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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549



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FORM 10-K



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2006

OR

| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from
                         to



Commission file number 033-71690



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Union Security Life Insurance Company of New York

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|New York                                                       |  | 13-2699219                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)
|212 Highbridge Street, Suite D Fayetteville, New York          |  | 13066                               
|(Address of Principal Executive Offices)                       |  | (Zip Code)                          



Registrants
telephone number, including area code:        (315) 637-4232

Securities registered
pursuant to Section 12(b) of the Act:        None

Securities registered pursuant to
Section 12(g) of the Act:        None



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Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.    Yes ̈No  x



Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x



NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act from their obligations under those Sections.



Indicate by check mark whether the registrant: (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark if
disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.  x



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check One):



 ̈Large accelerated
filer ̈Accelerated
filer            x  Non-accelerated filer



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ̈No  x



The aggregate market value of the voting and non-voting common equity held by non-affiliates is not applicable as no public market exists for the voting
stock of the registrant.



As of February 15, 2007, there
were 100,000 shares of common stock of the registrant outstanding, all of which are owned by Assurant, Inc.



THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1)(A) AND (B) OF FORM 10-K AND IS FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.

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UNION SECURITY LIFE INSURANCE COMPANY OF NEW YORK



ANNUAL REPORT ON FORM 10-K



For the Fiscal Year Ended December 31, 2006



TABLE OF CONTENTS



|           |  |                                                                                                              |  |           
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----------
|ItemNumber |  |                                                                                                              |  | PageNumber
|PART I    
|1.         |  | Business                                                                                                     |  | 2         
|1A.        |  | Risk Factors                                                                                                 |  | 3         
|1B.        |  | Unresolved Staff Comments                                                                                    |  | 4         
|2.         |  | Properties                                                                                                   |  | 4         
|3.         |  | Legal Proceedings                                                                                            |  | 4         
|4.         |  | Submission of Matters to a Vote of Security Holders                                                          |  | 4         
|          
|PART II   
|5.         |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 4         
|6.         |  | Selected Financial Data                                                                                      |  | 4         
|7.         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 4         
|7A.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 6         
|8.         |  | Financial Statements and Supplementary Data                                                                  |  | 7         
|9.         |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 7         
|9A.        |  | Controls and Procedures                                                                                      |  | 7         
|9B.        |  | Other Information                                                                                            |  | 7         
|          
|PART III  
|10.        |  | Directors, Executive Officersand Corporate Governance                                                        |  | 8         
|11.        |  | Executive Compensation                                                                                       |  | 8         
|12.        |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 8         
|13.        |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 8         
|14.        |  | Principal Accounting Fees and Services                                                                       |  | 8         
|          
|PART IV   
|15.        |  | Exhibits and Financial Statement Schedules                                                                   |  | 9         
|Signatures |  | 11                                                                                                          





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FORWARD-LOOKING STATEMENTS



Some of the statements under Business, Managements Discussion and Analysis of Financial Condition
and Results of Operations, and elsewhere in this report may contain forward-looking statements which reflect our current views with respect to, among other things, future events and financial performance. You can identify these forward-looking
statements by the use of forward-looking words such as outlook, believes, expects, potential, continues, may, will, should, seeks,
approximately, predicts, intends, plans, estimates, anticipates or the negative version of those words or other comparable words. Any forward-looking statements contained in
this report are based upon our historical performance and on current plans, estimates and expectations. The inclusion of this forward looking information should not be regarded as a representation by us or any other person that the future plans,
estimates or expectations contemplated by us will be achieved. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ
materially from those indicated in this report. We believe that these factors include but are not limited to those described under the subsection entitled Risk Factors and Managements Discussion and Analysis of Financial
Condition and Results of Operations. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report. We undertake no obligation to publicly update or
review any forward-looking statement, whether as a result of new information, future developments or otherwise.



If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary
materially from what we projected. Any forward-looking statements you read in this report reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations,
results of operations, financial condition, growth strategy and liquidity.



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PART I



Item 1.Business



Legal Organization



Union Security Life
Insurance Company of New York (formerly known as First Fortis Life Insurance Company) is a stock life insurance company formed in 1971 and organized under the laws of the State of New York. It is a direct wholly owned subsidiary of Assurant, Inc.
(Assurant), which owns and operates companies that provide specialty insurance products and related services in North America and selected other markets. Assurant is traded on the New York Stock Exchange under the symbol AIZ.



In this report, references to the Union Security Life,
we, us or our refer to Union Security Life Insurance Company of New York.



Dollar amounts are presented in U.S. dollars and all amounts are in thousands, except number of shares and number of employees.



Business Organization



Union Security Life is licensed to sell life, health and annuity insurance only in New York. We write insurance products
that are marketed in New York primarily by two of Assurants business segments, Assurant Employee Benefits and Assurant Solutions (see Assurants annual report on Form 10-K for the fiscal year ended December 31, 2006 for a full description
of each of these businesses). Within the Assurant Employee Benefits segment, we write group life, group dental, group long-term disability and group short-term disability insurance products. Within the Assurant Solutions segment, we market, sell and
issue credit life and credit disability products. Of our total gross revenues generated during 2006, approximately 79% was from the Assurant Employee Benefits segment, approximately 11% was from the Assurant Solutions segment, and the remaining 10%
from two other business segments of Assurant, Assurant Health and Corporate and Other. It is possible that our sales of credit life for the Assurant Solutions segment will decline, as almost all of the largest credit card issuing institutions in the
United States have switched from offering credit insurance to their credit card customers to offering their own debt protection programs. Debt protection is not an insurance product, but rather a service that is voluntarily added by retail customers
as an addendum to a loan. We offer administrative services for debt protection programs on behalf of the lender which generates fee income rather than the earned premiums that a credit insurance policy generates.



As a direct wholly owned subsidiary of Assurant, Union Security Life does not
have any publicly issued equity or debt securities. We are, however, subject to certain filing requirements of the Securities Exchange Act of 1934, as amended (the Exchange Act), because we have issued certain variable and market value
adjusted insurance contracts, which are required to be registered under the Securities Act of 1933, as amended (the Securities Act). Effective April 1, 2001, Assurant exited this line of business and sold the business segment, then
referred to as Fortis Financial Group (FFG), to The Hartford Financial Services Group, Inc. and certain of its subsidiaries (The Hartford). This sale was accomplished by means of reinsurance and modified coinsurance. As a
result, The Hartford is contractually responsible for servicing the insurance contracts, including the payment of benefits, oversight of investment management, overall contract administration and funding of reserves. If The Hartford fails to fulfill
its obligations, however, we will be obligated to perform the services and make the required payments and funding.



As of February 15, 2007, we had thirteen employees in our sales offices in New York, New York. In addition, two Assurant employees spent at least a
portion of their time working for us at our headquarters in Syracuse, New York.



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Our annual reports on Form 10-K, quarterly reports Form on 10-Q, current reports on Form 8-K and all
amendments to such reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available free of charge at the Securities and Exchange Commission (SEC) website at www.sec.gov.



For additional information that relates to our business, we refer you to
Assurants annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC and available on the SECs website at www.sec.gov or through Assurants website at www.assurant.com.



Item 1A.Risk Factors



Union Security Life is subject to risks associated with our business. These risks include, among others:



| |  |  | Reliance on Relationships with Significant Clients, Distributors and Other Parties. If our significant clients, distributors and other parties with
which we do business decline to renew or seek to terminate our relationships or contractual arrangements, our results of operations and financial condition could be materially adversely affected. We are also subject to the risk that these parties
may face financial difficulties, reputational issues or problems with respect to their own products and services, which may lead to decreased sales of products and services.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Failure to Attract and Retain Sales Representatives or Develop and Maintain Distribution Sources. Our sales representatives interface
with clients and third party distributors. Our inability to attract and retain our sales representatives or an interruption in, or changes to, our relationships with various third-party distributors could impair our ability to compete and market our
insurance products and services and materially adversely affect our results of operations and financial condition. In addition, our ability to market our products and services depends on our ability to tailor our channels of distribution to comply
with changes in the regulatory environment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Effect of General Economic, Financial Market and Political Conditions.Our results of operations and financial condition may be
materially adversely affected by general economic, financial market and political conditions, including:
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | insurance industry cycles;
| | - |  | --------------------------



| |  |  | levels of employment;
| | - |  | ---------------------



| |  |  | levels of inflation and movements of the financial markets;
| | - |  | -----------------------------------------------------------



| |  |  | fluctuations in interest rates;
| | - |  | -------------------------------



| |  |  | monetary policy;
| | - |  | ----------------



| |  |  | demographics; and
| | - |  | -----------------



| |  |  | legislative and competitive factors.
| | - |  | ------------------------------------



| |  |  | Failure to Predict Accurately Benefits and Other Costs and Claims. We may be unable to predict accurately benefits, claims and other
costs or to manage such costs through our loss limitation methods, which could have a material adverse effect on our results of operations and financial condition if claims substantially exceed our expectations.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in Regulation. Legislation or other regulatory reform that increases the regulatory requirements imposed on us or that changes
the way we are able to do business may significantly harm our business or results of operations in the future.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reinsurers Failure to Fulfill Obligations.In 2001, Assurant entered into a reinsurance agreement with The Hartford for the sale
of its FFG division. Under the reinsurance agreement, The Hartford is obligated to contribute funds to increase the value of the separate account assets relating to modified guaranteed annuity business sold if such value declines below the value of
the associated liabilities. If
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | The Hartford fails to fulfill these obligations, we will be obligated to make these payments and administer this business in the event of a default by the
reinsurer. In 2000 Assurant divested our long-term care (LTC) operations to John Hancock Life Insurance Company (John Hancock) through a reinsurance agreement. If John Hancock fails to fulfill its obligations we would be
obligated to make these payments.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For
additional risks that relate to our business, we refer you to Assurants annual report on Form 10-K for the fiscal year ended December 31, 2006 filed with the SEC and available on the SECs website at www.sec.gov or through
Assurants website at www.assurant.com.



Item 1B.Unresolved Staff Comments



None.



Item 2.Properties



We lease office space in Syracuse, New York that serves as our headquarters. We also lease office space in New York City that serves as our sales office. We believe that our leased properties are adequate for our
current business operations.



Item 3.Legal Proceedings



We are regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. We may from time to time be subject to a variety of legal and regulatory actions relating to our
current and past business operations. While we cannot predict the outcome of any pending or future litigation, examination or investigation and although no assurances can be given, we do not believe that any pending matter will have a material
adverse effect on our financial condition or results of operations.



Item 4.Submission of Matters to a Vote of Security Holders



Not required under reduced disclosure format.



Part II



Item 5.Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



There is no public trading market for our common stock. As of February 15, 2007, we had 100,000 shares of common stock
outstanding, all of which are owned directly by Assurant. We paid $10,000, $4,100, and $40,000 in dividends to our stockholder in 2006, 2005 and 2004, respectively.



Item 6.Selected Financial Data



Not required under reduced disclosure format.



Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operation



The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and
accompanying notes which appear elsewhere in this report. It contains forward-looking statements that involve risks and uncertainties. Please see Forward-Looking Statements for more information. Our actual results could differ materially
from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report.



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The table below presents information regarding our results of operations:



|                                                         |                |                                 |        |      |  |   |       
|-------------------------------------------------------- | -------------- | ------------------------------- | ------ | ---- |  | - | ------
|                                                         |                | For the Year Ended December 31,
|                                                         | 2006           |                                 |        | 2005
|                                                         | (in thousands)
|Revenues:                                                |                |                                 |        |      |  |   |       
|Net earned premiums and other considerations             |                | $                               | 61,338 |      |  | $ | 59,598
|Net investment income                                    |                |                                 | 9,175  |      |  |   | 8,756 
|Net realized (losses) gains on investments               |                |                                 | (173   | )    |  |   | 146   
|Amortization of deferred gains on disposal of businesses |                |                                 | 200    |      |  |   | 1,038 
|Fees and other income                                    |                |                                 | 47     |      |  |   | 31    
|                                                         |                |                                 |        |      |  |   |       
|Total revenues                                           |                |                                 | 70,587 |      |  |   | 69,569
|                                                         |                |                                 |        |      |  |   |       
|Benefits, losses and expenses:                           |                |                                 |        |      |  |   |       
|Policyholder benefits                                    |                |                                 | 32,284 |      |  |   | 34,571
|Selling, underwriting and general expenses (1)           |                |                                 | 17,781 |      |  |   | 17,637
|                                                         |                |                                 |        |      |  |   |       
|Total benefits, losses and expenses                      |                |                                 | 50,065 |      |  |   | 52,208
|                                                         |                |                                 |        |      |  |   |       
|Income before income taxes                               |                |                                 | 20,522 |      |  |   | 17,361
|Income taxes                                             |                |                                 | 7,081  |      |  |   | 5,957 
|                                                         |                |                                 |        |      |  |   |       
|Net income                                               |                | $                               | 13,441 |      |  | $ | 11,404
|                                                         |                |                                 |        |      |  |   |       

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|(1) | Includes amortization of deferred acquisition costs (DAC) and underwriting, general and administrative expenses.
|--- | ------------------------------------------------------------------------------------------------------------------



Year Ended December 31, 2006 Compared to December 31, 2005



Net Income



Net income increased $2,037, or 18%, to $13,441 for the year ended
December 31, 2006 from $11,404 for the year ended December 31, 2005. This increase was primarily driven by growth in business written through our Disability Reinsurance Management Services (DRMS) distribution channel and
approximately $1,400 of income related to a refund of previously paid policyholder benefits. These increases were offset by a reduction in amortization of deferred gains on disposal of businesses.



Total Revenues



Total revenues increased by $1,018, or 1%, to $70,587 for the year ended
December 31, 2006 from $69,569 for the year ended December 31, 2005. This increase was primarily driven by higher net earned premiums and other considerations of $1,740 due to an increase in premiums related to a closed block of disability
business written though our DRMS channel partially offset by decreases in our group life and group dental businesses. In addition, as a result of our annual review of estimates affecting the deferred gain on disposal of businesses we took an
additional charge of approximately $600 over the prior year.



Total Benefits, Losses and Expenses



Total
benefits, losses and expenses decreased by $2,143, or 4%, to $50,065 for the year ended December 31, 2006 from $52,208 for the year ended December 31, 2005. This decrease was driven by favorable experience in our group dental and group
life business, the continued decline in our domestic credit business and a refund of previously paid policyholder benefits which was accounted for as a reduction of policyholder benefits. Partially offsetting these decreases was the assumption of
reserves related to a closed block of disability business through our DRMS channel.



