<PAGE>
FIRST FORTIS MASTERS+ VARIABLE ANNUITY

Flexible Premium Deferred

Combination Variable and Fixed Annuity Contracts

PROSPECTUS DATED
May 1, 1998

[FORTIS LOGO]

FIRST FORTIS LIFE INSURANCE COMPANY
MAILING ADDRESS:     STREET ADDRESS:                PHONE: 1-800-745-8248
P.O. BOX 3249        220 SALINA MEADOWS PARKWAY
SYRACUSE             SUITE 255
NEW YORK 13220       SYRACUSE
                     NEW YORK 13212

This Prospectus describes flexible premium deferred combination variable and
fixed annuity contracts (a "Contract") issued by First Fortis Life Insurance
Company ("First Fortis"). The minimum initial purchase payment is generally
$5,000 and is $1,000 for each subsequent purchase payment.

A Contract allows you to accumulate funds on a tax-deferred basis. You may elect
a guaranteed interest accumulation option through First Fortis' Fixed Account or
a variable return accumulation option through Separate Account A (the "Variable
Account") of First Fortis, or a combination of these two options. Under the
variable rate accumulation option, you can choose among one or more of the
following investment portfolios of Fortis Series Fund, Inc. (the "Portfolios"):

<TABLE>
<S>                                       <C>
Money Market Series                       S&P 500 Index Series
U.S. Government Securities Series         Blue Chip Stock Series
Diversified Income Series                 International Stock Series
Global Bond Series                        Mid Cap Stock Series
High Yield Series                         Small Cap Value Series
Global Asset Allocation Series            Global Growth Series
Asset Allocation Series                   Large Cap Growth Series
Value Series                              Growth Stock Series
Growth & Income Series                    Aggressive Growth Series
</TABLE>

The accompanying Prospectuses for the Portfolios describe the investment
objectives, policies and risks of each of the Portfolios. Under the guaranteed
interest accumulation option, you can choose among ten different guarantee
periods, each of which has its own interest rate.

The Contract provides several different types of retirement and death benefits,
including fixed and variable annuity income options. Within limits, you may make
partial surrenders of the Contract Value or may totally surrender the Contract
for its Cash Surrender Value.

You have the right to examine a Contract for ten days from the time you receive
the Contract and return it for a refund of the full Contract Value.

This Prospectus gives prospective investors information about the Contracts that
they should know before investing. This Prospectus must be accompanied by a
current Prospectus of the Portfolios. All of the Prospectuses should be read
carefully and kept for future reference.

A Statement of Additional Information, dated May 1, 1998, 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 21 of this Prospectus.

THESE CONTRACTS ARE NOT OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK,
CREDIT UNION, BROKER-DEALER OR OTHER FINANCIAL INSTITUTION. THEY ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY; AND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

97104 (Ed. 5/98)
<PAGE>
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.....................................       7
The Variable Account....................................................       7
The Portfolios..........................................................       8
The Fixed Account.......................................................       8
    - Guaranteed Interest Rates/Guarantee Periods.......................       8
    - Market Value Adjustment...........................................       8
    - Investments by First Fortis.......................................       9
Accumulation Period.....................................................       9
    - Issuance of a Contract and Purchase Payments......................       9
    - Contract Value....................................................      10
    - Allocation of Purchase Payments and Contract Value................      10
    - Total and Partial Surrenders......................................      11
    - Benefit Payable on Death of Contract Owner (or Annuitant).........      11
The Annuity Period......................................................      12
    - Annuity Commencement Date.........................................      12
    - Commencement of Annuity Payments..................................      13
    - Relationship Between Subaccount Investment Performance and Amount
      of Variable Annuity Payments......................................      13
    - Annuity Forms.....................................................      13
    - Death of Annuitant or Other Payee.................................      14
Charges and Deductions..................................................      14
    - Premium Taxes.....................................................      14
    - Charges Against the Variable Account..............................      14
    - Tax Charge........................................................      14
    - Surrender Charge..................................................      14
    - Miscellaneous.....................................................      15
    - Reduction of Charges..............................................      15
General Provisions......................................................      15
    - The Contracts.....................................................      15
    - Postponement of Payment...........................................      15
    - Misstatement of Age or Sex and Other Errors.......................      15
    - Assignment........................................................      15
    - Beneficiary.......................................................      15
    - Reports...........................................................      15
Rights Reserved By First Fortis.........................................      15
Distribution............................................................      15
Federal Tax Matters.....................................................      16
Further Information about First Fortis..................................      18
    - General...........................................................      18
    - Selected Financial Data...........................................      18
Management's Discussion and Analysis of Financial Condition and Results
 of Operations..........................................................      18
Directors and Executive Officers........................................      19
    - Executive Compensation............................................      20
    - Ownership of Securities...........................................      21
Voting Privileges.......................................................      21
Legal Matters...........................................................      21
Other Information.......................................................      21
Contents of Statement of Additional Information.........................      21
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
</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>
SPECIAL TERMS USED IN THIS PROSPECTUS

<TABLE>
<S>                             <C>
ACCUMULATION PERIOD             The time period under a Contract between the
                                Contract Issue Date and the Annuity Commencement
                                Date.
ACCUMULATION UNIT               A unit of measure used to calculate a Contract
                                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 Certificate. 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 Participant, if he
                                or she is a natural person, shall become the
                                Annuitant.
ANNUITY COMMENCEMENT DATE       The date on which the Annuity Period commences.
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.
BENEFICIARY                     The person entitled to receive benefits under
                                the terms of the Contract.
CASH SURRENDER VALUE            The amount payable to the Contract Owner on
                                surrender of the Contract after all applicable
                                adjustments and deduction of all applicable
                                charges.
CONTRACT ISSUE DATE             The date on which the Contract becomes effective
                                as shown on the Contract Data Page.
CONTRACT OWNER                  The person or company named in the application
                                for a Contract, who is entitled to exercise all
                                rights and privileges of ownership under the
                                Contract during the Accumulation Period.
CONTRACT VALUE                  The sum of the Fixed Account Value and the
                                Variable Account Value.
FIXED ACCOUNT                   The name of the alternative under which purchase
                                payments are allocated to First Fortis' General
                                Account.
FIXED ACCOUNT VALUE             The amount of your Contract Value which is in
                                the Fixed Account.
FIXED ANNUITY OPTION            An annuity option under which First Fortis
                                promises to pay the Annuitant or any other payee
                                that you designate one or more fixed payments.
GENERAL ACCOUNT                 All assets of First Fortis other than those in
                                the Variable Account, and other than those in
                                any other legally segregated separate account
                                established by First Fortis.
GUARANTEED INTEREST RATE        The rate of interest we credit during any
                                Guarantee Period, on an effective annual basis.
GUARANTEE PERIOD                The period for which a Guaranteed Interest Rate
                                is credited.
HOME OFFICE                     Our office at 220 Salina Meadows Parkway,
                                Syracuse, New York 13220; 1-800-745-8248;
                                Mailing address: P.O. Box 3249, Syracuse NY
                                13220.
MARKET VALUE ADJUSTMENT         Positive or negative adjustment in Fixed Account
                                Value that 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.
NET PURCHASE PAYMENT            The gross amount of a purchase payment less any
                                applicable premium taxes or similar governmental
                                assessments.
NON-QUALIFIED CONTRACTS         Contracts that do not qualify for the special
                                federal income tax treatment applicable in
                                connection with certain retirement plans.
PORTFOLIO                       Each separate investment portfolio available for
                                investment by the Variable Account.
QUALIFIED CONTRACTS             Contracts that are qualified for the special
                                federal income tax treatment applicable in
                                connection with certain retirement plans.
SUBACCOUNTS                     The several Subaccounts of the Variable Account,
                                each of which invests its assets in a different
                                Portfolio.
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 ACCOUNT VALUE          The amount of your Contract Value in the
                                Subaccounts of the Variable Account.
VARIABLE ANNUITY OPTION         An annuity option under which First Fortis
                                promises to pay 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.
WRITTEN REQUEST                 A written, signed and dated request, in form and
                                substance satisfactory to First Fortis and
                                received at our Home Office.
</TABLE>

                                       3
<PAGE>
INFORMATION CONCERNING FEES AND CHARGES

CONTRACT OWNER TRANSACTION CHARGES

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

<TABLE>
<CAPTION>
                                     SURRENDER CHARGE AS A
    NUMBER OF YEARS SINCE           PERCENTAGE OF PURCHASE
PURCHASE PAYMENT WAS CREDITED               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>
       Other Surrender Fees.................................       0%
       Exchange Fee.........................................       0%

ANNUAL CONTRACT ADMINISTRATION CHARGE.......................  $    0

VARIABLE ACCOUNT ANNUAL EXPENSES
 (AS A PERCENTAGE OF AVERAGE ACCOUNT VALUE)
</TABLE>

<TABLE>
<S>                                                           <C>
       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. It is computed pursuant to a formula that is
described in more detail under "Market Value Adjustment."

PORTFOLIO ANNUAL EXPENSES (a)
<TABLE>
<CAPTION>
                                                               MONEY    U.S. GOVERNMENT   DIVERSIFIED    GLOBAL     HIGH
                                                              MARKET      SECURITIES         INCOME       BOND      YIELD
                                                              SERIES        SERIES           SERIES      SERIES    SERIES
                                                              -------   ---------------   ------------   -------   -------
<S>                                                           <C>       <C>               <C>            <C>       <C>
Investment Advisory and Management Fee......................
Other Expenses..............................................
Total Series Fund Operating Expenses........................

<CAPTION>
                                                                GLOBAL
                                                                 ASSET         ASSET                GROWTH &
                                                              ALLOCATION    ALLOCATION     VALUE     INCOME
                                                                SERIES        SERIES      SERIES     SERIES
                                                              -----------   -----------   -------   --------
<S>                                                           <C>           <C>           <C>       <C>
Investment Advisory and Management Fee......................
Other Expenses..............................................
Total Series Fund Operating Expenses........................
</TABLE>
<TABLE>
<CAPTION>
                                                        S&P 500    BLUE CHIP                     MID CAP    SMALL CAP    GLOBAL
                                                         INDEX       STOCK      INTERNATIONAL     STOCK       VALUE      GROWTH
                                                         SERIES      SERIES      STOCK SERIES     SERIES      SERIES     SERIES
                                                        --------   ----------   --------------   --------   ----------   -------
<S>                                                     <C>        <C>          <C>              <C>        <C>          <C>
Investment Advisory and Management Fee................
Other Expenses........................................
Total Series Fund Operating Expenses..................

<CAPTION>
                                                        LARGE CAP    GROWTH
                                                          GROWTH      STOCK     AGGRESSIVE
                                                          SERIES     SERIES    GROWTH SERIES
                                                        ----------   -------   -------------
<S>                                                     <C>          <C>       <C>
Investment Advisory and Management Fee................
Other Expenses........................................
Total Series Fund Operating Expenses..................
</TABLE>

------------------------------
(a)  As a percentage of Portfolio average net assets based on 1997 historical
     data except that for Small Cap Value Series, Mid Cap Stock Series and Large
     Cap Growth Series these amounts are based upon estimates for their current
     fiscal year.

                                       4
<PAGE>
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 Series...............................
U.S. Government Securities Series.................
Diversified Income Series.........................
Global Bond Series................................
High Yield Series.................................
Global Asset Allocation Series....................
Asset Allocation Series...........................
Value Series......................................
Growth & Income Series............................
S&P 500 Index Series..............................
Blue Chip Stock Series............................
International Stock Series........................
Mid Cap Stock Series..............................
Small Cap Value Series............................
Global Growth Series..............................
Large Cap Growth Series...........................
Growth Stock Series...............................
Aggressive Growth Series..........................
</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 Series...............................
U.S. Government Securities Series.................
Diversified Income Series.........................
Global Bond Series................................
High Yield Series.................................
Global Asset Allocation Series....................
Asset Allocation Series...........................
Value Series......................................
Growth & Income Series............................
S&P 500 Index Series..............................
Blue Chip Stock Series............................
International Stock Series........................
Mid Cap Stock Series..............................
Small Cap Value Series............................
Global Growth Series..............................
Large Cap Growth Series...........................
Growth Stock Series...............................
Aggressive Growth Series..........................
</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.

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

The foregoing tables and examples are included to assist you in understanding
the transaction and operating expenses imposed directly or indirectly under the
Contracts and the Portfolios. Amounts for state premium taxes or similar
assessments will also be deducted, where applicable.

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

                                       5
<PAGE>
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 Net 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.

PURCHASE PAYMENTS

The initial purchase payment under a Contract must be at least $5,000 ($2,000
for a Contract pursuant to a qualified contract). Additional purchase payments
under a Contract must be at least $1,000 ($50 for a Contract pursuant to a
qualified contract). See "Issuance of a Contract and Purchase Payments."

On the Contract Issue Date, the initial purchase payment is allocated, as
specified by the Contract Owner in the Contract application, among one or more
of the Subaccounts of the Variable Account, 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 the Contract Owner may subsequently 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.

FIXED ACCOUNT INVESTMENT OPTIONS

Any amount allocated by the Contract 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 Contract 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 the Contract Owner before the earlier of (1) if the participant
is a non-natural person, the Annuitant's death, or (2) the Annuity Commencement
Date. 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 Contract Owners or
other persons they properly designate to receive such payments, including Fixed
and Variable Annuity Options. The Contract 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 Forms" and "Federal Tax Matters" in
this Prospectus and "Taxation Under Certain Retirement Plans" in the Statement
of Additional Information.

