as deductions for certain charges.

Each portfolio has a separate and distinct investment objective and is managed
by Fortis Advisers, Inc or a subadviser of Fortis Advisers, Inc. A full
description of the portfolios and their investment objectives, policies, risks
and expenses can be found in the current prospectus for the portfolios, which
accompanies this prospectus, and the portfolios' Statement of Additional
Information which is available upon request from First Fortis at the address and
phone number on the cover of this prospectus.

FIXED ACCOUNT INVESTMENT OPTIONS

Any amount allocated by the owner to the fixed account earns a guaranteed
interest rate. The level of the guaranteed interest rate depends on the length
of the guarantee period selected by the owner. We currently make available ten
different guarantee periods, ranging from one to ten years.

If amounts are transferred, surrendered or otherwise paid out more than fifteen
days before or after the end of the applicable guarantee period other than the
one year guarantee period, a Market Value Adjustment will be applied to increase
or decrease the amount of fixed account value that is paid out. Accordingly, the
Market Value Adjustment can result in gains or losses to you. There is no Market
Value Adjustment for transfers or surrenders from the one-year guarantee period
of the fixed account.

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

TRANSFERS

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

TOTAL OR PARTIAL SURRENDERS

Subject to certain conditions, all or part of the contract value may be
surrendered by you before the earlier of (1) the annuity commencement date, or
(2) if the owner is a non-natural person the Annuitant's death. Amounts
surrendered may be subject to a surrender charge and, in addition, amounts
surrendered from the fixed account may be subject to a Market Value Adjustment.
See "Total and Partial Surrenders," "Surrender Charge" and "Market Value
Adjustment." Particular attention should be paid to the tax implications of any
surrender, including possible penalties for premature distributions. See
"Federal Tax Matters."

ANNUITY PAYMENTS

The contract provides several types of annuity benefits to you or other persons
you properly designate to receive such payments, including Fixed and Variable
Annuity Options. The owner has considerable flexibility in choosing the annuity
commencement date. However, the tax implications of an annuity commencement date
must be carefully considered, including the possibility of penalties for
commencing benefits either too soon or too late. See "Annuity Commencement
Date," "Annuity Options" and "Federal Tax Matters" in this prospectus and
"Taxation Under

                                        6
<PAGE>   7

Certain Retirement Plans" in the Statement of Additional Information.

DEATH BENEFIT

In the event of the death of the owner, or the Annuitant if the owner is a
non-natural person, prior to the annuity commencement date, a death benefit is
payable. See "Benefit Payable on Death of Contract Owner or Annuitant."

LIMITATIONS IMPOSED BY RETIREMENT PLANS AND EMPLOYERS

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

The record owner of contracts may be an employer (or the employer's designee) in
connection with an employee benefit plan. In the latter cases, certain rights
that an owner otherwise would have under a contract may be reserved instead by
the employer.

TAX IMPLICATIONS

The tax implications for you 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 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

The information presented below reflects the Accumulation Unit information for
subaccounts of the Variable Account through December 31, 1998. Accumulation
Units have been rounded to the nearest whole unit.

<TABLE>
<CAPTION>
                                                                                                GLOBAL
                                      MONEY    U.S. GOV'T   DIVERSIFIED   GLOBAL     HIGH       ASSET        ASSET
                                     MARKET    SECURITIES     INCOME       BOND      YIELD    ALLOCATION   ALLOCATION    VALUE
                                     ------    ----------   -----------   ------     -----    ----------   ----------    -----
<S>                                  <C>       <C>          <C>           <C>       <C>       <C>          <C>          <C>
December 31, 1999
  Accumulation Units in Force.....   797,681     71,855       756,563      27,683   143,241    108,668      797,681      179,372
  Accumulation Unit Value.........   $1.587     $17.823       $ 1.998     $12.092   $12.799    $16.150      $ 3.923     $ 15.875
December 31, 1998
  Accumulation Units in Force.....   318,605     71,200       597,806      14,947   132,636     91,185      867,243      160,886
  Accumulation Unit Value.........   $1.532     $18.421       $ 2.039     $13.254   $12.723    $16.513      $ 3.326     $ 14.768
December 31, 1997
  Accumulation Units in Force.....   170,961     12,970       148,631       5,883    47,286    542,582       25,317       55,753
  Accumulation Unit Value.........   $1.474     $17.149       $ 1.963     $11.837   $12.917    $ 2.809      $14.433     $ 13.651
December 31, 1996
  Accumulation Units in Force.....   31,800         427        20,649       1,347     9,846      7,591       63,004       15,690
  Accumulation Unit Value.........   $1.418     $15.935       $ 1.801     $11.961   $11.928    $12.884      $ 2.368     $ 11.048
May 1, 1996*
  Accumulation Unit Value.........   $10.000    $10.000       $10.000     $10.000   $10.000    $10.000      $10.000     $ 10.000

<CAPTION>

                                    GROWTH &
                                     INCOME
                                    --------
<S>                                 <C>
December 31, 1999
  Accumulation Units in Force.....  404,608
  Accumulation Unit Value.........  $23.775
December 31, 1998
  Accumulation Units in Force.....  326,229
  Accumulation Unit Value.........  $21.767
December 31, 1997
  Accumulation Units in Force.....  137,613
  Accumulation Unit Value.........  $19.487
December 31, 1996
  Accumulation Units in Force.....   14,412
  Accumulation Unit Value.........  $15.468
May 1, 1996*
  Accumulation Unit Value.........  $10.000
</TABLE>


                                        7
<PAGE>   8

<TABLE>
<CAPTION>
                                                                                                                         LARGE
                                              BLUE      INTERNATIONAL    GLOBAL     GROWTH     AGGRESSIVE    MID CAP      CAP
                                  S&P 500     CHIP          STOCK        GROWTH      STOCK       GROWTH       STOCK     GROWTH
                                  -------     ----      -------------    ------     ------     ----------    -------    ------
<S>                               <C>        <C>        <C>              <C>        <C>        <C>           <C>        <C>
December 31, 1999
  Accumulation Units in
    Force.....................    559,635    329,701       143,002        76,906    524,451     109,482      35,840     247,782
  Accumulation Unit Value.....    $22.189    $21.571       $19.711       $33.343    $5.923      $32.680      $10.538    $14.754
December 31, 1998
  Accumulation Units in
    Force.....................    385,486    270,261       125,894        75,340    475,115     105,783      13,231     90,599
  Accumulation Unit Value.....    $18.689    $18.238       $16.113       $21.433    $3.870      $15.829      $9.625     $11.755
December 31, 1997
  Accumulation Units in
    Force.....................    96,726      74,226        36,305        47,369    240,842      47,583          --         --
  Accumulation Unit Value.....    $14.786    $14.429       $14.021       $19.507    $3.296      $13.241          --         --
December 31, 1996
  Accumulation Units in
    Force.....................     5,144       9,457        10,999         6,899    70,686       14,449          --         --
  Accumulation Unit Value.....    $11.326    $11.520       $12.690       $18.510    $2.971      $13.232          --         --
May 1, 1996*
  Accumulation Unit Value.....    $10.000    $10.000       $10.000       $10.000    $10.000     $10.000          --         --

<CAPTION>

                                SMALL CAP
                                  VALUE
                                ---------
<S>                             <C>
December 31, 1999
  Accumulation Units in
    Force.....................    63,233
  Accumulation Unit Value.....   $10.659
December 31, 1998
  Accumulation Units in
    Force.....................    23,823
  Accumulation Unit Value.....   $ 9.367
December 31, 1997
  Accumulation Units in
    Force.....................        --
  Accumulation Unit Value.....        --
December 31, 1996
  Accumulation Units in
    Force.....................        --
  Accumulation Unit Value.....        --
May 1, 1996*
  Accumulation Unit Value.....        --
</TABLE>


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

* Accumulation Unit value at date of initial registration effectiveness.

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

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

Financial information concerning 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 is the issuer of the contracts. At the end
of 1999, First Fortis had approximately $9 billion of total life insurance in
force. First Fortis is a New York corporation founded in 1971. It is qualified
to sell life insurance and annuity contracts in New York. First Fortis is a
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis (NL)N.V. and 50% by Fortis (B). Fortis, Inc. manages the United States
operations for these two companies.


First Fortis is affiliated with the Fortis Financial Group. This group is a
joint effort by Fortis Benefits Insurance Company, Fortis Advisers, Inc., Fortis
Investors, Inc., and Fortis Insurance Company to offer financial products
through the management, marketing and servicing of mutual funds, annuities, life
insurance and disability income products.


Fortis (NL)N.V. is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
(B) is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis (NL)N.V. and
Fortis (B) have merged their operating companies under the trade name of Fortis.
The Fortis group of companies is active in insurance, banking and financial
services, and real estate development in The Netherlands, Belgium, the United
States, Western Europe, and the Pacific Rim. The Fortis group of companies had
approximately $XXX billion in assets at the end of 1999.


All of the guarantees and commitments under the contracts are general
obligations of First Fortis, regardless of whether you have allocated the
contract value to the Variable 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 is a segregated investment account of First Fortis. First
Fortis established Variable Account A under New York insurance law as of October
1, 1993. The Variable Account is an integral part of First Fortis. However, 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 these 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.

The Variable Account has subaccounts. The assets in each subaccount are invested
exclusively in one of the portfolios listed on the first page of the prospectus,
each of which represents a separate investment portfolio. 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. We may add or
eliminate new subaccounts as new portfolios are added or eliminated.

THE PORTFOLIOS

You may choose from among a number of different portfolios. Each portfolio is a
mutual fund available for purchase only as a funding vehicle for benefits under
variable life insurance and variable annuity products. These variable life
insurance and variable annuity products are issued by First Fortis and by other
life insurance companies. Each portfolio corresponds to one of the subaccounts
of the Variable Account. The assets of each portfolio are separate from the
assets of other portfolios. In addition, each

                                        8
<PAGE>   9

portfolio operates as a separate investment portfolio whose investment
performance has no effect on the investment performance of any other portfolio.
We offer more detailed information for each investment portfolio. This
information includes the investment policies, investment restrictions, charges,
and risks attendant to investing in each portfolio. This information also
includes other aspects of each portfolio's operations. You may find this
information in the current prospectus for each portfolio. These portfolio
prospectuses must accompany this prospectus, and you should read them in
conjunction with it. You may obtain a copy of each prospectus from us, free of
charge, by calling 1-800-800-2000, ext. 3057, or by writing P.O. Box 64272, St.
Paul, Minnesota 55164.

As noted, the investment portfolios may be available to registered separate
accounts of other participating insurance companies. These portfolios may also
be available to the Variable Account and other separate accounts of First
Fortis. Although First Fortis does not anticipate any disadvantages to this,
there is a possibility that a material conflict may arise between the interest
of the Variable Account and one or more of the other separate accounts
participating in the portfolios. For example, a conflict may occur due to (1) a
change in law affecting the operations of variable life and variable annuity
separate accounts, (2) differences in the voting instructions of the contract
owners and those of other companies, or (3) some other reason. In the event of
conflict, First Fortis will take any steps necessary to protect the contract
owners and variable annuity payees.

First Fortis purchases and redeems portfolios' shares for the Variable Account
at their net asset value without any sales or redemption charges. We
automatically reinvest dividends or capital gain distributions attributable to
contracts in shares of the portfolio from which they are received at the
portfolio's net asset value on the date paid. These dividends and distributions
will have the effect of reducing the new asset value of each share of the
corresponding portfolio and increasing, by an equivalent value, the number of
shares outstanding of the portfolio. However, the value of your interest in the
corresponding subaccount will not change as a result of any such dividends and
distributions.

The portfolios available for investment by the Variable Account are listed on
the cover page of this prospectus.

THE FIXED ACCOUNT

GUARANTEED INTEREST RATES/GUARANTEE PERIODS

Any amount you allocate to the fixed account earns a guaranteed interest rate
beginning on the date you make the allocation. The guaranteed interest rate
continues for the number of years you select, up to a maximum of ten years. At
the end of your guarantee period, your contract value, including accrued
interest, will be allocated to a new guarantee period of equal length. However,
you may reallocate your contract value to a different guarantee period (or
periods) or to one (or more) of the subaccounts of the Variable Account. If you
decide to reallocate your contract value, you must do so by sending us a written
request. We must receive your written request at least three business days
before the end of your guarantee period. The first day of your new guarantee
period (or other reallocation) will be the day after the end of your previous
guarantee period. We will notify you at least 45 days and not more than 60 days
before the end of your guarantee period.

We currently offer ten different guarantee periods. These guarantee periods
range in length from one to ten years. Each guarantee period has its own
guaranteed interest rate, which may differ from those for other guarantee
periods. From time to time we will, at our discretion, change the guaranteed
interest rate for future guarantee periods. These changes will not affect the
guaranteed interest rates we are paying on current guarantee periods. Please
note, when you allocate or transfer an amount to a guarantee period, a new
guarantee period begins running with respect to that amount. Therefore, the
amount you allocate will earn a guaranteed interest rate that will not change
until the end of that period. In addition, the guaranteed interest rate will
never be less than an effective annual rate of 3%.