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Item 7A.Quantitative and Qualitative Disclosures about Market Risk



As a provider of insurance products, effective risk management is fundamental to our ability to protect both our customers and our
stockholders interests. We are exposed to potential loss from various market risks, in particular interest rate risk, credit risk and inflation risk.



Interest rate risk is the possibility that the fair value of liabilities will change more or less than the market value of investments in response to
changes in interest rates, including changes in the slope or shape of the yield curve and changes in spreads due to credit risks and other factors.



Credit risk is the possibility that counterparties may not be able to meet payment obligations when they become due. We assume counterparty credit risk in
many forms. A counterparty is any person or entity from which cash or other forms of consideration are expected to extinguish a liability or obligation to us. Primarily, our credit risk exposure is concentrated in our fixed income investment
portfolio and, to a lesser extent, in our reinsurance recoverables.



Inflation risk is the possibility that a change in domestic price levels produces an adverse effect on earnings. This typically happens when only one of invested assets or liabilities is indexed to inflation.



Interest Rate Risk



Interest rate risk arises as we invest substantial funds in
interest-sensitive fixed income assets, such as fixed maturity investments, mortgage-backed and asset-backed securities and commercial mortgage loans. There are two forms of interest rate riskprice risk and reinvestment risk. Price risk occurs
when fluctuations in interest rates have a direct impact on the market valuation of these investments. As interest rates rise, the market value of these investments falls, and conversely, as interest rates fall, the market value of these investments
rises. Reinvestment risk occurs when fluctuations in interest rates have a direct impact on expected cash flows from mortgage-backed and asset-backed securities. As interest rates fall, an increase in prepayments on these assets results in earlier
than expected receipt of cash flows forcing us to reinvest the proceeds in an unfavorable lower interest rate environment, and conversely as interest rates rise, a decrease in prepayments on these assets results in later than expected receipt of
cash flows forcing us to forgo reinvesting in a favorable higher interest rate environment. As of December 31, 2006, we held $111,522 of fixed maturity securities at fair market value and $21,686 of commercial mortgages at amortized cost for a
combined total of 90% of total invested assets. As of December 31, 2005, we held $119,604 of fixed maturity securities at fair market value and $13,996 of commercial mortgages at amortized cost for a combined total of 90% of total invested
assets.



We expect to manage interest rate risk by selecting
investments with characteristics such as duration, yield, currency and liquidity tailored to the anticipated cash outflow characteristics of our insurance and reinsurance liabilities.



Our group long-term disability and group term life waiver of premium reserves are also sensitive to interest rates. These
reserves are discounted to the valuation date at the valuation interest rate. The valuation interest rate is determined by taking into consideration actual and expected earned rates on our asset portfolio, with adjustments for investment expenses
and provisions for adverse deviation.



Credit Risk



We have exposure to credit risk primarily as a holder of fixed income
securities and by entering into reinsurance cessions.



Our risk
management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to any one issuer. We attempt to limit our credit



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exposure by imposing fixed maturity portfolio limits on individual issuers based upon credit quality. Currently our portfolio limits are 1.5% for issuers
rated AA- and above, 1% for issuers rated A- to A+, 0.75% for issuers rated BBB- to BBB+ and 0.38% for issuers rated BB- to BB+. These portfolio limits are further reduced for certain issuers with whom we have credit exposure on reinsurance
agreements.



We use the lower of Moodys or
Standard & Poors ratings to determine an issuers rating.



We are also exposed to the credit risk of our reinsurers. When we reinsure, we are still liable to our insureds regardless of whether we get reimbursed by our reinsurer. As part of our overall risk and capacity
management strategy, we purchase reinsurance for certain risks that we underwrite.



For at least 50% of our $101,283 of reinsurance recoverables at December 31, 2006, we are protected from the credit risk by using some type of risk mitigation mechanism such as a trust, letter of credit or by
withholding the assets in a modified coinsurance or co-funds-withheld arrangement. For recoverables that are not protected by these mechanisms, we are dependent solely on the credit of the reinsurer. Occasionally, the credit worthiness of the
reinsurer becomes questionable. Reinsurance may not be available or adequate to protect us against losses, and we are subject to the credit risk of reinsurers.



Inflation Risk



Inflation risk arises as we invest substantial funds in nominal assets which are not indexed to the level of inflation, whereas the underlying liabilities
are indexed to the level of inflation. We have inflation risk in our individual and small employer group health insurance businesses to the extent that medical costs increase with inflation and we have not been able to increase premiums to keep pace
with inflation.



Item 8.Financial Statements and Supplementary Data



The financial statements and financial statement schedules in Part IV, Item 15(a) 1 and 2 of this report are incorporated by reference into this
Item 8.



Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



There have been no changes in or disagreements with accountants on accounting and financial disclosure.



Item 9A.Controls and Procedures



Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2006.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of that date in providing a reasonable level of assurance that information we are required
to disclose in reports we file or furnish under the Exchange Act is recorded, processed, summarized and reported within the time periods in SEC rules and forms. Further, our disclosure controls and procedures were effective in providing a reasonable
level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.



There have been no changes in
our internal control over financial reporting that occurred during Union Security Lifes fourth fiscal quarter in 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



Item 9B.Other Information



None.



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PART III



Item 10.Directors, Executive Officersand Corporate Governance



Not required under reduced disclosure format.



Item 11.Executive Compensation



Not required under reduced disclosure format.



Item 12.Security Ownership of Certain Beneficial Owners and Managementand Related Stockholder Matters



Not required under reduced disclosure format.



Item 13.Certain Relationships and Related Transactions, and Director Independence



Not required under reduced disclosure format.



Item 14.Principal Accounting Fees and Services



PricewaterhouseCoopers LLP has audited our financial statements for fiscal 2006. The following table shows the aggregate fees billed to us by
PricewaterhouseCoopers LLP for services rendered and the percentage of those services that were approved by Assurants Audit Committee, in its capacity as a committee of Assurants Board of Directors, during the fiscal years ended
December 31, 2006 and 2005.



|                                   |  |                                    |     |            |                                    |   |        |   |            |  |     |  
|---------------------------------- |  | ---------------------------------- | --- | ---------- | ---------------------------------- | - | ------ | - | ---------- |  | --- | -
|                                   |  | Fiscal Year EndedDecember 31, 2006 |     |            | Fiscal Year EndedDecember 31, 2005 |  
|Description of Fees (in thousands) |  | Amount                             |     | Percentage |                                    |   | Amount |   | Percentage | 
|Audit Fees                         |  | $                                  | 166 |            | 100                                | % |        | $ | 192        |  | 100 | %
|Audit Related Fees                 |  |                                    |    |            |                                   |   |        |   |           |  |    |  
|Tax Fees                           |  |                                    |    |            |                                   |   |        |   |           |  |    |  
|All Other Fees                     |  |                                    |    |            |                                   |   |        |   |           |  |    |  



The Audit Committee of
Assurants Board of Directors adopted written procedures for pre-approval of services by the independent auditors, including procedures relating to the Assurant Audit Committees power to:



| |  |  | Retain and terminate independent auditors and approve all audit engagement fees and terms;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | Inform each registered public accounting firm performing work for Union Security Life that such shall report directly to the Assurant Audit Committee;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Directly oversee the work of any registered public accounting firm employed by Union Security Life, including the resolution of any disagreement between management
and the auditor regarding financial reporting, for the purpose of preparing or issuing an audit report or related work; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approve in advance any significant audit or non-audit engagement or relationship between Union Security Life and the independent auditors, other than
prohibited non-auditing services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Prohibited nonauditing services are services that Congress, the SEC or the Public Company Accounting Oversight Board prohibits through regulation. Notwithstanding the foregoing, pre-approval is not necessary for minor audit
services if: (i) the aggregate amount of all such non-audit services provided to Assurant and its subsidiaries constitutes not more than 5% of the total amount of revenues paid by Assurant and its subsidiaries to its auditor during the fiscal
year in which the non-audit services are provided; (ii) such services were not recognized by Assurant at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Assurant
Audit Committee and approved prior to the completion of the audit by the Assurant Audit Committee or by one or more members of the Assurant Audit Committee to whom authority to grant such approvals has been delegated by the Assurant Board of
Directors. The Assurant Audit Committee may delegate to one or more of its members the authority to approve in advance all significant audit or non-audit services to be provided by the independent auditors so long as it is presented to
Assurants full Audit Committee at a later time.



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PART IV



Item 15.Exhibits and Financial Statement Schedules



(a)1. Financial Statements



The following financial statements of Union Security Life Insurance Company of New York, incorporated by reference into Item 8, are attached hereto:



|                                                                                                                                                        |  |     
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                                                        |  | Page
|Financial Statements of Union Security Life Insurance Company of New York                                                                               |  |     
|Report of Independent Registered Public Accounting Firm                                                                                                 |  | F-1 
|Balance Sheets of Union Security Life Insurance Company of New York at December 31, 2006 and 2005                                                       |  | F-2 
|Statements of Operations of Union Security Life Insurance Company of New York for the Years Ended December 31, 2006, 2005 and 2004                      |  | F-3 
|Statements of Changes in Stockholders Equity of Union Security Life Insurance Company of New York for the Years Ended December 31, 2006, 2005 and 2004 |  | F-4 
|Statements of Cash Flows of Union Security Life Insurance Company of New York for the Years Ended December 31, 2006, 2005 and 2004                      |  | F-5 
|Notes to Financial Statements of Union Security Life Insurance Company of New York                                                                      |  | F-6 



(a)2. Financial
Statement Schedules



The following financial statement
schedules of Union Security Life Insurance Company are attached hereto:



All schedules are omitted because they are not applicable, not required, or the information is included in the financial statements or the notes thereto.



(a)3. Exhibits



The following exhibits either (a) are filed with this report or (b) have previously been filed with the SEC and are incorporated herein by
reference to those prior filings. Exhibits are available upon request at the investor relations section of the Assurant website, located at www.assurant.com.



|    |  |                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1 |  | Articles of Incorporation of First Fortis Life Insurance Company (incorporated by reference from the Registrants Form 10-K filed, File No. 33-71690, filed on March 29,
1996).                                                                                                                                                                  
|    | 
|3.2 |  | By-laws of First Fortis Life Insurance Company (incorporated by reference from the Registrants Registration Statement on Form N-4, File No. 33-71686, and Separate Account A filed
on November 15, 1993).                                                                                                                                       
|    | 
|3.3 |  | Amended and Restated Charter of First Fortis Life Insurance Company (incorporated by reference from Exhibit 3.3 to Registrants Form 10-K, originally filed March 10,
2006).                                                                                                                                                                     
|    | 
|3.4 |  | By-laws of Union Security Life Insurance Company of New York, effective September 6, 2005 (incorporated by reference from Exhibit 3.4 to Registrants Form 10-K, originally filed
March 10, 2006).                                                                                                                                               
|    | 
|4.1 |  | Form of Combination Fixed and Variable Group Annuity Contract (incorporated by reference from the Registrants Post-Effective Amendment No. 11 to the Registration Statement on Form
N-4, File No. 33-71686, and Separate Account A filed on April 19, 2002).                                                                                    
|    | 
|4.2 |  | Form of Application to be used in connection with Form of Combination Fixed and Variable Group Annuity Contract filed as Exhibit 4.1 to this report (incorporated by reference from the
Registrants Post-Effective Amendment No. 8 to the Registration Statement on Form S-2 File No. 333-14761, and Separate Account A filed on April 4, 2002).



9



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##### Table of Contents

|     |  |                                                                                                                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|24.1 |  | Power of Attorney.                                                                                                                                                                                     
|     | 
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer.                                                                                                                                 
|     | 
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer.                                                                                                                                 
|     | 
|32.1 |  | Certification of Chief Executive Officer of Union Security Life Insurance Company of New York pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
|     | 
|32.2 |  | Certification of Chief Financial Officer of Union Security Life Insurance Company of New York pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.



10



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 1, 2007.



UNION SECURITY LIFE INSURANCE COMPANY OF NEW YORKBy:

/S/    P. BRUCE CAMACHOName:

P. Bruce CamachoTitle:

President and Chief Executive OfficerBy:

/S/    PETER A. WALKERName:

Peter A. WalkerTitle:

Treasurer and Chief Financial Officer




Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated on March 1, 2007.



|                                        |  |                                                                   
|--------------------------------------- |  | ------------------------------------------------------------------
|Signature                               |  | Title                                                             
|                                        | 
|/S/    P. BRUCE
CAMACHOP. Bruce
Camacho |  | President and Chief Executive Officer(Principal Executive Officer)
|                                        | 
|/S/    PETER A.
WALKERPeter A. Walker   |  | Treasurer and Chief Financial Officer(Principal Financial Officer)
|                                        | 
|*Terry Kryshak                          |  | Director                                                          
|                                        | 
|*Melissa J. T. Hall                     |  | Director                                                          
|                                        | 
|*Allen R. Freedman                      |  | Director                                                          
|                                        | 
|*H. Carroll Mackin                      |  | Director                                                          
|                                        | 
|*Dale Edward Gardner                    |  | Director                                                          
|                                        | 
|*Lesley G. Silvester                    |  | Director                                                          
|                                        | 
|*Esther L. Nelson                       |  | Director                                                          

|     |  |                                  
|---- |  | ---------------------------------
|     | 
|*By: |  | /S/    P. BRUCE
CAMACHO          
|     |  | P. Bruce Camacho Attorney-in-Fact



11



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



To the Board of Directors and Stockholder of

Union Security Life Insurance Company of New York:



In our opinion, the accompanying balance sheets and the related statements of operations, changes in stockholders
equity and cash flows present fairly, in all material respects, the financial position of Union Security Life Insurance Company of New York (the Company), a wholly owned subsidiary of Assurant, Inc. at December 31, 2006 and 2005,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006 in conformity with accounting principles generally accepted in the United States of America. These financial statements are
the responsibility of the Companys management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with standards of the Public Company
Accounting Oversight Board (United States), which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.