DEATH BENEFIT

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

RIGHT TO EXAMINE THE CONTRACT

The Contract Owner can cancel a Contract by delivering or mailing it, together
with a Written Request, to First Fortis' Home Office or to the sales
representative through whom it was purchased, before the close of business on
the tenth day after receipt of the Contract. If these items are sent by mail,
properly addressed and postage prepaid, they will be deemed to be received by
First Fortis on the date postmarked. First Fortis will pay you the then current
Contract Value.

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.

                                       6
<PAGE>
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 a Contract Owner otherwise would have under a Contract may be reserved
instead by the employer.

TAX IMPLICATIONS

The tax implications for Contract Owners or any other persons who may receive
payments under a Contract, and those of any related employee benefit plan can be
quite important. A brief discussion of some of these is set out under "Federal
Tax Matters" in this Prospectus and "Taxation Under Certain Retirement Plans" in
the Statement of Additional Information, but such discussion is not
comprehensive. Therefore, you should consider these matters carefully and
consult a qualified tax adviser before making purchase payments or taking any
other action in connection with a Contract or any related employee benefit plan.
Failure to do so could result in serious adverse tax consequences which might
otherwise have been avoided.

QUESTIONS AND OTHER COMMUNICATIONS

Any question about procedures of the Contract should be directed to your sales
representative, or First Fortis' Home Office: P.O. Box 3249, Syracuse, NY 13220;
1-800-745-8248. Purchase payments and Written Requests should be mailed or
delivered to the same Home Office address. All communications should include the
Contract number, the Contract Owner's name and, if different, the Annuitant's
name. The number for telephone transfers is 1-800-745-8248.

Any purchase payment or other communication, except a 10-day cancellation
notice, is deemed received at First Fortis' Home Office on the actual date of
receipt there in proper form unless received (1) after the close of regular
trading on The New York Stock Exchange, or (2) on a date that is not a Valuation
Date. In either of these two cases, the date of receipt will be deemed to be the
next Valuation Date.

FINANCIAL AND PERFORMANCE INFORMATION

The information presented below reflects the Accumulation Unit Information for
subaccounts of the Variable Account through December 31, 1997. Accumulation
Units have been rounded to the nearest whole unit.
<TABLE>
<CAPTION>
                                                U.S. GOV'T    DIVERSIFIED                                  GLOBAL ASSET
                                MONEY MARKET    SECURITIES       INCOME      GLOBAL BOND     HIGH YIELD     ALLOCATION
                                ------------   ------------   ------------   ------------   ------------   -------------
<S>                             <C>            <C>            <C>            <C>            <C>            <C>
DECEMBER 31, 1997
Accumulation Units in Force...
Accumulation Unit Value.......
DECEMBER 31, 1996
Accumulation Units in Force...        31,800            427         20,649          1,347          9,846           7,591
Accumulation Unit Value.......         1.418         15.935          1.801         11.961         11.928          12.884
MAY 1, 1996*
Accumulation Unit Value.......       $10.000        $10.000        $10.000        $10.000        $10.000         $10.000

<CAPTION>
                                   ASSET                        GROWTH &         S&P            BLUE       INTERNATIONAL
                                 ALLOCATION       VALUE          INCOME          500            CHIP          STOCK
                                ------------   ------------   ------------   ------------   ------------   ------------
<S>                             <C>            <C>            <C>
DECEMBER 31, 1997
Accumulation Units in Force...
Accumulation Unit Value.......
DECEMBER 31, 1996
Accumulation Units in Force...        63,004         15,690         14,412          5,144          9,457        10,999
Accumulation Unit Value.......         2.368         11.048         15.468         11.326         11.520        12.690
MAY 1, 1996*
Accumulation Unit Value.......       $10.000        $10.000        $10.000        $10.000        $10.000       $10.000

<CAPTION>
                                   GLOBAL                      AGGRESSIVE
                                   GROWTH      GROWTH STOCK      GROWTH
                                ------------   -------------  ------------
DECEMBER 31, 1997
Accumulation Units in Force...
Accumulation Unit Value.......
DECEMBER 31, 1996
Accumulation Units in Force...         6,899          70,686       14,449
Accumulation Unit Value.......        18.510           2.971       13.232
MAY 1, 1996*
Accumulation Unit Value.......       $10.000         $10.000      $10.000
</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, the issuer of the Contracts, was founded in
1971. At the end of 1997, First Fortis had approximately $xx billion of total
life insurance in force. First Fortis is a New York corporation and is qualified
to sell life insurance and annuity contracts in New York. First Fortis is a
wholly-owned subsidiary of Fortis, Inc., which is itself indirectly owned 50% by
Fortis AMEV and 50% by Fortis AG. Fortis, Inc. manages the United States
operations for these two companies.

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

Fortis AMEV is a diversified financial services company headquartered in
Utrecht, The Netherlands, where its insurance operations began in 1847. Fortis
AG is a diversified financial services company headquartered in Brussels,
Belgium, where its insurance operations began in 1824. Fortis AMEV and Fortis AG
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 has assets in excess
of $xxx billion.

All of the guarantees and commitments under the Contracts are general
obligations of First Fortis, regardless of whether the Contract Value has been
allocated to the Separate Account or to the Fixed Account. None of First Fortis'
affiliated companies has any legal obligation to back First Fortis' obligations
under the Contracts.

THE VARIABLE ACCOUNT

The Variable Account, which is a segregated investment account of First Fortis,
was established as Variable Account A by First Fortis pursuant to the insurance
laws of New York as of October 1, 1993. Although the Variable Account is an
integral part of First Fortis, the Variable Account is registered with the
Securities and Exchange Commission as a unit investment trust under the
Investment Company Act of 1940. Assets in the Variable Account representing
reserves and

                                       7
<PAGE>
liabilities under Contracts and other variable annuity contracts issued by First
Fortis will not be chargeable with liabilities arising out of any other business
of First Fortis.

There are currently fifteen Subaccounts in the Variable Account. The assets in
each Subaccount are invested exclusively in 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. New Subaccounts may be added as new Portfolios are added and made
available. Correspondingly, if any Portfolios are eliminated, Subaccounts may be
eliminated from the Variable Account.

THE PORTFOLIOS

Contract holders may choose from among a number of different Portfolios, each of
which is a mutual fund available for purchase only as a funding vehicle for
benefits under variable life insurance and variable annuities issued by Fortis
Benefits and 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 others and each Portfolio operates as a separate investment
portfolio whose performance has no effect on the investment performance of any
other Portfolio. More detailed information for each Portfolio offered, such as
its investment policies and restrictions, charges, risks attendant to investing
in it, and other aspects of its operations, may be found in the current
prospectus for each Portfolio. Such a prospectus for the Portfolios being
considered must accompany this Prospectus and should be read in conjunction with
it. A copy of each prospectus may be obtained without charge from Fortis
Benefits by calling 1-800-800-2000, ext. 3057, or writing P.O. Box 64272, St.
Paul, Minnesota 55164.

Fortis Benefits purchases and redeems Portfolios' shares for the Variable
Account at their net asset value without the imposition of any sales or
redemption charges. Any dividend or capital gain distributions attributable to
Contracts are automatically reinvested in shares of the Portfolio from which
they are received at the Portfolio's net asset value on the date paid. Such
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.

As indicated, Portfolios may also be available to registered separate accounts
offering variable annuity and variable life products of other participating
insurance companies, as well as to the Variable Account and other separate
accounts of Fortis Benefits. Although Fortis Benefits 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. A conflict may occur due to a
change in law affecting the operations of variable life and variable annuity
separate accounts, differences in the voting instructions of the Participants
and those of other companies, or some other reason. In the event of conflict,
Fortis Benefits will take any steps necessary to protect the Participants and
variable annuity payees.

THE FIXED ACCOUNT

GUARANTEED INTEREST RATES/GUARANTEE PERIODS

Any amount allocated by the Contract Owner to the Fixed Account earns a
Guaranteed Interest Rate commencing with the date of such allocation. This
Guaranteed Interest Rate continues for a number of years (not to exceed ten)
selected by the Contract Owner. At the end of this Guarantee Period, the
Contract Owner's Contract Value in that Guarantee Period, including interest
accrued thereon, will be allocated to a new Guarantee Period of the same length
unless First Fortis has received a Written Request from the Contract Owner to
allocate this amount to a different Guarantee Period or periods or to one or
more of the Subaccounts. We must receive this Written Request at least three
business days prior to the end of the Guarantee Period. The first day of the new
Guarantee Period (or other reallocation) will be the day after the end of the
prior Guarantee Period. We will notify the Contract Owner at least 45 days and
not more than 60 days prior to the end of any Guarantee Period.

We currently make available ten different Guarantee Periods, ranging 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 of
various lengths. These changes will not affect the Guaranteed Interest Rates
being paid on Guarantee Periods that have already commenced. Each allocation or
transfer of an amount to a Guarantee Period commences the running of a new
Guarantee Period with respect to that amount, which will earn a Guaranteed
Interest Rate that will continue unchanged until the end of that period. The
Guaranteed Interest Rate will never be less than an effective annual rate of 3%.

First Fortis declares the Guaranteed Interest Rates from time to time as market
conditions dictate. First Fortis advises a Contract Owner of the Guaranteed
Interest Rate for a chosen Guarantee Period at the time a purchase payment is
received, a transfer is effectuated or a Guarantee Period is renewed.

First Fortis has no specific formula for establishing the Guaranteed Interest
Rates for the Guarantee Periods. The rate may be influenced by, but not
necessarily correspond to, interest rates generally available on the types of
investments acquired with amounts allocated to the Guarantee Period. See
"Investments by First Fortis." First Fortis in determining Guaranteed Interest
Rates, may also consider, among other factors, the duration of a Guarantee
Period, regulatory and tax requirements, sales and administrative expenses borne
by First Fortis, risks assumed by First Fortis, First Fortis' profitability
objectives, and general economic trends.

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

Information concerning the Guaranteed Interest Rates applicable to the various
Guarantee Periods at any time may be obtained from our Home Office or from your
sales representative.

MARKET VALUE ADJUSTMENT

Except as described below, if any Fixed Account Value is surrendered,
transferred or otherwise paid out before the end of the Guarantee Period in
which it is being held, a Market Value Adjustment will be applied. This
generally includes amounts applied to an annuity option and amounts paid as a
single sum in lieu of an annuity. However, NO Market Value Adjustment will be
applied to amounts that are paid out

                                       8
<PAGE>
during the period beginning fifteen days before and ending fifteen days after
the end of a Guarantee Period in which it was being held or to amounts paid out
as a death benefit. Additionally, no Market Value Adjustment will be applied to
amounts that are withdrawn from a Guarantee Period and paid out to the Contract
Owner, or transferred to the Variable Account, on an automatic periodic basis
under a formal First Fortis program for the withdrawal or transfer of the
earnings of the Fixed Account. (There may be conditions and limitations imposed
by First Fortis associated with such a program. See your First Fortis
representative for the availability of any such program, and the conditions and
limitations of such a program, in your state.) Also, no Market Value Adjustment
will be applied to amounts that are paid out as a death benefit pursuant to the
Contract or to amounts withdrawn or transferred from the one-year Guarantee
Period.

The Market Value Adjustment may increase or decrease the amount of Fixed Account
Value being withdrawn or transferred. The comparison of two Guaranteed Interest
Rates determines whether the Market Value Adjustment produces an increase or a
decrease. The first rate to compare is the Guaranteed Interest Rate for the
amount being transferred or withdrawn. The second rate is the Guaranteed
Interest Rate then being offered for new Guarantee Periods of the same duration
as that remaining in the Guarantee Period from which the funds are being
withdrawn or transferred. If the first rate exceeds the second by more than
1/4%, the Market Value Adjustment produces an increase. If the first rate does
not exceed the second by at least 1/4%, the Market Value Adjustment produces a
decrease. Sample calculations are shown in Appendix A.

The Market Value Adjustment will be determined by multiplying the amount being
withdrawn or transferred from the Guarantee Period (after deduction of any
applicable surrender charge) by the following factor:

         1 + I           n / 12
      -----------               - 1
 (   1 + J + .0025   )

where,

    - I is the Guaranteed Interest Rate being credited to the amount being
      withdrawn from the existing Guarantee Period,

    - J is the Guaranteed Interest Rate then being offered 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),
      and

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

In the event that First Fortis discontinues offering a Guaranteed Interest Rate
for a Guarantee Period, I and J will not be determined as described above.
Instead they will be determined by use of the bond equivalent yield on the
applicable U.S. Treasury Bill or Note ("the yield") as determined on either the
1st or the 15th of the applicable month as follows:

    - I will be equal to "the yield" at the beginning of the Guarantee Period
      and assuming a maturity equal to the length of the Guarantee Period at
      that time.

    - J will be equal to "the yield" at the time the Market Value Adjustment is
      being calculated and assuming a maturity equal to the length of the
      Guarantee Period remaining at that time.

INVESTMENTS BY FIRST FORTIS

Our obligations with respect to the Fixed Account are legal obligations of First
Fortis and are supported by our General Account assets, which also support
obligations incurred by us under other insurance and annuity contracts.
Investments purchased with amounts allocated to the Fixed Account are the
property of First Fortis, and Contract Owners 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, and
neither of such accounts is subject to registration under the Investment Company
Act of 1940.