We declare the guaranteed interest rates from time to time as market conditions
dictate. We advise you of the guaranteed interest rate for a chosen guarantee
period at the time we receive a purchase payment from you, or at the time we
execute a transfer you have requested , or at the time a guarantee period is
renewed.

We do not have a specific formula for establishing the guaranteed interest rates
for the guarantee periods. Guaranteed interest rates may be influenced by the
available interest rates on the investments we acquire with the amounts you
allocate for a particular guarantee period. Guaranteed interest rates do not
necessarily correspond to the available interest rates on the investments we
acquire with the amounts you allocate for a particular guarantee period. See
"Investments by First Fortis". In addition, when we determine guaranteed
interest rates, we may consider: (1) the duration of a guarantee period, (2)
regulatory and tax requirements, (3) sales and administrative expenses we bear,
(4) risks we assume, (5) our profitability objectives, and (6) general economic
trends.

FIRST FORTIS' MANAGEMENT MAKES THE FINAL DETERMINATION OF THE GUARANTEED
INTEREST RATES TO BE DECLARED. WE CANNOT PREDICT OR ASSURE THE LEVEL OF ANY
FUTURE GUARANTEED INTEREST RATES IN EXCESS OF AN EFFECTIVE ANNUAL RATE OF 3%.

You may obtain information concerning the guaranteed interest rates that apply
to the various guarantee periods. You may obtain this information from our home
office or from your sales representative at any time.

MARKET VALUE ADJUSTMENT

Except as described below, we will apply a Market Value Adjustment to any fixed
account value that is:

     - surrendered,

     - transferred, or

     - otherwise paid out

Before the end of the guarantee period in which it is being held.

For example, we will apply a Market Value Adjustment to fixed account value that
we pay:

     - as an amount applied to an annuity option, and

     - as an amount paid as a single sum in lieu of an annuity.

The Market Value Adjustment we apply may increase or decrease the fixed account
value that is withdrawn or transferred. We determine whether the fixed account
value is increased or de-

                                        9
<PAGE>   10

creased by performing a comparison of two guaranteed interest rates.

The first rate we compare is the guaranteed interest rate for the fixed account
value that is withdrawn or transferred from the existing guarantee period. The
second rate we compare is the guaranteed interest rate we are then offering for
new guarantee periods with durations equal to the number of years remaining in
the existing guarantee period. After comparing these two rates, we determine
whether the fixed account value is increased or decreased as follows:

     - If the first rate exceeds the second rate by more than 1/4%, the Market
       Value Adjustment produces an increase in the fixed account value
       withdrawn or transferred.

     - If the first rate does not exceed the second rate by at least 1/4%, the
       Market Value Adjustment produces a decrease in the fixed account value
       withdrawn or transferred.

We will determine the Market Value Adjustment by multiplying the fixed account
value that is withdrawn or transferred from the existing guarantee period (after
deduction of any applicable surrender charge) by the following factor:

<TABLE>
         <S>  <C>            <C>  <C>     <C>
                  1 + I           n/12
             (-------------)              - 1
              1 + J + .0025
</TABLE>

where,

     - I is the guaranteed interest rate we credit to the fixed account value
       that is withdrawn or transferred from the existing guarantee period.

     - J is the guaranteed interest rate we are then offering for new guarantee
       periods with durations equal to the number of years remaining in the
       existing guarantee period (rounded up to the next higher number of
       years).

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

However, if we stop offering a guaranteed interest rate for a guarantee period,
we determine I and J with a different method. In these cases, we determine I and
J by using the "bond equivalent yield" on applicable U.S. Treasury Bills or U.S.
Treasury Notes. We determine this yield on either the 1st or the 15th of the
applicable month. Therefore, if we stop offering a guaranteed interest rate for
a guarantee period, I and J will be as follows:

     - I is the bond equivalent yield that was available on applicable U.S.
       Treasury Bills or U.S. Treasury Notes at the beginning of the existing
       guarantee period. The applicable U.S. Treasury Bills or U.S. Treasury
       Notes will be those that have maturities equal in length to that of the
       existing guarantee period.

     - J is the bond equivalent yield on applicable U.S. Treasury Bills or U.S.
       Treasury Notes that is available at the time we calculate the Market
       Value Adjustment. The applicable U.S. Treasury Bills or U.S. Treasury
       Notes will be those that have maturities equal in length to the length of
       time remaining in the existing guarantee period.

You will find sample Market Value Adjustment calculations in Appendix A.

We do not apply a Market Value Adjustment to withdrawals and transfers of fixed
account value under four exceptions. We describe these exceptions below.

(1) We will not apply a Market Value Adjustment to fixed account value that we
    pay out as a death benefit pursuant to a contract.

(2) We will not apply a Market Value Adjustment to fixed account value that is
    withdrawn or transferred from the one-year guarantee period.

(3) We will not apply a Market Value Adjustment to fixed account value that we
    pay out during a 30 day period that:

     - Begins 15 days before the end date of the guarantee period in which the
       fixed account value was being held,

     and that:

     - Ends 15 days after the end date of the guarantee period in which the
       fixed account value was being held.

(4) We will not apply a Market Value Adjustment to fixed account value that is
    withdrawn or transferred from a guarantee period on a periodic, automatic
    basis. This exception only applies to such withdrawals or transfers under a
    formal First Fortis program for the withdrawal or transfer of fixed account
    value.

We may impose conditions and limitations on any formal First Fortis program for
the withdrawal or transfer of fixed account value. Ask your First Fortis
representative about the availability of such a program in your state. In
addition, if such a program is available in your state, your First Fortis
representative can inform you about the conditions and limitations that may
apply to that program.

INVESTMENTS BY FIRST FORTIS

First Fortis' legal obligations with respect to the fixed account are supported
by our general account assets. These general account assets also support our
obligations under other insurance and annuity contracts. Investments purchased
with amounts allocated to the fixed account are the property of First Fortis,
and you have no legal rights in such investments. Subject to applicable law, we
have sole discretion over the investment of assets in our general account and in
the fixed account. Neither our general account nor the fixed account is subject
to registration under the Investment Company Act of 1940.

We will invest amounts in our general account, and amounts in the fixed account,
in compliance with applicable state insurance laws and regulations concerning
the nature and quality of investments for the general account. Within specified
limits and subject to certain standards and limitations, these laws generally
permit investment in:

     - federal, state and municipal obligations,

     - preferred and common stocks,

     - corporate bonds,

     - real estate mortgages,

     - real estate, and

                                       10
<PAGE>   11

     - certain other investments.

See "First Fortis' Financial Statements" for information on our investments.
Investment management for amounts in our general account and in the fixed
account is provided to us by Fortis Advisors, Inc.

When we establish guaranteed interest rates, we will consider the available
return on the instruments in which we invest amounts allocated to the fixed
account. However, this return is only one of many factors we consider when we
establish the guaranteed interest rates. See "Guaranteed Interest
Rates/Guarantee Periods".

Generally, we expect to invest amounts allocated to the fixed account in debt
instruments. We expect that these debt instruments will approximately match our
liabilities with regard to the guarantee periods. We also expect that these debt
instruments will primarily include:

(1) securities issued by the United States Government or its agencies or
    instrumentalities. These securities may or may not be guaranteed by the
    United States Government;

(2) debt securities that, at the time of purchase, have an investment grade
    within the four highest grades assigned by Moody's Investors Services, Inc.
    ("Moody's"), Standard & Poor's Corporation ("Standard & Poor's"), or any
    other nationally recognized rating service. Moody's four highest grades are:
    Aaa, Aa, A, and Baa. Standard & Poor's four highest grades are: AAA, AA, A,
    and BBB;

(3) other debt instruments including, but not limited to, issues of, or
    guaranteed by, banks or bank holding companies and corporations. Although
    not rated by Moody's or Standard & Poor's, we deem these obligations to have
    an investment quality comparable to securities that may be purchased as
    stated above;

(4) other evidences of indebtedness secured by mortgages or deeds of trust
    representing liens upon real estate.

Except as required by applicable state insurance laws and regulations, we are
not obligated to invest amounts allocated to the fixed account according to any
particular strategy, See "Regulation and Reserves".

ACCUMULATION PERIOD

ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS

We reserve the right to reject any application for a contract for any reason. If
we accept your application in the form received, we will credit the initial
purchase payment within two Valuation Dates after the later of (1) receipt of
the application or (2) receipt of the initial purchase payment at our home
office. If we cannot apply the initial purchase payment within five Valuation
Dates after receipt because the application or other issuing instructions are
incomplete, we will return the initial purchase payment unless you consent to
our retaining the initial purchase payment and applying it as of the end of the
Valuation Period in which the necessary requirements are fulfilled. Regardless
of your consent, if the initial purchase payment still cannot be credited within
thirty Valuation Dates after receipt because the application or issuing
instructions are incomplete, the initial purchase payment will be returned to
you. The initial purchase payment must be at least $5,000 ($2,000 for a contract
issued pursuant to a qualified plan).

The date that we apply the initial purchase payment to the purchase of the
contract is also the contract issue date. The contract issue date is the date
used to determine contract years, regardless of when we deliver the contract.
Our crediting of investment experience in the Variable Account, or a fixed rate
of return in the fixed account, generally begins as of the contract issue date.

We will accept additional purchase payments at any time after the contract issue
date and prior to the annuity commencement date, as long as the Annuitant is
living. You must transmit purchase payments (together with any required
information identifying the proper contracts and accounts to be credited with
purchase payments) to our home office. We apply additional purchase payments to
the contract, and add to the contract value as of the end of the Valuation
Period in which we receive the payments.

Each additional purchase payment under a contract must be at least $50. The
total of all purchase payments for all First Fortis annuities having the same
owner, or annuitant, may not exceed $1 million (not more than $500,000 allocated
to the fixed account) without our prior approval. We reserve the right to modify
this limitation at any time.

You may make purchase payments in excess of the initial minimum by monthly draft
against a bank account if you have completed and returned to us a special
authorization form. You may get the form from your sales representative or from
our home office. We can also arrange for you to make purchase payments by wire
transfer, payroll deduction, military allotment, direct deposit and billing.
Purchase payments by check should be made payable to Fortis Fortis Life
Insurance Company.

If the contract value is less than $1,000, we may cancel the contract on any
Valuation Date. We will notify you of our intention to cancel the contract at
least 90 days in advance of the cancellation date. If we do cancel your
contract, we will pay you the full contract value.

CONTRACT VALUE

Contract value is the total of any Variable Account value in all the subaccounts
of the Variable Account, plus any fixed account value in all the guarantee
periods.

The contract does not guarantee a minimum Variable Account value. You bear the
entire investment risk for the contract value that you allocate to the Variable
Account.

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

                                       11
<PAGE>   12

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

     - Accumulation Units purchased at the time that any purchase payments or
       transferred amounts are allocated to the subaccount; less

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

     - Accumulation Units redeemed to pay charges under the contract.

Net Investment Factor. The net investment factor for a subaccount is determined
by dividing (1) the net asset value per share of the portfolio shares held by
the subaccount, determined at the end of the current Valuation Period, plus the
per share amount of any dividend or capital gains distribution made with respect
to the portfolio shares held by the subaccount during the current Valuation
Period, minus a per share charge for the increase, plus a per share credit for
the decrease, in any income taxes assessed which we determine to have resulted
from the investment operation of the subaccount or any other taxes which are
attributable to this contract, by (2) the net asset value per share of the
portfolio shares held in the subaccount as determined at the end of the previous
Valuation Period, and subtracting from that result a factor representing the
mortality risk, expense risk and administrative expense charge.

If a subaccount's net investment factor is greater than one, the subaccount's
Accumulation Unit value has increased. If a subaccount's net investment factor
is less than one, the subaccount's Accumulation Unit value has decreased.

Determination of Fixed Account Value. A contract's fixed account value is
guaranteed by First Fortis. Therefore, we bear the investment risk with respect
to amounts allocated to the fixed account, except to the extent that (1) we may
vary the guaranteed interest rate for future guarantee periods (subject to the
3% effective annual minimum) and (2) the Market Value Adjustment imposes
investment risks on you.

The contract's fixed account value on any Valuation Date is the sum of its fixed
account values in each guarantee period on that date. The fixed account value in
a guarantee period is equal to the following amounts, in each case increased by
accrued interest at the applicable guaranteed interest rate:

     - The amount of purchase payments or transferred amounts allocated to the
       guarantee period; less

     - The amount of any transfers or surrenders out of the guarantee period.

ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE

Allocation of Purchase Payments. In your application for a contract, you may
allocate purchase payments, or portions of payments, to the:

     - available subaccounts of the Variable Account, or

     - to the guarantee periods in the fixed account, or

     - to a combination of the two previous options.

Percentages must be in whole numbers and the total allocation must equal 100%.
The percentage allocations for future purchase payments may be changed, without
charge, at any time by sending a written request to First Fortis' home office.
Changes in the allocation of future purchase payments will be effective on the
date we receive your written request.