PricewaterhouseCoopers LLP



March 1, 2007

Minneapolis, Minnesota



F-1



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##### Table of Contents

Union Security Life Insurance Company of New York



Balance Sheets

At December 31, 2006 and 2005



|                                                                                                          |  |                                       |         |                  |   |        
|--------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------- | ---------------- | - | -------
|                                                                                                          |  | December 31,2006                      |         | December 31,2005
|                                                                                                          |  | (in thousands exceptnumber of shares)
|Assets                                                                                                    |  |                                       |         |                  |   |        
|Investments:                                                                                              |  |                                       |         |                  |   |        
|Fixed maturities available for sale, at fair value (amortized cost$107,827 in 2006 and $113,980 in 2005) |  | $                                     | 111,522 |                  | $ | 119,604
|Equity securities available for sale, at fair value (cost$9,455 in 2006 and $9,046 in 2005)              |  |                                       | 9,381   |                  |   | 8,790  
|Commercial mortgage loans on real estate at amortized cost                                                |  |                                       | 21,686  |                  |   | 13,996 
|Policy loans                                                                                              |  |                                       | 120     |                  |   | 98     
|Short-term investments                                                                                    |  |                                       | 2,401   |                  |   | 3,341  
|Other investments                                                                                         |  |                                       | 2,524   |                  |   | 3,028  
|                                                                                                          |  |                                       |         |                  |   |        
|Total investments                                                                                         |  |                                       | 147,634 |                  |   | 148,857
|Cash and cash equivalents                                                                                 |  |                                       | 5,600   |                  |   | 2,863  
|Premiums and accounts receivable                                                                          |  |                                       | 3,383   |                  |   | 3,359  
|Reinsurance recoverables                                                                                  |  |                                       | 101,283 |                  |   | 94,660 
|Due from affiliates                                                                                       |  |                                       |        |                  |   | 327    
|Accrued investment income                                                                                 |  |                                       | 1,581   |                  |   | 1,605  
|Tax receivable                                                                                            |  |                                       | 1,273   |                  |   | 122    
|Deferred acquisition costs                                                                                |  |                                       | 1,188   |                  |   | 1,437  
|Deferred income taxes, net                                                                                |  |                                       | 1,485   |                  |   | 1,999  
|Goodwill                                                                                                  |  |                                       | 2,038   |                  |   | 2,038  
|Other assets                                                                                              |  |                                       | 85      |                  |   | 84     
|Assets held in separate accounts                                                                          |  |                                       | 21,948  |                  |   | 25,343 
|                                                                                                          |  |                                       |         |                  |   |        
|Total assets                                                                                              |  | $                                     | 287,498 |                  | $ | 282,694
|                                                                                                          |  |                                       |         |                  |   |        
|Liabilities                                                                                               |  |                                       |         |                  |   |        
|Future policy benefits and expenses                                                                       |  | $                                     | 40,381  |                  | $ | 35,762 
|Unearned premiums                                                                                         |  |                                       | 10,979  |                  |   | 14,008 
|Claims and benefits payable                                                                               |  |                                       | 138,880 |                  |   | 135,176
|Commissions payable                                                                                       |  |                                       | 4,634   |                  |   | 4,463  
|Reinsurance balances payable                                                                              |  |                                       | 514     |                  |   | 2,596  
|Funds held under reinsurance                                                                              |  |                                       | 76      |                  |   | 83     
|Deferred gain on disposal of businesses                                                                   |  |                                       | 5,254   |                  |   | 5,454  
|Accounts payable and other liabilities                                                                    |  |                                       | 4,507   |                  |   | 3,366  
|Due to affiliates                                                                                         |  |                                       | 1,576   |                  |   |       
|Liabilities related to separate accounts                                                                  |  |                                       | 21,948  |                  |   | 25,343 
|                                                                                                          |  |                                       |         |                  |   |        
|Total liabilities                                                                                         |  | $                                     | 228,749 |                  | $ | 226,251
|                                                                                                          |  |                                       |         |                  |   |        
|Commitments and contingencies (Note 15)                                                                   |  |                                       |         |                  |   |        
|                                                                                                          |  |                                       |         |                  |   |        
|Stockholders equity                                                                                      |  |                                       |         |                  |   |        
|Common stock, par value $20 per share, 100,000 shares authorized, issued, and outstanding                 |  |                                       | 2,000   |                  |   | 2,000  
|Additional paid-in capital                                                                                |  |                                       | 43,006  |                  |   | 43,006 
|Retained earnings                                                                                         |  |                                       | 11,389  |                  |   | 7,948  
|Accumulated other comprehensive income                                                                    |  |                                       | 2,354   |                  |   | 3,489  
|                                                                                                          |  |                                       |         |                  |   |        
|Total stockholders equity                                                                                |  |                                       | 58,749  |                  |   | 56,443 
|                                                                                                          |  |                                       |         |                  |   |        
|Total liabilities and stockholders equity                                                                |  | $                                     | 287,498 |                  | $ | 282,694
|                                                                                                          |  |                                       |         |                  |   |        



See the accompanying
notes to the financial statements



F-2



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##### Table of Contents

Union Security Life Insurance Company of New York



Statements of Operations

Years Ended December 31, 2006, 2005 and 2004



|                                                         |  |                          |        |   |      |   |        |  |   |       
|-------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ |  | - | ------
|                                                         |  | Years Ended December 31,
|                                                         |  | 2006                     |        |   | 2005 |   | 2004  
|                                                         |  | (in thousands)          
|Revenues                                                 |  |                          |        |   |      |   |        |  |   |       
|Net earned premiums and other considerations             |  | $                        | 61,338 |   |      | $ | 59,598 |  | $ | 65,593
|Net investment income                                    |  |                          | 9,175  |   |      |   | 8,756  |  |   | 9,738 
|Net realized (losses) gains on investments               |  |                          | (173   | ) |      |   | 146    |  |   | 819   
|Amortization of deferred gains on disposal of businesses |  |                          | 200    |   |      |   | 1,038  |  |   | 1,575 
|Fees and other income                                    |  |                          | 47     |   |      |   | 31     |  |   | 305   
|                                                         |  |                          |        |   |      |   |        |  |   |       
|Total revenues                                           |  |                          | 70,587 |   |      |   | 69,569 |  |   | 78,030
|                                                         |  |                          |        |   |      |   |        |  |   |       
|Benefits, losses and expenses                            |  |                          |        |   |      |   |        |  |   |       
|Policyholder benefits                                    |  |                          | 32,284 |   |      |   | 34,571 |  |   | 42,732
|Amortization of deferred acquisition costs               |  |                          | 1,084  |   |      |   | 981    |  |   | 247   
|Underwriting, general and administrative expenses        |  |                          | 16,697 |   |      |   | 16,656 |  |   | 18,442
|                                                         |  |                          |        |   |      |   |        |  |   |       
|Total benefits, losses and expenses                      |  |                          | 50,065 |   |      |   | 52,208 |  |   | 61,421
|                                                         |  |                          |        |   |      |   |        |  |   |       
|Income before income taxes                               |  |                          | 20,522 |   |      |   | 17,361 |  |   | 16,609
|Income taxes                                             |  |                          | 7,081  |   |      |   | 5,957  |  |   | 4,632 
|                                                         |  |                          |        |   |      |   |        |  |   |       
|Net income                                               |  | $                        | 13,441 |   |      | $ | 11,404 |  | $ | 11,977
|                                                         |  |                          |        |   |      |   |        |  |   |       





See the accompanying notes to the financial statements



F-3



---

##### Table of Contents

Union Security Life Insurance Company of New York



Statements of Changes in Stockholders Equity

Years Ended December 31, 2006, 2005 and 2004



|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|-------------------------------------------- |  | -------------------------------------- | ----- | ------------------------ | - | ---------------- |  | - | ------------------------------------------ | - |  | ----- | ------ | - |  | - | ------- | -
|                                             |  | CommonStock                            |       | AdditionalPaid-inCapital |   | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | Total |       
|                                             |  | (in thousands except number of shares) |      
|Balance, January 1, 2004                     |  | $                                      | 2,000 |                          | $ | 43,006           |  | $ | 28,663                                     |   |  | $     | 7,082  |   |  | $ | 80,751  |  
|Dividends on common stock                    |  |                                        |      |                          |   |                 |  |   | (40,000                                    | ) |  |       |       |   |  |   | (40,000 | )
|Comprehensive income:                        |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Net income                                   |  |                                        |      |                          |   |                 |  |   | 11,977                                     |   |  |       |       |   |  |   | 11,977  |  
|Net change in unrealized gains on securities |  |                                        |      |                          |   |                 |  |   |                                           |   |  |       | (1,239 | ) |  |   | (1,239  | )
|Other                                        |  |                                        |      |                          |   |                 |  |   | 4                                          |   |  |       | (4     | ) |  |   |        |  
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Total comprehensive income                   |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   | 10,738  |  
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2004                   |  |                                        | 2,000 |                          |   | 43,006           |  |   | 644                                        |   |  |       | 5,839  |   |  |   | 51,489  |  
|Dividends on common stock                    |  |                                        |      |                          |   |                 |  |   | (4,100                                     | ) |  |       |       |   |  |   | (4,100  | )
|Comprehensive income:                        |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Net income                                   |  |                                        |      |                          |   |                 |  |   | 11,404                                     |   |  |       |       |   |  |   | 11,404  |  
|Net change in unrealized gains on securities |  |                                        |      |                          |   |                 |  |   |                                           |   |  |       | (2,350 | ) |  |   | (2,350  | )
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Total comprehensive income                   |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   | 9,054   |  
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2005                   |  |                                        | 2,000 |                          |   | 43,006           |  |   | 7,948                                      |   |  |       | 3,489  |   |  |   | 56,443  |  
|Dividends on common stock                    |  |                                        |      |                          |   |                 |  |   | (10,000                                    | ) |  |       |       |   |  |   | (10,000 | )
|Comprehensive income:                        |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Net income                                   |  |                                        |      |                          |   |                 |  |   | 13,441                                     |   |  |       |       |   |  |   | 13,441  |  
|Net change in unrealized gains on securities |  |                                        |      |                          |   |                 |  |   |                                           |   |  |       | (1,135 | ) |  |   | (1,135  | )
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Total comprehensive income                   |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   | 12,306  |  
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  
|Balance, December 31, 2006                   |  | $                                      | 2,000 |                          | $ | 43,006           |  | $ | 11,389                                     |   |  | $     | 2,354  |   |  | $ | 58,749  |  
|                                             |  |                                        |       |                          |   |                  |  |   |                                            |   |  |       |        |   |  |   |         |  





See the accompanying notes to the financial statements



F-4



---

##### Table of Contents

Union Security Life Insurance Company of New York



Statements of Cash Flows

Years Ended December 31, 2006, 2005 and 2004



|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                  |  | Years Ended December 31, |        
|                                                                                  |  | 2006                     |         |   | 2005 |   |         | 2004 | 
|                                                                                  |  | (in thousands)           |        
|Operating activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income                                                                        |  | $                        | 13,441  |   |      | $ | 11,404  |      |  | $ | 11,977  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |         |   |      |   |         |      |  |   |         |  
|Change in reinsurance recoverables                                                |  |                          | (6,623  | ) |      |   | (1,053  | )    |  |   | 6,844   |  
|Change in premiums and accounts receivable                                        |  |                          | 303     |   |      |   | 1,754   |      |  |   | (2,663  | )
|Change in deferred acquisition costs                                              |  |                          | 249     |   |      |   | (314    | )    |  |   | (181    | )
|Change in accrued investment income                                               |  |                          | 24      |   |      |   | 96      |      |  |   | 484     |  
|Change in insurance policy reserves and expenses                                  |  |                          | 5,294   |   |      |   | (4,394  | )    |  |   | (7,834  | )
|Change in accounts payable and other liabilities                                  |  |                          | 2,880   |   |      |   | (1,107  | )    |  |   | (2,313  | )
|Change in commissions payable                                                     |  |                          | 171     |   |      |   | (538    | )    |  |   | 1,190   |  
|Change in reinsurance balances payable                                            |  |                          | (2,082  | ) |      |   | 87      |      |  |   | 574     |  
|Change in funds held under reinsurance                                            |  |                          | (7      | ) |      |   | (6      | )    |  |   | (5      | )
|Amortization of deferred gains on disposal of businesses                          |  |                          | (200    | ) |      |   | (1,038  | )    |  |   | (1,575  | )
|Change in income taxes                                                            |  |                          | (25     | ) |      |   | 1,875   |      |  |   | (794    | )
|Net realized losses (gains) on investments                                        |  |                          | 173     |   |      |   | (146    | )    |  |   | (819    | )
|Other                                                                             |  |                          | 135     |   |      |   | 57      |      |  |   | (166    | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                         |  |                          | 13,733  |   |      |   | 6,677   |      |  |   | 4,719   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Investing activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Sales of:                                                                         |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturities available for sale                                               |  |                          | 12,994  |   |      |   | 18,531  |      |  |   | 57,159  |  
|Equity securities available for sale                                              |  |                          | 3,812   |   |      |   | 1,143   |      |  |   | 4,376   |  
|Maturities, prepayments, and scheduled redemption of:                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturities available for sale                                               |  |                          | 8,635   |   |      |   | 15,909  |      |  |   | 11,035  |  
|Purchase of:                                                                      |  |                          |         |   |      |   |         |      |  |   |         |  
|Fixed maturities available for sale                                               |  |                          | (15,827 | ) |      |   | (35,839 | )    |  |   | (26,454 | )
|Equity securities available for sale                                              |  |                          | (4,342  | ) |      |   | (1,700  | )    |  |   | (3,330  | )
|Change in commercial mortgage loans on real estate                                |  |                          | (7,690  | ) |      |   | (4,871  | )    |  |   | (5,325  | )
|Change in short-term investments                                                  |  |                          | 940     |   |      |   | 1,234   |      |  |   | 3,516   |  
|Change in other invested assets                                                   |  |                          | 504     |   |      |   | 537     |      |  |   | (1,353  | )
|Change in policy loans                                                            |  |                          | (22     | ) |      |   | (18     | )    |  |   | (43     | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) provided by investing activities                               |  |                          | (996    | ) |      |   | (5,074  | )    |  |   | 39,581  |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Financing activities                                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Dividends paid                                                                    |  |                          | (10,000 | ) |      |   | (4,100  | )    |  |   | (40,000 | )
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) financing activities                                           |  |                          | (10,000 | ) |      |   | (4,100  | )    |  |   | (40,000 | )
|Change in cash and cash equivalents                                               |  |                          | 2,737   |   |      |   | (2,497  | )    |  |   | 4,300   |  
|Cash and cash equivalents at beginning of period                                  |  |                          | 2,863   |   |      |   | 5,360   |      |  |   | 1,060   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                        | 5,600   |   |      | $ | 2,863   |      |  | $ | 5,360   |  
|                                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|Supplemental information:                                                         |  |                          |         |   |      |   |         |      |  |   |         |  
|Income taxes paid (net of refunds)                                                |  |                          | 7,107   |   |      |   | 4,081   |      |  |   | 5,428   |  





See the accompanying notes to the financial statements



F-5



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements

December 31, 2006, 2005 and 2004

(In thousands except share data)



1. Nature of Operations



Union Security Life Insurance Company of New York (the Company), formerly known as First Fortis Life Insurance
Company, is a provider of life insurance products. The Company is a wholly owned subsidiary of Assurant, Inc. (the Parent). Assurant, Inc.s common stock is traded on the New York Stock Exchange under the symbol AIZ.