Amounts in the First Fortis General Account and the Fixed Account will be
invested 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 certain other investments. See "First Fortis Financial Statements" for
information on First Fortis' investments. Investment management for amounts in
the General Account and in the Fixed Account is provided to First Fortis by
Fortis Advisers, Inc.

First Fortis intends to consider the return available on the instruments in
which it intends to invest amounts allocated to the Fixed Account when it
establishes Guaranteed Interest Rates. Such return is only one of many factors
considered in establishing the Guaranteed Interest Rates. See "Guaranteed
Interest Rates/Guarantee Periods."

First Fortis expects that amounts allocated to the Fixed Account generally will
be invested in debt instruments that approximately match First Fortis'
liabilities with regard to the Guarantee Periods. First Fortis expects that
these will include primarily the following types of debt instruments: (1)
securities issued by the United States Government or its agencies or
instrumentalities, which securities may or may not be guaranteed by the United
States Government; (2) debt securities which have an investment grade, at the
time of purchase, within the four highest grades assigned by Moody's Investors
Services, Inc. ("Moody's") (Aaa, Aa, A or Baa), Standard & Poor's Corporation
("Standard & Poor's") (AAA, AA, A or BBB), or any other nationally recognized
rating service; (3) other debt instruments including, but not limited to, issues
of or guaranteed by banks or bank holding companies and corporations, which
obligations although not rated by Moody's or Standard & Poor's, are deemed by
First Fortis to have an investment quality comparable to securities which may be
purchased as stated above; and (4) other evidences of indebtedness secured by
mortgages or deeds of trust representing liens upon real estate. Notwithstanding
the foregoing, First Fortis is not obligated to invest amounts allocated to the
Fixed Account according to any particular strategy, except as may be required by
applicable state insurance laws and regulations. See "Regulation and Reserves."

ACCUMULATION PERIOD

ISSUANCE OF A CONTRACT AND PURCHASE PAYMENTS

First Fortis reserves the right to reject any application for a Contract for any
reason. If the application can be accepted in the form received, the initial
purchase payment will be credited within two Valuation Dates after the later of
receipt of the application or receipt of the initial purchase payment at First
Fortis' Home Office. If the initial purchase payment cannot be credited within
five Valuation Dates after receipt because the application or other issuing
requirements are incomplete, the initial purchase payment will be returned
unless the applicant consents to our retaining the initial purchase payment and
crediting it as of the end of the Valuation Period in which the necessary
requirements are fulfilled. Despite the consent of the applicant, if the initial
purchase payment still cannot be credited within thirty Valuation Dates after
receipt because the application or issuing

                                       9
<PAGE>
instructions are incomplete, the initial purchase payment will be returned to
the applicant. The initial purchase payment under a Contract must be at least
$5,000 ($2,000 for a Contract issued pursuant to a qualified plan).

The date that the initial purchase payment is applied 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 the Contract is delivered.
The crediting of investment experience in the Variable Account, or a fixed rate
of return in the Fixed Account, begins as of the Contract Issue Date.

The Contract Owner may make 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. Purchase payments (together with any required information
identifying the proper Contracts and account to be credited with purchase
payments) must be transmitted to our Home Office. Additional purchase payments
are credited to the Contract and added to the Contract Value as of the end of
the Valuation Period in which they are received in good order.

Each additional purchase payment under a Contract must be at least $1,000 ($50
for a Contract issued pursuant to a qualified plan). The total of all purchase
payments for all First Fortis annuities having the same owner or participant, or
annuitant, may not exceed $1 million (not more than $500,000 allocated to the
Fixed Account) without First Fortis' prior approval, and we reserve the right to
modify this limitation at any time.

Purchase payments in excess of the initial minimum may be made by monthly draft
against the bank account of any Contract Owner who has completed and returned to
us a special "Thrift-O-Matic" authorization form that may be obtained from your
sales representative or from our Home Office. Arrangements can also be made for
purchase payments by wire transfer, payroll deduction, military allotment,
direct deposit and billing. Purchase payments by check should be made payable to
First 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 the Contract Owner at least 90 days in advance of
our intention to cancel the Contract. Upon such cancellation we will pay the
Contract Owner the full Contract Value.

CONTRACT VALUE

Contract Value is the total of any Variable Account Value in all the Subaccounts
of the Variable Account pursuant to the Contract, plus any Fixed Account Value
in all the Guarantee Periods.

There is no guaranteed minimum Variable Account Value. To the extent Contract
Value is allocated to the Variable Account, you bear the entire investment risk.

DETERMINATION OF VARIABLE ACCOUNT VALUE. A Contract's Variable Account Value is
based on 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 directly 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.

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

    - Accumulation Units purchased at the time that any Net 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. If a Subaccount's net investment factor is greater than
one, the Subaccount's Accumulation Unit value has increased. If the net
investment factor is less than one, the Subaccount's Accumulation Unit value has
decreased. 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.

DETERMINATION OF FIXED ACCOUNT VALUE. A Contract's Fixed Account Value is
guaranteed by First Fortis. Therefore, First Fortis bears the investment risk
with respect to amounts allocated to the Fixed Account, except to the extent
that (a) First Fortis may vary the Guaranteed Interest Rate for future Guarantee
Periods (subject to the 3% effective annual minimum) and (b) the Market Value
Adjustment imposes investment risks on the Contract Owner.

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 Net 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 the application for a Contract, the Contract
Owner can allocate Net Purchase Payments, or portions thereof, to the available
Subaccounts of the Variable Account or to the Guarantee Periods in the Fixed
Account, or a combination thereof. Percentages must be in whole numbers and the
total allocation must equal 100%. The percentage allocations for future Net
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 Net Purchase Payments will be effective on the date we receive the
Contract Owner's Written Request.

TRANSFERS. Transfers of Contract Value from one available Subaccount to another
or into the Fixed Account, or from one Guarantee Period to another or to the
Subaccount, can be made by the Contract Owner in Written Request to First
Fortis' Home Office, or by telephone transfer as described below. There is no
charge for any transfer, although

                                       10
<PAGE>
transfers from a Guarantee Period other than the one year Guarantee Period that
are (1) more than 15 days before or after the expiration thereof, or (2) are not
a part of a formal First Fortis program for the transfer of earnings of the
Fixed Account 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. Irrespective of the above we may permit a continuing request for
transfers of lesser specified amounts automatically on a periodic basis. We will
count all transfers between and among the Subaccounts of the Variable Account
and the Fixed Account as one transfer, if all the transfer requests are made at
the same time as part of one request. We will execute the transfers and
determine all values in connection with transfers as of the end of the Valuation
Period in which we receive the transfer request. The amount of any positive or
negative Market Value Adjustment, respectively, will be added to or deducted
from the transferred amount.

At the time an application for a Contract is completed, or at any subsequent
time, you may complete the Telephone Transfer Authorization Form. We will honor
telephone transfer instructions from any person who provides the correct
identifying information. First Fortis will not be responsible for, and you will
bear the risk of loss from, oral instructions, including fraudulent instructions
which are reasonably believed to be genuine. We will employ reasonable
procedures to confirm that telephone instructions are genuine, but if such
procedures are not deemed reasonable, we may be liable for any losses due to
unauthorized or fraudulent instructions. Our procedures are to verify address
and social security number, tape record the telephone call, and provide written
confirmation of the transaction. We may modify or terminate our telephone
transfer procedures at any time. The number for telephone transfers is
1-800-745-8248.

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

TOTAL AND PARTIAL SURRENDERS

TOTAL SURRENDERS. The Contract Owner may surrender all of the Cash Surrender
Value at any time during the life of the Annuitant and prior to the Annuity
Commencement Date by a Written Request sent to First Fortis' 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 the Written Request for the total surrender is
received by First Fortis at its Home Office, less any applicable surrender
charge and after any Market Value Adjustment. See "Surrender Charge" and "Market
Value Adjustment."

The written consent of all collateral assignees and irrevocable beneficiaries
must be obtained prior to any total surrender. Surrenders from the Variable
Account will generally be paid within seven days of the date of receipt by First
Fortis' Home Office of the Written Request. Postponement of payments may occur,
however, in certain circumstances. See "Postponement of Payment."

The amount paid upon total surrender of the Cash Surrender Value (taking into
account any prior partial surrenders) may be more or less than the total Net
Purchase Payments made. After a surrender of the Cash Surrender Value or at any
time the Contract Value is zero, all rights of the Contract Owner, Annuitant, or
any other person will terminate.

PARTIAL SURRENDERS. At any time prior to the Annuity Commencement Date and
during the lifetime of the Annuitant, the Contract Owner may surrender a portion
of the Fixed Account Value and/or the Variable Account Value by sending to First
Fortis' Home Office a Written Request. We will not accept a partial surrender
request unless the net proceeds payable to you as a result of the request are at
least $1,000. If the total Contract Value in both the Variable Account and Fixed
Account would be less than $1,000 after the partial surrender, First Fortis will
surrender the entire Cash Surrender Value under the Contract.

In order for a request to be processed, the Contract Owner must specify from
which Subaccounts of the Variable Account or Guarantee Periods of the Fixed
Account a partial surrender should be made.

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. The amount payable to
the Contract Owner will be reduced by any applicable surrender charge.
Additionally, if the surrender is from a Guarantee Period other than the one
year Guarantee Period, the amount payable to the Contract Owner will be reduced
by any negative Market Value Adjustment, or increased by any positive Market
Value Adjustment unless the surrender is (1) within 15 days before or after the
expiration of a Guarantee Period, or (2) is a part of a formal First Fortis
program for the withdrawal of earnings from the Fixed Account. The partial
surrender will be effective at the end of the Valuation Period in which First
Fortis receives the Written Request for partial surrender at its 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.)

BENEFIT PAYABLE ON DEATH OF CONTRACT OWNER (OR ANNUITANT)

If the Contract Owner dies prior to the Annuity Commencement Date, a death
benefit will be paid. If the Participant is a non-natural person, the death
benefit will be paid upon the death of the Annuitant prior to the Annuity
Commencement Date. In such case, if more than one Annuitant has been named, the
death benefit payable upon the death of an Annuitant will only be paid 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 Participant unless the Participant 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 Participant. If the Participant 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.

                                       11
<PAGE>
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 Net Purchase Payments made, reduced by Pro Rata Adjustments
    for each withdrawal.

    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 Net Purchase Payments less Pro Rata
        Adjustments for all prior withdrawals.

(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 Participant'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

    (c) Pro Rata Adjustments for any withdrawals made since the anniversary.

    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 the
            withdrawal, plus

        (iii) Pro Rata Adjustments for withdrawals made since the anniversary
            and before the given withdrawal.

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 (a)
receive a single sum payment, which terminates the Contract, or (b) 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: a copy of a certified death
certificate; a copy of a certified decree of a court of competent jurisdiction
as to the finding of death; or a written statement by a medical doctor who
attended the deceased at the time of death.

If the Contract Owner dies before the Annuity Commencement Date with respect to
a Non-Qualified Contract certain additional requirements are mandated by the
Internal Revenue Code, which are discussed below under "Federal Tax
Matters--Required Distributions for Non-Qualified Contracts." It is imperative
that Written Notice of the death of the Contract Owner be promptly transmitted
to First Fortis at its Home Office, so that arrangements can be made for
distribution of the entire interest in the Contract Owner in a manner that
satisfies the Internal Revenue Code requirements. Failure to satisfy these
requirements may result in the Contract Owner not being treated as an annuity
contract for federal income tax purposes, which could have adverse tax
consequences.

THE ANNUITY PERIOD

ANNUITY COMMENCEMENT DATE

The Contract Owner may specify an Annuity Commencement Date in the application
not later than the Annuitant's 90th birthday. The Annuity Commencement Date
marks the beginning of the period during which an Annuitant or other payee
designated by the Contract Owner receives annuity payments under the Contract.
The Annuity Commencement Date must be at least two years after the Contract
Issue Date.

Depending on the type of retirement arrangement involved, amounts that are
distributed either too soon or too late may be subject to penalty taxes under
the Internal Revenue Code. See "Federal Tax Matters." You should consider this
carefully in selecting or changing an Annuity Commencement Date.

In order to advance or defer the Annuity Commencement Date, the Contract Owner
must submit a Written Request. The request must be received 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 the Written
Request is received. There is no right to make any total or partial surrender
during the Annuity Period.

COMMENCEMENT OF ANNUITY PAYMENTS

If the Contract Value at the end of the Valuation Period which contains the
Annuity Commencement Date is less than $1,000, we may pay the entire Contract
Value, without the imposition of any charges other than the premium tax charge,
if applicable, in a single sum payment to the Annuitant or other payee chosen by
the Contract Owner and cancel the Contract.

Otherwise, First Fortis 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 the Contract
Owner has notified us by Written Request to apply the Fixed Account Value and
Variable Account Value in different proportions. Any such Written Request must
be received by us at our Home Office at least 30 days before the Annuity
Commencement Date.

Annuity payments under a Fixed or Variable Annuity Option will be made on a
monthly basis to the Annuitant or other properly-designated payee, unless we
agree to a different payment schedule. If more than one person is named as an
Annuitant, the Contract Owner 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. There is no right to make any total or partial surrender during the
Annuity Period.