Transfers. You may transfer contract value:

     - from one available subaccount to another available subaccount, or

     - from one available subaccount to the fixed account, or

     - from one guarantee period to another guarantee period, or

     - from one guarantee period to an available subaccount

You must request transfers by (1) a written request to First Fortis' home
office, or by (2) a telephone transfer as described below. We do not charge for
any transfer. However, transfers from a guarantee period, other than the
one-year guarantee period, that are (1) more than 15 days before or 15 days
after the expiration of the existing guarantee period, or are (2) not a part of
a formal First Fortis program for the transfer of fixed account value may be
subject to a Market Value Adjustment. See "Market Value Adjustment".

The minimum transfer from a subaccount or guarantee period is the lesser of:

     - $1,000, or

     - all of the contract value in the subaccount or guarantee period.

However, we may permit a continuing request for transfers of lesser specified
amounts automatically on a periodic basis. Where you make all your transfer
requests at the same time, as part of one request, we will count all transfers
between and among the subaccounts of the Variable Account and the fixed account
as one transfer. We will execute the transfers, and determine all values in
connection with the transfers, at of the end of the Valuation Period in which we
receive the transfer request. The amount of any positive or negative Market
Value Adjustment will be added to or deducted from the transferred amount.

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

TOTAL AND PARTIAL SURRENDERS

Total Surrenders. You may surrender all of the cash surrender value at any time
during the life of the Annuitant and prior to the annuity commencement date. If
you choose to make a total surrender, you must do so by written request sent to
our home office. We reserve the right to require that the contract be returned
to us prior to making payment, although this will not affect our determination
of the amount of the cash surrender value. Cash surrender value is:

     - the contract value at the end of the Valuation Period during which we
       receive the written request for the total surrender at our home office,
       less

     - any applicable surrender charge, and

     - after we have applied any Market Value Adjustment.

                                       12
<PAGE>   13

See "Surrender Charge" and "Market Value Adjustment".

We must receive written consent of all collateral assignees and irrevocable
beneficiaries prior to any total surrender. We will generally pay surrenders
from the Variable Account within seven days of the date of receipt by our home
office of the written request. However, we may postpone payments in certain
circumstances. See "Postponement of Payment".

The amount we pay upon total surrender of the cash surrender value (taking into
account any prior partial surrenders) may be more or less than the total
purchase payments you made. After a surrender of the cash surrender value or at
any time the contract value is zero, all rights of the owner, Annuitant, or any
other person will terminate.

Partial Surrenders. At any time during the life of the Annuitant and prior to
the annuity commencement date, you may surrender a portion of the fixed account
and/or the Variable Account. You must request partial surrender by a written
request sent to First Fortis' home office. We will not accept a partial
surrender request from you unless the net proceeds payable to you, as a result
of the request, are at least $1,000. We will surrender the entire cash surrender
value under the contract if the total contract value in both the Variable
Account and fixed account would be less than $1,000 after the partial surrender.

You should specify the subaccounts of the Variable Account or guarantee periods
of the fixed account that you wish to partially surrender. If you do not
specify, we take the partial surrender from the subaccounts and from the
guarantee periods of the fixed account on a pro rata basis.


We will surrender Accumulation Units from the Variable Account and/ or dollar
amounts from the fixed account so that the total amount of the partial surrender
equals the dollar amount of the partial surrender request. We will reduce the
partial surrender by the amount of any applicable surrender charge. In addition,
if the surrender is from a guarantee period other than the one-year guarantee
period, we will reduce the amount payable to you by any negative Market Value
Adjustment, or we will increase the amount payable to you by any positive Market
Value Adjustment unless the surrender is (1) within 15 days before or 15 days
after the expiration of a guarantee period, or (2) is a part of a formal First
Fortis program for the transfer or withdrawal of fixed account value. The
partial surrender will be effective at the end of the Valuation Period in which
we receive the written request for partial surrender at our home office.
Payments will generally be made within seven days of the effective date of such
request, although certain delays are permitted. See "Postponement of Payment".


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

TELEPHONE TRANSACTIONS

You or your representative may make certain requests under the contract by
telephone if we have a written telephone authorization on file. These include
requests for (1) transfers, (2) withdrawals, and (3) changes in purchase payment
allocation instructions, dollar-cost averaging, portfolio rebalancing programs,
and systematic withdrawals. Our home office will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These
procedures may include, among others, (1) requiring some form of personal
identification such as your address and social security number prior to acting
upon instructions received by telephone, (2) providing written confirmation of
such transactions, and/or (3) tape recording of telephone instructions. Your
request for telephone transactions authorizes us to record telephone calls. We
may be liable for any losses due to unauthorized or fraudulent instructions if
we do not employ reasonable procedures. If we do employ reasonable procedures,
we will not be liable for any losses due to unauthorized or fraudulent
instructions. We reserve the right to place limits, including dollar limits, on
telephone transactions.

BENEFIT PAYABLE ON DEATH OF CONTRACT OWNER OR ANNUITANT

If the owner dies prior to the annuity commencement date, we will pay a death
benefit. If the contract owner is a non-natural person, then we will pay a death
benefit upon the death of the Annuitant prior to the annuity commencement date.
In such case, if more than one Annuitant has been named, we will pay the death
benefit payable upon the death of an Annuitant only upon the death of the last
survivor of the persons so named.

The term "decedent" in the death benefit description below refers to the death
of the contract owner unless the contract owner is a non-natural person, in
which case it refers to the death of the Annuitant. Also, the death benefit
description refers to the age of the contract owner. If the contract owner is a
non-natural person, the relevant age will instead be that of the Annuitant.

Additionally, the death benefit description makes reference to "Pro Rata
Adjustments." A pro rata adjustment is calculated separately for each
withdrawal, creating a decrease in the death benefit proportional to the
decrease the withdrawal makes in the contract value. Pro rata adjustments are
made for amounts withdrawn for partial surrenders and any associated surrender
charge (which shall be deemed to be an amount withdrawn), but not for any
contract fee-related surrenders.

The death benefit will equal the greatest of (1), (2), or (3) as follows:

(1) The contract value as of the date used for valuing the death benefit.

(2) The sum or all purchase payments made, reduced by pro rata adjustments for
    each withdrawal.

(3) The highest Anniversary Value of each of the contract's anniversaries prior
    to the earlier of: (1) the decedent's death, or (2) the contract owner's
    attainment of age 75.

     An Anniversary Value is equal to:

     (a) the contract value on the anniversary, plus

     (b) any purchase payments made since the anniversary, reduced by

                                       13
<PAGE>   14

     (c) pro rata adjustments for any withdrawals made since the anniversary.

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

The person entitled to the death benefit under the terms of the contract may (1)
receive a single sum payment, which terminates the contract, or (2) select an
annuity option. If the death benefit payee selects an annuity option, he or she
will have all the rights and privileges of a payee under the contract. If the
death benefit payee desires an annuity option, the election should be made
within 60 days of the date the death benefit becomes payable. Failure to make a
timely election can result in unfavorable tax consequences. For further
information, see "Federal Tax Matters."

We accept any of the following as proof of death: (1) a copy of a certified
death certificate; (2) a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; (3) a written statement by a medical
doctor who attended the deceased at the time of death.

The Internal Revenue Code requires that a Non-Qualified Contract contain certain
provisions about an owner's death. We discuss these provisions below under
"Federal Tax Matters--Required Distributions for Non-Qualified Contracts". It is
imperative that written notice of the death of the owner be promptly transmitted
to us at our home office, so that we can make arrangements for distribution of
the entire interest in the contract in a manner that satisfies the Internal
Revenue Code requirements. Failure to satisfy these requirements may result in
the contract not being treated as an annuity contract for federal income tax
purposes with possible adverse tax consequences.

The pro rata adjustments referred to above are more fully described in Appendix
D at the end of this prospectus.

See Appendix A for sample death benefit calculation.

THE ANNUITY PERIOD

ANNUITY COMMENCEMENT DATE

You may specify an annuity commencement date in your application. The annuity
commencement date marks the beginning of the period during which an Annuitant or
other payee designated by the owner receives annuity payments under the
contract. The annuity commencement date must be at least two years after the
contract issue date. You should consult your sales representative in this
regard.

The Internal Revenue Code may impose penalty taxes on amounts distributed either
too soon or too late depending on the type of retirement arrangement involved.
See "Federal Tax Matters". You should consider this carefully in selecting or
changing an annuity commencement date.

You must submit a written request in order to advance or defer the annuity
commencement date. We must receive the request at our home office at least 30
days before the then-scheduled annuity commencement date. The new annuity
commencement date must also be at least 30 days after we receive the written
request. You have no right to make any total or partial surrender during the
Annuity Period.

COMMENCEMENT OF ANNUITY PAYMENTS

We may pay the entire contract value, rather than apply the amount to an annuity
option if the contract value at the end of the Valuation Period which contains
the annuity commencement date is less than $1,000. We would make the payment in
a single sum to the Annuitant or other payee chosen by the owner and cancel the
contract. We would not impose any charge other than the premium tax charge.

Otherwise, we will apply (1) the fixed account value to provide a Fixed Annuity
Option and (2) the Variable Account value in any subaccount to provide a
Variable Annuity Option using the same subaccount, unless you have notified us
by written request to apply the fixed account value and Variable Account value
in different proportions. We must receive written request at our home office at
least 30 days before the annuity commencement date.

We will make annuity payments under a Fixed or Variable Annuity Option on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If you name more than one person as an
Annuitant, you may elect to name one of such persons to be the sole Annuitant as
of the annuity commencement date. We reserve the right to change the frequency
of any annuity payment so that each payment will be at least $50.

The amount of each annuity payment will depend on (1) the amount of contract
value applied to an annuity option, (2) the form of annuity selected, and (3)
the age of the Annuitant. For information concerning the relationship between
the Annuitant's sex and the amount of annuity payments, including special
requirements in connection with employee benefits plans, see "Calculations of
Annuity Payments" in the Statement of Additional Information. The Statement of
Additional Information also contains detailed information about how the amount
of each annuity payment is computed.

The dollar amount of any fixed annuity payments is specified during the entire
period of annuity payments according to the provisions of the annuity option
selected. The dollar amount of variable annuity payments varies during the
Annuity Period based on changes in Annuity Unit values for the subaccounts that
you choose to use in connection with your payments.

RELATIONSHIP BETWEEN SUBACCOUNT INVESTMENT PERFORMANCE AND AMOUNT OF VARIABLE
ANNUITY PAYMENTS

The amount of an annuity payment depends on the average effective net investment
return of a subaccount during the period since the preceding payment as follows:

     - if the return is higher than 3% annually, the Annuity Unit value will
       increase, and the second payment will be HIGHER than the First; and

     - if the return is lower than 3% annually, the Annuity Unit value will
       decrease, and the second payment will be lower than the first.

                                       14
<PAGE>   15

"Net investment return," for this purpose, refers to the subaccount's overall
investment performance after deduction of the mortality and expense risk and
administrative expense charges, which are assessed at an annual rate of 1.35%.

We guarantee that the amount of each variable annuity payment after the first
payment will not be affected by variations in our mortality experience or our
expenses.

Transfers. A person receiving annuity payments may make up to four transfers a
year among subaccounts. The current procedures for and conditions on these
transfers are the same as we describe above under "Allocation of Purchase
Payments and Contract Value--Transfers". We do not permit transfers from a Fixed
Annuity Option during the Annuity Period.

ANNUITY OPTIONS

You may select an annuity option or change a previous selection by written
request. We must receive your request at least 30 days before the annuity
commencement date. You may select one annuity form, although payments under that
form may be on a combination fixed and variable basis. If no annuity form
selection is in effect on the annuity commencement date, we usually
automatically apply Option B (described below), with payments guaranteed for ten
years. However, federal pension law may require that we make default payments
under certain retirement plans pursuant to plan provisions and/or federal law.
Tax laws and regulations may impose further restrictions to assure that the
primary purpose of the plan is distribution of the accumulated funds to the
employee.

Your contract offers the following options for fixed and variable annuity
payments. Under each of the options, we make payments as of the first Valuation
Date of each monthly period, starting with the annuity commencement date.

Option A, Life Annuity. We do not make payments after the annuitant dies. It is
possible for the annuitant to receive only one payment under this option, if the
annuitant dies before the second payment is due.

Option B, Life Annuity With Payments Guaranteed for 10 Years to 20 Years. We
continue payments as long as the annuitant lives. If the annuitant dies before
we have made all of the guaranteed payments, we continue installments of the
guaranteed payments to the beneficiary.

Option C, Joint and Full Survivor Annuity. We continue payments as long as
either the annuitant or the joint annuitant is alive. We stop payments when both
the annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.

Option D, Joint and One-Half Contingent Survivor Annuity. We continue payments
as long as either the annuitant or the joint annuitant is alive. If the
annuitant dies first, we continue payments to the joint annuitant at one-half
the original amount. If the joint annuitant dies first, we continue payments to
the annuitant at the original full amount. We stop payments when both the
annuitant and the joint annuitant have died. It is possible for the payee or
payees to receive only one payment under this option if both annuitants die
before the second payment is due.