The Company is domiciled in New York and is qualified to sell life, health
and annuity insurance in the state of New York. The Companys revenues are derived principally from group employee benefits and credit products. The Company offers credit insurance, group disability insurance, group dental insurance and group
life insurance.



2. Summary of Significant Accounting Policies



Basis of Presentation



The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). Dollar amounts are presented in U.S. dollars and all amounts are in thousands, except for number of shares.



Use of Estimates



The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities. The most significant items on the Companys balance sheet affected by the use of estimates are investments, reinsurance recoverables, deferred acquisition costs (DAC), deferred
income taxes, goodwill, future policy benefits and expenses, unearned premiums, claims and benefits payable, deferred gains on disposal of businesses, and commitments and contingencies. The estimates are sensitive to market conditions, investment
yields, mortality, morbidity, commissions and other acquisition expenses, policyholder behavior and other factors. Actual results could differ from the estimates reported. The Company believes the amounts reported are reasonable and adequate.



Comprehensive Income



Comprehensive income is comprised of net income and unrealized gains and
losses on securities classified as available for sale, less deferred income taxes.



Reclassifications



Certain prior period
amounts have been reclassified to conform to the 2006 presentation.



Revenue Recognition



The Company
recognizes and reports revenue when realized or realizable and earned. Revenue generally is realized or realizable and earned when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed
or determinable, and collectibility is reasonably assured.



F-6



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Investments



Fixed maturities and equity securities are classified as available for sale and reported at fair value. If the fair value is higher than the amortized
cost for debt securities or the purchase cost for equity securities, the excess is an unrealized gain; and, if lower than cost, the difference is an unrealized loss. The net unrealized gains and losses, less deferred income taxes, are included in
accumulated other comprehensive income.



Commercial mortgage
loans on real estate are reported at unpaid balances, adjusted for amortization of premium or discount, less allowance for losses. The allowance is based on managements analysis of factors including actual loan loss experience, specific events
based on geographical, political or economic conditions, industry experience and individually impaired loan analysis. A loan is considered individually impaired when it becomes probable the Company will be unable to collect all amounts due,
including principal and interest. Changes in the allowance for loan losses are recorded in net realized gains and losses.



Policy loans are reported at unpaid principal balances, which do not exceed the cash surrender value of the underlying policies.



Short-term investments include all investment cash and short maturity
investments. These amounts are reported at cost, which approximates fair value.



Other investments consist primarily of investments in certified capital companies (CAPCOs). The Companys CAPCOs consist of debt instruments that are recorded at amortized cost, which approximates
fair value.



The Company monitors its investment portfolio to
identify investments that may be other than temporarily impaired. In addition, securities whose market price is equal to 85% or less of their original purchase price are added to the impairment watchlist, which is discussed at quarterly meetings
attended by members of the Companys investment, accounting and finance departments. Any security whose price decrease is deemed other-than-temporary is written down to its then current market level with the amount of the writedown reported as
a realized loss in that period. Assessment factors include, but are not limited to, the length of time and the extent to which the market value has been less than cost, the financial condition and rating of the issuer, whether any collateral is held
and the intent and ability of the Company to retain the investment for a period of time sufficient to allow for recovery. 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 reported
as earned net of investment expenses.



The Company anticipates
prepayments of principal in the calculation of the effective yield for mortgage-backed securities and structured securities. The majority of the Companys mortgage-backed securities and structured securities are of high credit quality. The
retrospective method is used to adjust the effective yield.



Cash and
Cash Equivalents



The Company considers cash on hand,
all operating cash and working capital cash to be cash equivalents. These amounts are carried at cost, which approximates fair value. Cash balances are reviewed at the end of each reporting period to determine if negative cash balances exist. If
negative cash balances do exist, the cash accounts are netted with other positive cash accounts of the same bank providing the right of offset exists between the accounts. If the right of offset does not exist, the negative cash balances are
reclassified to accounts payable.



F-7



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Receivables



The Company reports a receivable when revenue has been recognized and reported but not collected.



Reinsurance



Reinsurance recoverables include amounts related to paid benefits and estimated amounts related to unpaid policy and
contract claims, future policyholder benefits and policyholder contract deposits. The cost of reinsurance is recognized over the terms of the underlying reinsured policies using assumptions consistent with those used to account for the policies.
Amounts recoverable from reinsurers are estimated in a manner consistent with claim and claim adjustment expense reserves or future policy benefits reserves and are reported in the balance sheets. The cost of reinsurance related to long-duration
contracts is recognized over the life of the underlying reinsured policies. The ceding of insurance does not discharge the Companys primary liability to insureds. An allowance for doubtful accounts is recorded on the basis of periodic
evaluations of balances due from reinsurers, reinsurer solvency, managements experience, and current economic conditions.



Reinsurance balances payable are reported for reinsurance assumed based upon ceding entities estimations.



Funds held under reinsurance represent amounts contractually held from
assuming companies in accordance with reinsurance agreements.



Reinsurance premiums assumed are calculated based upon payments received from ceding companies together with accrual estimates, which are based on both payments received and in force policy information received from ceding companies. Any
subsequent differences arising on such estimates are recorded in the period in which they are determined.



Income Taxes



The Company reports its taxable income in a consolidated federal income tax return along with other affiliated subsidiaries of the Parent. Income tax expense or credit is 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.



Current federal income taxes are charged to operations based upon amounts estimated to be payable or recoverable as a result of taxable operations for the
current year. Deferred income taxes are recognized for temporary differences between the financial reporting basis and income tax basis of assets and liabilities, based on enacted tax laws and statutory tax rates applicable to the periods in which
we expect the temporary differences to reverse. The Company is required to establish a valuation allowance for any portion of the deferred tax assets that management believes will not be realized. In the opinion of management, it is more likely than
not that the Company will realize the benefit of the deferred tax assets and, therefore, no such valuation allowance has been established.



Deferred Acquisition Costs



The costs of acquiring new business that vary with and are primarily related to the production of new business are deferred to the extent that such costs
are deemed recoverable from future premiums or gross profits. Acquisition costs primarily consist of commissions, policy issuance expenses, and certain direct marketing expenses.



F-8



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Loss recognition testing is performed annually and reviewed quarterly. Such testing involves the use
of best estimate assumptions including the anticipation of interest income to determine if anticipated future policy premiums are adequate to recover all DAC and related claims, benefits and expenses. To the extent a premium deficiency exists, it is
recognized immediately by a charge to the statement of operations and a corresponding reduction in DAC. If the premium deficiency is greater than unamortized DAC, a liability will be accrued for the excess deficiency.



Long Duration Contracts



Acquisition costs on the Fortis Financial Group (FFG) and
Long-Term Care (LTC) disposed businesses were written off when the businesses were sold.



Short Duration Contracts



Acquisition costs relating to monthly pay credit insurance business consist mainly of direct marketing costs and are deferred and amortized over the
estimated average terms and balances of the underlying contracts.



Acquisition costs relating to group term life, group disability and group dental consist primarily of compensation to sales representatives. These acquisition costs are front-end loaded; thus, they are deferred and amortized over the
estimated terms of the underlying contracts.



Property and Equipment



Property and equipment are reported at cost less
accumulated depreciation. Depreciation is calculated on a straight-line basis over estimated useful lives with a maximum of 7 years for furniture and a maximum of 5 years for equipment. Expenditures for maintenance and repairs are charged to income
and reported as incurred. Expenditures for improvements are capitalized and depreciated over the remaining useful life of the asset.



Goodwill



Goodwill represents the excess of acquisition costs over the net fair values of identifiable assets acquired and liabilities assumed in a business
combination. Goodwill is deemed to have an indefinite life and is not amortized, but rather tested at least annually for impairment. The goodwill impairment test has two steps. The first identifies potential impairments by comparing the fair value
of a reporting unit with its book value, including goodwill. If the fair value of the reporting unit exceeds the carrying amount, goodwill is not impaired and the second step is not required. If the carrying value exceeds the fair value, the second
step calculates the possible impairment loss by comparing the implied fair value of goodwill with the carrying amount. If the implied goodwill is less than the carrying amount, a write down is recorded. The fair value is based on an evaluation of
ranges of future discounted earnings, public company trading multiples and acquisitions of similar companies. Certain key assumptions considered include forecasted trends in revenues, operating expenses and effective tax rates.



The Company adopted the Financial Accounting Standards Board
(FASB) Statement of Financial Accounting Standards (FAS 142) No. 142, Goodwill and Other Intangible Assets, on January 1, 2002. As part of the adoption of FAS 142, the Company is required to test goodwill on
at least an annual basis. The Company



F-9



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



performed a January 1, 2005 impairment test during the first quarter and concluded that goodwill is not impaired. Effective September 30, 2005, the
Company changed the date of its annual goodwill impairment test to the fourth quarter based on actual data through October 1st. The Company determined this change in accounting principle is preferable because it will allow management to
incorporate this test into the normal flow of the financial planning and reporting cycle and provide more timely analysis on the recoverability of goodwill. The Companys fourth quarter 2006 impairment test also concluded that goodwill is not
impaired.



Other Assets



Other assets include prepaid items and intangible assets. Identifiable
intangible assets with finite lives, including costs capitalized relating to developing software for internal use, are amortized on a straight-line basis over their estimated useful lives. The Company tests the intangible assets for impairment
whenever circumstances warrant, but at least annually. If impairment exists, then the excess of the unamortized balance over the fair value of the intangible assets will be charged to earnings at that time.



Separate Accounts



Assets and liabilities associated with separate accounts relate to premium
and annuity considerations for variable life and annuity products for which the contract-holder, 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 or provided to the separate account policyholders, are excluded from the amounts reported in the accompanying statements of operations.



Prior to April 2, 2001, FFG had issued variable insurance products
registered as securities under the Securities Act of 1933. These products featured fixed premiums, a minimum death benefit, and policyholder returns linked to an underlying portfolio of securities. The variable insurance products issued by FFG have
been 100% reinsured with The Hartford Financial Services Group Inc. (The Hartford).



Reserves



Reserves are established according to GAAP, using generally accepted actuarial methods and are based on a number of factors. These factors include experience derived from historical claim payments and actuarial assumptions to arrive at loss
development factors. Such assumptions and other factors include trends, the incidence of incurred claims, the extent to which all claims have been reported, and internal claims processing charges. The process used in computing reserves cannot be
exact, particularly for liability coverages, since actual claim costs are dependent upon such complex factors as inflation, changes in doctrines of legal liabilities and damage awards. The methods of making such estimates and establishing the
related liabilities are periodically reviewed and updated.



Reserves do not represent an exact calculation of exposure, but instead represent our best estimates, generally involving actuarial projections at a given time, of what we expect the ultimate settlement and administration of a claim or
group of claims will cost based on our assessment of facts and circumstances then known. The adequacy of reserves will be impacted by future trends in claims severity, frequency, judicial theories of liability and other factors. These variables are
affected by both external and internal events, such as: changes in the economic cycle, changes in the social perception of the value of work, emerging medical perceptions regarding physiological or psychological causes of disability, emerging health
issues and new methods of treatment or accommodation, inflation, judicial trends, legislative changes and claims handling procedures.



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Many of these items are not directly quantifiable, particularly on a prospective basis. Reserve
estimates are refined as experience develops. Adjustments to reserves, both positive and negative, are reflected in the statement of operations of the period in which such estimates are updated. Because establishment of reserves is an inherently
uncertain process involving estimates of future losses, there can be no certainty that ultimate losses will not exceed existing claims reserves. Future loss development could require reserves to be increased, which could have a material adverse
effect on our earnings in the periods in which such increases are made.



Long Duration Contracts



Future policy
benefits and expense reserves on long-term care, life insurance policies and annuity contracts that are no longer offered and the traditional life insurance contracts within the Company are reported at the present value of future benefits to be paid
to policyholders and related expenses less the present value of the future net premiums. These amounts are estimated and include assumptions as to the expected investment yield, inflation, mortality, morbidity and withdrawal rates as well as
other assumptions that are based on the Companys experience. These assumptions reflect anticipated trends and include provisions for possible unfavorable deviations.



Future policy benefits and expense reserves for universal life insurance policies and investment-type annuity contracts no
longer offered, and the variable life insurance and investment-type annuity contracts in the Company consist of policy account balances before applicable surrender charges and certain deferred policy initiation fees that are being recognized in
income over the terms of the policies. Policy benefits charged to expense during the period include amounts paid in excess of policy account balances and interest credited to policy account balances.



Changes in the estimated liabilities are reported as a charge or credit to
policyholder benefits as the estimates are revised.



Short
Duration Contracts



For short duration contracts, claims
and benefits payable reserves are reported when insured events occur. The liability is based on the expected ultimate cost of settling the claims. The claims and benefits payable reserves include (1) case reserves for known but unpaid claims as
of the balance sheet date; (2) incurred but not reported (IBNR) reserves for claims where the insured event has occurred but has not been reported to the Company as of the balance sheet date; and (3) loss adjustment expense
reserves for the expected handling costs of settling the claims.



For group disability, the case reserves and the IBNR reserves are reported at an amount equal to the net present value of the expected claims future payments. Group long-term disability and group term life waiver of premiums reserves are
discounted to the valuation date at the valuation interest rate. The valuation interest rate is reviewed quarterly by taking into consideration actual and expected earned rates on our asset portfolio. Group long term disability and group term life
reserve adequacy studies are performed annually, and morbidity and mortality assumptions are adjusted where appropriate.



Unearned premium reserves are maintained for the portion of the premiums on short duration contracts that is related to the unexpired period of the
policies.



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Changes in the estimated liabilities are reported as a charge or credit to policyholder benefits as
estimates are revised.