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The amount of each annuity payment will depend on the amount of Contract Value
applied to an annuity option, the form of annuity selected and the age of the
Annuitant. Information concerning the relationship between the Annuitant's sex
and the amount of annuity payments, including special requirements in connection
with employee benefits plans, is set forth under "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 form
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

If a Subaccount on which a variable annuity payment is based has an average
effective net investment return higher than 3% per annum during the period
between two such annuity payments, the Annuity Unit Value will increase, and the
second payment will be higher than the first. Conversely, if the Subaccount's
average effective net investment return over the period between the annuity
payments is less than 4% per annum, the Annuity Unit Value will decrease, and
the second payment will be lower than the first. "Net investment return," for
this purpose, refers to the Subaccount's overall investment performance, net of
the mortality and expense risk and administrative expense charges, which are
assessed at a nominal aggregate 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. During the Annuity Period, the 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 described above under
"Allocation of Purchase Payments and Contract Value--Transfers." Transfers from
a Fixed Annuity Option are not permitted during the Annuity Period.

ANNUITY FORMS

The Contract Owner may select an annuity form or change a previous selection by
Written Request, which must be received by us at least 30 days before the
Annuity Commencement Date. One annuity form may be selected, although as
discussed above, payments under that form may be received on a combination fixed
and variable basis. If no annuity form selection is in effect on the Annuity
Commencement Date, in most cases we automatically apply Option B (described
below), with payments guaranteed for 10 years. If the Contract is issued under
certain retirement plans, however, federal pension law may require any default
payments that payments be made 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.

The following options are available for fixed annuity payments and for variable
annuity payments.

OPTION A, LIFE ANNUITY. Payments are made as of the first Valuation Date of each
monthly period during the Annuitant's life, starting with the Annuity
Commencement Date. No payments will be made after the Annuitant dies. It is
possible for the payee 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. Payments are made as of the first Valuation Date of each monthly period
starting on the Annuity Commencement Date. Payments will continue as long as the
Annuitant lives. If the Annuitant dies before all of the guaranteed payments
have been made, we will continue installments of the guaranteed payments to the
Beneficiary.

OPTION C, JOINT AND FULL SURVIVOR ANNUITY. Payments are made as of the first
Valuation Date of each monthly period starting with the Annuity Commencement
Date. Payments will continue as long as either the Annuitant or the joint
Annuitant is alive. Payments will stop when both the Annuitant and the joint
Annuitant have died. It is possible for the payee or payees under this option to
receive only one payment, if both Annuitants die before the second payment is
due.

OPTION D, JOINT AND ONE-HALF CONTINGENT SURVIVOR ANNUITY. Payments are made as
of the first Valuation Date of each monthly period starting with the Annuity
Commencement Date. Payments will continue as long as either the Annuitant or the
joint Annuitant is alive. If the Annuitant dies first, payments will continue to
the joint Annuitant at one-half the original amount. If the joint Annuitant dies
first, payments will continue to the Annuitant at the original full amount.
Payments will stop when both the Annuitant and the joint Annuitant have died. It
is possible for the payee or payees under this option to receive only one
payment if both Annuitants die before the second payment is due.

We also have other annuity forms available and information about them can be
obtained 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 First Fortis, 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

First Fortis will deduct a charge for state premium taxes or similar assessments
from the Contract Value at the time that annuity payments begin. The charge will
be deducted on a pro-rata basis from the then-current Fixed Account Value and,
by redemption of Accumulation Units, the then-current Variable Account Value in
each Subaccount.

Applicable premium tax rates depend upon the Contract Owner's then-current place
of residence. Applicable rates are subject to change by legislation,
administrative interpretations or judicial acts.

CHARGES AGAINST THE VARIABLE ACCOUNT

MORTALITY AND EXPENSE RISK CHARGE. We will assess each Subaccount of the
Variable Account with a daily charge for mortality and expense risk at a nominal
annual rate of 1.25% of the average daily net assets of the Variable Account
(consisting of approximately .8% for mortality risk

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and approximately .45% for expense risk). This charge is assessed during both
the Accumulation Period and the Annuity Period. We guarantee not to increase
this charge for the duration of the Contract.

The mortality risk borne by First Fortis arises from its 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, First Fortis bears a mortality risk in that it guarantees to pay a
death benefit upon the death of an Annuitant or Contract Owner prior to the
Annuity Commencement Date. No surrender charge is imposed upon the payment of a
death benefit, which places a further mortality risk on First Fortis.

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

If the administrative charges and the mortality and expense risk charge are
insufficient to cover the expenses and costs assumed, the loss will be borne by
First Fortis. Conversely, if the amount deducted proves more than sufficient,
the excess will be profit to First Fortis.

ADMINISTRATIVE EXPENSE CHARGE. We will 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. This charge is imposed during both the Accumulation
Period and the Annuity Period. This charge is to help 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 imposed on a given Contract and the amount of expenses
actually attributable to that Contract.

TAX CHARGE

We currently impose no charge for taxes payable by us in connection with the
Contract, other than for premium taxes and similar assessments when applicable.
We reserve the right to impose a charge for any other taxes that may become
payable by us in the future in connection with the Contracts or the Separate
Account.

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

SURRENDER CHARGE

No sales charge is collected or deducted at the time Net Purchase Payments are
applied under a Contract. A surrender charge will be assessed on certain total
or partial surrenders. The amounts obtained from the surrender charge will be
used to partially defray expenses incurred in the sale of the Contracts,
including commissions and other promotional or distribution expenses associated
with the marketing of the Contracts, and costs associated with the printing and
distribution of prospectuses and sales material.

FREE SURRENDERS. The following amounts can be withdrawn from the Contract
without a surrender charge:

    - Any purchase payments received by us more than seven years prior to the
      surrender date and that have not been previously surrendered;

    - Any earnings that have not been previously surrendered;

    - In any contract year, up to 10% of the purchase payments received by us
      less than seven years prior to the surrender date (whether or not the
      purchase payments have been previously surrendered).

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 prior to purchase payments which are still subject to a surrender
charge.

No surrender charge is imposed on annuitization (or payment of a single sum
because less than the minimum required Contract Value is available to provide an
annuity at the Annuity Commencement Date). Nor is the surrender charge deducted
from the payment of any benefit upon the death of an Annuitant or Contract
Owner.

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
provided that the amount then subject to the surrender charge is less than 25%
of the Contract Value. Since the Contracts have only been offered since 1994, no
such waivers have yet been made. 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. Surrender charges apply only 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:

       NUMBER OF YEARS           SURRENDER CHARGE
        SINCE PURCHASE          AS A PERCENTAGE OF
     PAYMENT WAS CREDITED        PURCHASE PAYMENT
------------------------------  ------------------
         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%

We anticipate the surrender charge will not be sufficient to cover our
distribution expenses. To the extent that the surrender charge is insufficient
to cover the actual costs of distribution, such costs will be paid from First
Fortis' General Account assets, which will include profit, if any, derived from
the mortality and expense risk charge.

MISCELLANEOUS

Because the Variable Account invests in shares of the Portfolios, the net assets
of the Variable Account will reflect the investment advisory fees and certain
other expenses incurred by the Portfolios that are described in the prospectus
for the Portfolios.

REDUCTION OF CHARGES

No surrender charge will be imposed under any Contract owned by (A) First
Fortis, and the following persons associated with First Fortis, if at the
Contract Issue date they are: (1) officers and directors; (2) employees; or (3)
spouses of any such persons or any of such persons' children.

GENERAL PROVISIONS

THE CONTRACTS

The Contract, copies of any applications, amendments, riders, or endorsements
attached to the Contract and copies of any supplemental applications,
amendments, endorsements, or revised Contract pages which are mailed to you are
the entire Contract. Only an officer of First Fortis can agree to change or
waive any provisions

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<PAGE>
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

First Fortis 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. First Fortis may also defer payment 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 age or sex of the Annuitant has been misstated, any amount payable will
be that which the purchase payments paid would have purchased at the correct age
and sex. If we have made any overpayments because of incorrect information about
age or sex, or any other miscalculation, First Fortis will deduct the
overpayment from the next payment or payments due. We add underpayments to the
next payment. The amount of any adjustment will be credited or charged with
interest at the effective annual rate of 3% per year.

ASSIGNMENT

Rights and interests under a Qualified Contract may be assigned only in certain
narrow circumstances referred to in the Contract. 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. A change in
ownership rights must be made in writing and a copy must be sent to First
Fortis' Home Office. The change will be effective on the date it was 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 the Home Office of
First Fortis. An assignment or pledge of a Contract may have adverse tax
consequences. See below under "Federal Tax Matters."

BENEFICIARY

Before the Annuity Commencement Date, the Contract Owner may name or change a
beneficiary or a contingent beneficiary by sending a Written Request of the
change to First Fortis. Under certain retirement programs, however, spousal
consent may be required to name or change a beneficiary, and the right to name a
beneficiary other than the spouse may be subject to applicable tax laws and
regulations. 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 payments 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
Participant 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 reports and
communications required by any 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

First Fortis reserves the right to make certain changes if, in its judgment,
they would best serve the interests of Contract Owners and Annuitants or would
be appropriate in carrying out the purposes of the Contracts. Any changes will
be made only to the extent and in the manner permitted by applicable laws. Also,
when required by law, First Fortis will obtain your approval of the changes and
approval from any appropriate regulatory authority. Such approval may not be
required in all cases, however. Examples of the changes First Fortis 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 First Fortis to take,
      including to change the way First Fortis assesses charges, but without
      increasing as to any then outstanding Contract the aggregate amount of the
      types of charges which First Fortis has guaranteed.

DISTRIBUTION

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

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

                                       15
<PAGE>
first contract year. 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 which are approximately
equivalent to the amounts of the selling allowances set forth above.

Additionally, registered representatives, broker-dealer firms, and exempt firms
may be eligible 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. 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 paid a total of
$xxxxxx to Fortis Investors for annuity contract distribution services during
1997, $xxxxx of which in 1997 was not reallowed to other broker dealers or
exempt firms.

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 conferences, sales or
training programs for their employees, seminars for the public, advertising,
sales campaigns regarding Contracts, and other broker-dealer sponsored programs
or events. Compensation may include payment for travel expenses incurred in
connection with trips taken by invited sales representatives and members of
their families to locations within or outside of the United States for meetings
or seminars of a business nature.

See Note 9 to the 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 AMEV and Fortis AG and is
therefore 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, which in the opinion of First Fortis are
currently in effect. These rules are based on laws, regulations and
interpretations which are subject to change at any time. This summary is not
comprehensive and is not intended 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. Purchase payments made under Non-Qualified Contracts are
not excludible or deductible from the gross income of the Contract Owner or any
other person. However, any increase in the accumulated value of a Non-Qualified
Contract resulting from the investment performance of the Variable Account or
interest credited to the Fixed Account is generally not taxable to the Contract
Owner or other payee until received by him or her, as surrender proceeds, death
benefit proceeds, or otherwise. The exception to this rule is that, generally,
Contract Owners who are not natural persons ARE taxed annually on any increase
in the Contract Value. However, this exception does not apply in all cases, and
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 a Contract Owner assigns or pledges any part of the value of a
Contract, the value so pledged or assigned is taxed to the Contract Owner as
ordinary income to the same extent as a partial withdrawal.

With respect to annuity payment options, although 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, a person's "investment in the Contract" is
the aggregate amount of purchase payments made by him or her. After an
Annuitant's or other payee's "investment in the Contract" is recovered, 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 determined by a formula which
establishes the specific dollar amount of each annuity payment that is not
taxed. This dollar amount is determined by dividing the "investment in the
Contract" 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 which 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 issued by us or our
affiliates to the Contract Owner within the same calendar year will be treated
as if they were a single Contract.

There is a 10% penalty under the Code on the taxable portion of a "premature
distribution." Generally, an amount is a "premature distribution" unless the
distribution is (1) made on or after the Contract Owner or other payee reaches
age 59 1/2, (2) made to a Beneficiary on or after death of the Contract Owner,
(3) made upon the disability of the Contract Owner or other payee, or (4) part
of a series of substantially equal annuity payments for the life or life
expectancy of the Contract Owner or the Contract Owner and Beneficiary.
Premature distributions may result, for example, from an early Annuity
Commencement Date, an early surrender, partial surrender or assignment of a
Contract or the early death of an Annuitant who is not also the Contract Owner
or other person receiving annuity payments under the Contract.

A transfer of ownership of a Contract, or designation of an Annuitant or other
payee who is not also the Contract Owner, may result in certain income or gift
tax consequences to the Contract Owner that are beyond the scope of this
discussion. A Contract Owner contemplating any transfer or assignment of a
Contract should contact a competent tax adviser with respect to the potential
tax effects of such transaction.

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 (a) if any
person receiving annuity payments dies on or after

                                       16
<PAGE>
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 (b) if any Contract Owner dies prior
to the Annuity Commencement Date, the entire interest in the Contract will be
distributed (1) within five years after the date of that person's death or (2)
as annuity payments which will begin within one year of that Contract Owner's
death and which will be made over the life of the Contract Owner's designated
Beneficiary or over a period not extending beyond the life expectancy of that
Beneficiary. However, if the Contract Owner's designated Beneficiary is the
surviving spouse of the Contract Owner, the Contract may be continued with the
surviving spouse deemed to be the new Contract Owner. Where the Contract Owner
or other person receiving payments is not a natural person, the required
distributions provided by Section 72(s) apply upon the death of the primary
Annuitant.