We Also Have Other Annuity Options Available. You can get information about them
from your sales representative or by calling or writing to our home office.

DEATH OF ANNUITANT OR OTHER PAYEE

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

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

CHARGES AND DEDUCTIONS

PREMIUM TAXES

We deduct state premium taxes as follows:


     - when imposed on purchase payments, we pay the amount on your behalf and
       deduct the amount from your contract value upon (1) our payment of
       surrender proceeds


     - or death benefit or (2) annuitization of a contract, or when imposed at
       the time annuity payments begin, we deduct the amount from your contract
       value.

Applicable premium tax rates depend upon your place of residence. Rates can
change by legislation, administrative interpretations, or judicial acts.

CHARGES AGAINST THE VARIABLE ACCOUNT

Mortality and Expense Risk Charge. We assess each subaccount of the Variable
Account with a daily charge for mortality and expense risk. This charge is a
nominal annual rate of 1.25% of the average daily net assets of the Variable
Account. It consists of approximately .8% for mortality risk and approximately
 .45% for expense risk. We guarantee not to increase this charge for the duration
of the contract. This charge is assessed during both the Accumulation Period and
the Annuity Period.

The mortality risk borne by us arises from our obligation to make annuity
payments (determined in accordance with the annuity tables and other provisions
contained in the contract) for the full life of all Annuitants regardless of how
long all Annuitants or any individual Annuitant might live. In addition, we bear
a mortality risk in that we guarantee to pay a death benefit upon the death of
an Annuitant or owner prior to the annuity commencement date. We do not impose a
surrender charge upon payment of a death benefit. This places a further
mortality risk on us.

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

We bear the loss if the administrative charges and the mortality and expense
risk charge are insufficient to cover the expenses

                                       15
<PAGE>   16

and costs assumed. Conversely, we profit if the amount deducted proves more than
sufficient.

Administrative Expense Charge. We assess each subaccount of the Variable Account
with a daily charge at an annual rate of .10% of the average daily net assets of
the subaccount. We assess this charge during both the Accumulation Period and
the Annuity Period. This charge helps cover administrative costs such as those
incurred in issuing contracts, establishing and maintaining the records relating
to contracts, making regulatory filings and furnishing confirmation notices,
voting materials and other communications, providing computer, actuarial and
accounting services, and processing contract transactions. There is no necessary
relationship between the amount of administrative charges assessed on a given
contract and the amount of expenses actually incurred for that contract.

TAX CHARGE

We currently impose no charge for taxes payable by us in connection with the
contract, other than for applicable premium taxes. We reserve the right to
impose a charge for any other taxes that may become payable by us in the future
for the contracts or the Variable Account.

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

SURRENDER CHARGE

We do not deduct a sales charge from purchase payments. We deduct surrender
charges on certain total or partial surrenders. We use the revenues from
surrender charges to partially pay our expenses in the sale of the contracts,
including (1) commissions, (2) promotional, distribution and marketing expenses,
and (3) costs of printing and distribution of prospectuses and sales material.

Free Surrenders. You can withdraw the following amounts from the contract
without a surrender charge:

     - Any purchase payments that we received more than seven years before the
       surrender date and that you have not previously surrendered;

     - Any earnings that you have not previously surrendered;

     - In any contract year, up to 10% of the purchase payments that we received
       less than seven years before the surrender date (whether or not you have
       previously surrendered the purchase payments).

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

We do not impose a surrender charge on (1) annuitization or (2) payment of a
single sum because less than the minimum required contract value is available to
provide an annuity at the annuity commencement date or (3) payment of any death
benefit.

In addition, we have an administrative policy to waive surrender charges for
full surrenders of contracts that have been in force for at least ten years if
the amount then subject to the surrender charge is less than 25% of the contract
value. We have offered these contracts since 1994. Therefore, we have made no
waivers. We reserve the right to change or terminate this practice at any time,
both for new and for previously issued contracts.

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

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

We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient,
we will pay such costs from our general account assets. These assets will
include any profit that we derive from the mortality and expense risk charge.

MISCELLANEOUS

The Variable Account invests in shares of the portfolios. Therefore, the net
assets of the Variable Account will reflect the investment advisory fees and
certain other expenses incurred by the portfolios and described in their
prospectus.

REDUCTION OF CHARGES

We will not impose a surrender charge under any contract owned by First Fortis
and the following persons associated with First Fortis, if at the contract issue
date they are (1) officers and directors (2) employees (3) spouses of any such
persons or any of such persons' children.

GENERAL PROVISIONS

THE CONTRACTS

The entire contract includes any application, amendment, rider, endorsement, and
revised contract pages. Only an officer of First Fortis can agree to change or
waive any provision of a contract. Any change or waiver must be in writing and
signed by an officer of First Fortis.

The contracts are non-participating and do not share in dividends or earnings of
First Fortis.

POSTPONEMENT OF PAYMENT

We may defer for up to 15 days the payment of any amount attributable to a
purchase payment made by check to allow the check reasonable time to clear. For
a description of other circumstances in which amounts payable out of Variable
Account assets could be deferred, see "Postponement of Payments" in the
Statement of Additional Information. We may also defer payment

                                       16
<PAGE>   17

of surrender proceeds payable out of the fixed account for a period of up to 6
months.

MISSTATEMENT OF AGE OR SEX AND OTHER ERRORS

If the Annuitant's age or sex was misstated, we pay the amount that the purchase
payments paid would have purchased at the correct age and sex. If we make any
overpayment because of incorrect information about age or sex, or any other
miscalculation, we deduct the overpayment from the next payment due. We add
underpayments to the next payment. We credit or charge the amount of any
adjustment with interest at the rate of 3% annually.

ASSIGNMENT

Owners and payees may assign their rights and interests under a Qualified
Contract only in certain narrow circumstances referred to in the contract.
Owners and other payees may assign their rights and interests under
Non-Qualified Contracts, including their ownership rights.

We take no responsibility for the validity of any assignment. Owners and payees
must make a change in ownership rights in writing and send it to our home
office. The change will be effective on the date made, although we are not bound
by a change until the date we record it.

The rights under a contract are subject to any assignment of record at our home
office. An assignment or pledge of a contract may have adverse tax consequences.
See below under "Federal Tax Matters".

BENEFICIARY

You may name or change a beneficiary or a contingent beneficiary before the
annuity commencement date. You must send a written request of the change to
First Fortis. Certain retirement programs may require spousal consent to name or
change a beneficiary. In addition, applicable tax laws and regulations may limit
the right to name a beneficiary other than the spouse. We are not responsible
for the validity of any change. A change will take effect as of the date it is
signed but will not affect any payment we make or action we take before
receiving the written request. We also need the consent of any irrevocably named
person before making a requested change.

In the event of the death of a contract owner, or the Annuitant if the contract
owner is a non-natural person, prior to the annuity commencement date, the
beneficiary will be determined as follows:

     - If upon the death of a contract owner there is one or more surviving
       contract owners, the surviving contract owner(s) will be the beneficiary
       (these override any other beneficiary designations).

     - If upon the death of a contract owner there are no surviving contract
       owners, and upon the death of the Annuitant, the beneficiary will be the
       beneficiary designated by the contract owner.

     - If there is no surviving beneficiary who has been designated by the
       contract owner, then the contract owner, or the contract owner's estate,
       will be the beneficiary.

REPORTS

We will mail to the contract owner (or to the person receiving payments during
the annuity period), at the last known address of record, any report and
communication required by applicable law or regulation. You should therefore
give us prompt written notice of any address change. This will include annual
audited financial statements of the portfolios, but not necessarily of the
Variable Account or First Fortis.

RIGHTS RESERVED BY FIRST FORTIS

We reserve the right to make certain changes if, in our judgment, they would
best serve the interests of owners and Annuitants or would be appropriate in
carrying out the purposes of the contracts. We will make any change only as
permitted by applicable laws. We will obtain your approval of the changes and
approval from any appropriate regulatory authority if required by law. Examples
of the changes we may make include:

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

     - To transfer any assets in any subaccount to another subaccount, or to one
       or more separate accounts, or to the fixed account; or to add, combine,
       or remove subaccounts in the Variable Account.

     - To substitute, for the portfolio shares held in any subaccount, the
       shares of another portfolio or the shares of another investment company
       or any other investment permitted by law.

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

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

     - To make any other necessary technical changes in the contract in order to
       conform with any action the above provisions permit us to take, including
       to change the way we assess charges, but without increasing as to any
       then outstanding contract the aggregate amount of the types of charges
       that we have guaranteed.

DISTRIBUTION

Fortis Investors, Inc. ("Fortis Investors") is the principal underwriter of the
contracts. The contracts will be sold by individuals who are licensed by state
insurance authorities to sell the contracts of First Fortis, and (1) are
registered representatives of Fortis Investors, or (2) are registered
representatives of other broker-dealer firms or (3) are representatives of other
firms that are exempt from broker dealer regulation. Fortis Investors and any
other broker-dealer firms are (1) registered with the Securities and Exchange
Commission under the Securities Exchange Act of 1934 as broker-dealers, and (2)
members of the National Association of Securities Dealers, Inc.

Fortis Investors will pay an allowance to its registered representatives and
selling brokers in varying amounts. Fortis Investors does not expect the
allowances under normal circumstances to exceed 6.25% of purchase payments plus
a servicing fee of .25% of contract value per year, starting in the first
contract year.

                                       17
<PAGE>   18

Fortis Investors may, under certain flexible compensation arrangements, pay
lesser or greater selling allowances and larger or smaller service fees to its
registered representatives and other broker dealer firms than as set forth
above. However, in such case, such flexible compensation arrangements will have
actuarial present values that are approximately equivalent to the amounts of the
selling allowances set forth above. Additionally, registered representatives,
broker-dealer firms and exempt firms may qualify for additional compensation
based upon meeting certain production standards. Fortis Investors may charge
back commissions paid to others if the contract upon which the commission was
paid is surrendered or cancelled within certain specified time periods.


First Fortis paid a total of $1,108,526, $1,355,423 and $          to Fortis
Investors for annuity contract distribution services during 1997, 1998 and 1999,
respectively, $101,176 of which in 1997 and $101,176 in 1998 was not reallowed
to other broker dealers or exempt firms. In the distribution agreement, First
Fortis has agreed to indemnify Fortis Investors (and its agents, employees, and
controlling persons) for certain damages and expenses, including those arising
under federal securities laws.


First Fortis or Fortis Investors may also provide additional compensation to
broker-dealers in connection with sales of contracts. Compensation may include
financial assistance to broker-dealers in connection with (1) conferences, (2)
sales or training programs for their employees, (3) seminars for the public, (4)
advertising, (5) sales campaigns regarding contracts, and (6) other
broker-dealer sponsored programs or events. Compensation may also include trips
taken by invited sales representatives and their family members to locations
within or without the United States for business meetings or seminars. First
Fortis or Fortis Investors may pay travel expenses that arise from these trips.


See Notes to First Fortis' Financial Statements as to amounts it has paid to
Fortis, Inc. and Fortis Benefits Insurance Company, affiliates of First Fortis
for various services.


Fortis Investors is an indirect subsidiary of Fortis (NL)N.V. and Fortis (B).
Fortis Investors is under common control with First Fortis. Fortis Investors'
principal business address is 500 Bielenberg Drive, Woodbury, Minnesota 55125
and its mailing address is P.O. Box 64284, St. Paul, MN 55164. Fortis Investors
is not obligated to sell any specific amount of interests under the contracts.
$23,000,000 of interests in the fixed account and an indefinite amount of
interests in the Variable Account have been registered with the Securities and
Exchange Commission.

FEDERAL TAX MATTERS

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

NON-QUALIFIED CONTRACTS

Section 72 of the Internal Revenue Code ("Code") governs the taxation of
annuities in general. Neither you nor any other person may exclude or deduct
purchase payments under Non-Qualified Contracts from gross income. However, you
are not currently taxed, until receipt, on any increase in the accumulated value
of a Non-Qualified Contract that results from (1) the investment performance of
the Variable Account, or (2) interest credited to the fixed account. Owners who
are not natural persons ARE taxed annually on any increase in the contract value
subject to exceptions. You may wish to discuss this with your tax adviser.

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

In general, surrenders or partial withdrawals under contracts are taxed as
ordinary income to the extent of the accumulated income or gain under the
contract. If you assign or pledge any part of the value of a contract, you pay
on the value so pledged or assigned to the same extent as a partial withdrawal.

With respect to annuity payment options, the tax consequences may vary depending
on the option elected under the contract. Until the "investment in the contract"
is recovered, generally only the portion of the annuity payment that represents
the amount by which the contract value exceeds the "investment in the contract"
will be taxed. In general, "investment in the contract" is the aggregate amount
of purchase payments made. After recovery of an Annuitant's or other payee's
"investment in the contract," the full amount of any additional annuity payments
is taxable.