Deferred Gains on Disposal of Businesses



The Company reports deferred gains on disposal of
businesses for disposals utilizing reinsurance. On March 1, 2000, the Parent sold its LTC business using a coinsurance contract. On April 1, 2001, the Parent sold its FFG business using a modified coinsurance contract. Since the form of
sale did not discharge the Companys primary liability to the insureds, the gains on these disposals were deferred and reported as a liability and decreased as recognized and reported as revenue over the estimated life of the contracts
terms. The Company reviews and evaluates the estimates affecting the deferred gains on disposal of businesses annually or when significant information affecting the estimates becomes known to the Company.



Premiums



Long Duration Contracts



Premiums for LTC insurance and traditional life insurance contracts within FFG are recognized and reported as revenue when due from the policyholder. For
universal life insurance and investment-type annuity contracts within FFG, revenues consist of charges assessed against policy balances. For the FFG and LTC businesses previously sold, all revenue is ceded.



Short Duration Contracts



The Companys short duration contracts are those on which the Company
recognizes and reports revenue on a pro-rata basis over the contract term. The Companys short duration contracts primarily include group term life, group disability, dental, and credit life and disability.



Fee Income



The Company primarily derives income from fees received from providing administrative services. Fee income is recognized and
reported when services are performed.



Underwriting, General and
Administrative Expenses



Underwriting, general and
administrative expenses consist primarily of commissions, premium taxes, licenses, fees, amortization of DAC, salaries and personnel benefits and other general operating expenses. These expenses are reported as incurred.



Leases



The Company reports expenses for operating leases on a straight-line basis over the lease term.



Contingencies



The Company follows SFAS No. 5, Accounting for Contingencies (FAS 5), which requires the
Company to evaluate each contingent matter separately. A loss is reported if reasonably estimable and probable. The



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Company establishes reserves for these contingencies at the best estimate, or if no one estimated number within the range of possible losses is more probable
than any other, the Company reports an estimated reserve at the low end of the estimated range. Contingencies affecting the Company include litigation matters which are inherently difficult to evaluate and are subject to significant changes.



Recent Accounting Pronouncements Adopted



On January 1, 2006, the Parent adopted Statement of Financial Accounting
Standards (FAS) No. 123 (revised 2004), Share-Based Payment(FAS 123R) which replaces Statement of Financial Accounting Standards No. 123, Share-Based Payment andsupersedes Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to Employees. FAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on theirfair values. The
pro forma disclosures previously permitted under FAS 123 are no longer an alternative to financial statement recognition. Under FAS 123R, companiesmust determine the appropriate fair value model to be used for valuing share-based payments,
the amortization method for compensation cost, and the transition method to be used at date of adoption. The Parent adopted FAS 123R using the modified prospective method which requires that compensation expense be recorded for all unvested stock
options at the beginning of the first quarter of adoption of FAS 123R. The adoption of FAS 123R did not have a material impact on the Companys financial statements.



On January 1, 2006, the Company adopted FAS No. 154, Accounting Changes and Error Corrections(FAS
154), a replacement of APB Opinion No. 20, Accounting Changes, and Statement No. 3,Reporting Accounting Changes in Interim Financial Statements. FAS 154 changes the accounting and reporting of a change in accounting principle.
Prior to FAS 154, the majority of voluntary changes in accounting principles were required to be recognized as a cumulative effect adjustment within net income during the period of the change. FAS 154 requires retrospective application to prior
period financial statements unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. The adoption of FAS 154 did not have a material effect on the Companys financial position or results
of operations.



On September 29, 2006 the FASB issued FAS 158,
Employers Accounting for Defined Benefit Pension and OtherPostretirement Plans (FAS 158). This standard requires companies to recognize a net liability or asset to report the funded status oftheir
defined benefit pension and other postretirement plans on their balance sheet with an offsetting adjustment to accumulated othercomprehensive income. FAS 158 requires companies to make additional disclosures, but does not change how pensions
andpostretirement benefits are accounted for and reported in the income statement. The Parent sponsors a defined benefit pension planand certain other postretirement benefits covering employees and certain agents who meet
eligibility requirements as to age and length of service. TheCompany has no legal obligation for benefits under these plans. The adoption of FAS 158 did not have a material impact on the Companys financial statements.



In September 2006, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin No. 108, Considering theEffects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108). SAB 108 provides guidance for how errors should be
evaluated to assess materiality from a quantitative perspective. SAB 108 permits companies to initially apply its provisions by either restating prior financial statements or recording the cumulative effect of initially applying the approach as
adjustments to the carrying values of assets and liabilities as of January 1, 2006 with an offsetting adjustment to retained earnings. The Company adopted SAB 108 as of December 31, 2006. The adoption of SAB 108 did not have a material impact on the
Companys financial statements.



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Recent Accounting Pronouncements Outstanding



In September 2005, the AICPA issued Statement of Position 05-1,
Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts, (SOP 05-1). SOP 05-1 provides guidance on internal replacements of insurance and
investment contracts. An internal replacement is a modification in product benefits, features, rights or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election
of a feature or coverage within a contract. Modifications that result in a new contract that is substantially different from the replaced contract are accounted for as an extinguishment of the replaced contract, and the associated unamortized DAC,
unearned revenue liabilities and deferred sales inducements from the replaced contract must be reported as an expense immediately. Modifications resulting in a new contract that is substantially the same as the replaced contract are accounted for as
a continuation of the replaced contract. SOP 05-1 is effective for internal replacements occurring in fiscal years beginning after December 15, 2006. The adoption of SOP 05-1 will not have a material impact on the Companys financial
statements.



In June 2006, the Financial Accounting Standards
Board (FASB) issued Interpretation No. 48, Accounting for Uncertainty in Income Taxesan interpretation of FASB Statement No. 109 (FIN 48). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprises financial statements. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken
in a tax return. This Interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Interpretation is effective for fiscal years beginning after
December 15, 2006 and, therefore, the Company is required to adopt FIN 48 by the first quarter of 2007. The adoption of FIN 48 will not have a material impact on the Companys financial statements.



On September 15, 2006, the FASB issued FAS 157, Fair Value Measurements(FAS 157). FAS 157 defines fair value, addresses how companies should measure fair value when they are required to use a fair value measure for recognition or disclosure purposes under GAAP, and expands disclosures about fair value
measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Therefore, the Company is required to adopt FAS 157 by the first quarter of 2008.
The Company is currently evaluating the requirements of FAS 157 and the potential impact on the Companys financial statements.



In February, 2007, the FASB issued FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities (FAS 159). FAS 159
permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. FAS 159 is effective for fiscal
years beginning after November 15, 2007. Therefore, the Company is required to adopt FAS 159 by the first quarter of 2008. The Company is currently evaluating the requirements of FAS 159 and the potential impact on the Companys financial
statements.



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



3. Investments



The amortized cost and fair value of fixed maturities and equity securities as of December 31, 2006 were as follows:



|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                                                                 |  | Cost orAmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturities                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Bonds:                                                           |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|United States Government and government agencies and authorities |  | $                    | 2,857   |                      | $ | 398                   |  | $ |           |   |  | $ | 3,255  
|States, municipalities and political subdivisions                |  |                      | 2,280   |                      |   | 167                   |  |   |           |   |  |   | 2,447  
|Foreign governments                                              |  |                      | 3,335   |                      |   | 199                   |  |   | (38        | ) |  |   | 3,496  
|Public utilities                                                 |  |                      | 15,048  |                      |   | 642                   |  |   | (78        | ) |  |   | 15,612 
|All other corporate bonds                                        |  |                      | 61,405  |                      |   | 2,743                 |  |   | (303       | ) |  |   | 63,845 
|Mortgage backed securities                                       |  |                      | 22,902  |                      |   | 129                   |  |   | (164       | ) |  |   | 22,867 
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total fixed maturities                                           |  | $                    | 107,827 |                      | $ | 4,278                 |  | $ | (583       | ) |  | $ | 111,522
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Equity securities                                                |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-redeemable preferred stocks:                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-sinking fund preferred stocks                                |  |                      | 9,455   |                      |   | 109                   |  |   | (183       | ) |  |   | 9,381  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total equity securities                                          |  | $                    | 9,455   |                      | $ | 109                   |  | $ | (183       | ) |  | $ | 9,381  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        



The amortized cost and
fair value of fixed maturities as of December 31, 2005 were as follows:



|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|---------------------------------------------------------------- |  | -------------------- | ------- | -------------------- | - | --------------------- |  | - | ---------- | - |  | - | -------
|                                                                 |  | Cost orAmortizedCost |         | GrossUnrealizedGains |   | GrossUnrealizedLosses |  |   | Fair Value
|Fixed maturities                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Bonds:                                                           |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|United States Government and government agencies and authorities |  | $                    | 4,160   |                      | $ | 571                   |  | $ | (13        | ) |  | $ | 4,718  
|States, municipalities and political subdivisions                |  |                      | 2,779   |                      |   | 214                   |  |   |           |   |  |   | 2,993  
|Foreign governments                                              |  |                      | 3,346   |                      |   | 255                   |  |   | (18        | ) |  |   | 3,583  
|Public utilities                                                 |  |                      | 15,493  |                      |   | 987                   |  |   | (20        | ) |  |   | 16,460 
|All other corporate bonds                                        |  |                      | 66,089  |                      |   | 3,955                 |  |   | (264       | ) |  |   | 69,780 
|Mortgage backed securities                                       |  |                      | 22,113  |                      |   | 158                   |  |   | (201       | ) |  |   | 22,070 
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total fixed maturities                                           |  | $                    | 113,980 |                      | $ | 6,140                 |  | $ | (516       | ) |  | $ | 119,604
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Equity securities                                                |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-redeemable preferred stocks:                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Non-sinking fund preferred stocks                                |  |                      | 9,046   |                      |   | 60                    |  |   | (316       | ) |  |   | 8,790  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        
|Total equity securities                                          |  | $                    | 9,046   |                      | $ | 60                    |  | $ | (316       | ) |  | $ | 8,790  
|                                                                 |  |                      |         |                      |   |                       |  |   |            |   |  |   |        



F-15



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



The amortized cost and fair value of fixed maturities at December 31, 2006 by contractual
maturity are shown below. Expected maturities may differ from contractual maturities because issuers of the securities may have the right to call or prepay obligations with or without call or prepayment penalties.



|                                       |  |               |         |            |   |        
|-------------------------------------- |  | ------------- | ------- | ---------- | - | -------
|                                       |  | AmortizedCost |         | Fair Value
|Due in one year or less                |  | $             | 1,708   |            | $ | 1,719  
|Due after one year through five years  |  |               | 19,809  |            |   | 20,336 
|Due after five years through ten years |  |               | 29,421  |            |   | 29,764 
|Due after ten years                    |  |               | 33,987  |            |   | 36,836 
|                                       |  |               |         |            |   |        
|Total                                  |  |               | 84,925  |            |   | 88,655 
|Mortgage and asset backed securities   |  |               | 22,902  |            |   | 22,867 
|                                       |  |               |         |            |   |        
|Total                                  |  | $             | 107,827 |            | $ | 111,522
|                                       |  |               |         |            |   |        



Proceeds from sales of
available for sale securities were $16,806, $19,674, and $61,535 during 2006, 2005 and 2004, respectively. Gross gains of $91, $498 and $1,474 and gross losses of $419, $332 and $427 were realized on dispositions in 2006, 2005 and 2004,
respectively.



Major categories of net investment income were
as follows:



|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|---------------------------------------- |  | ------------------------ | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                         |  | Years Ended December 31, |      
|                                         |  | 2006                     |       |   | 2005 |   |       | 2004 | 
|Fixed maturities                         |  | $                        | 6,951 |   |      | $ | 7,135 |      |  | $ | 8,517 |  
|Equity securities                        |  |                          | 596   |   |      |   | 581   |      |  |   | 719   |  
|Commercial mortgage loans on real estate |  |                          | 1,075 |   |      |   | 645   |      |  |   | 337   |  
|Policy loans                             |  |                          | 9     |   |      |   | 7     |      |  |   | 4     |  
|Short-term investments                   |  |                          | 206   |   |      |   | 158   |      |  |   | 98    |  
|Other investments                        |  |                          | 242   |   |      |   | 275   |      |  |   | 185   |  
|Cash and cash equivalents                |  |                          | 355   |   |      |   | 180   |      |  |   |      |  
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|Investment income                        |  |                          | 9,434 |   |      |   | 8,981 |      |  |   | 9,860 |  
|Investment expenses                      |  |                          | (259  | ) |      |   | (225  | )    |  |   | (122  | )
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  
|Net investment income                    |  | $                        | 9,175 |   |      | $ | 8,756 |      |  | $ | 9,738 |  
|                                         |  |                          |       |   |      |   |       |      |  |   |       |  



The net realized
(losses) gains recorded in income for 2006, 2005 and 2004 are summarized as follows:



|                            |  |                          |      |   |      |   |     |      |  |   |       |  
|--------------------------- |  | ------------------------ | ---- | - | ---- | - | --- | ---- |  | - | ----- | -
|                            |  | Years Ended December 31, |     
|                            |  | 2006                     |      |   | 2005 |   |     | 2004 | 
|Fixed maturities            |  | $                        | (219 | ) |      | $ | 172 |      |  | $ | 1,060 |  
|Equity securities           |  |                          | (121 | ) |      |   | (26 | )    |  |   | (13   | )
|                            |  |                          |      |   |      |   |     |      |  |   |       |  
|Total marketable securities |  |                          | (340 | ) |      |   | 146 |      |  |   | 1,047 |  
|Other                       |  |                          | 167  |   |      |   |    |      |  |   | (228  | )
|                            |  |                          |      |   |      |   |     |      |  |   |       |  
|Total                       |  | $                        | (173 | ) |      | $ | 146 |      |  | $ | 819   |  
|                            |  |                          |      |   |      |   |     |      |  |   |       |  



The Company recorded
$12, $20 and $0 of pre-tax realized losses in 2006, 2005 and 2004, respectively, associated with other-than-temporary declines in value of available for sale securities.