No regulations interpreting the requirements of Section 72(s) have yet been
issued (although proposed regulations have been issued interpreting similar
requirements for qualified plans). First Fortis intends 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, unless the Beneficiary elects otherwise, the above requirements will
be satisfied where the death occurs prior to the Annuity Commencement Date by
paying the death benefit in a single sum, subject to proof of the Contract
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, particularly where the annuitant dies and the annuitant is not the
Contract Owner, 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 Contract 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 retirement program recognized under the Code on
behalf of an individual are excludable from the individual's gross income for
tax purposes during the Accumulation Period. The portion, if any, of any
purchase payment made by or on behalf of an individual under a Contract that is
not excluded from the individual's gross income for tax purposes during the
Accumulation Period constitutes the individual's "investment in the Contract."
Aggregate deferrals under all plans at the employee's option may be subject to
limitations.

When annuity payments begin, the individual will receive back his or her
"investment in the Contract" if any, as a tax-free return of capital. The dollar
amount of annuity payments received in any year in excess of such return is
taxable as ordinary income. When payments are received as an annuity, the
tax-free return of capital is treated as if received ratably over the entire
period of the annuity until fully recovered (as described above with respect to
Non-Qualified Contracts).

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 educational 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); Section
457 unfunded deferred compensation plans of public employers and 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.

Notwithstanding the recipient's election, withholding may be required with
respect to certain payments to be delivered outside the United States and with
respect to certain distributions from certain types of qualified retirement
plans, unless the proceeds are transferred directly from the qualified plan to
another qualified retirement plan. Moreover, special "backup withholding" rules
may require First Fortis to disregard the recipient's election if the recipient
fails to supply First Fortis with a "TIN" or taxpayer identification number
(social security number for individuals), or if the Internal Revenue Service
notifies First Fortis that the TIN provided by the recipient is incorrect.

PORTFOLIO DIVERSIFICATION

The United States Treasury Department has adopted regulations under Section
817(h) of the Code which set standards of diversification for the investments
underlying the Contracts, in order for the Contracts to be treated as annuities.
First Fortis believes that these diversification standards will be satisfied.
Failure to do so would result in immediate taxation to Contract Owners or
persons receiving annuity payments of all returns credited to Contracts, except
in the case of certain Qualified Contracts. Also, current regulations do not
provide guidance as to any circumstances in which control over allocation of
values among different investment alternatives may cause Contract Owners or
persons receiving annuity payments to be treated as the owners of Variable
Account assets for tax purposes. First Fortis reserves the right to amend the
Contracts in any way necessary to avoid any such result. The Treasury Department
may establish standards in this regard through regulations or rulings. Such
standards may apply only prospectively, although retroactive application is
possible if such standards were considered not to embody a new position.

CERTAIN EXCHANGES

Section 1035 of the Code provides generally that no gain or loss will be
recognized under the exchange of a life insurance or annuity contract for an
annuity contract. Thus, a properly completed exchange from one of these types of
products into a Contract pursuant to the special annuity contract exchange form
we provide for this purpose is not generally a taxable event under the Code, and
your investment in the Contract will be the same as your investment in the
product you exchanged out of.

Because of the complexity of these and other tax aspects in connection with an
exchange, you should consult a tax adviser before making any exchange.

TAX LAW RESTRICTIONS AFFECTING SECTION 403(b) PLANS

Section 403(b)(12) of the Internal Revenue Code restricts the distribution under
Section 403(b) annuity contracts of:

    (1) elective contributions made for years beginning after December 31, 1988;

    (2) earnings on those contributions; and

                                       17
<PAGE>
    (3) earnings on amounts held as of December 31, 1988.

Distribution of these amounts may only occur upon death of the employee,
attainment of age 59 1/2, separation from service, disability, or financial
hardship. In addition, income attributable to elective contributions made after
December 31, 1988 may not be distributed in the case of hardship.

FURTHER INFORMATION ABOUT FIRST FORTIS

First Fortis Life Insurance Company is an affiliate of the worldwide Fortis
group of companies owned by Fortis AMEV of the Netherlands and Fortis AG of
Belgium. 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

First Fortis is engaged in the offer and sale of insurance products, including
fixed and variable annuity contracts, and group life, accident and health
insurance policies. First Fortis markets its products to small business and
individuals through a network of independent agents, brokers, and financial
institutions.

SELECTED FINANCIAL DATA

The following is a summary of certain financial data of First Fortis. This
summary has been derived in part from, and should be read in conjunction with,
the financial statements of First Fortis included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED DECEMBER 31,
                                                                    -----------------------------------------------------
                                                                      1997       1996       1995       1994       1993
                                                                    ---------  ---------  ---------  ---------  ---------
                                                                                       (IN THOUSANDS)
<S>                                                                 <C>        <C>        <C>        <C>        <C>
INCOME STATEMENT DATA
  Premiums........................................................  $  51,846  $  67,516  $  81,201  $  92,056  $  75,393
  Net investment income...........................................      7,907      7,891      7,466      6,261      6,074
  Realized investment gains (losses)..............................        361         (3)     2,683     (1,057)     3,062
  Other income....................................................        682        336        298        287        533
                                                                    ---------  ---------  ---------  ---------  ---------
    TOTAL REVENUES................................................     60,796     75,740     91,648     97,547     85,062
                                                                    ---------  ---------  ---------  ---------  ---------
  Benefits and expenses...........................................     60,983     75,596     96,371    104,582     85,170
  Income tax expense (benefit)....................................        (63)       (39)    (1,563)      (999)      (686)
                                                                    ---------  ---------  ---------  ---------  ---------
  Net income (loss)...............................................  $    (124) $     183  $  (3,160) $  (6,036) $     578
                                                                    ---------  ---------  ---------  ---------  ---------
                                                                    ---------  ---------  ---------  ---------  ---------
BALANCE SHEET DATA
  Total assets....................................................  $ 170,898  $ 142,742  $ 139,913  $ 123,954  $ 132,077
  Total liabilities...............................................  $ 133,817  $ 107,050  $ 101,523  $  97,913  $  92,863
  Total shareholder's equity......................................  $  37,081  $  35,692  $  38,390  $  26,041  $  39,214
</TABLE>

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

REVENUES

First Fortis' (the "Company") insurance premiums decreased in 1997 as compared
to 1996. This decrease was substantially attributable to the following: (1)
effective January 1, 1996, the Company ceased new sales of group medical
policies; however, the Company continues to service the existing group medical
business. The decision to effectively exit the group medical business has
reduced premiums associated with this line from a peak in 1996 of $26 million
inforce to a current inforce of $5.8 million in premium; and, (2) during the
last six months of 1996, the annualized premium of group life insurance ($2.6
M), group LTD insurance ($1.4 M) and group dental insurance ($7.0 M) of business
written through a third party administrator was lapsed. Historically, the
benefit loss experience related to this business was worse than the experience
from the Company's remaining business. The loss of this business should have
minimal impact on overall operating results. 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 disability income, dental, and medical
premium represented 39%, 39% and 22%, respectively, of total group accident and
health premium in 1997 compared to 40%, 25% and 35%, respectively, in 1996.

The Company continues to match investment portfolio composition to liquidity
needs and capital requirements. Changes in interest rates during 1997 and 1996
resulted in recognition of realized gains and losses upon sales of securities.

BENEFITS

During the first three quarters of 1996, the Company's group life claims ratio
was higher than expected as a result of increased mortality and larger average
claim amounts. Consistent with the last quarter of 1996, the Company's group
life mortality experience and average claim amounts remained low in 1997. The
decrease in accident and health benefits in 1997 as compared to 1996 is
consistent with the

                                       18
<PAGE>
decrease in accident and health premium. During 1997, group disability claims
decreased as compared to 1996. The Company's group dental claims ratio was
higher than expected during 1997 as a result of higher benefit utilization rates
and an increase in dental care costs.

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.

As the Company's inforce medical lives continue to decrease, the Company
continues to experience a reduction in medical insurance related administrative
expenses. Some fixed costs related to the medical business remain with the
Company.

YEAR 2000

The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Company and any of
its businesses or subsidiaries. All of the Company's major businesses are
processed by computer systems of affiliates, and many have significant
interaction with systems of third parties.

A comprehensive review of each of the affiliate computer systems and business
processes has been conducted to identify the major systems that could be
affected by the Year 2000 issue. Steps are being taken to resolve any potential
problems including modification to existing software and the purchase of new
software. These measures are scheduled to be completed and tested on a timely
basis. Each affiliate's goal is to complete internal remediation and testing of
each system by early 1999.

Factors that could influence the total costs to be incurred by the Company in
connection with the Year 2000 issue include the ability of the Company to
successfully identify systems containing two-digit year codes, the nature and
amount of programming required to fix the affected programs, the related labor
and consulting costs for such remediation, and the ability of third parties that
interface with the Company to successfully address their Year 2000 issues.

The Company is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's operations.
The potential materiality of any such impact is not entirely known at this time.
The Company is closely monitoring these entities to avoid any unforeseen
circumstances.

LIQUIDITY AND CAPITAL RESOURCES

The liquidity requirements of the Company have been met by funds provided from
operations, including investment income. Funds are principally used to provide
for policy benefits, operating expenses, commissions and investment purchases.
The impact of the declining inforce medical business has been considered in
evaluating the Company's future liquidity needs. The Company expects its
operating activities to continue to generate sufficient funds.

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 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, 1997, 97% of the
Company's fixed maturity investments consisted of investment grade bonds, and
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.

DIRECTORS AND EXECUTIVE OFFICERS

Set forth is information concerning First Fortis' directors and executive
officers, together with their business experience and principal occupations for
the past five years:

<TABLE>
<S>                               <C>
Zafar Rashid, 48                  President and Chief Executive Officer; Senior
                                  Vice President and Chief Financial Officer of
                                  Fortis, Inc.
Larry M. Cains, 51                Treasurer; Senior Vice President of Fortis,
Director since 1995               Inc.
Allen R. Freedman, 58             Chairman of the Board; Chairman and Chief
Director Since 1989               Executive Officer of Fortis, Inc.
Thomas M. Keller, 50              President of Time Insurance Company;
Director Since 1994               President--Fortis Healthcare of Fortis
                                  Benefits Insurance Company; before that Senior
                                  Vice President of Fortis, Inc.
Dean C. Kopperud, 45              Chief Executive Officer of Fortis Advisers,
Director Since 1994               Inc. and President of Fortis Investors, Inc.;
                                  President--Fortis Financial Group of Fortis
                                  Benefits Insurance Company
Terry J. Kryshak, 47              Senior Vice President and Chief Administrative
Director Since 1991               Officer
Susie Gharib, 47                  Anchorwoman, Cable NBC; before that,
Director Since 1991               Anchorwoman, Financial News Network
Guy Gerard Rutherfurd, Jr., 58    Senior Vice President, Dean Witter
Director Since 1989               Intercapital; before that Executive Vice
                                  President and Chief Investment Officer of
                                  Nomura Asset Management, Inc.
Dale Edward Gardner, 67           President, Gardner & Bull
Director Since 1989
</TABLE>

                                       19
<PAGE>
<TABLE>
<S>                               <C>
Kenneth W. Nelson, 76             President, Tech Products, Inc.
Director Since 1989
Clarence Elkus Galston, 88        Attorney at Law
Director Since 1989
Robert B. Pollock, 43             President and Chief Executive Officer of
Director Since 1995               Fortis Benefits Insurance Company
Barbara R. Hege, 54               Assistant Treasurer and Chief Financial
                                  Officer
Jerome A. Atkinson, 48            Secretary; Vice President, Secretary and
                                  General Counsel of Fortis, Inc.; before that
                                  Senior Vice President, Secretary and General
                                  Counsel of American Security Insurance Company
</TABLE>

First Fortis' officers serve at the pleasure of the Board of Directors, and
members of the Board who are also officers or employees of First Fortis serve
without compensation. All Directors serve until their successors are duly
elected and qualified. The compensation of members of the Board who are not also
officers or employees of First Fortis or its affiliates is as follows. The
Director receives $1,000 for attendance at the annual Board meeting. If the
Director is also a member of the Audit Committee and/or the Investment
Committee, the Director also receives $1,000 for attending any meeting of such
committee unless the committee meeting date is the same as the annual meeting,
in which case the committee meeting compensation is $500.

Mr. Freedman is also a director of Systems and Computer Technology Corporation
and Genesis Health Ventures and the following registered investment companies:
Fortis Equity Portfolios, Inc.; Fortis Growth Fund, Inc.; Fortis Fiduciary Fund,
Inc.; Fortis Income Portfolios, Inc.; Fortis Securities, Inc.; Fortis Tax-Free
Portfolios, Inc.; Fortis Money Portfolios, Inc.; Fortis Advantage Portfolios,
Inc.; Fortis Worldwide Portfolios, Inc.; Fortis Series Fund, Inc.; Special
Portfolios, Inc.

EXECUTIVE COMPENSATION

Set forth below is certain information concerning the compensation of the named
executive officers of First Fortis. Mr. Rashid and Mr. Freedman are compensated
by other affiliates of First Fortis.