For variable annuity payments, in general, the taxable portion of each annuity
payment (prior to recovery of the "investment in the contract") is the amount of
the payment less the nontaxable portion. The nontaxable portion of each payment
is the "investment in the contract" divided by the total number of expected
annuity payments.

For fixed annuity payments, in general, prior to recovery of the "investment in
the contract," there is no tax on the amount of each payment that bears the same
ratio to that payment as the "investment in the contract" bears to the total
expected value of the annuity payments for the term of the payments. However,
the remainder of each annuity payment is taxable. The taxable portion of a
distribution (in the form of an annuity or a single sum payment) is taxed as
ordinary income.

For purposes of determining the amount of taxable income resulting from
distributions, all contracts and other annuity contracts we or our affiliates
issue to you within the same calendar year will be treated as if they were a
single contract.

You, or any other payee, will pay a 10% penalty on the taxable portion of a
"premature distribution." Generally, an amount is a "premature distribution"
unless the distribution is:

     - made on or after you or another payee reach age 59 1/2, or is

     - made to a beneficiary on or after your death, or is

     - made upon your disability or that of another payee, or is

     - part of a series of substantially equal annuity payments for your life or
       life expectancy, or is

     - part of a series of substantially equal annuity payments for the life or
       life expectancy of you and your beneficiary.

                                       18
<PAGE>   19

Premature distributions may result, for example, from:

     - an early annuity commencement date

     - an early surrender or partial surrender of a contract

     - an assignment of a contract

     - the early death of an Annuitant other than you or another person
       receiving annuity payments under the contract

If you transfer ownership of a contract, or designate an Annuitant or payee
other than yourself, you may have certain income or gift tax consequences that
are beyond the scope of this discussion. If you are contemplating any transfer
or assignment of a contract, you should contact a competent tax adviser.

REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS

In order that a Non-Qualified Contract be treated as an annuity contract for
federal income tax purposes, Section 72(s) of the Code requires:

     - if any person receiving annuity payments dies on or after the annuity
       commencement date but prior to the time the entire interest in the
       contract has been distributed, the remaining portion of such interest
       will be distributed at least as rapidly as under the method of
       distribution being used as of the date of the person's death; and

     - if you die prior to the annuity commencement date, the entire interest in
       the contract will be distributed:

       - within five years after your death, or

       - as annuity payments that will begin within one year of your death and
         will be made over your designated beneficiary's life or over a period
         not extending beyond the life expectancy of that beneficiary.

However, if the owner's designated beneficiary is the surviving spouse, the
surviving spouse may continue the contract as the new contract owner. Where the
owner or other person receiving payments is not a natural person, the required
distributions under Section 72(A) apply on the death of the primary Annuitant.

The Internal Revenue Service has not issued regulations interpreting the
requirements of Section 72(s) (although it has issued proposed regulations
interpreting similar requirements for qualified plans). We intend to review and
modify the contract if necessary to ensure that it complies with the
requirements of Section 72(s) when clarified by regulation or otherwise.

Generally, the above requirements will be satisfied with a single sum payment
where the death occurs prior to the annuity commencement date. A single sum
payment will be subject to proof of the owner's death. The beneficiary, however,
may elect by written request to receive an annuity option instead of a lump sum
payment. However, if the election is not made within 60 days of the date the
single sum death benefit otherwise becomes payable, the IRS may disregard the
election for tax purposes and tax the beneficiary as if a single sum payment had
been made.

QUALIFIED CONTRACTS

The contracts may be used with several types of tax-qualified plans. The tax
rules applicable to owners, Annuitants, and other payees vary according to the
type of plan and the terms and conditions of the plan itself. In general,
purchase payments made under a tax qualified plan on your behalf are excludable
from your gross income during the Accumulation Period. The portion, if any, of
any purchase payment that is not excluded from your gross income during the
Accumulation Period constitutes your "investment in the contract".

When annuity payments begin, you will receive back your "investment in the
contract" if any, as a tax-free return of capital. The Code provides which
portion of each payment is taxable and which portion is tax free. These rules
may vary depending on the type of tax qualified plan.

The contracts are available in connection with the following types of retirement
plans:

     - Section 403(b) annuity plans for employees of certain tax-exempt
       organizations and public education institutions;

     - Section 401 or 403(a) qualified pension, profit-sharing, or annuity
       plans;

     - Individual retirement annuities ("IRAs") under Section 408(b);

     - Simplified employee pension plans ("SEPs") under Section 408(k);

     - Simple IRA Plans under Section 408(p); and

     - Section 457 unfunded deferred compensation plans of tax-exempt
       organizations and private employer unfunded deferred compensation plans.

The tax implications of these plans are further discussed in the Statement of
Additional Information under the heading "Taxation Under Certain Retirement
Plans".

WITHHOLDING

Annuity payments and other amounts received under 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.

Despite the recipient's election, the Code may require withholding from certain
payments outside the United States. The Code may also require withholding from
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 us to disregard the recipient's election if the recipient fails to
supply us with a "TIN" or taxpayer identification number (social security number
for individuals), or if the Internal Revenue Service notifies us 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 that set forth diversification requirements for investments
underlying Non-Qualified Contracts.

                                       19
<PAGE>   20

We believe that the investments will satisfy these requirements. Failure to do
so would result in immediate taxation to you or another person of all income
credited to Non-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 you or another person
receiving annuity payments to be treated as the owners of Variable Account
assets for tax purposes. We reserve 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 the
Treasury Department considered such standards 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 pursuant to the special
annuity contract exchange form we provide for this purpose is not generally a
taxable event under the Code. Moreover, 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)(11) 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, we may not distribute income attributable to elective
contributions made after December 31, 1988.

FURTHER INFORMATION ABOUT FIRST FORTIS

First Fortis Life Insurance Company is an affiliate of the worldwide Fortis
group of companies owned by Fortis (NL) N.V. of the Netherlands and Fortis (B)
of Belgium. 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 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

We offer and sell insurance products, including fixed and variable annuity
contracts, and group life, accident and health insurance policies. We market our
products to small business and individuals through a network of independent
agents, brokers, and financial institutions.

OWNERSHIP OF SECURITIES

All of First Fortis' outstanding shares are owned by Fortis, Inc., One Chase
Manhattan Plaza, New York, N.Y. 10005. Fortis, Inc., in turn is wholly owned by
Fortis International, Inc., which is wholly owned by AMEV/VSB 1990 N.V., both of
which share the same address with N.V. AMEV., Archimedeslaan 10, 3584 BA,
Utrecht, The Netherlands. AMEV/ VSB 1990 N.W. is 50% owned by Fortis (NL)N.V.
and 50% owned, through certain subsidiaries, by Fortis (B), Boulevard Emile
Jacqmain 53, 1000 Brussels, Belgium.

                                       20
<PAGE>   21

SELECTED FINANCIAL DATA

The following is a summary of certain financial data of First Fortis. This
summary has been derived in part from the financial statements of First Fortis
included elsewhere in this prospectus. You should read the following along with
these financial statements.


<TABLE>
<CAPTION>
                                                                                YEAR ENDED DECEMBER 31,
                                                                --------------------------------------------------------
                                                                  1999        1998        1997        1996        1995
                                                                  ----        ----        ----        ----        ----
                                                                                     (IN THOUSANDS)
<S>                                                             <C>         <C>         <C>         <C>         <C>
Income Statement Data
  Premiums and policy charges...............................    $ 59,477    $ 54,451    $ 51,846    $ 67,516    $ 81,201
  Net investment income.....................................       8,564       8,187       7,907       7,891       7,466
  Realized investment gains (losses)........................        (123)      1,436         361          (3)      2,683
  Other income..............................................       1,374       1,202         682         336         298
                                                                --------    --------    --------    --------    --------
          Total Revenues....................................    $ 69,292    $ 65,276    $ 60,796    $ 75,740    $ 91,648
                                                                ========    ========    ========    ========    ========
  Benefits and expenses.....................................    $ 66,194    $ 61,477    $ 60,983    $ 75,596    $ 96,371
  Income tax expense (benefit)..............................       1,032       1,347         (63)        (39)     (1,563)
  Net income (loss).........................................    $  2,066    $  2,452    $   (124)   $    183    $ (3,160)
Balance Sheet Data
          Total assets......................................    $248,252    $217,502    $170,898    $142,742    $139,913
          Total liabilities.................................     212,316     177,476     133,817     107,050     101,523
          Total shareholder's equity........................      35,936      40,026      37,081      35,692      38,390
</TABLE>


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


1999 COMPARED TO 1998



REVENUES



First Fortis (the Company) life insurance premiums increased during 1999 as
compared to 1998 due to strong group life sales. Group disability and dental
sales account for the increase in accident and health premiums. Offsetting this
is a decrease in the group medical premiums. This group medical premium decrease
was substantially attributable to the Company's decision, effective January 1,
1996, to cease new sales of group medical policies. The Company continues to
service the existing group medical business. The decision to effectively exit
the group medical business has reduced annualized premiums associated with this
line from $11.4 million inforce at January 1, 1997 to a $724,000 in premium
inforce at December 31, 1999. Accident and health premiums are principally
composed of group accident and health coverages. The discontinuance of group
medical sales and strong dental and disability sales have caused the group
accident and health premium mix to shift. Dental, disability income, and medical
premium represented 48%, 46%, and 6%, respectively, of total group accident and
health premium in 1999 compared to 44%, 41%, and 15%, respectively, in 1998.



The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Changes in interest rates during 1999 and 1998
resulted in recognition of realized gains and losses upon sales of securities.



BENEFITS



The ratio of 1999 life benefits to premium increased to 77% from 70% in 1998 due
to more favorable 1998 mortality experience and higher life premium volumes. The
decrease in accident and health benefits as a percent of premium to 80% in 1999
from 85% in 1998 is primarily due to improved experience in the group long-term
disability claims.



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.



The Company's general and administrative expenses as a percent of premium
remained relatively flat decreasing to 23.3% in 1999 from 23.7% in 1998. The
Company continues to strive for improvements in the expense to gross revenue
ratio while maintaining quality and timely services to the policyholders.



1998 COMPARED TO 1997



REVENUES



First Fortis (the "Company") life insurance premiums increased during 1998 as
compared to 1997 due to strong group life sales. Accident and health premiums
decreased during 1998 as compared to 1997. This accident and health premium
decrease was substantially attributable to the Company's decision, effective
January 1, 1996, to cease new sales of group medical policies. The Company
continues to service the existing group medical business. The decision to
effectively exit the group medical business has reduced annualized premiums
associated with this line from $11.4 million inforce at January 1, 1997 to a
$4.2 million in premium inforce at December 31, 1998. Accident and health
premiums are principally composed of group accident and health coverages. The
discontinuance of group medical sales and strong dental sales have caused the
group accident and health premium mix to shift. The dental, disability income,
and medical premium represented 44%, 41%, and 15%, respectively, of total group
accident and health premium in 1998 compared to 39%, 39%, and 22%, respectively,
in 1997.



The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Changes in


                                       21
<PAGE>   22


interest rates during 1998 and 1997 resulted in recognition of realized gains
and losses upon sales of securities.



BENEFITS



1998 life benefits as compared to premium were lower than 1997 due to more
favorable mortality experience, despite the fact that the aggregate amount of
claims increased. The decrease in accident and health benefits in 1998 as
compared to 1997 is primarily due to improved experience in the group medical
products. Slightly offsetting this is a larger volume of new group long term
disability claims.



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.



The Company's general and administrative expenses as a percent of premium has
decreased in 1998 from 1997 as a reflection of the Company's expense monitoring
efforts.



MARKET RISK AND RISK MANAGEMENT



Interest rate risk is the Company's primary market risk exposure. Substantial
and sustained increases and decreases in market interest rates can affect the
profitability of insurance products and market value of investments. The yield
realized on new investments generally increases or decreases in direct
relationship with interest rate changes. The market value of the Company's fixed
maturity and mortgage loan portfolios generally increases when interest rates
decrease, and decreases when interest rates increase.



Interest rate risk is monitored and controlled through asset/liability
management. As part of the risk management process, different economic scenarios
are modeled, including cash flow testing required for insurance regulatory
purposes, to determine that existing assets are adequate to meet projected
liability cash flows. A major component of the Company's asset/liability
management program is structuring the investment portfolio with cash flow
characteristics consistent with the cash flow characteristics of the Company's
insurance liabilities.



The Company uses computer models to perform simulations of the cash flow
generated from existing insurance policies under various interest rate
scenarios. Information from these models is used in the determination of
interest crediting strategies and investment strategies. The asset/liability
management discipline includes strategies to minimize exposure to loss as market
interest rates change. On the basis of these analyses, management believes there
is no material solvency risk to the Company with respect to interest rate
movements up or down of 100 basis points from year end levels.



Equity market risk exposure is not significant. Equity investments in the
general account are not material enough to threaten solvency and contract owners
bear the investment risk related to the variable products. Therefore, the risks
associated with the investments supporting the variable separate accounts are
assumed by contract owners, not by the Company. The Company provides certain
minimum death benefits that depend on the performance of the variable separate
accounts. Currently the majority of these death benefit risks are reinsured
which then protects the Company from adverse mortality experience and prolonged
capital market decline.