F-16



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



The investment category and duration of the Companys gross unrealized losses on fixed
maturities and equity securities at December 31, 2006 were as follows:



|                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|--------------------------------- |  | ------------------- | ------ | ---------------- | ----------------- | ---- | ---------- | ----- | ---------------- | ----- |  | ---------- | ---- | ---------------- |  | - | ------ |  | - | ---- | -
|                                  |  | Less than 12 months |        |                  | 12 Months or More |      |            | Total |                 
|                                  |  | Fair Value          |        | UnrealizedLosses |                   |      | Fair Value |       | UnrealizedLosses |       |  | Fair Value |      | UnrealizedLosses | 
|Fixed maturities                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Bonds:                            |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Foreign governments               |  | $                   | 966    |                  | $                 | (34  | )          |       | $                | 526   |  | $          | (4   | )                |  | $ | 1,492  |  | $ | (38  | )
|Public utilities                  |  |                     | 2,940  |                  |                   | (66  | )          |       |                  | 191   |  |            | (12  | )                |  |   | 3,131  |  |   | (78  | )
|All other corporate bonds         |  |                     | 16,768 |                  |                   | (277 | )          |       |                  | 774   |  |            | (26  | )                |  |   | 17,542 |  |   | (303 | )
|Mortgage backed securities        |  |                     | 10,782 |                  |                   | (152 | )          |       |                  | 495   |  |            | (12  | )                |  |   | 11,277 |  |   | (164 | )
|                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Total fixed maturities            |  | $                   | 31,456 |                  | $                 | (529 | )          |       | $                | 1,986 |  | $          | (54  | )                |  | $ | 33,442 |  | $ | (583 | )
|                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Equity securities                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Non-redeemable preferred stocks:  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Non-sinking fund preferred stocks |  |                     | 2,893  |                  |                   | (63  | )          |       |                  | 2,310 |  |            | (120 | )                |  |   | 5,203  |  |   | (183 | )
|                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Total equity securities           |  | $                   | 2,893  |                  | $                 | (63  | )          |       | $                | 2,310 |  | $          | (120 | )                |  | $ | 5,203  |  | $ | (183 | )
|                                  |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  



The investment
category and duration of the Companys gross unrealized losses on fixed maturities and equity securities at December 31, 2005 were as follows:



|                                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|---------------------------------------------------------------- |  | ------------------- | ------ | ---------------- | ----------------- | ---- | ---------- | ----- | ---------------- | ----- |  | ---------- | ---- | ---------------- |  | - | ------ |  | - | ---- | -
|                                                                 |  | Less than 12 months |        |                  | 12 Months or More |      |            | Total |                 
|                                                                 |  | Fair Value          |        | UnrealizedLosses |                   |      | Fair Value |       | UnrealizedLosses |       |  | Fair Value |      | UnrealizedLosses | 
|Fixed maturities                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Bonds:                                                           |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|United States Government and government agencies and authorities |  | $                   | 913    |                  | $                 | (13  | )          |       | $                |      |  | $          |     |                  |  | $ | 913    |  | $ | (13  | )
|Foreign governments                                              |  |                     | 1,516  |                  |                   | (18  | )          |       |                  |      |  |            |     |                  |  |   | 1,516  |  |   | (18  | )
|Public utilities                                                 |  |                     | 1,030  |                  |                   | (17  | )          |       |                  | 48    |  |            | (3   | )                |  |   | 1,078  |  |   | (20  | )
|All other corporate bonds                                        |  |                     | 10,151 |                  |                   | (221 | )          |       |                  | 706   |  |            | (43  | )                |  |   | 10,857 |  |   | (264 | )
|Mortgage backed securities                                       |  |                     | 10,525 |                  |                   | (188 | )          |       |                  | 497   |  |            | (13  | )                |  |   | 11,022 |  |   | (201 | )
|                                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Total fixed maturities                                           |  | $                   | 24,135 |                  | $                 | (457 | )          |       | $                | 1,251 |  | $          | (59  | )                |  | $ | 25,386 |  | $ | (516 | )
|                                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Equity securities                                                |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Non-redeemable preferred stocks:                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Non-sinking fund preferred stocks                                |  |                     | 5,168  |                  |                   | (176 | )          |       |                  | 1,878 |  |            | (140 | )                |  |   | 7,046  |  |   | (316 | )
|                                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  
|Total equity securities                                          |  | $                   | 5,168  |                  | $                 | (176 | )          |       | $                | 1,878 |  | $          | (140 | )                |  | $ | 7,046  |  | $ | (316 | )
|                                                                 |  |                     |        |                  |                   |      |            |       |                  |       |  |            |      |                  |  |   |        |  |   |      |  



The total unrealized
losses represent less than 2% and 3% of the aggregate fair value of the related securities at December 31, 2006 and 2005, respectively. Approximately 77% and 76% of these unrealized losses have been in a continuous loss position for less than
twelve months in 2006 and 2005, respectively. The total unrealized losses are comprised of 166 and 183 individual securities with 100% of the individual securities having an unrealized loss of less than $200 in 2006 and 2005, respectively. The total
unrealized losses on securities that



F-17



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



were in a continuous unrealized loss position for greater than six months but less than 12 months were approximately $22 and $158 in 2006 and 2005,
respectively. There were no securities with an unrealized loss of greater than $200 at December 31, 2006 and 2005.



As part of the Companys ongoing monitoring process, the Company regularly reviews its investment portfolio to ensure that investments that may be
other-than-temporarily impaired are identified on a timely basis and that any impairment is charged against earnings in the proper period. The Company has reviewed these securities and recorded $12, $20 and $0 of additional other-than-temporary
impairments as of December 31, 2006, 2005 and 2004, respectively. Due to issuers continued satisfaction of the securities obligations in accordance with their contractual terms and their continued expectations to do so, as well as
the Companys evaluation of the fundamentals of the issuers financial condition, the Company believes that the prices of the securities in an unrealized loss position as of December 31, 2006 in the sectors discussed above were
temporarily depressed primarily as a result of the prevailing level of interest rates at the time the securities were purchased. The company has the intent and ability to hold these assets until the date of recovery.



The Company has made commercial mortgage loans, collateralized by the
underlying real estate, on properties located throughout the United States. At December 31, 2006, approximately 60% of the outstanding principal balance of commercial mortgage loans was concentrated in the states of New York, Washington, and
Texas. Although the company has a diversified loan portfolio, an economic downtown could have an adverse impact on the ability of its debtors to repay their loans. The outstanding balance of commercial mortgage loans range in size from $621 to
$1,762 at December 31, 2006 and from $641 to $1,820 at December 31, 2005. The mortgage loan valuation allowance for losses was $33 and $200 at December 31, 2006 and 2005, respectively.



At December 31, 2006 loan commitments outstanding totaled approximately
$450.



The Company has short term investments and fixed
maturities carried at $440 and $438 at December 31, 2006 and 2005, respectively, on deposit with various governmental authorities as required by law.



4. Income Taxes



The Company is subject to U.S. taxes. Starting in 2003, it is part of the U.S. consolidated federal income tax return with the Parent. Information about
the Companys current and deferred tax expense is as follows:



|                         |  |                          |       |      |   |       |  |   |      
|------------------------ |  | ------------------------ | ----- | ---- | - | ----- |  | - | -----
|                         |  | Years Ended December 31,
|                         |  | 2006                     |       | 2005 |   | 2004 
|Current expense:         |  |                          |       |      |   |       |  |   |      
|Federal                  |  | $                        | 5,955 |      | $ | 5,209 |  | $ | 2,406
|                         |  |                          |       |      |   |       |  |   |      
|Total current expense    |  |                          | 5,955 |      |   | 5,209 |  |   | 2,406
|Deferred expense         |  |                          |       |      |   |       |  |   |      
|Federal                  |  |                          | 1,126 |      |   | 748   |  |   | 2,226
|                         |  |                          |       |      |   |       |  |   |      
|Total deferred expense   |  |                          | 1,126 |      |   | 748   |  |   | 2,226
|                         |  |                          |       |      |   |       |  |   |      
|Total income tax expense |  | $                        | 7,081 |      | $ | 5,957 |  | $ | 4,632
|                         |  |                          |       |      |   |       |  |   |      



F-18



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



A reconciliation of the federal income tax rate to the Companys effective income tax rate is as
follows:



|                                       |  |              |   |  |      |   |  |      |  
|-------------------------------------- |  | ------------ | - |  | ---- | - |  | ---- | -
|                                       |  | December 31, |  
|                                       |  | 2006         |   |  | 2005 |   |  | 2004 |  
|Federal income tax rate                |  | 35.0         | % |  | 35.0 | % |  | 35.0 | %
|Reconciling items:                     |  |              |   |  |      |   |  |      |  
|Tax exempt interest                    |  | (0.1         | ) |  | (0.2 | ) |  | (0.3 | )
|Dividends received deduction           |  | (0.3         | ) |  | (0.2 | ) |  | (0.4 | )
|Permanent nondeductible expenses       |  | 0.1          |   |  | 0.3  |   |  |     |  
|Change in reserve for prior year taxes |  |             |   |  | (0.4 | ) |  | (6.0 | )
|Other                                  |  | (0.2         | ) |  | (0.2 | ) |  | (0.4 | )
|                                       |  |              |   |  |      |   |  |      |  
|Effective income tax rate:             |  | 34.5         | % |  | 34.3 | % |  | 27.9 | %
|                                       |  |              |   |  |      |   |  |      |  



The tax effects of
temporary differences that result in significant deferred tax assets and deferred tax liabilities are as follows:



|                                                  |  |              |       |      |   |      
|------------------------------------------------- |  | ------------ | ----- | ---- | - | -----
|                                                  |  | December 31,
|                                                  |  | 2006         |       | 2005
|Deferred tax assets:                              |  |              |       |      |   |      
|Accrued liabilities                               |  | $            | 327   |      | $ | 136  
|Deferred acquisition costs                        |  |              | 1,055 |      |   | 1,073
|Deferred gains on reinsurance                     |  |              | 1,839 |      |   | 1,909
|Investment adjustment                             |  |              | 1     |      |   | 115  
|Other assets                                      |  |              |      |      |   | 723  
|                                                  |  |              |       |      |   |      
|Gross deferred tax assets                         |  |              | 3,222 |      |   | 3,956
|                                                  |  |              |       |      |   |      
|Deferred tax liabilities:                         |  |              |       |      |   |      
|Policyholder and separate account reserves        |  |              | 470   |      |   | 78   
|Unrealized gains on fixed maturities and equities |  |              | 1,267 |      |   | 1,879
|                                                  |  |              |       |      |   |      
|Gross deferred tax liabilities                    |  |              | 1,737 |      |   | 1,957
|                                                  |  |              |       |      |   |      
|Net deferred income tax asset                     |  | $            | 1,485 |      | $ | 1,999
|                                                  |  |              |       |      |   |      



As of
December 31, 2006, the Company had no capital loss carryforwards for U.S. federal income tax purposes.



5. Stockholders Equity



The Board of Directors of the Company has authorized 100,000 shares of common stock with a stated value of $20 per share. All the shares are issued and outstanding as of December 31, 2006 and 2005. All the outstanding shares at
December 31, 2006 are owned by the Parent (see Note 1). The Company paid dividends of $10,000, $4,100, and $40,000 at December 31, 2006, 2005 and 2004, respectively.



The maximum amount of dividends which can be paid by the State of New York insurance companies to shareholders without prior
approval of the Insurance Commissioner is subject to restrictions relating to statutory surplus (see Note 6).



F-19



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



6. Statutory Information



Statutory-basis financial statements are prepared in accordance with accounting practices prescribed or permitted by the New
York Department of Commerce. Prescribed statutory accounting principles (SAP) includes the Accounting Practices and Procedures Manual of the National Association of Insurance Commissioners (NAIC) as well as state laws,
regulations and administrative rules.



The principal
differences between SAP and GAAP are: 1) policy acquisition costs are expensed as incurred under SAP, but are deferred and amortized under GAAP; 2) the value of business acquired is not capitalized under SAP but is under GAAP; 3) amounts collected
from holders of universal life-type and annuity products are recognized as premiums when collected under SAP, but are initially recorded as contract deposits under GAAP, with cost of insurance recognized as revenue when assessed and other contract
charges recognized over the periods for which services are provided; 4) the classification and carrying amounts of investments in certain securities are different under SAP than under GAAP; 5) the criteria for providing asset valuation allowances,
and the methodologies used to determine the amounts thereof, are different under SAP than under GAAP; 6) the timing of establishing certain reserves, and the methodologies used to determine the amounts thereof, are different under SAP than under
GAAP; 7) certain assets are not admitted for purposes of determining surplus under SAP; 8) methodologies used to determine the amounts of deferred taxes and goodwill are different under SAP than under GAAP; and 9) the criteria for obtaining
reinsurance accounting treatment is different under SAP than under GAAP.



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



|                                                  |  |            |        |   |                      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|------------------------------------------------- |  | ---------- | ------ | - | -------------------- | - | ------ | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                  |  | Net Income |        |   | Shareholders Equity |  
|                                                  |  | 2006       |        |   | 2005                 |   |        | 2004 |  |   | 2006   |   |  | 2005 |       
|Based on statutory accounting practices           |  | $          | 14,471 |   |                      | $ | 10,538 |      |  | $ | 11,088 |   |  | $    | 52,054 |   |  | $ | 49,026 |  
|Deferred policy acquisition costs                 |  |            | (249   | ) |                      |   | 314    |      |  |   | 181    |   |  |      | 1,188  |   |  |   | 1,437  |  
|Deferred and uncollected premiums                 |  |            | (8     | ) |                      |   | (87    | )    |  |   | 1,612  |   |  |      | 47     |   |  |   | 55     |  
|Policy reserves                                   |  |            | 490    |   |                      |   | 602    |      |  |   | (15    | ) |  |      | 3,104  |   |  |   | 2,614  |  
|Investment valuation difference                   |  |            | 10     |   |                      |   | 14     |      |  |   | 17     |   |  |      | 3,464  |   |  |   | 5,035  |  
|Commissions                                       |  |            | (38    | ) |                      |   | 534    |      |  |   | 99     |   |  |      | 2      |   |  |   | (11    | )
|Deferred taxes                                    |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 948    |   |  |   | 681    |  
|Deferred gain on disposal of businesses           |  |            | 41     |   |                      |   | 211    |      |  |   | 320    |   |  |      | (5,254 | ) |  |   | (5,454 | )
|Unearned ceding fee                               |  |            | 82     |   |                      |   |       |      |  |   | 612    |   |  |      | (367   | ) |  |   | (448   | )
|Amounts payable reinsurance ceded                 |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 4      |   |  |   | (9     | )
|Realized (losses) gains on investments            |  |            | (43    | ) |                      |   | 104    |      |  |   | 480    |   |  |      |       |   |  |   |       |  
|Amortization of goodwill                          |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 2,038  |   |  |   | 2,038  |  
|Income taxes                                      |  |            | (1,093 | ) |                      |   | (747   | )    |  |   | (2,226 | ) |  |      | 32     |   |  |   |       |  
|Pension                                           |  |            | (150   | ) |                      |   | (149   | )    |  |   | (154   | ) |  |      | (600   | ) |  |   | (450   | )
|Amortization of interest maintenance reserve      |  |            | (29    | ) |                      |   | (77    | )    |  |   | (37    | ) |  |      |       |   |  |   |       |  
|Reinsurance in unauthorized companies             |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 424    |   |  |   | 2      |  
|Interest maintenance reserve                      |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 357    |   |  |   | 596    |  
|Asset valuation reserve                           |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 1,143  |   |  |   | 1,012  |  
|Agents balances                                   |  |            |       |   |                      |   |       |      |  |   |       |   |  |      | 40     |   |  |   | (3     | )
|Other                                             |  |            | (43    | ) |                      |   | 147    |      |  |   |       |   |  |      | 125    |   |  |   | 322    |  
|                                                  |  |            |        |   |                      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  
|Based on generally accepted accounting principles |  | $          | 13,441 |   |                      | $ | 11,404 |      |  | $ | 11,977 |   |  | $    | 58,749 |   |  | $ | 56,443 |  
|                                                  |  |            |        |   |                      |   |        |      |  |   |        |   |  |      |        |   |  |   |        |  



F-20



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Insurance enterprises are required by State Insurance Departments to adhere to minimum risk-based
capital (RBC) requirements developed by the NAIC. The Company exceeds the minimum RBC requirements.