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

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                     ANNUAL COMPENSATION
                                                               --------------------------------
                                                                                   OTHER ANNUAL      ALL OTHER
                                                                SALARY    BONUS    COMPENSATION   COMPENSATION (1)
              NAME AND PRINCIPAL POSITION                YEAR    ($)       ($)         ($)              ($)
-------------------------------------------------------  ----  --------  --------  ------------   ----------------
<S>                                                      <C>   <C>       <C>       <C>            <C>
Zafar Rashid                                             1997  $      0  $      0    $     0          $     0
 President
Allen R. Freedman                                        1997         0         0          0                0
 President                                               1996         0         0          0                0
                                                         1995         0         0          0                0
Terry J. Kryshak                                         1997   115,000    34,000          0            8,940
 Senior Vice President and Chief Administrative Officer  1996   111,000    34,000          0            6,660
                                                         1995   107,350    25,764          0            8,288
</TABLE>

------------------------
1   This column includes contributions made by First Fortis for the year for the
    benefit for the named individual to defined contribution retirement plans.

As additional compensation to its employees and executive officers, First Fortis
has an Employees' Uniform Retirement Plan and an Executive Retirement Plan which
generally provide an annual annuity benefit upon retirement at age 65 (or a
reduced benefit upon early retirement) equal to: .9% of the employee's Average
Annual compensation up to the employee's social security covered compensation,
plus 1.3% of Average Annual compensation above the employee's social security
covered compensation up to $235,840, as adjusted by an index, multiplied by the
employee's years of credited services.

The following table illustrates the combined estimated life annuity benefit
payable from the Employees Uniform Retirement Plan and the Executive Retirement
Plan to employees with the specified Final Average Salary and Years of Service
upon retirement.

PENSION TABLE

<TABLE>
<CAPTION>
                                                    YEARS OF SERVICE
                                     -----------------------------------------------
FINAL AVERAGE EARNINGS                 10      15      20      25      30      35
-----------------------------------  ------  ------  ------  ------  ------  -------
<S>                                  <C>     <C>     <C>     <C>     <C>     <C>
125,000                              15,078  22,617  30,156  37,695  45,234   52,772
150,000                              18,328  27,492  36,656  45,820  54,984   64,147
175,000                              21,578  32,367  43,156  53,945  64,734   75,522
200,000                              24,828  37,242  49,656  62,070  74,484   86,897
225,000                              28,078  42,117  56,156  70,195  84,234   98,272
250,000                              30,695  46,042  61,389  76,737  92,084  107,432
275,000+                             31,163  46,744  62,326  77,907  93,489  109,070
</TABLE>

The table above excludes social security benefits. In general, for the purposes
of these plans compensation includes salary and bonuses. The credited years of
service with First Fortis for those individuals named in the Summary
Compensation Table above are as follows: 0, 0, and 7.

                                       20
<PAGE>
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 AMEV and
50% owned, through certain subsidiaries, by Fortis AG, Boulevard Emile Jacqmain
53, 1000 Brussels, Belgium.

VOTING PRIVILEGES

In accordance with its view of current applicable law, First Fortis will vote
shares of each of the Portfolios which are attributable to a Contract at regular
and special meetings of the shareholders of a Portfolio in proportion to
instructions received from the persons having the voting interest in the
Contract as of the record date for the corresponding Portfolio shareholders
meeting. Contract Owners have the voting interest during the Accumulation
Period, persons receiving annuity payments during the Annuity Period, and
Beneficiaries after the death of the Annuitant or Contract Owner. However, if
the Investment Company Act of 1940 or any rules thereunder should be amended or
if the present interpretation thereof should change, and as a result First
Fortis determines that it is permitted to vote shares of the Portfolios in its
own right, it may elect to do so.

During the Accumulation Period, the number of shares of a Portfolio attributable
to a Contract is determined by dividing the amount of Contract Value in the
corresponding Subaccount pursuant to the Contract as of the record date for the
shareholders meeting by the net asset value of one Portfolio share as of that
date. During the Annuity Period, or after the death of the Annuitant or Contract
Owner, the number of Portfolio shares deemed attributable to the Contract will
be computed in a comparable manner, based on the liability for future variable
annuity payments allocable to that Subaccount under the Contract as of the
record date. Such liability for future payments will be calculated on the basis
of the mortality assumptions and the assumed interest rate used in determining
the number of Annuity Units credited to the Contract and the applicable Annuity
Unit value on the record date. During the Annuity Period, the number of votes
attributable to a Contract will generally decrease since funds set aside to make
the annuity payments will decrease.

First Fortis will vote shares for which it has received no timely instructions,
and any shares attributable to excess amounts First Fortis has accumulated in
the related Subaccount, in proportion to the voting instructions which it
receives with respect to all Contracts and other variable annuity contracts
participating in a Portfolio. To the extent that First Fortis or any affiliated
company holds any shares of a Portfolio, they will be voted in the same
proportion as instructions for that Portfolio that are received from persons
holding the voting interest with respect to all First Fortis separate accounts
participating in that Portfolio. Shares held by separate accounts other than the
Variable Account will in general be voted in accordance with instructions of
participants in such other separate accounts. This diminishes the relative
voting influence of the Contracts.

Each person having a voting interest in a Subaccount of the Separate Account
will receive proxy material, reports and other materials relating to the
appropriate Portfolio. Pursuant to the procedures described above, these persons
may give instructions regarding the election of the Board of Directors of a
Portfolio, ratification of the selection of its independent auditors, the
approval of the investment managers of a Portfolio, changes in fundamental
investment policies of a Portfolio and all other matters that are put to a vote
of Portfolio shareholders.

LEGAL MATTERS

The legality of the Contracts described in this Prospectus has been passed upon
by Douglas R. Lowe, Esquire, Assistant General Counsel with the law department
of Fortis Benefits Insurance Company, an affiliate of First Fortis. Messrs.
Freedman, Levy, Kroll & Simonds, Washington, D.C., have advised First Fortis on
certain federal securities law matters.

OTHER INFORMATION

Registration Statements have been filed with the Securities and Exchange
Commission under the Securities Act of 1933 as amended, with respect to the
Contracts discussed in this Prospectus. Not all of the information set forth in
the Registration Statement, amendments and exhibits thereto has been included in
this Prospectus. Statements contained in this Prospectus concerning the content
of the Contracts and other legal instruments are intended to be summaries. For a
complete statement of the terms of these documents, reference should be made to
the instruments filed with the Securities and Exchange Commission.

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

CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<CAPTION>
                                                                            PAGE
<S>                                                                         <C>
First Fortis and the Variable Account.....................................    2
Calculation of Annuity Payments...........................................    2
Postponement of Payments..................................................    3
Services..................................................................    3
  - Safekeeping of Variable Account Assets................................    3
  - Experts...............................................................    3
  - Principal Underwriter.................................................    3
Limitations on Allocations................................................    4
Change of Investment Adviser or Investment Policy.........................    4
Taxation Under Certain Retirement Plans...................................    4
Withholding...............................................................    8
Terms of Exemptive Relief in Connection With Mortality and Expense Risk
 Charge...................................................................    8
Variable Account Financial Statements.....................................    9
APPENDIX A--Performance Information.......................................  A-1
</TABLE>

FIRST FORTIS FINANCIAL STATEMENTS

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

                                       21
<PAGE>
                 [This page has been intentionally left blank]
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors
First Fortis Life Insurance Company

We have audited the accompanying balance sheets of First Fortis Life Insurance
Company, an indirect, wholly-owned subsidiary of Fortis AMEV and Fortis AG, as
of December 31, 1997 and 1996, and the related statements of income, changes in
shareholder's equity and cash flows for each of the three years in the period
ended December 31, 1997. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First Fortis Life Insurance
Company at December 31, 1997 and 1996, and the results of its operations and its
cash flows for each of three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.

                                                    /s/ Ernst& Young LLP
Minneapolis, Minnesota
February 27, 1998

                                      F-1
<PAGE>
BALANCE SHEETS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31
                                                                        -----------------------------
                                                                            1997             1996
                                                                        ------------     ------------
<S>                                                                     <C>              <C>
ASSETS
Investments:
  Fixed maturities, at fair value (amortized cost 1997--$102,284;
   1996--$111,970)....................................................  $    105,776     $    113,137
  Short-term investments..............................................        11,697               --
                                                                        ------------     ------------
                                                                             117,473          113,137
Cash and cash equivalents.............................................         7,453            1,545

Receivables:
  Uncollected premiums, less allowance (1997 and 1996--$100)..........         2,358            3,890
  Reinsurance recoverable on unpaid and paid losses...................        19,764           14,731
  Other...............................................................         1,402            2,141
                                                                        ------------     ------------
                                                                              23,524           20,762
Accrued investment income.............................................         1,700            1,739
Deferred policy acquisition costs.....................................         1,413              247
Property and equipment at cost, less accumulated depreciation
 (1997--$1,853; 1996--$1,396).........................................           676            1,028
Deferred federal income tax...........................................         2,079            1,527
Goodwill, less accumulated amortization (1997--$322; 1996--$276)......           508              554
Assets held in separate accounts......................................        16,072            2,203
                                                                        ------------     ------------
TOTAL ASSETS..........................................................  $    170,898     $    142,742
                                                                        ------------     ------------
                                                                        ------------     ------------

POLICY RESERVES, LIABILITIES, AND SHAREHOLDER'S EQUITY
POLICY RESERVES AND LIABILITIES:
  Future policy benefit reserves:
    Life insurance....................................................  $     27,671     $     25,089
    Interest sensitive and investment products........................         6,878              136
    Accident and health...............................................        61,175           60,774
                                                                        ------------     ------------
                                                                              95,724           85,999
  Unearned revenues...................................................         5,223            3,978
  Other policy claims and benefits payable............................        10,304           10,821
  Income taxes payable................................................           911               --
Other liabilities.....................................................         5,583            4,049
Liabilities related to separate accounts..............................        16,072            2,203
                                                                        ------------     ------------
TOTAL POLICY RESERVES AND LIABILITIES.................................       133,817          107,050

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
  Retained deficit....................................................        (4,642)          (4,517)
  Unrealized gains (losses) on investments, net.......................         2,283              769
                                                                        ------------     ------------
TOTAL SHAREHOLDER'S EQUITY............................................        37,081           35,692
                                                                        ------------     ------------
TOTAL POLICY RESERVES, LIABILITIES, AND SHAREHOLDER'S EQUITY..........  $    170,898     $    142,742
                                                                        ------------     ------------
                                                                        ------------     ------------
</TABLE>

                            See accompanying notes.

                                      F-2
<PAGE>
STATEMENTS OF OPERATIONS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31
                                                                        ------------------------------------------
                                                                           1997            1996           1995
                                                                        -----------       ------       -----------
<S>                                                                     <C>            <C>             <C>
REVENUES
  Insurance operations:
    Life insurance premiums...........................................  $    19,158    $     22,791    $    18,879
    Interest sensitive and investment products policy charges.........            4              59             --
    Accident and health premiums......................................       32,684          44,666         62,322
  Net investment income...............................................        7,907           7,891          7,466
  Net realized gains (losses) on investments..........................          361              (3)         2,683
  Other income........................................................          682             336            298
                                                                        -----------          ------    -----------
      TOTAL REVENUES..................................................       60,796          75,740         91,648

BENEFITS AND EXPENSES
  Benefits to policyholders:
    Life insurance....................................................       14,597          19,720         16,207
    Interest sensitive and investment products........................          196              72             --
    Accident and health...............................................       29,090          37,988         56,592
                                                                        -----------          ------    -----------
                                                                             43,883          57,780         72,799
  Amortization of deferred policy acquisition costs...................          (56)            (92)         4,595
  Insurance commissions...............................................        4,457           5,214          5,071
  General and administrative expenses.................................       12,699          12,694         13,906
                                                                        -----------          ------    -----------
      TOTAL BENEFITS AND EXPENSES.....................................       60,983          75,596         96,371
                                                                        -----------          ------    -----------
  (Loss) income before federal income taxes...........................         (187)            144         (4,723)
  Federal income tax benefit..........................................          (63)            (39)        (1,563)
                                                                        -----------          ------    -----------
  NET (LOSS) INCOME...................................................  $      (124)   $        183    $    (3,160)
                                                                        -----------          ------    -----------
                                                                        -----------          ------    -----------
</TABLE>

                            See accompanying notes.

                                      F-3
<PAGE>
STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                    UNREALIZED
                                                                                                       GAINS
                                                                        ADDITIONAL                   (LOSSES)
                                                             COMMON       PAID-IN     RETAINED    ON INVESTMENTS
                                                              STOCK       CAPITAL      DEFICIT          NET          TOTAL
                                                           -----------  -----------  -----------  ---------------  ---------
<S>                                                        <C>          <C>          <C>          <C>              <C>
Balance January 1,1995...................................   $   2,000    $  30,440    $  (1,540)     $  (4,858)    $  26,042
Additional paid-in capital from Fortis AMEV..............          --        7,000           --             --         7,000
Net loss.................................................          --           --       (3,161)            --        (3,161)
Change in unrealized gains (losses) on investment, net...          --           --           --          8,509         8,509
                                                           -----------  -----------  -----------        ------     ---------
Balance December 31, 1995................................       2,000       37,440       (4,701)         3,651        38,390
Net income...............................................          --           --          183             --           183
Change in unrealized gains (losses) on investment, net...          --           --           --         (2,882)       (2,882)
                                                           -----------  -----------  -----------        ------     ---------
Balance December 31, 1996................................       2,000       37,440       (4,518)           769        35,691
Net loss.................................................          --           --         (124)            --          (124)
Change in unrealized gains (losses) on investment, net...          --           --           --          1,514         1,514
                                                           -----------  -----------  -----------        ------     ---------
Balance December 31, 1997................................   $   2,000    $  37,440    $  (4,642)     $   2,283     $  37,081
                                                           -----------  -----------  -----------        ------     ---------
                                                           -----------  -----------  -----------        ------     ---------
</TABLE>

                            See accompanying notes.