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 expect its
operating activities to continue to generate sufficient funds.



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



The Company has no long or short term debt. As of December 31, 1999, 99% of the
Company's fixed maturity investments consisted of investment grade bonds. The
Company does not expect this percentage to change significantly in the future.



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.



YEAR 2000



Introduction. The Company relies heavily on information technology (IT) systems
to conduct its business. These IT systems include both internally developed and
vendor-supplied systems. The Company also relies on the non-IT systems including
the embedded technology and facility related systems. In addition, The Company
has business relationships with numerous entities including but not limited to
financial institutions, financial intermediaries, third party administrators and
other critical vendors as well as regulators and customers. These entities are
themselves reliant on their IT systems to conduct their businesses. Therefore,
there is a supply chain of dependency among and between all involved entities.



State of Readiness. In 1997, the Fortis parent company organized a
multi-disciplinary Year 2000 Project Team (Team). The Team consists of employees
at each subsidiary, audit, legal and outside consultants. The Team and the
Company developed and executed a comprehensive plan (Plan) designed to make the
Company's IT systems Year 2000 ready. The Plan covered four stages including (i)
inventory, (ii) assessment, (iii) programming, and (iv) testing and
certification. Programming, testing and certification of all systems and
applications were completed in December, 1999; therefore, the Company has
completed its Plan. The Company also inventoried its various


                                       22
<PAGE>   23


facility locations and the systems that related thereto, including embedded
technologies. These areas were also part of the Plan and were completed.



The Company identified third parties with which they have a material
relationship in both sending and receiving information from those entities, with
respect to current Year 2000 readiness. This action has also been completed as
part of the Plan.



Costs. The Company will not incur any cost for the Year 2000 project since it is
being paid for by affiliates of the Company.



Risks. The Company limited the potential impact of the Year 2000 by monitoring
the progress of its own Year 2000 project and those of its critical external
relationships (both I/T and non-I/T) and by developing contingency/recovery
plans. Those contingency plans identified the mission critical systems and
relationships and put action plans in place to address a year 2000 issue. To
date, none of the contingency plans have been implemented. In addition, no
significant Year 2000 issue has arisen which has had a material adverse effect
on the Company's results of operations, liquidity or financial condition.



Contingency Plans. Consistent with prudent due diligence efforts, the Company
defined contingency plans aimed at ensuring the continuity of critical business
functions before and after December 31, 1999, should there have been or in the
future, be, an unexpected system failure. The Company developed plans that are
designed to reduce the negative impact on the Company, and provide methods of
returning to normal operations, if failure occurs.


VOTING PRIVILEGES

In accordance with our view of current applicable law, we will vote shares of
each of the portfolios attributable to a contract at regular and special
meetings of the shareholders of the portfolios. We will vote those shares in
proportion to instructions we receive from the persons having the voting
interest in the contract as of the record date for the corresponding portfolio
shareholders meeting. Owners have the voting interest during the Accumulation
Period, persons receiving annuity payments have the voting interest during the
Annuity Period, and beneficiaries have the voting interest after the death of
the Annuitant or 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 we determine that we are permitted to vote shares
of the portfolios in our own right, we may elect to do so.

We determine the number of shares of a portfolio attributable to a contract as
follows:

     - During the Accumulation Period, we divide the amount of contract value in
       a subaccount by the net asset value of one share of the portfolio
       corresponding to that subaccount. We make this calculation as of the
       record date for the applicable portfolio.

     - During the Annuity Period, or after the death of the Annuitant or owner,
       we make a similar calculation. However, for subaccount value we use the
       liability for future variable annuity payments allocable to that
       subaccount as of the record date for the applicable portfolio. We
       calculate the liability for future variable annuity payments on the basis
       of the following on the record date:

     - mortality assumptions,

     - the assumed interest rate used in determining the number of Annuity Units
       under the contract, and

     - the applicable Annuity Unit value

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.

We will vote shares for which we have not received timely instructions, and any
shares attributable to excess amounts we have accumulated in the related
subaccount, in proportion to the voting instructions which we receive for all
contracts and other variable annuity contracts participating in a portfolio. To
the extent that we or any affiliated company holds any shares of a portfolio,
those shares will be voted in the same proportion as instructions for that
portfolio from all our policy holders holding voting interests in that
portfolio. Shares held by separate accounts other than the Variable Account will
in general be voted in accordance with instructions of owners 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 Variable Account
will receive proxy material, reports and other materials relating to the
appropriate portfolio. Under the procedures described above, these persons may
give instructions regarding:

     - the election of the Board of Directors of the portfolios,

     - ratification of the selection of a portfolio's 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 of portfolio shareholders

LEGAL MATTERS

David A. Peterson, Esquire, Vice President and Assistant General Counsel with
our legal department has passed on the legality of the contracts described in
this prospectus. Messrs. Freedman, Levy, Kroll & Simonds, Washington, D.C., have
advised First Fortis on certain federal securities law matters.


OTHER INFORMATION


We have filed Registration Statements with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
contracts discussed in this prospectus. We have not included in the prospectus
all of the information set forth in the Registration Statement, amendments, and
exhibits thereto. We intend statements contained in this prospectus about the
content of the contracts and other legal instruments to be summaries. For a
complete statement of the terms of these documents, you should refer to the
instruments filed with the Securities and Exchange Commission.

                                       23
<PAGE>   24

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

CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<S>                                                <C>
First Fortis and the Variable Account..........
Calculation of Annuity Payments................
Postponement of Payments.......................
Services.......................................
  - Safekeeping of Variable Account Assets.....
  - Experts....................................
  - Principal Underwriter......................
Taxation Under Certain Retirement Plans........
Withholding....................................
Variable Account Financial Statements..........
APPENDIX A--Performance Information............
</TABLE>

FIRST FORTIS FINANCIAL STATEMENTS

The financial statements of First Fortis that are included in this prospectus
should be considered primarily as bearing on our ability to meet our obligations
under the contracts. The contracts are not entitled to participate in our
earnings, dividends or surplus.

                                       24
<PAGE>   25

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, an indirect, wholly-owned subsidiary of Fortis (B) and Fortis (NL)
N.V., as of December 31, 1999 and 1998, 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, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with accounting standards generally
accepted in the United States. 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, 1999 and 1998, and the results of its operations and its
cash flows for each of three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

                                          [/s/ Ernst & Young LLP]

February 17, 2000
Minneapolis, Minnesota

                                       F-1
<PAGE>   26

BALANCE SHEETS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                     DECEMBER 31
                                                                ---------------------
                                                                  1999         1998
                                                                ---------    --------
<S>                                                             <C>          <C>
ASSETS
Investments:
  Fixed maturities, at fair value (amortized cost
     1999--$126,432; 1998--$125,787)........................    $ 121,212    $130,038
  Policy loans..............................................            1          --
  Short-term investments....................................        5,800         830
                                                                ---------    --------
                                                                  127,013     130,868
Cash and cash equivalents...................................        4,562       1,160
Receivables:
  Uncollected premiums, less allowance (1999 and
     1998--$100)............................................        3,097       3,538
  Reinsurance recoverable on unpaid and paid losses.........       31,634      28,458
  Other.....................................................        1,495         417
                                                                ---------    --------
                                                                   36,226      32,413
Accrued investment income...................................        2,095       1,895
Deferred policy acquisition costs...........................        4,353       3,148
Property and equipment at cost, less accumulated
  depreciation (1999--$2,287; 1998--$2,087).................          124         324
Deferred federal income taxes...............................        3,535       1,150
Goodwill, less accumulated amortization (1999--$414;
  1998--$368)...............................................          416         462
Assets held in separate accounts............................       69,928      46,082
                                                                ---------    --------
Total assets................................................    $ 248,252    $217,502
                                                                =========    ========
</TABLE>

                                       F-2
<PAGE>   27
BALANCE SHEETS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                    DECEMBER 31
                                                                --------------------
                                                                  1999        1998
                                                                --------    --------
<S>                                                             <C>         <C>
POLICY RESERVES, LIABILITIES AND SHAREHOLDER'S EQUITY
Policy reserves and liabilities:
  Future policy benefit reserves:
     Life insurance.........................................    $ 34,165    $ 30,388
     Interest sensitive and investment products.............       3,487       6,267
     Accident and health....................................      70,852      68,206
                                                                --------    --------
                                                                 108,504     104,861
  Unearned revenues.........................................       9,834       8,535
  Other policy claims and benefits payable..................      12,247      11,084
  Income taxes payable......................................       1,213       2,017
  Other liabilities.........................................      10,590       4,897
  Liabilities related to separate accounts..................      69,928      46,082
                                                                --------    --------
Total policy reserves and liabilities.......................     212,316     177,476
Commitments and contingencies Shareholder's equity:
  Common stock, $20 par value:
     Authorized, issued and outstanding shares--100,000.....       2,000       2,000
  Additional paid-in capital................................      37,440      37,440
  Accumulated deficit.......................................        (124)     (2,190)
  Accumulated other comprehensive (loss) income.............      (3,380)      2,776
                                                                --------    --------
Total shareholder's equity..................................      35,936      40,026
                                                                --------    --------
Total policy reserves, liabilities and shareholder's
  equity....................................................    $248,252    $217,502
                                                                ========    ========
</TABLE>

                            See accompanying notes.

                                       F-3
<PAGE>   28

STATEMENTS OF OPERATIONS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                                -----------------------------
                                                                 1999       1998       1997
                                                                -------    -------    -------
<S>                                                             <C>        <C>        <C>
REVENUES
Insurance operations:
  Life insurance premiums...................................    $24,765    $23,057    $19,158
  Interest sensitive and investment product policy
     charges................................................        214         71          4
  Accident and health insurance premiums....................     34,498     31,323     32,684
                                                                -------    -------    -------
                                                                 59,477     54,451     51,846
Net investment income.......................................      8,564      8,187      7,907
Net realized gains (losses) on investments..................       (123)     1,436        361
Other income................................................      1,374      1,202        682
                                                                -------    -------    -------
Total revenues..............................................     69,292     65,276     60,796
BENEFITS AND EXPENSES
Benefits to policyholders:
  Life insurance............................................     19,100     16,167     14,597
  Interest sensitive investment products....................        315        815        196
  Accident and health claims................................     27,585     26,616     29,090
                                                                -------    -------    -------
                                                                 47,000     43,598     43,883
Amortization of deferred policy acquisition costs...........        240       (106)       (56)
Insurance commissions.......................................      5,114      5,056      4,457
General and administrative expenses.........................     13,840     12,929     12,699
                                                                -------    -------    -------
Total benefits and expenses.................................     66,194     61,477     60,983
                                                                -------    -------    -------
Income (loss) before federal income taxes...................      3,098      3,799       (187)
Federal income taxes........................................      1,032      1,347        (63)
Net income (loss)...........................................    $ 2,066    $ 2,452    $  (124)
                                                                =======    =======    =======
</TABLE>

                            See accompanying notes.

                                       F-4
<PAGE>   29

STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FIRST FORTIS LIFE INSURANCE COMPANY
(In thousands)

<TABLE>
<CAPTION>
                                                                                          ACCUMULATED
                                                              ADDITIONAL                     OTHER
                                                     COMMON    PAID-IN     ACCUMULATED   COMPREHENSIVE
                                            TOTAL    STOCK     CAPITAL       DEFICIT     (LOSS) INCOME
                                           -------   ------   ----------   -----------   -------------
<S>                                        <C>       <C>      <C>          <C>           <C>
Balance, January 1, 1997.................  $35,691   $2,000    $37,440       $(4,518)       $   769
  Comprehensive income:
     Net loss............................     (124)     --          --          (124)            --
     Change in unrealized gains (losses)
       on investments, net...............    1,514      --          --            --          1,514
                                           -------
  Comprehensive income...................    1,390
                                           -------   ------    -------       -------        -------
Balance, December 31, 1997...............   37,081   2,000      37,440        (4,642)         2,283
  Comprehensive income:
     Net income..........................    2,452      --          --         2,452             --
     Change in unrealized gains on
       investments, net..................      493      --          --            --            493
                                           -------
  Comprehensive income...................    2,945
                                           -------   ------    -------       -------        -------
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)
                                           =======   ======    =======       =======        =======
</TABLE>

                            See accompanying notes.