Dividend distributions to the Parent are restricted as to the amount by state regulatory requirements. A dividend is extraordinary when combined with all
other dividends and distributions made with in the preceding 12 months exceeds the greater of 10% of the insurers surplus as regards to policyholders on December 31 of the next preceding year, or the net gain from operations. In 2006, the Company
declared and paid dividends of $10,000, of which $4,703 was ordinary and $5,297 was extraordinary. In 2005, the Company declared and paid dividends of $4,100, all of which were ordinary. In 2004, the Company declared and paid dividends of $40,000,
of which $7,160 was ordinary and $32,840 was extraordinary. The Company has the ability, under state regulatory requirements, to dividend up to $5,005 to its parent in 2007 without permission from New York regulators.



7. Reinsurance



In the ordinary course of business, the Company is involved in both the assumption and cession of reinsurance with
non-affiliated companies. The following table provides details of the reinsurance recoverables balance for the years ended December 31:



|                                               |  |      |         |      |   |       
|---------------------------------------------- |  | ---- | ------- | ---- | - | ------
|                                               |  | 2006 |         | 2005
|Ceded future policyholder benefits and expense |  | $    | 40,686  |      | $ | 35,688
|Ceded unearned premium                         |  |      | 9,625   |      |   | 12,167
|Ceded claims and benefits payable              |  |      | 48,312  |      |   | 44,225
|Ceded paid losses                              |  |      | 2,660   |      |   | 2,580 
|                                               |  |      |         |      |   |       
|Total                                          |  | $    | 101,283 |      | $ | 94,660
|                                               |  |      |         |      |   |       



The changes in direct
premiums and premiums ceded were as follows:



|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------ | ------- | - | ------------- | - | ------- | ----- |  | - | ------------ | - |  | ------------- | ------- | - | ----- | - | ------- | ------------ |  | - | ------------- | - |  | ----- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                             |  | Years Ended December 31, |        
|                                             |  | 2006                     |         |   | 2005          |   |         | 2004  | 
|                                             |  | LongDuration             |         |   | ShortDuration |   |         | Total |  |   | LongDuration |   |  | ShortDuration |         |   | Total |   |         | LongDuration |  |   | ShortDuration |   |  | Total |        
|Gross earned                                 |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Premiums and other considerations            |  | $                        | 10,820  |   |               | $ | 60,482  |       |  | $ | 71,302       |   |  | $             | 11,247  |   |       | $ | 70,879  |              |  | $ | 82,126        |   |  | $     | 10,930  |   |  | $ | 79,285  |   |  | $ | 90,215  |  
|Premiums assumed                             |  |                          |        |   |               |   | 19,384  |       |  |   | 19,384       |   |  |               |        |   |       |   | 11,402  |              |  |   | 11,402        |   |  |       |        |   |  |   | 13,174  |   |  |   | 13,174  |  
|Premiums ceded                               |  |                          | (10,820 | ) |               |   | (18,528 | )     |  |   | (29,348      | ) |  |               | (11,247 | ) |       |   | (22,683 | )            |  |   | (33,930       | ) |  |       | (10,930 | ) |  |   | (26,866 | ) |  |   | (37,796 | )
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Net earned premiums and other considerations |  | $                        |        |   |               | $ | 61,338  |       |  | $ | 61,338       |   |  | $             |        |   |       | $ | 59,598  |              |  | $ | 59,598        |   |  | $     |        |   |  | $ | 65,593  |   |  | $ | 65,593  |  
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Gross policyholder benefits                  |  | $                        | 18,125  |   |               | $ | 34,334  |       |  | $ | 52,459       |   |  | $             | 17,931  |   |       | $ | 44,880  |              |  | $ | 62,811        |   |  | $     | 19,628  |   |  | $ | 46,939  |   |  | $ | 66,567  |  
|Benefits assumed                             |  |                          |        |   |               |   | 17,335  |       |  |   | 17,335       |   |  |               |        |   |       |   | 8,384   |              |  |   | 8,384         |   |  |       |        |   |  |   | 15,304  |   |  |   | 15,304  |  
|Benefits ceded                               |  |                          | (18,116 | ) |               |   | (19,394 | )     |  |   | (37,510      | ) |  |               | (17,925 | ) |       |   | (18,699 | )            |  |   | (36,624       | ) |  |       | (19,619 | ) |  |   | (19,520 | ) |  |   | (39,139 | )
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  
|Net policyholder benefits                    |  | $                        | 9       |   |               | $ | 32,275  |       |  | $ | 32,284       |   |  | $             | 6       |   |       | $ | 34,565  |              |  | $ | 34,571        |   |  | $     | 9       |   |  | $ | 42,723  |   |  | $ | 42,732  |  
|                                             |  |                          |         |   |               |   |         |       |  |   |              |   |  |               |         |   |       |   |         |              |  |   |               |   |  |       |         |   |  |   |         |   |  |   |         |  



The Company utilizes
ceded reinsurance for loss protection and capital management and business divestitures.



F-21



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Loss Protection and Capital Management



As part of the Companys overall risk and capacity management strategy, the Company purchases reinsurance for certain
risks underwritten by the Company, including significant individual or catastrophic claims, and to free up capital to enable the Company to write additional business.



Under indemnity reinsurance transactions in which the Company is the ceding insurer, the Company remains liable for policy
claims if the assuming company fails to meet its obligations. To limit this risk, the Company has control procedures in place to evaluate the financial condition of reinsurers and to monitor the concentration of credit risk to minimize this
exposure. The selection of reinsurance companies is based on criteria related to solvency and reliability and, to a lesser degree, diversification as well as on developing strong relationships with the Companys reinsurers for the sharing of
risks.



Business Divestitures



The Parent has used reinsurance to exit certain businesses. Assets backing
ceded liabilities related to this business are held in trust for the benefit of the Company and are reflected in the Companys balance sheet.



In 2001, the Parent entered into a reinsurance agreement with the Hartford for the sale of its annuity business. The Companys reinsurance
recoverable from the Hartford was $4,185 and $5,840 as of December 31, 2006 and 2005, respectively. The Company would be responsible to administer this business in the event of a default by reinsurers. In addition, under the reinsurance
agreement, the Hartford is obligated to contribute funds to increase the value of the separate account assets relating to modified guaranteed annuity business sold if such value declines below the value of the associated liabilities. If the Hartford
fails to fulfill these obligations, the Company will be obligated to make these payments.



In 2000, the Parent divested its LTC operations to John Hancock. The Companys reinsurance recoverable from John Hancock was $46,115 and $36,278 as of December 31, 2006 and 2005, respectively.



8. Reserves



The following table provides reserve information by major lines of business as of December 31, 2006 and 2005:



|                                  |  |                                  |        |                   |   |             |  |                                 |         |                                  |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|--------------------------------- |  | -------------------------------- | ------ | ----------------- | - | ----------- |  | ------------------------------- | ------- | -------------------------------- | - | ---------------- |  | ----------- | ------ | ------------------------------- | - | ------ |  | - | ------- |  | - | ------
|                                  |  | December 31, 2006                |        | December 31, 2005
|                                  |  | FuturePolicyBenefits andExpenses |        | UnearnedPremiums  |   | CaseReserve |  | IncurredBut NotReportedReserves |         | FuturePolicyBenefits andExpenses |   | UnearnedPremiums |  | CaseReserve |        | IncurredBut NotReportedReserves
|Long Duration Contracts:          |  |                                  |        |                   |   |             |  |                                 |         |                                  |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|FFG and other disposed businesses |  | $                                | 40,381 |                   | $ | 3,949       |  | $                               | 6,963   |                                  | $ | 1,477            |  | $           | 35,762 |                                 | $ | 4,125  |  | $ | 3,790   |  | $ | 248   
|Short Duration Contracts:         |  |                                  |        |                   |   |             |  |                                 |         |                                  |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|Group term life                   |  |                                  |       |                   |   | 75          |  |                                 | 14,864  |                                  |   | 1,765            |  |             |       |                                 |   | 63     |  |   | 16,651  |  |   | 1,981 
|Group disability                  |  |                                  |       |                   |   | 306         |  |                                 | 94,242  |                                  |   | 6,352            |  |             |       |                                 |   | 218    |  |   | 86,841  |  |   | 6,412 
|Medical                           |  |                                  |       |                   |   | 4           |  |                                 | 849     |                                  |   | 24               |  |             |       |                                 |   | 4      |  |   | 1,233   |  |   | 46    
|Dental                            |  |                                  |       |                   |   | 48          |  |                                 | 51      |                                  |   | 1,176            |  |             |       |                                 |   | 33     |  |   | 66      |  |   | 1,532 
|Credit Life and Disability        |  |                                  |       |                   |   | 6,597       |  |                                 | 6,255   |                                  |   | 4,862            |  |             |       |                                 |   | 9,565  |  |   | 8,314   |  |   | 8,062 
|                                  |  |                                  |        |                   |   |             |  |                                 |         |                                  |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       
|Total                             |  | $                                | 40,381 |                   | $ | 10,979      |  | $                               | 123,224 |                                  | $ | 15,656           |  | $           | 35,762 |                                 | $ | 14,008 |  | $ | 116,895 |  | $ | 18,281
|                                  |  |                                  |        |                   |   |             |  |                                 |         |                                  |   |                  |  |             |        |                                 |   |        |  |   |         |  |   |       



F-22



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



The following table provides a roll-forward of the claims and benefits payable for the Companys
group term life and group disability lines of business. These are the Companys product lines with the most significant short duration claims and benefits payable balances.



|                                                      |  |                |        |   |                 |   |         |  
|----------------------------------------------------- |  | -------------- | ------ | - | --------------- | - | ------- | -
|                                                      |  | GroupTerm Life |        |   | GroupDisability |  
|Balance as of January 1, 2004, gross of reinsurance   |  | $              | 20,936 |   |                 | $ | 85,956  |  
|Less: Reinsurance ceded and other(1)                  |  |                |       |   |                 |   | (25,120 | )
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of January 1, 2004, net of reinsurance     |  |                | 20,936 |   |                 |   | 60,836  |  
|Incurred losses related to:                           |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 7,373  |   |                 |   | 19,664  |  
|Prior years interest                                 |  |                | 730    |   |                 |   | 2,664   |  
|Prior year(s)                                         |  |                | (2,360 | ) |                 |   | (5,201  | )
|                                                      |  |                |        |   |                 |   |         |  
|Total incurred losses                                 |  |                | 5,743  |   |                 |   | 17,127  |  
|Paid losses related to:                               |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 4,213  |   |                 |   | 2,241   |  
|Prior year(s)                                         |  |                | 2,421  |   |                 |   | 9,652   |  
|                                                      |  |                |        |   |                 |   |         |  
|Total paid losses                                     |  |                | 6,634  |   |                 |   | 11,893  |  
|Balance as of December 31, 2004, net of reinsurance   |  |                | 20,045 |   |                 |   | 66,070  |  
|Plus: Reinsurance ceded and other(1)                  |  |                |       |   |                 |   | 26,571  |  
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of December 31, 2004, gross of reinsurance |  | $              | 20,045 |   |                 | $ | 92,641  |  
|Less: Reinsurance ceded and other(1)                  |  |                |       |   |                 |   | (26,571 | )
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of January 1, 2005, net of reinsurance     |  |                | 20,045 |   |                 |   | 66,070  |  
|Incurred losses related to:                           |  |                |        |   |                 |   |         |  
|Current year                                          |  | $              | 6,875  |   |                 | $ | 12,776  |  
|Prior years interest                                 |  |                | 686    |   |                 |   | 3,059   |  
|Prior year(s)                                         |  |                | (3,104 | ) |                 |   | (1,938  | )
|                                                      |  |                |        |   |                 |   |         |  
|Total incurred losses                                 |  |                | 4,457  |   |                 |   | 13,897  |  
|Paid losses related to:                               |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 4,380  |   |                 |   | 2,663   |  
|Prior year(s)                                         |  |                | 1,897  |   |                 |   | 11,628  |  
|                                                      |  |                |        |   |                 |   |         |  
|Total paid losses                                     |  |                | 6,277  |   |                 |   | 14,291  |  
|Balance as of December 31, 2005, net of reinsurance   |  |                | 18,225 |   |                 |   | 65,676  |  
|Plus: Reinsurance ceded and other(1)                  |  |                | 407    |   |                 |   | 27,577  |  
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of December 31, 2005, gross of reinsurance |  | $              | 18,632 |   |                 | $ | 93,253  |  
|Less: Reinsurance ceded and other(1)                  |  |                | (407   | ) |                 |   | (27,577 | )
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of January 1, 2006, net of reinsurance     |  |                | 18,225 |   |                 |   | 65,676  |  
|Incurred losses related to:                           |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 5,817  |   |                 |   | 21,472  |  
|Prior years interest                                 |  |                | 642    |   |                 |   | 2,853   |  
|Prior year(s)                                         |  |                | (3,166 | ) |                 |   | (6,089  | )
|                                                      |  |                |        |   |                 |   |         |  
|Total incurred losses                                 |  |                | 3,293  |   |                 |   | 18,236  |  
|Paid losses related to:                               |  |                |        |   |                 |   |         |  
|Current year                                          |  |                | 4,092  |   |                 |   | 4,707   |  
|Prior year(s)                                         |  |                | 1,198  |   |                 |   | 10,281  |  
|                                                      |  |                |        |   |                 |   |         |  
|Total paid losses                                     |  |                | 5,290  |   |                 |   | 14,988  |  
|Balance as of December 31, 2006, net of reinsurance   |  |                | 16,228 |   |                 |   | 68,924  |  
|Plus: Reinsurance ceded and other(1)                  |  |                | 401    |   |                 |   | 31,670  |  
|                                                      |  |                |        |   |                 |   |         |  
|Balance as of December 31, 2006, gross of reinsurance |  | $              | 16,629 |   |                 | $ | 100,594 |  
|                                                      |  |                |        |   |                 |   |         |  



F-23



---

##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



---

|(1) | Reinsurance ceded and other includes claims and benefits payable balance that have either been [a] reinsured to third parties, [b] established for claims related expenses whose
subsequent payment is not recorded as a paid claim, or [c] reserves established for obligations that would persist even if contracts were cancelled (such as extension of benefits), which cannot be analyzed appropriately under a roll-forward
approach.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Claims and benefits payable include
claims in process as well as provisions for incurred but not reported claims. Such amounts are developed using actuarial principles and assumptions that consider, among other things, contractual requirements, historical utilization trends and
payment patterns, benefit changes, medical inflation, seasonality, membership, product mix, legislative and regulatory environment, economic factors, disabled life mortality and claim termination rates and other relevant factors. The Company
consistently applies the principles and assumptions listed above from year to year, while also giving due consideration to the potential variability of these factors.