                                      F-4
<PAGE>
STATEMENTS OF CASH FLOWS
FIRST FORTIS LIFE INSURANCE COMPANY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                       YEAR ENDED DECEMBER 31
                                                         --------------------------------------------------
                                                              1997              1996              1995
                                                         --------------    --------------    --------------
<S>                                                      <C>               <C>               <C>
OPERATING ACTIVITIES
  Net (loss) income....................................  $         (124)   $          183    $       (3,160)
  Adjustments to reconcile net (loss) income to net
   cash (used in) provided by operating activities:
      Change in deferred tax valuation allowance.......          (1,338)               --              (178)
      Depreciation, amortization and accretion.........             707               804               750
      Net realized (gains) losses on investments.......            (361)                4            (2,683)
      Decrease (increase) in uncollected premiums,
       accrued investment income and other.............           2,309            (1,076)              113
      Increase in reinsurance recoverable..............          (5,033)           (5,395)             (461)
      Increase (decrease) in income taxes payable......             883             1,772            (1,569)
      Amortization of policy acquisition costs.........             (56)              (92)            4,595
      Policy acquisition costs deferred................          (1,110)             (155)               --
      Increase in future policy benefit reserves and
       other policy claims and benefits................           1,769             5,265             3,481
      Increase (decrease) in other liabilities.........           1,533            (1,939)              128
                                                         --------------    --------------    --------------
        NET CASH (USED IN) PROVIDED BY OPERATING
         ACTIVITIES....................................            (821)             (629)            1,016

INVESTING ACTIVITIES
  Purchases of fixed maturity investments..............        (127,426)         (140,954)         (122,290)
  Sales and maturities of fixed maturity investments...         137,273           135,352           120,298
  (Increase) decrease in equity securities and
   short-term investments..............................         (11,697)            6,942            (5,042)
  Purchase of property and equipment...................            (107)             (310)             (321)
                                                         --------------    --------------    --------------
        NET CASH (USED IN) PROVIDED BY INVESTING
         ACTIVITIES....................................          (1,957)            1,030            (7,355)
FINANCING ACTIVITIES
  Activities related to investment products:
      Considerations received..........................          10,679
      Surrenders and death benefits....................          (2,152)
      Interest credited to policyholders...............             159
      Additional paid-in capital from shareholder......              --                               7,000
                                                         --------------    --------------    --------------
        NET CASH PROVIDED BY FINANCING ACTIVITIES......           8,686                --             7,000
                                                         --------------    --------------    --------------
  Increase in cash and cash equivalents................           5,908               401               661
        CASH AND CASH EQUIVALENTS AT BEGINNING OF
         YEAR..........................................           1,545             1,144               483
                                                         --------------    --------------    --------------
        CASH AND CASH EQUIVALENTS AT END OF YEAR.......  $        7,453    $        1,545    $        1,144
                                                         --------------    --------------    --------------
                                                         --------------    --------------    --------------
</TABLE>

                            See accompanying notes.

                                      F-5
<PAGE>
FIRST FORTIS LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1997

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

First Fortis Life Insurance Company ("the Company") is an affiliate of the
worldwide Fortis group of companies owned by Fortis AMEV of the Netherlands and
Fortis AG of Belgium. Prior to April 30, 1997, First Fortis was wholly-owned by
Fortis AMEV, while the other U.S. subsidiaries of Fortis AMEV and Fortis AG
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. To date, the Company's revenues have been derived primarily from
group employee benefits products. During 1997, the Company had $1,120,000 of
direct premium written principally by third party administrators ("TPA's").
Effective January 1, 1996, the Company stopped offering its group medical
products; however, the Company will continue to renew and service existing
medical business, which represented $7,297,000, $17,871,000, and $34,011,000 of
1997, 1996 and 1995 accident and health premiums, respectively.

BASIS OF STATEMENT PRESENTATION

The preparation of financial statements in conformity with generally accepted
accounting principles 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
generally accepted accounting principles, 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 credit life insurance included in life insurance premiums and
    accident and health insurance premiums are recognized as revenues when due
    over the estimated coverage period. 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 policy account balances and interest credited to policy account
    balances. Interest credit rates for universal life and investment products
    ranged from 3.5% to 10.0% in 1997 and 1996.

    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 1964 Commissioners
    Disability Table at 6% interest. Calculated reserves are modified based on
    the Company's actual experience.

    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.

    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 directly in shareholder's equity as unrealized gains (losses) on
    investments and, accordingly, have no effect on net income.

    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.

                                      F-6
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

1.  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
    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 an appropriate
    period in proportion to premium revenue. For interest sensitive and
    investment products, such costs are amortized in relation to expected future
    gross profits. Estimation of future gross profits requires significant
    management judgment and is reviewed periodically. As excess amounts of
    deferred costs over future premiums or gross profits are identified, such
    excess amounts are expensed.

    PROPERTY AND EQUIPMENT

    Property and equipment are recorded at cost less accumulated depreciation.
    The Company provides for depreciation principally on the straight-line
    method over the estimated useful lives of the related property.

    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.

    INCOME TAXES

    Income taxes have been provided using the liability method in accordance
    with Financial Accounting Standards Board ("FASB") Statement 109, ACCOUNTING
    FOR INCOME TAXES. Deferred tax assets and liabilities are determined based
    on the differences between the financial reporting and the tax bases and are
    measured using the enacted tax rates.

    SEPARATE ACCOUNTS

    The Company began selling variable annuity products July 1, 1996. 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.

    Revenues and expenses related to the separate account assets and
    liabilities, to the extent of benefits paid, are provided to the separate
    account policyholders and are excluded from the amounts reported in the
    accompanying statements of operations.

    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.

    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.

    NEW FINANCIAL ACCOUNTING STANDARDS

    In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
    Income." SFAS No. 130 defines the financial statement presentation for all
    changes in a company's equity during a period except those resulting from
    investments by owners and distributions to owners. SFAS No. 130 will be
    adopted by the Company in the first quarter of 1998. Because the statement
    is merely a change in presentation, the Company does not expect the adoption
    of this statement to have a significant impact on the financial statements.

    RECLASSIFICATIONS

    Certain amounts in the 1996 and 1995 financial statements have been
    reclassified to conform to the 1997 presentation.

2.  AMORTIZATION OF DEFERRED POLICY ACQUISITION COSTS
On October 1, 1991, First Fortis Life Insurance Company and an affiliate, Fortis
Benefits Insurance Company, (the "Companies") entered into an Asset Transfer and
Acquisition Agreement (the "Agreement") with Mutual Benefit Life Insurance
Company in Rehabilitation ("MBL"). Pursuant to the Agreement, the Companies
acquired certain assets and assumed certain liabilities of MBL relating to the
group life, disability, dental and medical insurance business (the "Business")
of MBL. That portion of the Business conducted in New York was assumed by First
Fortis, while the most substantial portion of the Business was assumed by Fortis
Benefits Insurance Company. First Fortis paid $10,166,000 for its portion of the
Business acquired including contingent Promissory Note ("Note") payments
aggregating $1,366,000 from 1992 to 1994 which were based on the persistency of
the acquired Business through September 30, 1994. No additional payments will be
made. Note payments were added to deferred policy acquisition costs ("DPAC")
when made. The DPAC amortization period, which was originally scheduled through
September 30, 1997, was completed December 31, 1995 (an acceleration of
$2,749,000 into 1995), based on the overall experience of the acquired block of
business.

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

3.  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, 1997:
  Governments...................................   $   3,599    $     125    $       2    $   3,722
  Public utilities..............................       8,212          247           --        8,459
  Industrial and miscellaneous..................      90,473        3,197           75       93,595
                                                  -----------  -----------  -----------  -----------
    Total.......................................   $ 102,284    $   3,569    $      77    $ 105,776
                                                  -----------  -----------  -----------  -----------
                                                  -----------  -----------  -----------  -----------
</TABLE>

<TABLE>
<S>                                               <C>          <C>          <C>          <C>
December 31, 1996:
  Governments...................................   $  13,463    $      92    $      44    $  13,511
  Public utilities..............................       6,446           67           25        6,488
  Industrial and miscellaneous..................      92,061        1,426          350       93,137
                                                  -----------  -----------  -----------  -----------
    Total.......................................   $ 111,970    $   1,585    $     419    $ 113,136
                                                  -----------  -----------  -----------  -----------
                                                  -----------  -----------  -----------  -----------
</TABLE>

The amortized cost and fair value of fixed maturity securities at December 31,
1997, by contractual maturity, are shown below (in thousands):

<TABLE>
<CAPTION>
                                                                         AMORTIZED
                                                                           COST      FAIR VALUE
                                                                        -----------  -----------
<S>                                                                     <C>          <C>
Due in one year or less...............................................   $   1,257    $   1,264
Due after one year through five years.................................      43,155       43,938
Due after five years through ten years................................      19,424       20,051
Due after ten years...................................................      38,448       40,523
                                                                        -----------  -----------
                                                                         $ 102,284    $ 105,776
                                                                        -----------  -----------
                                                                        -----------  -----------
</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.

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

Major categories of net investment income and realized gains (losses) on
investments for each year were as follows (in thousands):

<TABLE>
<CAPTION>
                                                                             NET REALIZED GAINS
                                                    NET INVESTMENT INCOME       (LOSSES) ON
                                                                                INVESTMENTS
                                                    ----------------------  --------------------
                                                     1997    1996    1995   1997   1996    1995
                                                    ------  ------  ------  -----  ----   ------
<S>                                                 <C>     <C>     <C>     <C>    <C>    <C>
Fixed maturities..................................  $7,744  $7,941  $7,579  $ 361  $(3)   $2,683
Short-term investments............................     302     231     152     --   --        --
                                                    ------  ------  ------  -----  ----   ------
                                                     8,046   8,172   7,731  $ 361  $(3)   $2,683
                                                                            -----  ----   ------
                                                                            -----  ----   ------
Expenses..........................................    (139)   (281)   (265)
                                                    ------  ------  ------
Net investment income.............................  $7,907  $7,891  $7,466
                                                    ------  ------  ------
                                                    ------  ------  ------
</TABLE>

Proceeds from sales of investments were $134,234,000, $135,352,000 and
$120,298,000 in 1997, 1996 and 1995, respectively. Gross gains of $1,136,000,
$1,551,000 and $3,374,000 and gross losses of $775,000, $1,554,000 and $691,000
were realized on the sales in 1997, 1996 and 1995, respectively.

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

3.  INVESTMENTS (CONTINUED)
NET UNREALIZED GAINS (LOSSES)

The adjusted net unrealized gains (losses) recorded in shareholder's equity for
the years ended December 31 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                              1997           1996           1995
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
Change in unrealized gains (losses) before
 adjustments...........................................    $     2,405    $    (4,367)   $    10,390
Deferred income tax (expense) benefit..................           (891)         1,485         (1,881)
                                                           -----------    -----------    -----------
Change in net unrealized gains (losses)................          1,514         (2,882)         8,509
Net unrealized gains (losses) beginning of year........            769          3,651         (4,858)
                                                           -----------    -----------    -----------
Net unrealized gains, end of year......................    $     2,283    $       769    $     3,651
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------
</TABLE>

4.  LEASES
The Company leases office space under operating lease arrangements that have
various renewal options and are subject to escalation clauses for real estate
taxes and operating expenses. Rent expense was $661,000, $692,000 and $673,000
in 1997, 1996, and 1995, respectively. Future minimum payments required under
operating lease arrangements that have initial or noncancelable terms in excess
of one year or more are: 1998--$769,000, 1999--$602,000, 2000--$51,000, and
2001--$43,000.

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

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                           -----------------------------------------
                                                              1997           1996           1995
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
Balance as of January 1, net of reinsurance
 recoverables..........................................    $    61,482    $    65,764    $    66,136
Add: Incurred losses related to:
  Current year.........................................         25,424         38,798         57,400
  Prior years..........................................          3,666           (810)          (808)
                                                           -----------    -----------    -----------
    Total incurred losses..............................         29,090         37,988         56,592
                                                           -----------    -----------    -----------
Deduct: Paid losses related to:
  Current year.........................................         15,393         23,727         35,779
  Prior years..........................................         14,681         18,543         21,185
                                                           -----------    -----------    -----------
    Total paid losses..................................         30,074         42,270         56,964
                                                           -----------    -----------    -----------
Balance as of December 31, net of reinsurance
 recoverable...........................................    $    60,498    $    61,482    $    65,764
                                                           -----------    -----------    -----------
                                                           -----------    -----------    -----------
</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; (2) the table above includes claims adjustment expense
liabilities that are included in other liabilities on the balance sheet; and (3)
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 for the year ended December 31, 1997 and 1996.