                                       F-5
<PAGE>   30

STATEMENTS OF CASH FLOWS
FIRST FORTIS LIFE INSURANCE COMPANY
(In thousands)

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31
                                                                --------------------------------
                                                                  1999        1998        1997
                                                                --------    --------    --------
<S>                                                             <C>         <C>         <C>
OPERATING ACTIVITIES
Net income (loss)...........................................    $  2,066    $  2,452    $   (124)
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Provision for deferred taxes..............................         930         665      (1,338)
  Depreciation, amortization and accretion..................         330         299         707
  Loss on disposal of property and equipment................          --          12          --
  Net realized losses (gains) on investments................         123      (1,436)       (361)
  (Increase) decrease in uncollected premiums, accrued
     investment income and other............................        (837)       (390)      2,309
  Increase in reinsurance recoverable.......................      (3,176)     (8,694)     (5,033)
  (Decrease) increase in income taxes payable...............        (804)      1,106         883
  Amortization of policy acquisition costs..................         240        (106)        (56)
  Policy acquisition costs deferred.........................      (1,445)     (1,629)     (1,110)
  Increase in future policy benefit reserves, unearned
     revenues and other policy claims and benefits..........       8,894      13,922       1,769
  Increase (decrease) in other liabilities..................       5,693        (686)      1,533
                                                                --------    --------    --------
Net cash provided by (used in) operating activities.........      12,014       5,515        (821)
INVESTING ACTIVITIES
Purchases of fixed maturity investments.....................    (159,025)   (187,953)   (127,426)
Sales and repayments of fixed maturity investments..........     158,172     165,971     137,273
(Increase) decrease in short-term investments...............      (4,970)     10,867     (11,697)
Purchases of property and equipment.........................          --          --        (107)
                                                                --------    --------    --------
Net cash used in investing activities.......................      (5,823)    (11,115)     (1,957)
FINANCING ACTIVITIES
Activities related to investment products:
  Considerations received...................................       2,875      13,661      10,679
  Surrenders and death benefits.............................      (5,941)    (15,075)     (2,152)
  Interest credited to policyholders........................         277         721         159
                                                                --------    --------    --------
Net cash (used in) provided by financing activities.........      (2,789)       (693)      8,686
Increase (decrease) in cash and cash equivalents............       3,402      (6,293)      5,908
Cash and cash equivalents at beginning of year..............       1,160       7,453       1,545
                                                                --------    --------    --------
Cash and cash equivalents at end of year....................    $  4,562    $  1,160    $  7,453
                                                                ========    ========    ========
</TABLE>

                             See accompanying notes

                                       F-6
<PAGE>   31

NOTES TO FINANCIAL STATEMENTS
FIRST FORTIS LIFE INSURANCE COMPANY
DECEMBER 31, 1999

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

First Fortis Life Insurance Company (the Company) is a wholly-owned subsidiary
of Fortis, Inc., which itself is a wholly-owned subsidiary of Fortis (B) and
Fortis (NL) N.V. Prior to April 30, 1997, First Fortis was wholly-owned by
Fortis (B), while the other U.S. subsidiaries of Fortis (B) and Fortis (NL) N.V.
operated under the holding company of Fortis, Inc. Upon regulatory approval by
the New York State Insurance Department in April 1997, the Company became a
wholly-owned subsidiary of Fortis, Inc. 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 $1,859,000, $4,648,000 and
$7,297,000 of 1999, 1998 and 1997 of the accident and health premiums,
respectively.


BASIS OF STATEMENT PRESENTATION
During 1998, the Company adopted Statement of Financial Accounting Standards
Board (SFAS) 130, Reporting Comprehensive Income. SFAS 130 establishes new rules
for the reporting and display of comprehensive income and its components;
however, the adoption of this SFAS had no impact on the Company's net income or
shareholder's equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities, which prior to adoption were reported
separately in shareholder's equity, to be included in other comprehensive
income. Prior year financial statements have been reclassified to conform to the
requirements of SFAS 130.

Effective January 1, 1999, the Company adopted SOP 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments". SOP 97-3
requires the estimation and recording of certain insurance-related assessments.
Because the Company previously recorded insurance-related assessments on this
basis, the adoption of SOP 97-3 had no impact on the results of operations or
financial position.


In June 1999, the Financial Accounting Standards Board issued SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of SFAS 133", which deferred to January 1, 2001 the effective
date of the accounting and reporting requirements of SFAS 133. SFAS 133
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. The adoption of SFAS 133 is not expected to have a material
effect on the Company's results of operations or financial position.


The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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.

The accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which practices
differ in certain respects from statutory accounting practices prescribed or
permitted by the Department of Insurance of the State of New York. The more
significant of these principles are:

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.

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

                                       F-7
<PAGE>   32
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
policy account balances and interest credited to policy account balances.
Interest credit rates for universal life and investment products ranged from
4.0% to 6.75% in 1999, 3.5% to 10.25% in 1998 and 3.5% to 10.0% in 1997.


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 Commissions 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.

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 are reviewed periodically. As excess amounts
of deferred costs over future premiums or gross profits are identified, such
excess amounts are expensed.

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

All fixed maturity investments are classified as available-for-sale and carried
at fair value.

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 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 at cost which approximates fair value.

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

PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost less accumulated depreciation. The
Company provides for depreciation principally on the straight-line method over
the estimated useful lives of the related property. Depreciation expense was
$202,000, $341,000 and $446,000 at December 31, 1999, 1998 and 1997,
respectively.

GOODWILL
Goodwill represents the excess of the purchase price paid over net assets
acquired in connection with the purchase of the shell of Metropolitan Life.
Goodwill is amortized on a straight line basis over 18 years.

                                       F-8
<PAGE>   33
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

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

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 contractholder, 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.

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.

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

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

RECLASSIFICATIONS
Certain amounts in the 1998 and 1997 financial statements have been reclassified
to conform to the 1999 presentation.

                                       F-9
<PAGE>   34
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

2.   INVESTMENTS
AVAILABLE-FOR-SALE SECURITIES
The following is a summary of the available-for-sale securities (in thousands):

<TABLE>
<CAPTION>
                                                                 GROSS         GROSS
                                                  AMORTIZED    UNREALIZED    UNREALIZED
                                                    COST          GAIN          LOSS       FAIR VALUE
                                                  ---------    ----------    ----------    ----------
<S>                                               <C>          <C>           <C>           <C>
DECEMBER 31, 1999
Governments.....................................  $ 83,070       $  212        $3,469       $ 79,813
Public utilities................................    11,494           --           360         11,134
Industrial and miscellaneous....................    31,868           15         1,618         30,265
                                                  --------       ------        ------       --------
Total...........................................  $126,432       $  227        $5,447       $121,212
                                                  ========       ======        ======       ========
DECEMBER 31, 1998
Governments.....................................  $ 18,770       $  437        $   14       $ 19,193
Public utilities................................    14,446          768           119         15,095
Industrial and miscellaneous....................    92,571        3,471           292         95,750
                                                  --------       ------        ------       --------
Total...........................................  $125,787       $4,676        $  425       $130,038
                                                  ========       ======        ======       ========
</TABLE>

The amortized cost and fair value of fixed maturity securities at December 31,
1999, by contractual maturity, are shown below (in thousands):

<TABLE>
<CAPTION>
                                                                AMORTIZED      FAIR
                                                                  COST        VALUE
                                                                ---------    --------
<S>                                                             <C>          <C>
Due in one year or less.....................................    $  1,517     $  1,520
Due after one year through five years.......................      31,077       30,502
Due after five years through ten years......................      47,662       45,531
Due after ten years.........................................      46,176       43,659
                                                                --------     --------
Total.......................................................    $126,432     $121,212
                                                                ========     ========
</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 $502,000 and $525,000 at December
31, 1999 and 1998, respectively, on deposit with various governmental
authorities as required by law.

NET INVESTMENT INCOME AND NET REALIZED GAINS (LOSSES) ON INVESTMENTS

Major categories of net investment income for each year were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                  1999       1998      1997
                                                                --------    ------    ------
<S>                                                             <C>         <C>       <C>
NET INVESTMENT INCOME
Fixed maturities............................................    $  8,375    $8,108    $7,744
Short-term investments......................................         326       222       302
                                                                --------    ------    ------
                                                                   8,701     8,330     8,046
Expenses....................................................        (137)     (143)     (139)
                                                                --------    ------    ------
Net investment income.......................................    $  8,564    $8,187    $7,907
                                                                ========    ======    ======
</TABLE>

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

                                      F-10
<PAGE>   35
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

2.   INVESTMENTS (CONTINUED)
Proceeds from sales of investments were $157,672,000, $165,471,000 and
$134,234,000 in 1999, 1998, and 1997, respectively. Gross gains of $738,000,
$1,757,000 and $1,136,000 and gross losses of $861,000, $321,000 and $775,000
were realized on the sales in 1999, 1998 and 1997, respectively.

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 (in thousands):


<TABLE>
<CAPTION>
                                                                                TAX
                                                               BEFORE-TAX     BENEFIT     NET-OF-TAX
                                                                 AMOUNT      (EXPENSE)      AMOUNT
                                                               ----------    ---------    ----------
<S>                                                            <C>           <C>          <C>
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)
                                                                =======       =======      =======
DECEMBER 31, 1998
Unrealized gains (losses) on investments:
  Unrealized gains (losses) on available-for-sale
     investments...........................................     $ 2,194       $  (768)     $ 1,426
  Reclassification adjustment for gains (losses) realized
     in net income.........................................      (1,436)          503         (933)
                                                                -------       -------      -------
Other comprehensive income.................................     $   758       $  (265)     $   493
                                                                =======       =======      =======
DECEMBER 31, 1997
Unrealized gains (losses) on investments:
  Unrealized gains (losses) on available-for-sale
     investments...........................................     $ 2,766       $(1,017)     $ 1,749
  Reclassification adjustment for gains (losses) realized
     in net income.........................................        (361)          126         (235)
                                                                -------       -------      -------
Other comprehensive income.................................     $ 2,405       $  (891)     $ 1,514
                                                                =======       =======      =======
</TABLE>


3.   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 $915,000, $789,000 and $661,000
in 1999, 1998 and 1997, respectively. Future minimum payments required under
operating lease arrangements that have initial or noncancelable terms in excess
of one year or more are: 2000--$632,000, 2001--$638,000, 2002--$629,000,
2003--$604,000, 2004--$610,000, and thereafter $429,000.

                                      F-11
<PAGE>   36
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

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

<TABLE>
<CAPTION>
                                                                   YEAR ENDED DECEMBER 31
                                                                -----------------------------
                                                                 1999       1998       1997
                                                                -------    -------    -------
<S>                                                             <C>        <C>        <C>
Balance as of January 1, net of reinsurance recoverables....    $62,540    $60,498    $61,482
Add: Incurred losses related to:
  Current year..............................................     18,907     16,816     25,424
  Prior years...............................................      8,678      9,800      3,666
                                                                -------    -------    -------
Total incurred losses.......................................     27,585     26,616     29,090
Deduct: Paid losses related to:
  Current year..............................................     14,717     11,639     15,393
  Prior year................................................     11,620     12,935     14,681
                                                                -------    -------    -------
Total paid losses...........................................     26,337     24,574     30,074
                                                                -------    -------    -------
Balance as of December 31, net of reinsurance
  recoverables..............................................    $63,788    $62,540    $60,498
                                                                =======    =======    =======
</TABLE>

The table above compares to the amounts reported on the balance sheet in the
following respects: (1) the table above is presented net of ceded reinsurance
and the accident and health reserves reported on the balance sheet are gross of
ceded reinsurance; 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.

As discussed in Note 1, the Company stopped offering group medical products in
1996 but continues to service and renew existing business, resulting in lower
incurred and paid loss activity on the group medical products for the years
ended December 31, 1999, 1998 and 1997.


The 1999, 1998 and 1997 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 $59,535,000,
$59,339,000 and $55,956,000 of total disability income reserves as of December
31, 1999, 1998 and 1997, respectively, which were discounted for anticipated
interest earnings assuming a 6.0% interest rate.


5.   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,
Inc. (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.

                                      F-12
<PAGE>   37
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

5.   FEDERAL INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax liabilities and assets
as of December 31, 1999 and 1998 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31
                                                                ----------------
                                                                 1999      1998
                                                                ------    ------
<S>                                                             <C>       <C>
Deferred tax assets:
  Reserves..................................................    $1,315    $  473
  Separate account assets/liabilities.......................       727     1,545
  Unrealized losses.........................................     1,827        --
  Alternative minimum tax credit carryforward...............        --       308
  Net operating loss carryforward...........................        --       557
  Other.....................................................       207        19
                                                                ------    ------
Total deferred tax assets...................................     4,076     2,902
Deferred tax liabilities:
  Deferred policy acquisition costs.........................       494       213
  Unrealized gains..........................................        --     1,487
  Other.....................................................        47        52
                                                                ------    ------
Total gross deferred tax liabilities........................       541     1,752
                                                                ------    ------
Net deferred tax asset......................................    $3,535    $1,150
                                                                ======    ======
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                                 1999      1998     1997
                                                                ------    ------    ----
<S>                                                             <C>       <C>       <C>
Current.....................................................    $  102    $  889    $(35)
Deferred....................................................       930       458     (28)
                                                                ------    ------    ----
                                                                $1,032    $1,347    $(63)
                                                                ======    ======    ====
</TABLE>

Federal income tax payments and refunds resulted in net payments of $906,000 and
$382,000 in 1999 and 1997, respectively, and net refunds of $424,000 in 1998.