Since claims and benefits payable include estimates developed from various actuarial methods, the Companys actual
losses incurred may be more or less than the Companys previously developed estimates. As shown in the table above, if the amounts listed on the line labeled Incurred losses related to: Prior year are negative (redundant) this means
that the Companys actual losses incurred related to prior years for these lines were less than the estimates previously made by the Company. If the line labeled Incurred losses related to: Prior year are positive (deficient) this
means that the Companys actual losses incurred related to prior years for these lines were greater than the estimates previously made by the Company.



The Group Term Life redundancies in all years are due to actual mortality rates running below those assumed in prior year reserves, and actual recovery
rates running higher than those assumed in prior year reserves.



Group Disability claims and benefits payable show redundancies in all years due to actual claim recovery rates exceeding those assumed in prior year reserves.



Long Duration Contracts



The Companys long duration contracts are comprised of FFG and LTC disposed businesses. The principal products and services included in these
categories are described in the summary of significant accounting polices (see Note 2).



The reserves for FFG and LTC are included in the companys reserves in accordance with FAS 113, Accounting and Reporting for Reinsurance of Short-Duration and Long-Duration Contracts. The Company maintains an
offsetting reinsurance recoverable related to these reserves (see note 7).



Short Duration Contracts



The
Companys short duration contracts are comprised of group term life, group disability, medical, dental, and credit life. The principal products and services included in these categories are described in the summary of significant accounting
polices (see note 2).



The Companys short duration
contract group disability category includes short and long term disability products. Claims and benefits payable for long-term disability have been discounted at 5.25%. The December 31, 2006 and 2005 liabilities include $67,656 and $63,686,
respectively, of such reserves. The amount of discounts deducted from outstanding reserves as of December 31, 2006 and 2005 are $21,166 and $20,946, respectively.



F-24



---

##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



9. Fair Value Disclosures



Statement of Financial Accounting Standards No. 107, Disclosures About Fair Value of Financial Instruments
(FAS 107) requires disclosure of fair value information about financial instruments, as defined therein, for which it is practicable to estimate such fair value. These financial instruments may or may not be recognized in the balance
sheets. In the measurement of the fair value of certain financial instruments, if quoted market prices were not available other valuation techniques were utilized. These derived fair value estimates are significantly affected by the assumptions
used. Additionally, FAS 107 excludes certain financial instruments including those related to insurance contracts.



In estimating the fair value of the financial instruments presented, the Company used the following methods and assumptions:



Cash, cash equivalents and short-term investments: the carrying amount
reported approximates fair value because of the short maturity of the instruments.



Fixed maturity securities: the fair value for fixed maturity securities, which includes both public and 144A securities, is based on quoted market prices, where available. For fixed maturity securities that are
not actively traded, fair values are estimated using values obtained from independent pricing services or, in the case of private placements, excluding 144A securities, are estimated by discounting expected future cash flows using a current market
rate applicable to the yield, credit quality, and maturity of the investments.



Equity securities: the fair value of equity securities and non-sinking fund preferred stocks is based upon quoted market prices.



Commercial mortgage loans and policy loans: the fair values of mortgage loans are estimated using discounted cash
flow analyses, based on interest rates currently being offered for similar loans to borrowers with similar credit ratings. Mortgage loans with similar characteristics are aggregated for purposes of the calculations. The carrying amounts of policy
loans reported in the balance sheets approximate fair value.



Other investments: The carrying amounts of other investments approximate fair value.



Policy reserves under investment products: the fair values for the Companys policy reserves under the investment products are determined
using cash surrender value.



F-25



---

##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



Separate account assets and liabilities: separate account assets and liabilities are reported
at their estimated fair values in the balance sheet.



|                                                                                                                |  |                   |         |                   |   |                |  |            |         |  |   |        
|--------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | ----------------- | - | -------------- |  | ---------- | ------- |  | - | -------
|                                                                                                                |  | December 31, 2006 |         | December 31, 2005
|                                                                                                                |  | Carrying Value    |         | Fair Value        |   | Carrying Value |  | Fair Value
|Financial assets                                                                                                |  |                   |         |                   |   |                |  |            |         |  |   |        
|Cash and cash equivalents                                                                                       |  | $                 | 5,600   |                   | $ | 5,600          |  | $          | 2,863   |  | $ | 2,863  
|Fixed maturities                                                                                                |  |                   | 111,522 |                   |   | 111,522        |  |            | 119,604 |  |   | 119,604
|Equity securities                                                                                               |  |                   | 9,381   |                   |   | 9,381          |  |            | 8,790   |  |   | 8,790  
|Commercial mortgage loans on real estate                                                                        |  |                   | 21,686  |                   |   | 21,566         |  |            | 13,996  |  |   | 14,355 
|Policy loans                                                                                                    |  |                   | 120     |                   |   | 120            |  |            | 98      |  |   | 98     
|Short-term investments                                                                                          |  |                   | 2,401   |                   |   | 2,401          |  |            | 3,341   |  |   | 3,341  
|Other investments                                                                                               |  |                   | 2,524   |                   |   | 2,524          |  |            | 3,028   |  |   | 3,028  
|Assets held in separate accounts                                                                                |  |                   | 21,948  |                   |   | 21,948         |  |            | 25,343  |  |   | 25,343 
|Financial liabilities                                                                                           |  |                   |         |                   |   |                |  |            |         |  |   |        
|Policy reserves under investment products (Individual and group annuities, subject to discretionary withdrawal) |  | $                 | 3,859   |                   | $ | 3,842          |  | $          | 5,462   |  | $ | 5,402  
|Liabilities related to separate accounts                                                                        |  |                   | 21,948  |                   |   | 21,948         |  |            | 25,343  |  |   | 25,343 



The fair value of the
Companys liabilities for insurance contracts other than investment-type contracts are not required to be disclosed. However, the fair values of liabilities 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.



10. Retirement and Other Employee Benefits



The Parent sponsors a defined benefit pension plan and certain other post
retirement benefits covering employees and certain agents who meet eligibility requirements as to age and length of service. Plan assets of the defined benefit plans are not specifically identified by each participating subsidiary. Therefore, a
breakdown of plan assets is not reflected in these financial statements. The Company has no legal obligation for benefits under these plans. The benefits are based on years of service and career compensation. The Parents pension plan funding
policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus additional amounts as the Parent may determine to be appropriate from time to time
up to the maximum permitted, and to charge each subsidiary an allocable amount based on its employee census. Pension cost allocated to the Company amounted to approximately $124, $124 and $108 for 2006, 2005 and 2004, respectively.



The Company participates in a contributory profit sharing plan, sponsored by
the Parent, covering employees and certain agents who meet eligibility requirements as to age and length of service. Benefits are payable to participants on retirement or disability and to the beneficiaries of participants in the event of death. For
employees hired on or before December 31, 2000, the first 3% of an employees contribution is matched 200% by the Company. The second 2% is matched 50% by the Company. For employees hired after December 31, 2000, the first 3% of an
employees contribution is matched 100% by the Company. The second 2% is matched 50% by the Company. The amount expensed was approximately $48, $33 and $15 for 2006, 2005 and 2004, respectively.



F-26



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



With respect to retirement benefits, the Company participates in other health care and life insurance
benefit plans (postretirement benefits) for retired employees, sponsored by our Parent. Health care benefits, either through the Parents sponsored retiree plan for retirees under age 65 or through a cost offset for individually purchased
Medigap policies for retirees over age 65, are available to employees who retire on or after January 1, 1993, at age 55 or older, with 10 years or more service. Life insurance, on a retiree pay all basis, is available to those who retire on or
after January 1, 1993. During 2006, 2005 and 2004 the Company incurred expenses related to retirement benefits of $26, $25 and $37, respectively.



11. Deferred Policy Acquisition Costs



Information regarding deferred policy acquisition costs follows:



|                  |  |              |        |   |      |   |       |      |  |   |       |  
|----------------- |  | ------------ | ------ | - | ---- | - | ----- | ---- |  | - | ----- | -
|                  |  | December 31, |       
|                  |  | 2006         |        |   | 2005 |   |       | 2004 | 
|Beginning Balance |  | $            | 1,437  |   |      | $ | 1,123 |      |  | $ | 942   |  
|Costs deferred    |  |              | 835    |   |      |   | 1,295 |      |  |   | 428   |  
|Amortization      |  |              | (1,084 | ) |      |   | (981  | )    |  |   | (247  | )
|                  |  |              |        |   |      |   |       |      |  |   |       |  
|Ending Balance    |  | $            | 1,188  |   |      | $ | 1,437 |      |  | $ | 1,123 |  
|                  |  |              |        |   |      |   |       |      |  |   |       |  



12. Goodwill



Information regarding goodwill follows:



|                  |  |              |       |      |   |       |  |   |      
|----------------- |  | ------------ | ----- | ---- | - | ----- |  | - | -----
|                  |  | December 31,
|                  |  | 2006         |       | 2005 |   | 2004 
|Beginning Balance |  | $            | 2,038 |      | $ | 2,038 |  | $ | 2,038
|Acquisitions      |  |              |      |      |   |      |  |   |     
|                  |  |              |       |      |   |       |  |   |      
|Ending Balance    |  | $            | 2,038 |      | $ | 2,038 |  | $ | 2,038
|                  |  |              |       |      |   |       |  |   |      



13. Other Comprehensive Income



The Companys components of other comprehensive
income (loss) net of tax December 31 are as follows:



|                             |  |                                        |        |   |                                       |   |        |  
|---------------------------- |  | -------------------------------------- | ------ | - | ------------------------------------- | - | ------ | -
|                             |  | Unrealized Gains(Losses) on Securities |        |   | Accumulated OtherComprehensive Income |  
|Balance at January 1, 2004   |  | $                                      | 7,082  |   |                                       | $ | 7,082  |  
|Activity in 2004             |  |                                        | (1,243 | ) |                                       |   | (1,243 | )
|                             |  |                                        |        |   |                                       |   |        |  
|Balance at December 31, 2004 |  |                                        | 5,839  |   |                                       |   | 5,839  |  
|Activity in 2005             |  |                                        | (2,350 | ) |                                       |   | (2,350 | )
|                             |  |                                        |        |   |                                       |   |        |  
|Balance at December 31, 2005 |  |                                        | 3,489  |   |                                       |   | 3,489  |  
|Activity in 2006             |  |                                        | (1,135 | ) |                                       |   | (1,135 | )
|                             |  |                                        |        |   |                                       |   |        |  
|Balance at December 31, 2006 |  | $                                      | 2,354  |   |                                       | $ | 2,354  |  
|                             |  |                                        |        |   |                                       |   |        |  



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##### Table of Contents

Union Security Life Insurance Company of New York



Notes to Financial Statements(Continued)

December 31, 2006, 2005 and 2004

(In
thousands except share data)



14. Related Party Transactions



The Company received various services from the Parent. These services include assistance in benefit plan administration,
corporate insurance, accounting, tax, auditing, investment, information systems, actuarial and other administrative functions. The fees paid for these services for years ended December 31, 2006, 2005 and 2004 were $4,471, $9,137 and $4,192,
respectively.



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



The Company cedes group liability business to its affiliate, Union Security Insurance Company (USIC). The Company has ceded $6,916, $6,588 and
$6,526 of premium to USIC in 2006, 2005 and 2004, respectively. The Company has ceded $29,151, $24,879 and $23,533 of reserves in 2006, 2005 and 2004, respectively, to USIC.



15. Commitments and Contingencies



The Company leases office space and equipment under operating lease arrangements. Certain facility leases contain escalation clauses based on increases in
the lessors operating expenses. At December 31, 2006, the aggregate future minimum lease payment under operating lease agreements that have initial or non-cancelable terms in excess of one year are:



|                                    |  |   |      
|----------------------------------- |  | - | -----
|2007                                |  | $ | 611  
|2008                                |  |   | 569  
|2009                                |  |   | 228  
|2010                                |  |   | 172  
|2011 and thereafter                 |  |   |     
|                                    |  |   |      
|Total minimum future lease payments |  | $ | 1,580
|                                    |  |   |      



Rent expense was $564,
$623 and $333 for 2006, 2005 and 2004 respectively.



The
Company is regularly involved in litigation in the ordinary course of business, both as a defendant and as a plaintiff. The Company may from time to time be subject to a variety of legal and regulatory actions relating to the Companys current
and past business operations. While the Company cannot predict the outcome of any pending or future litigation, examination or investigation, the Company does not believe that any pending matter will have a material adverse effect on the
Companys business, financial condition or results of operations.



F-28