The liability for unpaid accident and health losses and loss expense allowance
includes $55,956,000, $55,152,000 and $53,953,000 of long-term disability income
reserves as of December 31, 1997, 1996, and 1995, respectively, which were
discounted for anticipated interest earnings assuming a 6.0% interest rate.

The 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. For 1996 and
1995, the claims incurred related to prior years resulted from favorable
experience mitigated by increases to the discounted accident and health reserves
based on actual experience of claims liabilities through the current year.

6.  FEDERAL INCOME TAXES
As of May 1, 1997, the Company reports its taxable income in a consolidated
federal income tax return along with other affiliated subsidiaries of Fortis,
Inc. 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-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FIRST FORTIS LIFE INSURANCE COMPANY

6.  FEDERAL INCOME TAXES (CONTINUED)
The significant components of the Company's deferred tax assets and liabilities
as of December 31, 1997 and 1996 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                            DECEMBER 31
                                                                        --------------------
                                                                          1997       1996
                                                                        ---------  ---------
<S>                                                                     <C>        <C>
Deferred tax assets:
  Reserves............................................................  $   2,437  $   2,006
  Separate account assets/liabilities.................................        229         34
  Deferred policy acquisition costs...................................        228        555
  Alternative minimum tax credit carryforward.........................        392        392
  Net operating loss carryforward.....................................        598        216
  Other...............................................................        493        265
                                                                        ---------  ---------
    Total gross deferred tax assets...................................      4,377      3,468
Valuation allowance...................................................         --     (1,338)
                                                                        ---------  ---------
Deferred tax assets...................................................      4,377      2,130
Deferred tax liabilities:
  Unrealized gains....................................................      1,287        396
  Other...............................................................      1,011        207
                                                                        ---------  ---------
    Total gross deferred tax liabilities..............................      2,298        603
                                                                        ---------  ---------
    Net deferred tax asset............................................  $   2,079  $   1,527
                                                                        ---------  ---------
                                                                        ---------  ---------
</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. As of
December 31, 1997 and 1996, the Company had a deferred tax asset valuation
allowance of $0 and $1,338,000, respectively. The valuation allowance decrease
of $1,338,000 in 1997 was offset by a corresponding increase in the current
liability.

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

<TABLE>
<CAPTION>
                                                                               1997        1996       1995
                                                                                ---      ---------  ---------
<S>                                                                         <C>          <C>        <C>
Current...................................................................   $     (35)  $    (131) $     393
Deferred..................................................................         (28)         92     (1,954)
                                                                                   ---   ---------  ---------
                                                                             $     (63)  $     (39) $  (1,561)
                                                                                   ---   ---------  ---------
                                                                                   ---   ---------  ---------
</TABLE>

Federal income tax payments and refunds resulted in net payments of $382,000,
$32,000 and $252,000 in 1997, 1996 and 1995, respectively.

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

<TABLE>
<CAPTION>
                                                                               1997        1996       1995
                                                                                ---      ---------  ---------
<S>                                                                         <C>          <C>        <C>
Statutory income tax rate.................................................        35.0%       34.0%      34.0%
Other, including provision for prior year adjustments.....................        (1.3)      (61.3)       0.9%
                                                                                   ---   ---------  ---------
                                                                                  33.7%      (27.3)%      33.1%
                                                                                   ---   ---------  ---------
                                                                                   ---   ---------  ---------
</TABLE>

As of May 1, 1997, the Company is included as a member of a federal consolidated
group that has a statutory federal rate of 35%.

At December 31, 1997, the Company has net operating loss carryforwards relating
to periods ending before May 1, 1997, for federal income tax purposes of
$1,708,000 which are available to offset future federal taxable income of the
Company, if any, through 2011. The Company also has alternative minimum tax
credit carryforwards of $392,000 relating to periods before May 1, 1997, which
are available to reduce future federal regular income taxes of the Company, if
any, over an indefinite period of time.

7.  REINSURANCE
The maximum amounts that the Company retains on any one life are $500,000 for
group life; $250,000 for group accidental death; $2,000 net monthly benefit for
long-term disability; from 10% to 50% of possible benefits payable under credit
life and credit disability insurance; and none of a closed block of individual
life business. Amounts in excess of these limits are reinsured with various
insurance companies on a yearly renewable term, coinsurance or other basis.

In the second quarter of 1996, the Company received approval from the New York
State Insurance Department for a reinsurance agreement with 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

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

7.  REINSURANCE (CONTINUED)
after January 1, 1996. The Company has ceded $5,472,000 and $6,144,000 of
premium to Fortis Benefits in 1997 and 1996, respectively. Fortis Benefits has
assumed $5,452,000 and $3,599,000 of reserves in 1997 and 1996, 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 $19,764,000 and $14,731,000 in 1997 and
1996, respectively.

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

<TABLE>
<CAPTION>
                                                                            1997       1996       1995
                                                                          ---------  ---------  ---------
<S>                                                                       <C>        <C>        <C>
Life insurance..........................................................  $   3,249  $   1,366  $   1,497
Accident and health insurance...........................................      8,768      7,085      1,375
                                                                          ---------  ---------  ---------
                                                                          $  12,017  $   8,451  $   2,872
                                                                          ---------  ---------  ---------
                                                                          ---------  ---------  ---------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                            1997       1996       1995
                                                                          ---------  ---------  ---------
<S>                                                                       <C>        <C>        <C>
Life insurance..........................................................      1,628      1,021        706
Accident and health insurance...........................................      2,310        348        350
                                                                          ---------  ---------  ---------
                                                                          $   3,938  $   1,369  $   1,056
                                                                          ---------  ---------  ---------
                                                                          ---------  ---------  ---------
</TABLE>

Ceded reinsurance would become a liability of the Company in the event the
reinsurers are unable to meet the obligations assumed under the reinsurance
agreements. 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.

8.  DIVIDEND RESTRICTIONS
The Company is subject to insurance regulatory restrictions that limit cash
dividends which can be paid from the Company to its Parent. All dividends
require prior approval by the New York State Insurance Department.

9.  REGULATORY ACCOUNTING REQUIREMENTS
The Company prepares its statutory-basis financial statements in accordance with
accounting practices prescribed or permitted by the Department of Insurance of
the State of New York. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices that
are not prescribed; such practices may differ from company to company within a
state, and may change in the future. The NAIC is currently in the process of
recodifying statutory accounting practices. This project, which is not expected
to be completed before 1999, may result in changes to the accounting practices
that insurance enterprises use to prepare their statutory-basis financial
statements.

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

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

9.  REGULATORY ACCOUNTING REQUIREMENTS (CONTINUED)
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 EQUITY
                                                              NET INCOME (LOSS)
                                                    -------------------------------------  ------------------------
                                                       1997         1996         1995         1997         1996
                                                    -----------     -----     -----------  -----------  -----------
<S>                                                 <C>          <C>          <C>          <C>          <C>
Based on statutory accounting practices...........  $      (296) $      (428) $    (1,628) $    27,358  $    27,467
Deferred policy acquisition costs.................        1,180          247       (4,595)       1,413          247
Deferred and uncollected premiums.................          246           76           --          425          358
Policy reserves...................................         (660)         476           68          (92)         659
Investment valuation difference...................          (47)          --           --        3,492        1,166
Realized gains (losses) on investments............          235           (3)       2,683           --           --
Amortization of goodwill..........................          (46)         (46)         (46)         508          554
Income taxes......................................           28          115          675          778        2,865
Deferred tax valuation allowance..................           --                       178           --       (1,338)
Pension...........................................         (275)          --           --         (301)          --
Amortization of IMR...............................         (348)        (426)        (433)          --           --
Interest maintenance reserve ("IMR")..............           --           --           --        1,888        2,001
Asset valuation reserve...........................           --           --           --          717          998
Property and equipment............................           --           --           --          318          482
Agents balances...................................           --           --           --          456          166
Other.............................................         (141)         172          (63)         121           67
                                                    -----------        -----  -----------  -----------  -----------
                                                    $      (124) $       183  $    (3,161) $    37,081  $    35,692
                                                    -----------        -----  -----------  -----------  -----------
                                                    -----------        -----  -----------  -----------  -----------
</TABLE>

10. TRANSACTIONS WITH AFFILIATED COMPANIES
In 1995, the Company received cash of $7,000,000 representing additional paid-in
capital from Fortis AMEV.

The Company received various services from Fortis, Inc. and its affiliates.
These services include assistance in benefit plan administration, corporate
insurance, accounting, tax, auditing, investment, information systems, actuarial
and other administration functions. The fees paid for these services for the
years ended December 31, 1997, 1996 and 1995, were $2,568,000, $1,648,000 and
$1,581,000, 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.

11. FAIR VALUE DISCLOSURES
VALUATION METHODS AND ASSUMPTIONS

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

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

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
                                                    --------------------------------------------------
                                                              1997                      1996
                                                    ------------------------  ------------------------
                                                     CARRYING                  CARRYING
                                                      AMOUNT     FAIR AMOUNT    AMOUNT     FAIR AMOUNT
                                                    -----------  -----------  -----------  -----------
<S>                                                 <C>          <C>          <C>          <C>
Assets:
Investments:
  Securities available-for-sale:
  Fixed maturities................................  $  105,776   $   105,776  $  113,137   $   113,137
Short-term investments............................      11,697        11,697          --            --
Cash..............................................       7,453         7,453       1,545         1,545
Assets held in separate accounts..................      16,072        16,072       2,203         2,203
Liabilities:
Individual and group annuities (subject to
 discretionary withdrawal)........................       6,877         6,554  $    2,355   $     2,346
</TABLE>

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

12. RETIREMENT AND OTHER EMPLOYEE BENEFITS
Fortis, Inc., the Company's parent, 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, Inc's 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 $61,000,
$72,000 and $63,000 for 1997, 1996 and 1995, respectively. As of January 1,
1997, the Plan's total accumulated benefit obligation determined in accordance
with ERISA was $56,838,000. This amount was based on an assumed interest rate of
8.00% and included vested benefits of $54,831,000. The fair market value of the
Plan assets as of January 1, 1997 was $60,004,000.

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 for 1997 was $122,000 compared to $182,000 and $169,000 for 1996 and
1995, 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.

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

14. YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs having been written using
two digits rather than four to define a year. Any programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than 2000. This could result in the failure of major systems or miscalculations,
which could have a material impact on the operations of the Company and any of
its businesses or subsidiaries. All of the Company's major businesses are
processed by computer systems of Fortis affiliates, and many have significant
interaction with systems of third parties.

A comprehensive review of each of the Fortis affiliate computer systems and
business processes has been conducted to identify the major systems that could
be affected by the Year 2000 issue. Steps are being taken to resolve any
potential problems including modification to existing software and the purchase
of new software. These measures are scheduled to be completed and tested on a
timely basis. Each affiliate's goal is to complete internal remediation and
testing of each system by early 1999.

The costs related to the Year 2000 issue are not expected to have a material
impact on the Company's results of operations or financial condition. This
expectation is subject to uncertainties that could cause actual results to
differ materially. Factors that could influence the total costs to be incurred
by the Company in connection with the Year 2000 issue include the ability of the
Company to successfully identify systems containing two-digit year codes, the
nature and amount of programming required to fix the affected programs, the
related labor and consulting costs for such remediation, and the ability of
third parties that interface with the Company to successfully address their Year
2000 issues.

The Company is evaluating the Year 2000 readiness of advisors and other third
parties whose system failures could have an impact on the Company's operations.
The potential materiality of any such impact is not entirely known at this time.
The Company is closely monitoring these entities to avoid any unforeseen
circumstances.

                                      F-13
<PAGE>
APPENDIX A--SAMPLE MARKET VALUE ADJUSTMENT CALCULATIONS

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

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

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

                                      A-1
<PAGE>
                 [This page has been intentionally left blank]
<PAGE>
APPENDIX B--SAMPLE DEATH BENEFIT CALCULATIONS

DATE OF DEATH IS THE 3RD CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
                                                           EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
                                                          -----------  -----------  -----------
<S>   <C>                                                 <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>

DATE OF DEATH IS THE 5TH CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
                                                           EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
                                                          -----------  -----------  -----------
<S>   <C>                                                 <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>

DATE OF DEATH IS THE 10TH CONTRACT ANNIVERSARY

<TABLE>
<CAPTION>
                                                           EXAMPLE 1    EXAMPLE 2    EXAMPLE 3
                                                          -----------  -----------  -----------
<S>   <C>                                                 <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>
                 [This page has been intentionally left blank]
<PAGE>
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>
     Total Variable Account Annual Expenses         1.35%
+    Total Series Fund Operating Expenses
=    Total Expense Rate
</TABLE>

<TABLE>
<S>                           <C>         <C>
Year 1 Beginning Policy Value = $1000.00
Year 1 Expense = $1000.00       x    =    $

Year 2 Beginning Policy Value = $
Year 2 Expense = $              x    =    $

Year 3 Beginning Policy Value = $
Year 3 Expense = $              x    =    $
</TABLE>

So the cumulative expenses for years 1-3 for the Growth Stock Series are equal
to $    + $    + $    = $    .

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

<TABLE>
<S>                                <C>                                       <C>  <C>
Surrender Charge Percentage x      (Initial Premium - 10% Free Withdrawal)    =   Surrender Charge
          0.05          x          ( $1000.00    -      $100.00    )          =   $45.00
</TABLE>

So the total expense if surrendered is $    + $    = $     .

                                      C-1