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

<TABLE>
<CAPTION>
                                                                1999     1998     1997
                                                                -----    -----    -----
<S>                                                             <C>      <C>      <C>
Statutory income tax rate...................................     35.0%    35.0%    35.0%
Other, including provision for prior year adjustments.......     (1.7)      .4     (1.3)
                                                                -----    -----    -----
                                                                 33.3%    35.4%    33.7%
                                                                =====    =====    =====
</TABLE>


At December 31, 1999, the Company has fully utilized all net operating loss,
capital loss, and alternative minimum tax credit carryforwards.


6.   REINSURANCE
The maximum amounts that the Company retains on any one life are $500,000 for
group life; $250,000 for group accidental death; $2,000 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

                                      F-13
<PAGE>   38
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

6.   REINSURANCE (CONTINUED)
excess of these limits are reinsured with various insurance companies on a
yearly renewable term, coinsurance or other basis.

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 $10,000 net monthly benefit to a $2,000 net monthly
benefit for claims incurred on and after January 1, 1996. The Company has ceded
$6,580,000, $5,601,000 and $5,742,000 of premium to Fortis Benefits in 1999,
1998 and 1997, respectively. Fortis Benefits has assumed $11,047,000, $9,315,000
and $5,452,000 of reserves in 1999, 1998 and 1997, respectively, from the
Company. 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 $31,634,000 and $28,458,000 in 1999 and
1998, respectively.

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

<TABLE>
<CAPTION>
                                                                 1999       1998       1997
                                                                -------    -------    -------
<S>                                                             <C>        <C>        <C>
Life insurance..............................................    $ 5,001    $ 5,343    $ 3,249
Accident and health insurance...............................     11,186     11,343      8,768
                                                                -------    -------    -------
                                                                $16,187    $16,686    $12,017
                                                                =======    =======    =======
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 1999      1998       1997
                                                                ------    -------    -------
<S>                                                             <C>       <C>        <C>
Life insurance..............................................    $2,571    $ 1,740    $ 1,628
Accident and health insurance...............................     5,522      3,504      2,310
                                                                ------    -------    -------
                                                                $8,093    $ 5,244    $ 3,938
                                                                ======    =======    =======
</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.

7.   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.

8.   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. In 1998, the NAIC adopted codified
statutory accounting principles ("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 will
require adoption by the various states before it becomes the prescribed
statutory basis of accounting for insurance companies domesticated within those
states. At this time the State of New York has not decided

                                      F-14
<PAGE>   39
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

8.   REGULATORY ACCOUNTING REQUIREMENTS (CONTINUED)
whether to adopt or not to adopt Codification. Therefore, management has not yet
determined the impact of Codification to the Company's 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 the minimum RBC requirements.

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

<TABLE>
<CAPTION>
                                                                                        SHAREHOLDER'S
                                                            NET INCOME (LOSS)               EQUITY
                                                        --------------------------    ------------------
                                                         1999      1998      1997      1999       1998
                                                        ------    ------    ------    -------    -------
<S>                                                     <C>       <C>       <C>       <C>        <C>
Based on statutory accounting practices.............    $1,793    $1,177    $ (296)   $30,419    $28,782
Deferred policy acquisition costs...................     1,356     1,764     1,180      4,353      3,148
Deferred and uncollected premiums...................        59      (323)      246        156         97
Policy reserves.....................................       555      (269)     (660)       204       (361)
Investment valuation difference.....................                  --       (47)    (5,220)     4,250
Realized gains (losses) on investments..............       (80)      896       235         --         --
Amortization of goodwill............................       (46)      (46)      (46)       416        462
Income taxes........................................      (930)     (458)       28      2,440         55
Pension.............................................       (84)      (19)     (275)      (405)      (321)
Amortization of IMR.................................      (383)     (347)     (348)        --         --
Interest Maintenance Reserve........................        --        --        --      1,975      2,438
Asset Valuation Reserve.............................        --        --        --        928        814
Property and equipment..............................        --        --        --         61        164
Agents balances.....................................        --        --        --        486        300
Other...............................................      (174)       77      (141)       123        198
                                                        ------    ------    ------    -------    -------
As reported herein..................................    $2,066    $2,452    $ (124)   $35,936    $40,026
                                                        ======    ======    ======    =======    =======
</TABLE>

9.   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, investments, information systems, actuarial and other
administrative functions. The fees paid for these services for years ended
December 31, 1999, 1998 and 1997, were $1,541,000, $1,712,000 and $2,568,000,
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.

10. 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.

                                      F-15
<PAGE>   40
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

10. FAIR VALUE DISCLOSURES (CONTINUED)
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,          DECEMBER 31,
                                                                    1999                  1998
                                                             -------------------   -------------------
                                                             CARRYING     FAIR     CARRYING     FAIR
                                                              AMOUNT     VALUE      AMOUNT     VALUE
                                                             --------   --------   --------   --------
                                                                          (IN THOUSANDS)
<S>                                                          <C>        <C>        <C>        <C>
Assets:
  Investments:
  Securities available-for-sale:
  Fixed maturities.........................................  $121,212   $121,212   $130,038   $130,038
  Short-term investments...................................     5,800      5,800        830        830
  Cash.....................................................     4,562      4,562      1,160      1,160
  Policy loans.............................................         1          1         --         --
  Assets held in separate accounts.........................    69,928     69,928     46,082     46,082
Liabilities:
  Individual and group annuities (subject to discretionary
     withdrawal)...........................................     5,516      5,231      8,435      8,097
  Liabilities related to Separate Accounts.................    69,928     69,928     46,082     46,082
</TABLE>

11. RETIREMENT AND OTHER EMPLOYEE BENEFITS
The Company is an indirect wholly-owned subsidiary of Fortis, Inc., 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 $20,000, $52,000 and $61,000 for 1999, 1998 and 1997,
respectively.

The Company has a contributory profit sharing plan, sponsored by Fortis, Inc.,
covering employees and certain agents who meet eligibility requirements as to
age and length of service. The Company matches 200% up to 3% of the employee's
contribution. Benefits are payable to participants on retirement or disability
and to the beneficiaries of participants in the event of death. The amount
expensed was approximately $133,000, $124,000 and $122,000 for 1999, 1998 and
1997, 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, Inc. 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 15 years or more service. Life insurance, on a retiree pay all
basis, is available to those who retire on or after January 1, 1993.

12. 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.

                                      F-16
<PAGE>   41
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

13. YEAR 2000 (UNAUDITED)

The Company utilizes Fortis and its computer systems to process Company
businesses. Fortis created a Year 2000 Project Office which was dedicated to
ensuring that all of the systems for Fortis and its subsidiaries and affiliates
were ready for year 2000. The estimated total cost of the Fortis Year 2000
Project was approximately $85 million. This cost reflects the total cost to the
Fortis U.S. companies (excluding the recent American Bankers Insurance Group
acquisition). The Company is not incurring any cost for the Year 2000 project
since it is being paid for by affiliates of the Company.



As of December 20, 1999, 100% of the Mission Critical and non-Mission Critical
computer system lines of code that had been identified were renovated and tested
and were ready for year 2000. Although there have been several minor matters, as
of the date of this report, no significant disruptions resulting from the
century date change have been detected in any of the mission critical systems.
The Company will continue to monitor the status of and exposure to any potential
Year 2000 issues.


                                      F-17
<PAGE>   42

APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS

The formula which will be used to determine the Market Value Adjustment is:

<TABLE>
         <S>  <C>            <C>  <C>     <C>
                  1 + I           n/12
             (-------------)              - 1
              1 + J + 0025
</TABLE>

Sample Calculation 1: Positive Adjustment

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

<TABLE>
<S>        <C>  <C>              <C>  <C>      <C>  <C>    <C>
                    1 + .08           60/12
$10,000 x     [(---------------)               - 1]        = $354.57
                1 + .07 + .0025
</TABLE>

    Amount transferred or withdrawn (adjusted for Market Value Adjustment):
                                   $10,354.57

Sample Calculation 2: Negative Adjustment

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

<TABLE>
<S>        <C>  <C>              <C>  <C>      <C>  <C>    <C>
                    1 + .08           60/12                = $559.14
$10,000 x     [(---------------)               - 1]        $559.14
                1 + .09 + .0025
</TABLE>

    Amount transferred or withdrawn (adjusted for Market Value Adjustment):
$9,440.86

Sample Calculation 3: Negative Adjustment

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

<TABLE>
<S>        <C>  <C>                <C>  <C>      <C>  <C>    <C>
                     1 + .08            60/12
$10,000 x     [(-----------------)               - 1]        = $0
                1 + .0775 + .0025
</TABLE>

    Amount transferred or withdrawn (adjusted for Market Value Adjustment):
$10,000
------------------------------
* Assumed for illustrative purposes only.

                                       A-1
<PAGE>   43

APPENDIX B--SAMPLE DEATH BENEFIT CALCULATIONS

<TABLE>
<CAPTION>
                                                                EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
       DATE OF DEATH IS THE 3RD CONTRACT ANNIVERSARY            ---------    ---------    ---------
<S>                                                             <C>          <C>          <C>
  a. Purchase Payments Made Prior to Death, accumulated at
     5%                                                          $32,000      $32,000      $32,000
  b. Contract Value on Date of Death                             $20,000      $36,000      $25,000
  c. 1 Year Ratchet Option Value                                 $35,000      $36,000      $31,000
Death Benefit is larger of a, b, and c                           $35,000      $36,000      $32,000
</TABLE>

<TABLE>
<CAPTION>
                                                                EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
       DATE OF DEATH IS THE 5TH CONTRACT ANNIVERSARY            ---------    ---------    ---------
<S>                                                             <C>          <C>          <C>
  a. Purchase Payments Made Prior to Death, accumulated at
     5%                                                          $34,000      $34,000      $34,000
  b. Contract Value on Date of Death                             $38,000      $38,000      $28,000
  c. 1 Year Ratchet Option Value                                 $38,000      $40,000      $33,000
Death Benefit is larger of a, b, and c                           $38,000      $40,000      $34,000
</TABLE>

<TABLE>
<CAPTION>
                                                                EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
       DATE OF DEATH IS THE 10TH CONTRACT ANNIVERSARY           ---------    ---------    ---------
<S>                                                             <C>          <C>          <C>
  a. Purchase Payments Made Prior to Death, accumulated at
     5%                                                          $36,000      $36,000      $36,000
  b. Contract Value on Date of Death                             $39,000      $34,000      $31,000
  c. 1 Year Ratchet Option Value                                 $39,000      $37,000      $32,000
Death Benefit is larger of a, b, and c                           $39,000      $37,000      $36,000
</TABLE>

                                       B-1
<PAGE>   44

APPENDIX C--EXPLANATION OF EXPENSE CALCULATIONS

The expense for a given year is calculated by multiplying the projected
beginning of the year policy value by the total expense rate. The total expense
rate is the sum of the variable account expense rate plus the total portfolio
expense rate plus The annual administrative charge rate.

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

For example, the 3 year expense for the Growth Stock Series is calculated as
follows:


<TABLE>
<S> <C>  <C>                                                           <C>   <C>
--------------------------------------------------------------------------------
         Total Variable Account Annual Expenses                        1.35%
--------------------------------------------------------------------------------
     +   Total Series Fund Operating Expenses                          0.66%
--------------------------------------------------------------------------------
     =   Total Expense Rate                                            2.01%
--------------------------------------------------------------------------------
</TABLE>


Year 1 Beginning Policy Value = $1000.00

Year 1 Expense = 1000.00 X .0201 = $20.10



Year 2 Beginning Policy Value = $1029.90


Year 2 Expense = 1029.90 X .0201 = $20.70



Year 3 Beginning Policy Value = $1060.69


Year 3 Expense = 1060.69 X .0201 = $21.32


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

     $20.10 + $20.70 + $21.32 = $62.12.


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

Surrender Charge Percentage X (Initial Premium - 10% Free Withdrawal) =
Surrender Charge
     0.06 X ($1000.00 - $100.00) = $54.00


So the total expense if surrendered is $62.12 + $54.00 = $116.12.


                                       C-1
<PAGE>   45

APPENDIX D--PRO RATA ADJUSTMENTS

Pro rata adjustments are made for withdrawals in calculating the death benefit
payable under the contract. The benefit is described under the section of this
prospectus entitled Benefit Payable on Death of Owner (or Annuitant).

Under the death benefit set forth as (2) in that section, the pro rata
adjustment for a given withdrawal is equal to:

     (a) the withdrawn amount, divided by

     (b) the contract value immediately before the amount was withdrawn, the
         result multiplied by

     (c) the aggregate amount of all prior purchase payments less pro rata
         adjustments for all prior withdrawals.

Under the death benefit set forth as (3) in that section, the pro rata
adjustment for a given withdrawal is equal to

     (a) the withdrawn amount, divided by

     (b) the contract value immediately before the amount was withdrawn, the
         result multiplied by

     (c) the quantity equal to:

          (i) the contract value on the anniversary, plus

         (ii) purchase payments made since the anniversary and before
              withdrawal, plus

        (iii) pro rata adjustments for withdrawals made since the anniversary
              and before the given withdrawal.

                                       D-1